Not sure where to get your subprime mortgage refinance? With the subprime mortgage industry in virtual free fall, where do home buyers with less than perfect credit turn for financing?

The news reports are grim: Not only have dozens of subprime lenders closed their doors or cut back sharply on new mortgage offerings, but they’re also severely tightening the loose underwriting standards that got them into trouble. As a result, many people who would have been approved for a loan months ago now find all the doors suddenly closed.

But here’s some potentially helpful news: There is a mortgage source that is actually expanding its business nationwide for credit-impaired and first-time home purchasers. That source is the golden oldie of the mortgage arena — the Federal Housing Administration, which recently has seen a doubling of customers refinancing out of private, subprime loans into its insured mortgage programs.

There’s good reason: The FHA doesn’t have problems with Wall Street investors who now see subprime mortgage bonds as toxic. FHA’s bonds, by contrast, are gilt-edged and backed by the federal government, so there’s no shortage of mortgage money.

Equally important: FHA-insured loans are more consumer-friendly than subprime offerings and come with interest costs roughly three percentage points below directly comparable subprime mortgages.

There are drawbacks, of course. FHA mortgage maximums top out just under $363,000. In the highest-cost markets, an FHA loan will let you buy only a starter home. Yet in more-typical markets, the FHA’s limit does not pose a problem. And FHA’s maximum loan amounts are likely to increase. Legislation to raise the loan ceiling to the full Fannie Mae-Freddie Mac limit — $417,000 — is expected to be introduced shortly and appears to have support for passage this year.

Another drawback for some borrowers is FHA’s down payment requirement. The FHA does not allow consumers to buy a house without putting something into the deal. Down payments generally are 3 percent, although that could be lowered soon.

Additional differences between FHA mortgages and subprime: You can’t just “state” your income and get a loan. You’ve got to show proof that you earn what you say. The FHA never has offered “payment option” plans that allow borrowers to send in almost nothing while adding to their debt through negative amortization.

The FHA is not known for razzle-dazzle, so don’t look for controversial “2/28″ or “3/27″ adjustable-rate plans that feature low payments in the first two or three years followed by sharply higher payments later. Many subprime users of 2/28 adjustables, who made no down payments figuring they’d refinance before the first reset date, now face higher costs and negative equity positions in soft housing markets.

Unlike private competitors, the FHA does not set rates on the basis of FICO credit scores; it underwrites loans using what it calls a total scorecard that examines an applicant’s full credit history, employment and nontraditional credit patterns such as rent and utilities payments.

It does not disqualify anyone automatically because of a bankruptcy, and it emphasizes a holistic “compensating factors” approach to credit decision making.

You might ask: If the FHA is so wonderful, why has the private subprime market boomed while the FHA’s share of the market has withered — at least until recently? Part of the reason is the FHA itself.

During the 1980s and ’90s, the FHA developed a reputation for red tape, slow processing and excessive rules on mandatory fix-ups of properties prior to sale.

It also did not forge ties with the mortgage brokerage industry, which now originates nearly two-thirds of all new home loans. Instead, Wall Street seized the initiative and vacuumed up billions of dollars of broker-originated subprime loans through wholesale lenders, paying fat fees to keep the production lines rolling.

Many of those mortgages carried terms that credit-impaired applicants found hard to resist, especially in comparison with what the FHA offered: No money down, no asset or income verification, debt-to-income ratios in excess of 50 percent, negative amortization up to 125 percent of the home’s value, interest only and other reduced-payment concepts.

Those easy-money, no-questions-asked loans for people with bad credit habits are now the dodo birds of the mortgage market. Meanwhile, the FHA is cutting out the red tape and speeding up processing and is eager to expand its business to credit-worthy borrowers who are willing to put a little of their money into home purchases.

I’m afraid that as of 4pm today 3/29/2007 we are out of business  Part of the Subprime meltdown.

