Refinance Applications Surge 26.4% as Rates Set New Lows

Mortgage applications jumped 23.1 percent on a seasonally adjusted basis during the week ended January 13, 2012.  The increase in the Market Composite Index, a measure of loan application volume maintained by the Mortgage Bankers Association (MBA) reflected improvements in both the purchase and refinance business following the traditionally slow Christmas and New Year holiday period.  On an unadjusted basis the index increased 38.1 percent.

The Refinance Index increased 26.4 percent from the week ended January 6 to its highest point since August 8, 2011.  The seasonally adjusted Purchase Index rose 10.3 percent, returning to pre-holiday levels.  The unadjusted Purchase Index was up 28.4 percent from the previous week and was 2.2 percent higher than during the same week in 2011.

The four-week moving average for each index also increased; the Composite Index increased by 5.99 percent, the seasonally adjusted Purchase Index by 1.96 percent and the Refinance Index by 7.0 percent.

Refinancing took an 82.2 percent share of all application activity, up from 80.8 percent the previous week and the highest share since October 22, 2010.  Applications for adjustable rate mortgages (ARMs) constituted represented a 5.6 percent share of applications, up two basis points from the previous week.

“Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “With mortgage rates reaching new lows, refinance volume jumped and MBA’s refinance index reached its highest level in the last six months.  Purchase activity also increased as buyers returned to the market after the holiday season.”

With the exception of jumbo loans (with balances over $417,500) interest rates continued their downward trend. Three of the rates, in fact, hit the lowest level in the history of the MBA applications survey.  The jumbo rate – for 30-year fixed-rate (FRM) loans – increased to 4.40 percent from 4.34 percent with points decreasing to 0.37 from 0.47 point.  The effective rate also increased.

Thirty-year FRM with conforming (under $417,500) balances hit a new low, decreasing to 4.06 percent with 0.48 point from 4.11 percent with 0.41 point. The effective rate also decreased.

Rates for FHA guaranteed 30-year FRM were at 3.91 percent with 0.59 point, the lowest FHA rate in the history of MBA’s application survey, down from 3.96 percent with 0.72 point.  The effective rate also decreased from the previous week.

The third all-time low is the 3.33 percent rate with 0.39 point for the 15-year FRM.  This was a drop from 3.40 percent with 0.37 point rate the previous week.  The effective rate also decreased.

The average contract interest rate for 5/1 ARMs was unchanged at the record low 2.90 percent established the previous week.  Points decreased to 0.45 from 0.49.   The effective rate also decreased from last week.

All rates quoted are for 80 percent loan-to-value originations and points include the application fee.

 MBA’s covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.

HOPE Now Nears 5 million Loan Modification Mark

HOPE Now, which was the first program initiated to deal with the mounting foreclosure problem in 2007, has reached a level of 4.86 million loan modifications. HOPE is a voluntary private sector alliance of mortgage servicers, investors, private mortgage insurers and non-profit housing and debt counselors.

HOPE reports there were 56,000 permanent modifications of proprietary loans during August,  unchanged from the July rate. This brings the total of proprietary modifications since 2007 to 4.06 million. An additional 791,399 modifications were completed up to the end of July through the Home Affordable Modification Program (HAMP), a joint initiative of the Departments of the Treasury and Housing and Urban Development.

To date this year HOPE has completed 690,000 permanent loan modifications.  An estimated 478,000 of these were proprietary and 211,749 were completed under HAMP with August HAMP totals not yet tabulated.

Completed foreclosure sales increased in August from 65,000 to 68,000 (+5 percent) and foreclosure starts increased 18 percent from 185,000 in July to 218,000 in August. Sixty plus day delinquencies were up only slight from July figures at 2.81 million.

Reduced principal and interest payments accounted for approximately 83 percent of modifications in August and 38,000 loans were modified with reductions in principal and interest payments of more than 10 percent.  Eight-three percent of proprietary modifications in August were fixed-rate with initial periods of five years or more.

Faith Schwartz, Executive Director, reports, “HOPE NOW’s servicing partners continue to complete permanent loan modifications at a rate consistent with past months – in spite of tremendous negative impact of the continued housing and unemployment crisis. And, in cases where modifications are not possible, the industry is working hard to educate at-risk homeowners about the options available to them.”

Related articles

• HAMP Loan Modifications Performing Well (youngenvied.com)
• Freddie Mac Finalizes New Modification Option (michael-mcdevitt.com)

Mortgage Rates Rise Slightly Heading Into The Weekend

After two days of significant improvements, Mortgage Rates took a measured step back today.  Best-Execution rates rose about an eighth of a point, but in some cases, your rate may not have changed at all today-merely your closing cost quote (temporary caveat that we’ll probably repeat a few more times):

Please keep in mind that lenders simply cannot move mortgage rates lower at the same pace as a rapid rally in Benchmark Treasuries.  Although you might hear talking heads on TV or read articles saying that mortgage rates are tied to Treasuries, THEY ARE NOT, and you’ll be perennially frustrated if you expect them to be.  We explained that in greater detail earlier in the month:(Why aren’t rates getting lower as fast as Treasuries). 

