Offering federal help for strapped mortgage holders, President Bush is proposing to aid hundreds of thousands of borrowers hard hit by the housing slump. [ Submit your comments below. ] The president on Friday was to talk about several initiatives and reforms to help homeowners with risky mortgages keep their homes, a senior administration official said Thursday. Bush also was to discuss efforts ...
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[Source: Yahoo! News Search Results for mortgages]
Friday, August 31, 2007
Option One Sale in Jeopardy - H&R Block May Shutter Unit
Bloomberg is reporting today that the sale of Option One, H&R Block’s subprime mortgage unit, may be in jeopardy as the company is in default of many of the originally agreed-to deal points with buyer Cerberus Capital Management.
From Bloomberg:
H&R Block Inc., the biggest U.S. tax- preparation company, said it may shut a subprime-mortgage unit if sale negotiations with a hedge-fund manager collapse.
Cerberus Capital Management LP, which agreed in April to purchase the entire Option One Mortgage Corp. subsidiary, may buy just the loan-servicing business as demand for mortgages continues to deteriorate, Kansas City, Missouri-based H&R Block said today in a statement. Failure to renegotiate terms of the sale would force H&R block to close Option One, it said.
More from the OC Register:
The Option One announcement was included in H&R Blocks earnings report for its fiscal first quarter. The tax preparer reported a loss of $302.6 million, more than double the year ago loss of $131.4 million.
H&R Block said it has failed to meet certain aspects of its agreement to sell money-losing Option One and is trying to strike a new deal with Cerberus Capital Management, L.P. which was going to buy the mortgage unit. The news follows at least two rounds of layoffs at the lender in the past four months.
Here are the key points of the original deal that H&R Block hopes to change:
The closing conditions requiring Option One to have $2 billion in loans funded within 60 days of closing and $8 billion minimum in warehouse lines would be waived, with certain other closing conditions being waived or modified.
H&R Block would be responsible for divesting or winding down Option Ones remaining origination business, which would be pursued immediately. As a result, certain shutdown costs may be incurred.
Cerberus would purchase Option Ones loan servicing platform.
The parties are working toward advancing the Dec. 31 contract termination date to provide for an earlier resolution of the Option One situation.
The tax preparer said other parts of the original contract also may be changed or canceled. It said theres no guarantee Cerberus will agree to all the changes and the deal might fall through.
Some of my friends work over at Option One and have anecdotally confirmed the massive drop-off in originations since the onset of the subprime mortgage meltdown. The company continues to make adjustments to its product guidelines, and is rumored to be making the push towards conforming-only products (that is unsubstantiated at this time). The company also pared their outside sales-staff down significantly a few weeks ago, in an attempt to reduce losses associated with the origination side of the business.
It makes sense as Cerberus already has exposure to further potential losses directly and indirectly tied to the mortgage industry with its investments in GMAC and DaimlerChrysler. I would imagine that Cerberus would want the servicing platform as Option One handles a large portfolio of loans originated by themselves and others.
We’ll keep you posted as this story develops.
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[Source: Blown Mortgage]
Countrywides Official Response to the NY Times
Countrywide issued an official response to the scathing New York Times expose on the mortgage lender’s alleged institutionalized practice of steering borrowers in to high cost loans. The lengthy, 3 page statement can be found here. (PDF)
In short, Countrywide categorically denies institutionalized steering and highlights everything the company does to ensure the highest percentage of people eligible for prime products end up in prime loans.
Here are some highlights:
Countrywides business processes are designed to prohibit steering borrowers who qualify for prime loans into subprime loans. In fact, the majority of consumers who come through Countrywides retail subprime channel receive a prime loan.
Second, Countrywides loan officers do not receive higher commissions for subprime loans with repayment penalties.
Third, Countrywide prides itself on the extraordinary efforts we are undertaking to assist borrowers who are experiencing difficulty making their loan payments, and in fact we have found solutions to keep more than 35,000 borrowers out of foreclosure during this year alone. The company has a team of 2,500 employees in its Home Retention Division dedicated full-time to these efforts.
…
Countrywides systems, scripting, training, policies and procedures focus on providing loan options that meet a borrowers individual objectives. We are committed to supporting every effort to help borrowers make informed credit decisions and understand the options available to them. A proprietary financial benefits worksheet is used with every subprime borrower to determine the benefit of the loan products offered. We make loans that provide a financial benefit to the borrower.