Good luck,

Broker Funding Wholesale
www.bfswholesale.com

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The Perfect Housing Crimes

Let’s start off with the fact this is a Mortgage Bubble, Not A Housing Bubble (you’ll see it all clearly in a minute). A bubble by definition is characterized by rapid increases in the valuations or volume of demand until unsustainable levels are reached relative to incomes and other economic indicators of affordability.

Lets carefully look into this ‘Housing Bubble’ thing that some wannabe experts call it. From a real estate detectives perspective, we can now see and prove how this is actually a ‘Mortgage Bubble’ we are experiencing. By evaluating the facts, we will uncover many variables which amount to the ‘Perfect Housing Crimes’ and who has committed these crimes.

We do acknowledge there is a ‘Housing Bubble’, however, we will prove the real problem is the Mortgage Bubble. The Housing Bubble is considered the cut and the Mortgage Bubble is then knife that had this gaping wound.

Ok, so we are now a detective and we need to define what we are experiencing in the real estate/mortgage arena. What is the crime? What caused it? Who caused it? And who is to take responsibility?

The Motive:

1. Greed & Profit
2. Ignorance

The Crime?

1. 1,500,000+ foreclosures anticipated for 2007
2. 44+ mortgage lenders thathave shut down completely, are bankrupt, out of business, selling to abigger fish so they do not drown since December 2006 Interesting to see.

So what is it about these 44 lenders that have BIG problems and 1,500,000+ foreclosures that prove this is a Mortgage Bubble? Are the clues that distinguishable that prove this a Mortgage Bubble and not a Housing Bubble? What will tie them together? Let’s take a look and start with…

What Caused The Perfect Housing Crime?

Many of the variables that have contributed to the Mortgage Bubble are considered to be mortgage lending guidelines, however, they must be separated individually because they are not individually related. The obvious point is that each of these variables can occur without any of the other variables existing.

Testifying before the House Finance Committee Wednesday 3/27/2007, Center for Responsible Lending’s president, Michael Calhoun, said the primary reason for the jump in foreclosures is “the abandonment of underwriting standards.”