Today’s Rates:  The current market is in a state of flux at the moment and mortgage rates moving up and down around ALL TIME LOWS.  BestExecution 30yr Fixed rates were mostly near 3.875% today, with a higher than normal degree of variation around there.  FHA/VA deals are in a bit of a predicament that’s keeping them blocked off below 3.75% (there’s no secondary market for rates any lower than that right now!).  For similar reasons, 15 year fixed conventional loans may be stuck at 3.25%.  5 year ARMS remain near 3.125%, but with variations from lender to lender.

GUIDANCE:  Yesterday’s guidance was really excellent.  As feared, we saw plenty of “pipeline control” price changes among lenders, and that was exacerbated today by weakness in the bond market.  Strategically (longer term, bigger picture), locking when the Best-Execution rate is 3.875% makes a ton of sense.  Even on a shorter term outlook, the broader shift that’s taken place behind the scenes in the secondary mortgage market suggests a range of rates between 3.75 and 4.125.  So right now it’s leaning slightly to the more aggressive side.  If there was any better time in history to lock a loan than today, it was yesterday.  We don’t know what sort of opportunities will be available next week, and although we think rates will be relatively low for a while, we’re not sure it’s worth the risk to float for marginal gains when we’re only an eighth or two away from some of the most aggressive offers yesterday (and consequently, of all-time).

Freddie Mac Finalizes New Modification Option

Freddie Mac finalized requirements for a new modification option that will be made available to qualified borrowers on Oct. 1.

Mortgage servicers must evaluate borrowers deemed ineligible for the larger Home Affordable Modification Program for the new “Standard Modification” beginning in January. Trial period plans can begin in October. Through the new program the borrower‘s principal and interest payments drop at least 10%, according to Freddie.

Since March 2009, servicers granted roughly 791,000 permanent HAMP modifications and extended more than 1.6 million trials through the national program. But servicers canceled more than 763,000 trials because of redefault, not enough documentation or the borrower did not meet the requirements.

In order for a borrower to qualify for a standard modification, he or she must be at least 60 days delinquent. If they’ve missed fewer payments or are current, he or she must be an owner-occupant, in imminent default and provide a hardship document.

The borrower must have already been evaluated for HAMP within 12 months of the Standard Modification. Mortgages on homes without an owner-occupant can be eligible, even vacant homes that cannot be condemned.

The loan-to-value ratio of the mortgage must also be greater than 80%.

Servicers will receive $1,600 for each modification completed before the loan slips into 120-day delinquency. They get $1,200 for a modified mortgage between 120- and 210-days behind. For standard modifications completed after 210 days of missed payments, the servicer gets $400 from Freddie.

The standard modification program will fall under the joint servicing alignment initiative launched in April.

How And Why Commercial Loan Modifications Are Completely Attainable By Real Experts

It’s entirely possible for struggling commercial-property owners to obtain a loan modification, Capital Mitigation Group is a commercial-foreclosure-prevention firm that specializes in modifying rates, terms and amortization schedules. They employ a vareity of Seasoned Commercial Mortgage Pro’s including bankers/brokers, asset managers, negotiators, mitigators, certified auditors, underwriters and attorneys displaying an ecleptic group on a mission. 

The problem is that most commercial-mortgage borrowers don’t know the proper way to ask, I don’t think that it’s not the borrowers’ fault, think about it. Did the clients faciliatate their own loan? No, of course not, they use a professional, so it only makes sense to do the same in attempting to modify. I say this because Commercial is very different than Residential, with Residential you have these huge conglomerates called Fannie Mae and Freddie Mac that basically own all the paper on conforming loans. Commercial loans on the other hand are usually the banks own money.

The point I’m tyring to make is the borrower discloses their Personal Financial information, if it is disclosed innacurately I’m going to have a hard time trying to convince the underwriters at the bank how and why your financials are unusually different from when you applied 4 months ago. If someone sued you would you represent yourself in court?  If you have very complex financials would you file your own taxes? No, lawyers speak a different landguage and certain CPA’s understand Tax Strategy and know how to disclsoe income and expense information in a manner that allows their clients to pay the least amount of money,  We do the same thing.

Obtaining a loan modification can be difficult, especially if the loan is what’s known as a commercial mortgage-backed securities loan, or CMBS loan. CMBS loans are often tricky to modify, because the original issuer of the loan is no longer involved and the beneficiaries are individual and institutional investors, often scattered across the globe.

A CMBS loan, usually in default, is regularly managed by a loss-mitigation specialist known as a special servicer. It’s easy for commercial-property owners to get discouraged when trying to obtain a loan modification from a special servicer, because the negotiation process can resemble talking to a wall.

