Today’s FOMC meeting adjourned with an announcement of another quarter point increase to key short-term interest rates. This was the sixteenth consecutive increase but was expected and has not affected mortgage rates or bond trading much. However, the post-meeting statement did lead to inflationary fears and initially, sellin g in the financial markets.

The statement indicated that more rate hikes may be needed, depending on future economic data. This was not what analysts were expecting to hear. They wanted a stronger hint that the end is near for the increases and inflation was in-check. The knee-jerk reaction led to selling in the markets and upward revisions to mortgage rates.

The Dow has rebounded from the initial selling, currently standing up 20 points, while the Nasdaq remains down 12 points. The bond market has given back its earlier gains, currently standing +1/32. This will likely lead to many lenders revising rates higher this afternoon by approximately .125 of a discount point.

Tomorrow morning will brings us the first piece of important economic news. April’s Retail Sales data will be posted at 8:30 AM. This is an extremely important report for the financial markets as it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. ec onomy, this data can have a pretty significant impact on the markets. Current forecasts are calling for an increase in sales of approximately 0.8%. A smaller than expected increase should push bond prices higher and mortgage rates lower. However, a larger increase could fuel bond selling and lead to higher mortgage rates early tomorrow.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

 

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Wednesday’s bond market has opened up slightly as investors prepare for today’s FOMC meeting results. The stock markets are mixed with the Dow up 5 points and the Nasdaq down 8 points. The bond market is currently up 5/32, which will likely push this morning’s mortgage rates lower by approximately .125 of a discount point.

There is no relevant economic n ews scheduled for release today. We do, however, have the FOMC meeting to deal with. It will adjourn at 2:15 PM ET today and is expected to bring another quarter point increase to key short-term interest rates. The move itself will not likely affect the markets, but the post meeting statement should lead to some volatility during afternoon trading.

Traders will be looking for any indication of the Fed’s next move. Many are hoping and expecting to see that a pause or end to the rate hikes will come in the immediate future. If the post-meeting statement confirms that theory, we should see the bond market rally and mortgage rates fall this afternoon. But, a hint of more rate hikes could lead to bond selling and higher mortgage rates later today and tomorrow.

Look for an update to this report shortly after the markets have had an opportunity to react to the news.

If I were considering financing/refinancing a home, I would…. Lock if my closing was takin g place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

 

Provided by a la mode

 

 

 

According to the Justice & Integrity Project in its newest home lending survey, overcharging the homeowner and or out right fraud have reached epic proportions in the U.S. mortgage markets. The net result is that mortgage lenders and or those who purchase mortgage portfolio’s may be at risk for tens of billions of dollars in liability for fraud or for the intentional overcharging of tens of millions of U.S. homeowners.

According to the survey, the number one culprit in lender overcharging is a mortgage fee called a “Yield Spread Premium”. A “yield spread premium” is a term for a fee that is paid as a kick-back to mortgage brokers for increasing the borrowers interest rate over the best rate the consumer could have received at time of the closing of the home loan. While mortgage brokers must disclose these hidden fees, mortgage bankers and or banks have no such requirement. What is astonishing about the bank/mortgage banker exemption from yield spread premium disclosure to the consumer is the fact banks/mortgage bankers like mortgage brokers get these kick backs too-they simply are not required to disclose them.

Of the over 1000 homeowners polled, less that 3% realized that the mortgage broker had received a yield spread premium/extra compensation on their mortgage transaction. Put another way, if a yield spread kick-back is received by the mortgage broker, the homeowner is now paying a higher monthly mortgage payment. The survey also discovered that far less than half of all homeowners receive the federally mandated Good Faith Estimate and or Truth in Lending Agreement within three business days of the homeowner making application for a home loan. In the instance of mortgage brokers; a yield spread is supposed to be disclosed on the Good Faith Estimate; but according to the survey results, it is disclosed less than 1% of the time. To make matters worse, the yield spread premium kick-back is rarely disclosed on a HUD-1 Settlement Statement as a “Yield Spread Premium”, rather it is disclosed as a “POC Broker Comp” or something else as confusing to the consumer. The vast majority of consumers surveyed indicated that if they had known the broker was receiving this additional compensation that resulted in a higher monthly mortgage payment…they would not have gone through with the mortgage transaction with the broker. Again, for some unknown reason banks and mortgage bankers are not required to disclose their yield spread premium kickback to the homeowner even though they receivce them too. Many to most banks or mortgage bankers simply give the consumer a higher interest rate and pocket the extra profits with no disclosure. In this example the consumer gets a higher monthly mortgage payment and never knew it happened.

