American Mortgage Blog

The big news recently was the $25 billion-plus settlement between the states and the five largest banks. But, unfortunately, the national mortgage settlement will not help everyone in trouble. For example, to pick one state, numbers indicate that 62% of California mortgages are held by Freddie Mac and Fannie Mae. The settlement does not apply to those.

Up until the last few years, events overseas had little or no impact on our bond or stock markets. Traders would go to work in the morning in New York, and although they knew what happened overnight in other markets, it was rarely too much of a concern unless something cataclysmic had occurred.

During his State of the Union Address, President Obama made several comments directed at housing, and at the mortgage market. In particular, he announced that he will send Congress a plan that will allow responsible homeowners who are current on their payments to save $3,000 a year on their mortgage by refinancing. If this plan requires Congressional approval, it will probably have a very low likelihood of succeeding in 2012.

Up until a few years ago, few people outside of the mortgage industry knew what a FICO score was. Now, it seems that many people make decisions purely based on how something may or may not impact their credit scores, which in turn impacts their ability to borrow. As a quick refresher, the score is representative of how the borrower has upheld their debt obligations in the past. But of great interest now is answering the question, “Did your credit score drop in the last few years?”

Consumers want the best price and best value, whether it is with a gallon of gasoline or a mortgage. Most lenders’ business comes to them from referrals, which is a very good thing, and many mortgage loan originators have had years of experience watching borrowers shop for loans. Some shop different lenders as if they could make a selection based on price. Most mortgage borrowers, however, don’t try to shop; they select or are selected by a single lender, which tends to work very well.

As we start 2012, the housing, and mortgage, industry is in a very interesting position. Interestingly, looking back over the past several decades, many analysts believe that this year will be a great time to obtain a new mortgage. So although economic uncertainty (isn’t there always economic uncertainty?) is still present, and loan documentation requirements have increased, housing prices and low mortgage rates have made homes incredibly affordable.

It is hard, as things stand now in the United States, not to mix politics and the mortgage industry. Congress agreed to finance a two-month extension of the payroll tax cut and unemployment benefits by raising the guarantee fee that Fannie and Freddie charge loan originators by at least one-tenth of a percentage point. And it is unlikely that mortgage companies will absorb this cost, but instead pass it on to borrowers on new loans. The bill also will raise the annual mortgage insurance (MI) premium borrowers pay on Federal Housing Administration loans by one-tenth of a percent.

For a lender, down payments represent “skin in the game” since the more money a borrower can put toward a house the more the buyer will lose if they stop making payments. For many borrowers, attempting to put as little down toward the purchase of a house is standard, as they would rather have more money left over for furnishings, landscaping, and so on.

Congress voted, and the president signed, a bill re-increasing the FHA loan ceiling. Fannie and Freddie, better known for conventional conforming loans, were not so fortunate: their maximum one-unit loan limit stayed put at $625,500. It was reduced to that level on October 1 from the previous $729,750.

As the U.S. economy continues to bump along toward year-end, there are plenty of suggestions on how to repair it. And many of those involve the housing and mortgage market, especially with the recent HARP refinancing news. If politicians in Washington could ever put their differences aside, there are some very useful things that might help.