1. Stated Income - Stated income is when a person has difficulty ‘proving’ their income because they are typically self employed and they are in a cash business, as an example. Well that is what this type of mortgage was intended to be used for. Over the last several years, more and more lenders have offered and even exploited this guideline.
   They realized that there was an untapped market of prospective homeowners that could be eligible for a mortgage if they can stretch their income. The problem with this is that everyone has a current limited amount of income and by exaggerating their income it puts people in a actionable position. 85% of America lives paycheck to paycheck, so what happens when a family runs into a financial difficulty when they have one of these exaggerated mortgages? Need I say more…?
2. 100% Mortgages - In the not so distant past, most people I speak with remember when mom and dad had to save up to buy a home. They had to sock away 20% of the home value that they wanted to buy. So a $100,000 home meant that mom and dad needed to save $20,000 plus closing costs. This means they probably needed close to $25,000+ to buy that house and realize that American Dream. It often took years to save that much money. Imagine all the discipline they must have had. Nowadays, families can sit around the Sunday morning kitchen table and decide that they want to go out and buy a home this week. Often times we have heard people saying that they figured it was a good idea to own a home now, kind of like they were walking down the supermarket isle and deciding on which brand of bread they should buy. We went from earning the American to giving the American Dream away.
3. 55% DTI (Debt to Income) - This is a funny one. What this number represents is the proportion of all your debts credit cards, loans, leases, mortgage, taxes and insurance that show up on your credit report vs. how much money you make. Ideally when a client wants a mortgage those numbers are approximately 40%. There are circumstances that
   allow a borrow to have this 40% go a little higher, such as, real good credit and strong assets which are called redeeming qualities. OK, ’so what’, you say. Well dig just a little deeper into how 55% is too much unless you know that you will be expecting a decent pay raise in the next short while. Let’s add it up considering an average family with 2 children grossing $8,000/month. If you allow 55% of their income to be diverted to credit cards, loans, leases, mortgages, real estate taxes and homeowners insurance those numbers equal $4,400 per month. This does not look like a problem you say, your correct but we are not done. How about the 20% Uncle Sam takes every paycheck? That is another $1,600 in taxes per month. Now we are at $6,000 per month, still not too bad, right? Wrong, there is more. Let’s add in all the things we classify as common housing expenses, such as, car insurance, your ever increasing health insurance premium, food and household toiletries, cloths, shoes, automobile maintenance, automobile gas, electricity, gas for the house, water/sewer/sewage/garbage, telephone, cell phones, cable TV, internet, entertainment (movies, dinners, Blockbuster Video, etc), life insurance, donations, dues/memberships, medical bills not covered, child care, tuitions, dry cleaning and other expenses that just cannot think of but I hope you got my point. Where is there any extra money incase anything should happen? It is NOT there! Paycheck to paycheck. Oh wait, what about retirement, vacations and a rainy day?
4. Adjustable Interest Rates - Adjustable rate mortgages are typically used as a short term mortgage. They are intended to be a gateway loan for people coming out of a credit problem. After a short period of time they refinance into a better long term loan.
   Another very good reason to use this type of mortgage would be if you know that you have a temporary job position in an area and will be transferred shortly like a military person experiences. This actually leads our evaluation to #5 below, Lowest Interest Rates in History. Why did any lender ever offer adjustable rate mortgages at that time knowing this? What, to temporarily squeeze more home into their budget?
5. Lowest Interest Rates in History - As everyone knows, we have recently experienced what was said to have been the lowest mortgage interest rates in the history of America. This did not happen because our economy was doing great. To the contrary, if it were not for both the mortgage and real estate industry our economy might have been in a recession. So why were we buying more and more home? Was it because people acted like sheep and did what all the other sheep were doing? Did the big corporate mortgage banking wolf sniff this out and try to capitalize on this situation. Why did the Federal Reserve lower rates? Was it done to promote investments’, savings or for us to go out and maximize our spending? Did we react appropriately as consumers or were some of us cut off and singled out without regard to our financial futures for corporate gain and left to die?
6. No Homebuyer Education - We haven’t done extensive research about homebuyer educational instruction and how it relates, but once again similar to #2, the time and effort our parents went thru to earn a home makes a strong case for the development of such programs. Why has it become taboo for Americans to earn anything? How soft have we become? Should we or should we not learn how to manage investments that reach into the hundreds of thousands of dollars? Maybe something should be put in place that offers an incentive to learn this management skill, such as better interest rates upon successful completion of such a course.
7. Low FICO Scores - In a New Year’s clip, the television network CNN had published a segment about New Year’s resolutions, planning and our individual financial future. They had mentioned that an average American family experiences a financial hardship of some sort every 7 years. So what is the point you say? It is understandable that from time to time financial hardships do occur and people can have low fico scores, however, what is not understandable is how can you lend hundreds of thousands of dollars to people that have NEVER proved that they can manage money. If you personally would not lend to the people in that situation, why should a major institution with the livelihood and investments of thousands or tens of thousands of people be able to so and ‘think’ that it is a good investment?
8. Federal Reserve - TheMessThatGreenspanMade blog. Who is the Federal Reserve anyway? By definition they are a quasi-governmental banking system. Do they have the consumers interest in mind or investors? Seem unreasonable to say? Why does our money say, ‘Federal Reserve Note’ and not United State Note like this 1963 $5.00 bill. This will be an argument for a future article and the facts are riveting.
9. Appreciation - Appreciation is when a market, determines a perceived increase in value for a home due to changes in market conditions, inflation, employment as well as supply and demand. If you take a look at the variables that attributed to the appreciation of home values over the last few years you will find that the economy was in ruff shape and employment wasn’t a major positive factor. The #1 focus for the increased appreciation has to be placed upon supply/demand that was artificially fueled by the increase in (#10) ‘Qualified’ Buyers and the lowest interest rates in the history of America.
10. Approximately 15%+ More ‘Qualified’ Buyers - Well we made it to number 10. This one is short but sweet. Simply add up 1 to 9 and this equals our # 10 which equals our Mortgage Bubble dilema.