With respect to Yield Spread’s, the survey concluded that lack of meaningful or understandable disclosure of the yield spread could mean tens of millions of individual law suits asserting the claim that the borrower never knew about the yield spread premium or kick-back for increasing the borrowers interest rate/monthly mortgage payment.In some states, this can get expensive because the borrower may be entitled to the difference between the rate that the homeowner deserved versus the rate the homeowner received multiplied by 360 payments.

As an example, a borrower received a 6.50% interest rate versus a 6.0% rate they could have received from the broker & the broker received his or her kick-back (perhaps thousands of extra dollars). The difference in the monthly payment was $100. The unaware borrower/possible victim may be able to sue for $100 X 360 in this example (the number of payments in a 30 year mortgage) and actually win. In this case, the recovery would be $36,000 plus potential legal/court costs. While no one affilitated with this survey is a lawyer, and while this is not an attempt to practice law/render a legal opinion, there may be case law to support tens of millions of individual yield spread lawsuits on the part of homeowners; especially in light of the fact that over 90% of consumers never even knew what yield spreads were or what they did to their monthly mortgage payment.

HUD’s various statements on the topic are at best contradictory,unclear and very confusing. One thing that HUD has been clear about is that yield spread premiums must be disclosed to the borrower (unless you are lucky enough to be a bank or mortgage banker). The survey discovered yield spreads are not disclosed because 97% of the homeowners surveyed never knew what a yield spread was/what the yield spread meant to their monthly mortgage payment. Up until this point the mortgage industry has tried to explain away yield spreads as a fee the broker gets from the mortgage banker/bank so that the consumer does not have to pay for the costs associated with the mortgage out of their pocket/home equity. In fact, in the vast majority of cases we observed the broker was paid twice, once for their standard origination and other fee’s and at the same time they were paid a yield spread premium kick-back for increasing the borrowers interst rate with little or no disclosure, or a disclosure that could be described as impossible for almost any consumer to understand. As a footnote…many in the mortgage industry refer to “yield Spread Premiums” as “back-ending” or “back loading” the borrower/the deal. Even banks and mortgage bankers use these terms…they simply are not required to disclose the “back-ending” to the uninformed U.S. consumer.

The survey also discovered junk mortgage fees and or needless and or duplicative mortgage fees are on the rise. According to the survey typical junk mortgage fees are “loan application fee’s”, “document prep fees”, “loan discount fees” (with no discount),”funding fees”,”Table funding fees” and or “appraisal review fee’s”. In the strongest terms possible, the survey/study suggests that the Department of Housing & Urban Development should level the playing field for consumers and inact an immeadiate requirement that banks and mortgage bankers be required to show yield spread premiums on all HUD-1 Settlement statements & Good Faith Estimates, (as do mortgage brokers) along with a new requirement for a simple form signed by the borrower explaining the extra compensation from a yield spread to a broker, mortgage banker or a bank along with what this fee will do to a borrowers monthly mortgage payment. The study also suggests a $25,000 fine per occurance for duplicate or upcharged mortgage fees or poorly disclosed yield spread premiums as a way to deter this type of activity and or provide for additional consumer protection in the home mortgage process.

While the forgoing is a biblical type disaster for the mortgage industry that may rival or exceed the S & L Crisis of the 1980’s, the other situation discovered may turn out to be just as bad. This newest survey/study contacted appraisers mortgage brokers & real estate agents nationwide on the topic of phony real estate appraisals and or appraisals that over-estimate a homes value. The results were startling. According to nationwide interviews of appraisers, mortgage brokers and real estate agents, 15%+ of all real estate appraisals puff up or overstate the value of a home.

