Underwriter

HUD’s Mortgagee Review Board has suspended three mortgage lenders accused of serious violations under the agency’s regulations.

Golden First Mortgage of Great Neck, NY, Great Country Mortgage Bankers, Inc., of Coral Gables, FL, and Beneficial Mortgage Corporation of San Juan, PR have all been barred from originating new FHA-insured mortgages.

The Board found that Golden First Mortgage failed to notify HUD/FHA about an investigation by the Office of Thrift Supervision into the business activities of the company’s president, including his involvement in a civil money penalty.

Great Country Mortgage Bankers, Inc. was suspended for violating multiple HUD/FHA requirements, including failure to implement a quality control plan, failure to disclose business affiliations, and failure to properly verify “key credit information” on 55 FHA mortgage loans reviewed by HUD.

Beneficial Mortgage Corporation was suspended for failing to notify HUD/FHA about an investigation and sanctions imposed by the Puerto Rico Financial Institutions Commissioner’s Office related to its loan servicing practices.

HUD took these actions after it determined that the serious nature of each violation posed a risk to the agency and the public, as well the FHA’s depleted insurance fund.

FHA lending increased an unhealthy 169 percent in the first half of fiscal year 2009, prompting HUD officials to improve oversight and go after bad players.

The suspension of these three companies is probably just the beginning of what will be an ongoing trend in cleaning up the FHA lending space, which many liken to the new subprime. Story courtesy of Truth in Mortgage.

The below tell-all article exposes how the mortgage banking industry twisted the arms of appraisers and how the government ignorantly refused to take appropriate steps to curb fraud and abuse. Again and again I wonder when the regulators will start doing their jobs and again and again I am disappointed.

How can we relie on regulators that are deaf, dumb and blind to help consumers and protect the system.

Unheard Warning Bells

""Before real estate prices began to plummet in 2006, some sounded the alarm on fraudulent appraisals and lender pressure, but few listened to the warnings, least of all Congress, industry regulators, and the Justice Department.

David Callahan, a founder of the public policy think tank Demos, was one of the first people to study inflated appraisals and lender pressure. In 2005, Callahan wrote a paper describing the financial incentives for lenders and appraisers to pursue inflated appraisals. The goal of lenders, brokers, real estate agents and developers was to ensure that a home loan closed without a problem, Callahan said. All those people exert pressure on appraisers to inflate values.

In a 2007 study by October Research, a real estate news provider, 90 percent of more than 1,200 appraisers polled reported feeling pressure to change property values, usually from lenders, mortgage brokers or real estate agents.

“Congress didn’t really care about it,” Callahan said, noting the lack of reaction his report generated in Washington. “There was remarkably little legislative activity looking at the corruption in the real estate market.”""

Mortgage Interest Rate Buydowns

Most mortgage borrowers shop for the lowest mortgage interest rate. Finding the lowest rate is one way to gain a low mortgage interest rate, another is to buy down the rate.

Mortgage borrowers will take a higher mortgage interest rate with lower closing costs (higher rate usually means lower fees). Other mortgage shoppers will buy the lowest possible interest rate by paying one-time up front fees to save on interest over the long-run. This is a prudent idea if the borrower intends to keep the property for many years.

If you’re working with a mortgage bank or mortgage broker you can buy down your rate by buying "points". This is called "buying down" the mortgage interest rate and is very common in the mortgage industry.

Since coming out of a sellers market, some real estate agents aren't aware of the practice of having the seller buy down mortgage rates for the home buyer. Your agent may be too timid to ask for a buydown but you should still ask the agent and the seller to offer a buydown contribution as part of the purchase offer.

If you are refinancing, decide whether you should buydown your rate by speaking to your loan officer and calculating the savings over the loans term. This is a fairly easy thing to do. Most of the time you can save a .25% on rate by paying 1% in "points". A point is 1 percent of the loan amount.

For example, if your interest rate is level at 6.25%, but you would like a mortgage interest rate of 6%, you’ll need to buydown the rate.

your broker rates sheet could look like this:

Rate / Fee

6.25% - 0.00 (Level/par: not paying $ and not costing $ )

6.00% - 1.00

Each rate has a price/cost that is displayed as a percentage of the loan amount. A mortgage loan at the Level or Par rate would be 6.25% in the above example because it has an associated price of zero.

Usually as the interest rate goes lower, the cost goes higher. Many homeowners or buyers may have a certain interest rate they must have. It is important to compare your payment at different rates and the associated costs for buying down those rates to see if its worth it.

You can easily calculate your payment comfort range by plugging the numbers for payment, cost to get that rate and the savings over the years.