Who Caused It?

As we evaluate ‘who is to blame’, you can reflect on the conversations in the coffee shops, the various articles that you read on the internet and what everyone is saying. “It’s the mortgage lenders”, some say “It’s the mortgage broker” while other are saying that “It’s the borrowers themselves”. How can ‘everyone’ be the blame? And the answer is you cannot say it is everyone.

With the current structure of our economic climate, you see executives’ willing to go to any measure to build the value of their stocks. It appears as if a large percent of decision makers would eat their young if it meant that their stock values would increase and they could look like the next Donald Trump.

We are all about business, capitalism and earning a profit, however, the line must be drawn and strongly defined prior to the development of such a major problem. The Mortgage Bubble problem we are experiencing should never have occurred. Are we ever going to be prepared to say no and make the right decisions for America. Can anybody else stand up and do what is correct? This problem is larger than just mortgages If you evaluated the credentials of some of the borrowers that received thousands of dollars to buy a home, you would have NEVER put your savings into that so called opportunity. Some people within corporate America were so slick they were able to sell these “liar loans” to investors. These investors were given pie in the sky historical data and evaluated their investments under terms that would never be relevant under the new lending climate we discussed above (see What Caused The Perfect Housing Crime?).

Who Should Take Accountability, Be Responsible or Punished?

The mortgage bankers do not have any responsibility to mortgage brokers. Mortgage bankers coexist with the brokers in an effort to expand their reach. An interesting fact is that a mortgage broker cannot exist without a relationship with a bank because they do not have the actual power to lend money. The bank offers the mortgage guidelines to the mortgage broker and subsequently the mortgage broker goes out and does exactly what their title states and that is they broker or act as a 3rd party intermediary and brokers mortgages.

If the scenario evolved as a few homeowners, here and her went into foreclosure then we could say that the majority of responsibility should be placed on the homeowner, but we can’t say that. This Mortgage Bubble problem has become an economic cancer and 44 major mortgage lenders no longer can sustain themselves.

As we speak, the House Finance Committee is interviewing high level industry professionals trying to decipher who knew what along with the thousands of other questions they have. Oh wait a minute, has anyone from congress or the senate received political donations from any of these 44 lenders? If so, does this make them guilty as well?

Decision -  The responsible parties should be

1. The 1st responsible party and biggest culprit needs to be the mortgage banking industry for offering these horrific programs.
2. The Federal Government because they are suppose to regulate against bad lending practices.
3. The consumer because we are all responsible for ourselves and the people we elect to represent us.

Winners and Looser -Everyone

1. 44sub prime mortgage companies since December 2006 that have fallen upon REAL
   hard times or are out of business
2. 1,500,000+ foreclosures anticipated for 2007

In summary, should short term corporate thinkers shape our country at the expense of all Americans? Should we mortgage our future for a few dollars today, like Enron and 44 mortgage banks did? Should we set standards for achieving the American Dream and be responsible or should we just give it away?

..

You have your home already. You already have your mortgage. All these subprime mortgage problems don’t have an effect on me you say. Or do they? See CNN’s story Mortgage Woes.

With all the foreclosure problems we are facing, foreclosures are anticipated to be in the range of 1,500,00 to 2,000,000. How can this not affect every American? Let’s explore exactly how this DOES affect everyone and what can we do about it so the right people are affected and not just YOU!!

Please contact your Attorney General to make the subprime lenders responsible and also take a look at the elected officials who receive thousands and sometimes millions of dollars that are donated to their political campaign.  Attorney General Contact Information, Congress and Senate.

How Existing Homeowners Are Affected

According to a December 2006 report, the Center for Responsible Lending, a home will lose 1% of it’s value for every home that is foreclosed upon in your neighborhood. So your $200,000 home with lets say just 8 foreclosures in the area will lose 8% of its value.