According to those polled, the mortgage lender or the real estate agent calls the appraiser and says “I need a certain value on this home”. (regardless if the homes value is in fact anywhere close to the desired value)If the appraiser refuses to do the phony/puffed up appraisal, the real estate agent or mortgage lender will simply find another real estate appraiser who wants the money for the appraisal, regardless if the appraisal is based on fact or in many cases fiction. The transalation on all of this is simple. This nations real estate markets may all have over-stated value. This suggestion is based on the fact that if a home’s value was founded on false or inaccurate comparable home values, all appraisals and or notions of value might be impacted.

Members of the media are encouraged to contact local real estate appraisers, mortgage lenders and or real estate agents to verify our real estate valuation findings. It goes without saying that a real estate market that is not worth what it says it is worth puts at risk nearly every type of citizen, homeowner, financial institution and or pension fund in this nation. Once again this begs the question…where was the Department of Housing & Urban Development when all of this was/is happening? As for members of the U.S. House or U. S. Senate Banking Committee’s…the question may be…How do they protect 75 million U.S. Homeowners when their biggest campaign contributers are the mortgage or banking industries?

The study concludes that of the current 75 million U.S. homeowners, 50 million plus were chagred yield spread premiums that were never disclosed or were poorly disclosed to the consumer. As a result we have 50 million plus U.S. homeowners who have paid or are paying a higher mortgage payment every month. For homeowners wishing to discover if they might have an undisclosed or poorly disclosed yield spread premium in their mortgage documents they are welcome, to contact the National Mortgage Complaint Center through our web site (http://tinymce.moxiecode.cp/mce_temp_url) for a thorough and affordable examination along with the names of lawyers or law firms that might be able to help them in their state. According to the study there are tens of millions of U.S. homeowners who may be owed thousands, if not tens of thousands each, because of the yield spread premium kick-back scheme. If plaintiffs law firms and or individual attorneys have an interest in possible individual yield spread consumer cases and or mass torts involving possible improper disclosure of yield spreads, they are encouraged to contact The National Mortgage Complaint Center.If you are a current or former employee of a mortgage firm, a mortgage banker or a bank that intentionally cheats or overcharges consumers we would also like to hear from you at the National Mortgage Complaint Center.

 

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Associated Press A bill planned for the 2006 legislative session would allow mortgage fraud to be prosecuted under Utah’s anti-racketeering laws. Different types of mortgage fraud are prosecuted under different sections of the state’s criminal code. Classifying the offense as racketeering would serve as a deterrent because perpetrators would likely face stiffer penalties if convicted, said the sponsor, State Rep. Paul Ray, R-Clinton. Mortgage fraud fits the legal definition of racketeering because it can involve a conspiracy among several people, including homebuyers, builders, real estate agents and lenders, said Ray, who is a commercial lending officer for Sterling Mortgage in Salt Lake City. Ray’s bill would bring attention to mortgage fraud, said Michael Blackburn, a spokesman for Perfect Home Living, a Centerville organization that works with law enforcement agencies to catch people involved in mortgage fraud. “The law is really lenient when it comes to mortgage fraud criminals,” he said. Ray’s bill also would ask the state attorney general to hire a special prosecutor and possibly an investigator at a cost of about $150,000 a year to specifically handle mortgage fraud cases. “Mortgage fraud is so complicated that it’s better to get one person to prosecute it,” Ray said. The FBI in Salt Lake City has more than 260 mortgage fraud cases awaiting prosecution, he said. In 2004, there were 255 complaints of mortgage fraud in Utah that involved funds from federally insured lending institutions, representing losses of about $11.1 million, according to the FBI. Ray’s bill also would authorize the state to prosecute violators of the federal Truth in Lending Act. The act is designed to protect borrowers and requires lenders to disclose payment schedules, finance charges, prepayment and late payment penalties, and other information.