It is very hard to prove institutionalized steering. I know from a broker perspective there was always the carrot dangled of major rebates and fees on higher-cost loans (such as pay option ARMs) but that was on the prime side. I know that Full Spectrum and Countrywide retail are super-aggressive but I think it’s a stretch to say they made steering customers part of corporate guidance.
Could a sales team, branch office or loan officer take a mindset to maximize fees on products? Of course. Would a large company intentionally build its systems to funnel customers to subprime, it seems dubious.
What do you think?
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[Source: Blown Mortgage]
Thursday, August 30, 2007
High-end ARM reset (mild) hilarity
What do you get when you combine a bought-at-the-top Hamptons denzien with an adjustable rate mortgage and Career Builder’s Monk-e-Mail? Mild amusement worth forwarding to a friend.
Enjoy a little ha-ha courtesy of your friends at Blown Mortgage.
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[Source: Blown Mortgage]
Option One Sale in Jeopardy - H&R Block May Shutter Unit
Bloomberg is reporting today that the sale of Option One, H&R Block’s subprime mortgage unit, may be in jeopardy as the company is in default of many of the originally agreed-to deal points with buyer Cerberus Capital Management.
From Bloomberg:
H&R Block Inc., the biggest U.S. tax- preparation company, said it may shut a subprime-mortgage unit if sale negotiations with a hedge-fund manager collapse.
Cerberus Capital Management LP, which agreed in April to purchase the entire Option One Mortgage Corp. subsidiary, may buy just the loan-servicing business as demand for mortgages continues to deteriorate, Kansas City, Missouri-based H&R Block said today in a statement. Failure to renegotiate terms of the sale would force H&R block to close Option One, it said.
More from the OC Register:
The Option One announcement was included in H&R Blocks earnings report for its fiscal first quarter. The tax preparer reported a loss of $302.6 million, more than double the year ago loss of $131.4 million.
H&R Block said it has failed to meet certain aspects of its agreement to sell money-losing Option One and is trying to strike a new deal with Cerberus Capital Management, L.P. which was going to buy the mortgage unit. The news follows at least two rounds of layoffs at the lender in the past four months.
Here are the key points of the original deal that H&R Block hopes to change:
The closing conditions requiring Option One to have $2 billion in loans funded within 60 days of closing and $8 billion minimum in warehouse lines would be waived, with certain other closing conditions being waived or modified.
H&R Block would be responsible for divesting or winding down Option Ones remaining origination business, which would be pursued immediately. As a result, certain shutdown costs may be incurred.
Cerberus would purchase Option Ones loan servicing platform.
The parties are working toward advancing the Dec. 31 contract termination date to provide for an earlier resolution of the Option One situation.
The tax preparer said other parts of the original contract also may be changed or canceled. It said theres no guarantee Cerberus will agree to all the changes and the deal might fall through.
Some of my friends work over at Option One and have anecdotally confirmed the massive drop-off in originations since the onset of the subprime mortgage meltdown. The company continues to make adjustments to its product guidelines, and is rumored to be making the push towards conforming-only products (that is unsubstantiated at this time). The company also pared their outside sales-staff down significantly a few weeks ago, in an attempt to reduce losses associated with the origination side of the business.
It makes sense as Cerberus already has exposure to further potential losses directly and indirectly tied to the mortgage industry with its investments in GMAC and DaimlerChrysler. I would imagine that Cerberus would want the servicing platform as Option One handles a large portfolio of loans originated by themselves and others.
We’ll keep you posted as this story develops.
Read More...
[Source: Blown Mortgage]
Countrywides Official Response to the NY Times
Countrywide issued an official response to the scathing New York Times expose on the mortgage lender’s alleged institutionalized practice of steering borrowers in to high cost loans. The lengthy, 3 page statement can be found here. (PDF)
In short, Countrywide categorically denies institutionalized steering and highlights everything the company does to ensure the highest percentage of people eligible for prime products end up in prime loans.
Here are some highlights:
Countrywides business processes are designed to prohibit steering borrowers who qualify for prime loans into subprime loans. In fact, the majority of consumers who come through Countrywides retail subprime channel receive a prime loan.
Second, Countrywides loan officers do not receive higher commissions for subprime loans with repayment penalties.
Third, Countrywide prides itself on the extraordinary efforts we are undertaking to assist borrowers who are experiencing difficulty making their loan payments, and in fact we have found solutions to keep more than 35,000 borrowers out of foreclosure during this year alone. The company has a team of 2,500 employees in its Home Retention Division dedicated full-time to these efforts.
