Originating Mortgage Loans

American Banker (02/23/07) P. 17; Terris, Harry
A top priority for the National Association of Mortgage Brokers this year, according to Legislative Chairman Joe Falk, will be pushing for a federal government study of the causes of foreclosures and what actions should be taken to curtail them. Falk says the causes of the most recent wave of foreclosures are unclear, but originators, investors, brokers and borrowers all played a role. The group continues to voice opposition to a suitability standard that would force lenders to ensure that borrowers obtain loans that fit their budgets, with Falk insisting that "the ultimate decision maker" is the consumer. Among other things, the group will also push for increased government loan limits and the development of a reverse mortgage backed by the Department of Veterans Affairs.
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Investor's Business Daily (02/23/07) P. A2
The Federal Deposit Insurance Corp. reports a 15.6-percent increase in late mortgage payments in the fourth quarter of 2006, following an increase of 5.2 percent during the previous three-month period. Non-traditional loans such as subprime mortgages account for a large number of delinquencies, with officials predicting that "their performance will get worse before it gets better."
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American Banker (02/22/07) P. 19; Kaper, Stacy
In a Feb. 16 letter to bank and thrift regulators, more than two dozen Democrats on the House Financial Services Committee requested that financial institutions be given greater leeway in approving mortgage forbearances. The legislators are concerned about a possible jump in foreclosures tied to the fact that interest rates on more than $1 trillion in adjustable-rate mortgages will reset this year. The letter states that "it is important that institutions who are willing to forbear in particular instances understand that they will not be subject to additional penalties."
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Baltimore Sun (02/16/07)
The flawed-credit mortgage market saw delinquencies reach 12.6 percent last quarter, and subprime mortgage lenders are facing financial difficulties that have forced some companies to shut down or file for bankruptcy protection. During a recent Senate banking and housing committee hearing, Martin Eakes--CEO of the Center for Responsible Lending--estimated that 2.2 million homeowners with subprime loans could lose their properties to foreclosure, placing the blame on limited documentation, low- or no-down payment and risky loans with teaser rates that have the potential for significant payment increases. Mortgage industry officials countered that borrowers defaulting on their home loans are experiencing job loss, illness, high consumer debt loads and marital problems; and Mortgage Bankers Association chief economist Douglas Duncan challenged the idea that "delinquencies are at crisis levels" by pointing out that they surpassed 14 percent in mid-2002, declined to about 10 percent in 2004 and 2005 and are now rising again. Nonetheless, lenders are likely to tighten their lending standards. Congress will push to restrict limited documentation, low downpayments and excessively risky loans; and lenders will face more lawsuits from consumers.
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USA Today (02/08/07); Kirchhoff, Sue
The Senate Banking Committee held a hearing on Feb. 7 to discuss predatory lending, which Chairman Christopher Dodd, D-Conn., has deemed a "crisis." Dodd called for legislative action, noting that many cash-strapped, low-income borrowers are obtaining adjustable-rate subprime loans and could see their monthly payments skyrocket by 50 percent in just a couple of years. Mortgage Bankers Association chief economist Doug Duncan said the current 1-percent mortgage foreclosure rate is normal and underscored that "specific mortgage products" play less of a role in foreclosures than unemployment. Uniform national lending standards and enhanced financial education for borrowers were recommended by Duncan to curtail predatory lending.
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