“For subprime mortgages originated from 1998 through 2006, we project that 2.2 million U.S. households will lose their homes to foreclosure, costing these households as much as $164 billion. One out of every five (19.4 percent) subprime loans made today will fail.”

Your home that was once valued at $200,000 is now $184,000. I hope you don’t have a $200,000 mortgage on it. Depending on where you live, there are areas of the country that have whole towns in foreclosure. Just look at the pockets of massive foreclosure in Michigan, Colorado, Illinois, etc.

Are You CURRENTLY Looking For A Home, This Affects You

If you are in the market for a new home you have both advantages and disadvantages.

Advantages

Just reflecting on the aforementioned How An Existing Homeowner Is Affected, you can see as a home buyer that you are in the opposite position. Property prices are coming down because there are fewer buyers than sellers. This is what is known as a ‘homebuyers market’ and is based upon supply and demand. The supply being the existing homes for sales as well as the foreclosures and the demand being less homebuyers. You should be able to find your dream home cheaper than you could have just a few years ago.
Another advantage will be that ’some of’ the individuals that are selling could be motivated because they could be facing a foreclosure themselves. Obviously you may not know that unless you research public records. You can research foreclosure records here:

The last advantage will be that the interest rates are still very low and are comparable to a few years ago when we experienced record lows for interest rates.

Disadvantages

Here is the big reason we should all be upset. The mortgage industry has allowed many people to get a mortgage with little or absolutely no money down. Currently they are loosing millions of dollars during the foreclosure of these homes because not only is there no equity position but statistics show that it costs a lender approximately $30,000 in expenses to foreclose on a home. We will all pay for this.What does this mean? This means 3 things to everyone. The first way this can affect us is that lenders have a fiduciary relationship to their stock holders and therefore they expect a profit. Remember, the investors that buy the mortgages from the subprime mortgage companies are not very happy right now because their stocks are losing a tremendous amount of money AND have to make it up….somehow so…:

1. We are currently seeing is an increase in the interest rates for the not so perfect borrowers.
2. Mortgage guidelines are tightening up and the common 100% mortgage is becoming a thing of the past.
3. Lower interest rates for a new mortgage is more difficult to attain today and will increasing become more and more difficult.

Looking To Sell Your Home, Your Affected As Well

If you are looking to sell your home, this may not be the best time to do that. If you are in the obvious situation that you have to sell because of employment, foreclosure or some pressing matter then you may not have a choice. If that is not your case then seriously consider if this is the right time to sell.

Our current housing market is best suited for the homebuyer vs the homeseller, simply due to the fact that there are more sellers than buyers. Another major disadvantage could be the fact that depending on where you live, property values have dropped as much as 20% over the last 18 months. If that describes you, we hope your current mortgage is less than what you owe.

How You Are Affected If You Are Looking For A Mortgage

If you are either refinancing or if you are currently looking for that dream home or investment property, buyer beware. What we once knew of the mortgage market just 30 days ago has been transformed into an industry in shambles with mortgage brokers scurrying around just to keep up with all the changes.

That is very important to you because the days of 100% loans are coming to an end quickly. Low credit score individuals and high loans are also ending as we speak. If you want to obtain your absolute best interest rates and terms then it behooves you to work with mortgage professionals that have a great reach into the mortgage investor pool. Every mortgage guideline is as unique as the homeowner looking for the loan. You can only be certain that you do in fact have the best rates and terms if you are working with a well positioned broker.

If you are in need of help and would like to reach a well respected Mortgage Professional, call the Mortgage Professional Hotline 1-888-577-8338.

..

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.

In an effort to retain their massive employee base, New Century Mortgage has guaranteed some employees 1/2 of Decembers pay for the next 3 months. As of this moment this is what we are understanding, we have confirmation that this compensation was offered to their existing account executives positions.

New Century Mortgage is/was the largest subprime mortgage lender.