…
Countrywides systems, scripting, training, policies and procedures focus on providing loan options that meet a borrowers individual objectives. We are committed to supporting every effort to help borrowers make informed credit decisions and understand the options available to them. A proprietary financial benefits worksheet is used with every subprime borrower to determine the benefit of the loan products offered. We make loans that provide a financial benefit to the borrower.
It is very hard to prove institutionalized steering. I know from a broker perspective there was always the carrot dangled of major rebates and fees on higher-cost loans (such as pay option ARMs) but that was on the prime side. I know that Full Spectrum and Countrywide retail are super-aggressive but I think it’s a stretch to say they made steering customers part of corporate guidance.
Could a sales team, branch office or loan officer take a mindset to maximize fees on products? Of course. Would a large company intentionally build its systems to funnel customers to subprime, it seems dubious.
What do you think?
Read More...
[Source: Blown Mortgage]
Federal Housing Adminstration to help refi at-risk loans (USA Today)
Some homeowners with risky "subprime" adjustable-rate mortgages will be able to refinance before they lose their home to foreclosure, with the help of steps President Bush will announce today, senior administration officials said Thursday night.
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[Source: Yahoo! News Search Results for mortgages]
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[Source: Yahoo! News Search Results for mortgages]
Option One switches to all Fannie eligible products
As I mentioned in my last post, Option One has switched their underwriting guidelines from subprime to Fannie-eligible only according to this email below. While its understandable, I can’t see how you make a profitable business model out of it right now. There are tons of players who have been servicing the A-paper side of things forever; and new players are going to find it hard to gain any foothold at all.
Why would you send A-paper stuff to Option One if you’re A-paper traditionally goes to Wells Fargo? The only two viable I can think of are 1) pricing and 2) underwriting turn times. Both of these cause big problems for Option One. If the pricing is much better there is little to no profit in each loan; as the margins on agency paper are lean to begin with. Further, fast underwriting turn times typically mean that there is reduced volume and underwriters aren’t busy.
It doesn’t take a math major to figure out that low margin on low volume means low, low revenue. We’ll see how that further complicates the H&R sale to Cerberus.
Here’s the email received from Option One this afternoon:
Option One - Business As Usual
There are many uncertainties in today’s marketplace. Here is what we do know:
The nonprime mortgage originations business continues to be extremely volatile. The only stable source of liquidity is FNMA, which is why we recently changed our guidelines to ensure that all loans we originate are FNMA-eligible. We do not see any improvement in market conditions in the relative near term.
As H&R Block stated in its press release this morning, one option it is considering is the sale of Option One’s servicing business (rather than the entire company) to Cerberus. If this were to happen, then H&R Block would work with us to determine the appropriate manner and timing for H&R Block to divest itself of the origination side of our business. Again, this is one possible outcome, but nothing has been decided by H&R Block.
As of today, we continue to accept applications, fund loans and honor our pipeline.
Ummm….switching from subprime (jumbo too) to agency-only doesn’t sound like business as usual to me; but hey, what do I know?
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[Source: Blown Mortgage]
Rates on 30-Year Mortgages Fall (Washington Post)
WASHINGTON -- Rates on 30-year mortgages fell this week to the lowest level in three months.
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[Source: Yahoo! News Search Results for mortgages]
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[Source: Yahoo! News Search Results for mortgages]
Rates on 30-Year Mortgages Fall to 3 Month Low (Fox News)
Freddie Mac announced that 30-year, fixed rate mortgages averaged 6.45 percent this week, down from 6.52 percent last week.
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[Source: Yahoo! News Search Results for mortgages]
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[Source: Yahoo! News Search Results for mortgages]
1 in 5 default mortgages in California is investor loan (Deseret Morning News)
A Mortgage Bankers Association report on Thursday showed that up to one in five mortgages in default in California belongs to a borrower who is not living in the home with the troubled loan.
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[Source: Yahoo! News Search Results for mortgages]
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[Source: Yahoo! News Search Results for mortgages]
Refinance Your Parents’ Home Into Your Name
Refinancing a House
Whether you need extra cash for necessary home improvements or simply want to take advantage of lower interest rates, refinancing your home responsibly can be a useful tool for capitalizing on real estate equity. Many consumers look to the possibility of refinancing their home as a way to improve their financial status. Sometimes, in order to help a family member, individuals wonder if it is possible for them to refinance a family members home in their own name. The most common relationship when this question arises is between parents and their children. But whether you intend to refinance in your own name the property of a parent, sibling, cousin or total stranger, most of the answers remain the same.
