July 5, 2007

Efforts Made To Help Borrowers Avoid Foreclosure

CSBS Senior Vice President for Regulatory Affairs Michael Stevens said, "Servicers should provide information on when the recast will occur and how

much the monthly payment will adjust. Should the loan go into default, servicers should consider workout arrangements to prevent foreclosures."

Freddie Mac is also touting its foreclosure avoidance activities. The corporation, along with Fannie Mae, the Mortgage Bankers Association, and 20 other

mortgage industry leaders has established NeighborWorks America which is sponsoring a public service advertising campaign on television urging troubled homeowners to face their problems and seek help. Two of the ads can be viewed on the Freddie Mac website.

A Freddie-sponsored survey conducted by Roper Public Affairs and Media found that 74 percent of home mortgage borrowers were very interested in seeking the assistance of housing counselors in avoiding foreclosure yet only 64 percent had been aware of the existence of such counselors. Only 61 percent of borrowers who were already late on mortgage payments were even aware that there was help available to them.

Regulators Tighten Rules For Sub prime-Lending
By Damian Paletta

Federal bank, thrift and credit-union regulators issued beefed-up guidelines Friday aimed at curbing weak underwriting standards for "subprime" mortgage loans.

The guidelines require more than 8,000 federally regulated lenders to underwrite loans based on a borrower's ability to make payments on a loan's adjusted rate, not just its low introductory rate. Roughly 75% of the subprime adjustable-rate mortgages offered last year were loans with a low flat or "teaser" rate for the first two or three years and then a higher, floating rate for the life of the 30-year mortgage. The guidelines are very similar to a March proposal, with two significant changes.

First, with limited exceptions, the guidelines expect lenders to collect much more information to prove that borrowers have the capacity to pay. Second, lenders are directed to give borrowers the option to refinance out of an adjustable-rate mortgage at least 60 days before the interest rate jumps to a higher level, without penalty.

Today's Rates
30 yr fixed mtg 6.26% 30 yr fixed jumbo mtg 6.49%
15 yr fixed mtg 5.97% $30K home equity loan 8.12%7/1 ARM 6.07% $30K HELOC 7.19%

"There is no doubt in my mind that anytime you put in more stringent standards you are likely to reduce the supply of credit," Comptroller of the Currency John Dugan said. "We don't do that lightly."

Wall Street Journal Online

With Many Loan Options, Pick One That Fits Your Needs
By Benjamin Levisohn
New York Daily News via the Washington Post

"The majority of people don't realize that the right interest rate in the wrong product can cost them tens of thousands of dollars over time," said mortgage broker Lynn Rogers.

The 30-year fixed is the granddaddy of mortgages. It's simple: Get a good interest rate, send 360 payments to the bank and the house is yours. But you can get a lower payment with adjustable-rate and interest-only mortgages, at least in the beginning. That can work for you in many circumstances, but be sure you know what you're getting into. When the initial term ends, you could see payments spike unless you refinance, adding another expense. If your house has lost value, you've really got a problem.

But adjustables make sense for borrowers who know they may need to move in, say, five years, or think they can refinance at in a better rate later on.

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