"New Century understands the value of their sales force and that the sales division has been the high performance engine that drives the company. By spending thousands of dollars on every individual every year, New Century has been able to build great employees and a great company. This is an obvious gesture to maintain their integrity and see the human side of the company despite their current trials and tribulations. Only time will tell.", said Scott Pasinski a well known mortgage professional.

We shall see if New Century is able to pull themselves from this dilemma or what their true intentions really are. As of today, 3-17-07 approximately 41 mortgage lenders are experiencing financial problems or have gone out of business.

There appears to be some belief internally.

Your thoughts are…

….be good!!… 

The Saff of ConsumerMortgageReports.com

One in seven homeowners currently has a subprime adjustable rate mortgage (ARMs)that is at least 30 days late. About 90% of the subprime mortgages that are offered are adjustable rate mortgages, according to a report that was issued this week.

Overall, when you count all homeowners, not just subprime, the delinquency rate was 5 percent. That was up from 4.7 percent from the same period a year earlier and also from the third quarter of 2006.

Among the other discouraging news was word that one of the biggest subprime lenders, New Century, is under criminal investigation into accounting practices and that two other Top 15 subprime lenders — Accredited Home Lenders and H&R Block's Option One — were taking financial hits because they had misread the riskiness of the subprime loans that they recently issued.

It was smoother sailing in the market for prime mortgages. Industry insiders take that as an indication that the mortgage business is fundamentally sound, with problems limited to subprime, which accounted for one-fifth of mortgage dollars borrowed last year.

"Even in the subprime arena, the preponderance of those customers graduate into the prime marketplace and improve themselves up the credit risk curve, an overreaction by Congress or regulators would curtail mortgage options to consumers", says Doug Duncan. Mr Duncan is the chief economist for the Mortgage Bankers Association.

Around the same time Duncan was stating his thoughts, Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said that: "The federal government has a dual obligation both to protect consumers from abusive lending practices going forward and to work to ensure that Americans who have been victimized by abusive products and practices are able to keep their homes and with them, their piece of the American dream. I am considering a number of options, including legislation, to accomplish both of these objectives."

Public outrage immediately jumped on that statement, pointing out that if the federal government bails out homeowners who are having trouble paying their mortgages, it's the same as the government bailing out the lenders who underwrote risky loans. A bailout could encourage lenders in the future to take unnecessary risks, confident that they would get a handout from the federal government if things went wrong.

In the 2006 election year, Dodd collected $5.7 million in political contributions, and $2.5 million of that came from the financial services, insurance and real estate industries. Seventeen of his top 20 contributors are financial services companies.

So if this is you, if your mortgage is coming due, if you are in an adjustable rate mortgage currently, you should SERIOUSLY consider refinacing as quickly as possible. This may help you in more than one way.

First of all, during a refinance you typically miss 1 mortgage payment and the savings could certainly help many Americans. The second reason is that the rates are extremely low right now and and you can put yourself into a much better fixed interest rate position. In fact, the interest rates are similar to that of a few years ago and depending on your particular situation, the vast majority of the people we interviewed should have been given a fixed rate mortgages.

WOW, what can we really say here? A lot!

Lets start with New Century is not the only company that has problems with screwed up ideas. There are over 36 sub prime mortgage companies since late 2006 that have fallen upon REAL hard times or are out of business.

Did you know that New Century restated Form 8-K on December 19, 2006 and Robert K. Cole announced that he will resign as Chairman of the Board? What? Did you know that according to Columbia Law School, ‘…stock prices of restating companies declined 10% on average on the announcement of these restatements, with restating firms losing over $100 billion in market capitalization over a short three day trading window surrounding these restatements’.

At the time, I do know their stocks were valued around $30.00 and now they have a value just over $3.00 (we haven’t looked in a few days).

How is New Century not responsible for some of the current economic climate? They are the largest sub prime mortgage company in the industry, well not anymore. But really, I know in my world as well as the world of 99% of my friends and the people I work with, I am responsible for what I do. If I make a mistake, somehow it is coming back to me and I’m paying for it. That’s actually fine because it promotes responsibility.