Even Co-signing Carries Its Own Credit Issues
Regardless of whom you intend to sign or even co-sign for, your personal credit history, personal income, and debt/credit ratio will determine the amount of money you can refinance in your parents home. Home mortgage lenders are concerned with your reasonable ability to fulfill the terms of any refinanced home loan. Consequently, their willingness to approve your proposal will depend on their evaluation of your creditworthiness.
Lenders also want to make sure you can afford the monthly payments. This will depended largely on your financial lifestyle, current financial obligations and level of income. Current financial obligations that may frustrate your loan approval could include credit card debt, student loans, an auto loan, or (perhaps most relevant) your own home mortgage payments. As a general rule, mortgagers shy away from approving loans where the borrowers total mortgage payments account for more than 36%40% of the borrowers total monthly income. As such, your lenders willingness to approve your refinancing strategy rests greatly on your ability to make the extra monthly mortgage payment within your fiscal means.
Collateral: Its All in the Family
Another issue of concern to potential home mortgage lenders when you consider refinancing a parents home in your name is collateral. Lenders demand a modicum of security. All banks and most lending institutions prefer your monthly cash payment to the possibility of foreclosure and seizure of land.
Banks are in the money business, not real estate. But at the end of the day, your lender will need proof that in the event you default on your loan, the lending institution will be able to salvage the money it lent you. The fact that the home you intend to refinance is in another persons name may be problematic when the bank evaluates its security risk in your home mortgage refinance application. Before make any hard-set plans, talk to your personal lender or a real estate attorney about local or state laws that may complicate your request to refinance your parents home in your name.
Additional Resources:
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[Source: Mortgage Blog]
Banks Press American Home for Mortgages (AP via Yahoo! Finance)
Acting on behalf of a syndicate of investors, a unit of Credit Agricole has laid claim to nearly $1.2 billion worth of mortgages caught up in the bankruptcy of American Home Mortgage Co.
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[Source: Yahoo! News Search Results for mortgages]
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[Source: Yahoo! News Search Results for mortgages]
OfferAngel.com Founder Meg Burns Interview
In this edition of the Blownmortgage.com interview series we speak with Meg Burns, the founder of OfferAngel.com. Offer Angel’s mission is to bring transparency to the loan origination process by providing loan officers with an independent platform to present their offers to consumers. It equips consumers with tools that make comparing competing mortgage offers a much easier process.
In this interview we talk about the common problems that loan originators face when working with a customer who has come from an online lead provider. We also talk about the problems consumers face when shopping for a mortgage, including a discussion on too-good-to-be-true offers and bait-and-switch tactics.
OfferAngel.com is working hard to eliminate those dangers associated with shopping for a mortgage; and make it a more equitable and honest process for both loan originators and customers.
Blown Mortgage is an affiliate of OfferAngel.com and does receive compensation if a loan officer signs up for the service through our banner links. However, we are strong supporters of anyone looking to improve the mortgage origination process by making transparency and honesty the pillars of the process.
Music licensed under the Creative Commons license, The Streets of Miami performed by Dokapi.
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[Source: Blown Mortgage]
Bernanke calls for new mortgage products to ease crunch
Ben Bernanke, in a letter addresses to Senator Schumer outlined some high-level thoughts that the Fed Chairman has to help alleviate the pending ARM-reset foreclosure wave. Bernanke calls for innovative mortgage products and more buying capacity for Freddie and Fannie to help subprime borrowers trapped in exploding ARMs.
From Market Watch:
The private sector and Congress should create new, affordable mortgage products that would help some homeowners refinance their mortgages and keep their homes, Federal Reserve Chairman Ben Bernanke suggested in a letter released Wednesday.
…
In his letter, Bernanke called for creative thinking to get the nation out of its subprime mess.
“It might be worth considering at this juncture whether the private and public sectors, separately or in collaboration, could help the situation by developing a broader range of mortgage products which are appropriate for low-and moderate-income borrowers, including those seeking to refinance,” Bernanke wrote.
“Such products could be designed to avoid or mitigate the risk of payment shock and to be more transparent with respect to their terms,” Bernanke wrote. “They might also contain features to improve affordability, such as variable maturities or shared-appreciation provisions for example.”
What do you think?
If you couldn’t tell by my lack of posting, it’s been a busy day for me here; so I’ll have more thoughts on this later this evening.
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[Source: Blown Mortgage]
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