With my experience in the commercial finance industry, special servicers were essentially limited to accepting or rejecting the borrower’s offer. They usually are prohibited from making a counteroffer or disclose why a borrower’s offer was rejected. As a result, I’ve experienced first hand that borrowers have often given up after a couple of rejected offers.

CMBS loans, which total about $36.5 billion, was issued in Arizona with little improvement in the value of commercial real estate, Arizona could be headed for more serious problems economically if a high percentage of CMBS loan defaults end with foreclosure. Currently, about $3.5 billion of CMBS loans in AZ have already filed Notice of Defaults.

The value of outstanding CMBS loans is $800 billion Nationwide. More than 60 percent of those loans were issued between 2005 and 2007, when commercial real estate was heavily overvalued. Most commercial-mortgage loans don’t face a serious risk of foreclosure until they reach maturity, usually after 10 years… usually. The meaning behind this is that foreclosures seen so far among commercial properties barely scratch the surface of the problem.

There is no question in my mind that the worst has yet to come in Commercial Real Estate. The situation isn’t hopeless, Capital Mitigation Group specializes, for a fee, the structuring of a loan-modification proposal based on deals special servicers have accepted in the past.

While Capital Mitigation Group has a business model that is relatively unique, it isn’t the only company in this business that has successfully prevented a CMBS loan from being wiped out by foreclosure.

A landmark case decided in 2010, a Maricopa County Superior Court judge held that a receiving commercial investment company could sell seven Arizona apartment complexes formerly owned by the by a “investor group” based in California, without requiring the assigned special servicer to foreclose on the properties.

An “investor group” financed the purchase of the seven apartment properties with a $164.5 million CMBS loan in 2007 and subsequently defaulted on the loan. By allowing a new buyer to assume the CMBS loan, rather than wiping out the debt and forcing the buyer to pay cash, the court protected bond holders connected with the loan and prevented the seven apartment properties from losing at least $50 million in combined value, so I’ve read.

Since Capital Mitigation Group has opened millions in CMBS loan restructures / modifications and are using a variety of methods which include term extensions, discounted payoffs, interest-rate reductions, forbearance agreements and extension of adjustable rates to fixed rates for underwater properties.

Unless more commercial-building owners can work out deals with their lenders to avoid foreclosure, the real-estate and lending crises are likely to continue for years to come and Capital Mitigaiton Group is a provider that ensures success.

Investment funds and pension plans, too, will suffer if more CMBS loans cannot be modified. Because of its early successes with obtaining commercial loan modifications, Capital Mitigaiton Group has expanded.  Capital Mitigation Group intends on expanding and being very selected in candidates. CMG also offers, for a fee, the opportunity to be a Net Branch and leverage and use ALL of our Marketing Platforms, Customer Database Management / CRM, Forms and Tools, and a variety of very useful training.

For more information send me a message.

To You Commercial Realtors: Development Loans!

Development Loan Options!

Possibly the most needed loan in the marketplace today is the development loan.  Letting people know you have it slams you with leads and deals because- so few people are doing it.

You see, to a bank, especially in this environment, a construction loan is a huge risk.  No income or cash flow for 1-3 years and you hope there are no delays, etc.  Most of the bad loans on a banks books right now are construction loans gone awry.  Construction loans go immediately to the high risk portion of a bank’s balance sheet and hurts their ratio of good loans to bad loans that they are being graded on by the FDIC when they come in to audit them.  In other words, to a bank, there is NO reason to do a construction loan, it can only hurt the bank.  It is in this area that I have probably worked harder than any other finding good sources for my guys.  And we have OPTIONS for development loans right now, for example we have:

-normal construction loans to 65% Loan to Cost (LTC) for most commercial projects up to $10 Million

-hotel construction loans to 70% LTC in major metro markets to $8 Million

-a hedge fund that can do mega-strong development loans above $10 Million and with a combination of debt, equity and mezzanine, can get up over 80% LTC

-a trade program that is sourced and vetted and can net a project $40 Million for $10 Million on deposit that never leaves the clients control.   I have all the proof of that transaction-something no one else seems to be able to get on trade platform loans-proof!

–FHA construction financing up to 90% LTC from $2 million to $50 million

-and of course, SBA build-out money nationwide

Exciting stuff.  The kind of stuff that can make you hundreds of thousands of dollars this year.  It has taken me over 1 year to find these sources, and I have them available for you and your clients.  Give me a call today at 888-650-9966 Ext.100 for more info on any of these products or to run a scenario by me.

Together, we can have an INCREDIBLE 2010!  Have an awesome week and talk to you soon!

Mike McDevitt

P.S. Remember, I have many options for development and construction money that you probably will not get from any local banks.  Give me a call TODAY to discuss at 888.650.9966 Ext.100.  Be blessed!