Tag Archives: Home Mortgage

Mortgage Applications Decrease in Latest Mortgage Bankers Association Weekly Survey

The first graph shows the refinance index. The refinance index is down 76% from the levels in May 2013. Refinance activity is very low this year and will be the lowest since year 2000.

The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is down about 11% from a year ago.

Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 26, 2014 …

The Refinance Index decreased 0.3 percent from the previous week. The seasonally adjusted Purchase Index remained unchanged from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 11 percent lower than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.33 percent from 4.39 percent, with points decreasing to 0.31 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Source: Calculated Risk


From One Scam to Another: How Banks in Spain Intend to “Compensate” 1.4 Million Fleeced Homeowners


Spain’s biggest banks, it seems, will never learn — not even when the highest court of the land, the European Court of Justice (ECJ), rules against their dodgy practices.

The ECJ ruled just before Christmas that Spain’s major banks would have to refund all the billions of euros they had surreptitiously overcharged borrowers as a result of the so-called “mortgage floor-clauses” that were unleashed across the whole home mortgage sector in 2009 [A Nightmare Before Christmas for Spanish Banks].

These floor clauses set a minimum interest rate, typically of between 3% and 4.5%, for variable-rate mortgages, which are a very common mortgage in Spain, even if the Euribor dropped far below that figure. In other words, the mortgages were only really variable in one direction: upwards! While this is not illegal, most banks failed to properly inform their customers that the mortgage contract included such a clause.

The ECJ’s ruling was an emphatic victory for the almost 1.4 million borrowers who had been fleeced out of thousands of euros, many of whom have spent years trying to recoup the funds through Spain’s creaking legal system. Yet even now, the banks, many of which are struggling against a backdrop of negative interest rates and tightening margins, seem loath to part with the cash.

The president of Spain’s sixth biggest bank, Josep Oliu, today called the ruling against the bank’s floor clauses an “attack against the banks,” likening claimants to “roguish swindlers.” His bank, Sabadell, has been accused of pressuring its mortgage customers to sign a “pact of silence,” by which the customers, knowingly or not, pledge never to speak publicly about the conditions of their mortgage — not even to their lawyers — and in return the bank removes the floor clause from the mortgage, without reimbursing a single cent of what it owes.

Even today, with the law firmly on the borrowers’ side, “poisoned offers” continue to proliferate, warns consumer association Facua-Consumidores en Acción.


“It was entirely predictable that the same entities that had shafted consumers out of millions with their abusive mortgage contracts would try to do the same despite the fact that the European Court of Justice has ruled that they must reimburse absolutely all the money they have overcharged customers,” said Facua’s spokesperson, Rubén Sánchez.

Some banks are pressuring customers to sign documents seemingly designed to strip them of their rights to take the banks to court while reimbursing just part of the money they’re owed.

As usual, the banks have the Rajoy government firmly on their side. At first his coalition government considered passing a law that would have forced all the banks to reimburse all the money they had overcharged customers, as the ECJ had ruled. Unsurprisingly, such an approach was firmly opposed by the banking sector and was duly shelved.

The government then came up with a much more bank-friendly offer that included a voluntary, non-binding arrangement, which all big banks tend to love. However, the proposal was deemed too lenient by the coalition government’s “socialist” faction, which fears being seen by voters as coming down too softly on the banking sector, especially at a time when social-democratic parties are fading into irrelevance all over Europe.

In the latest offering, which could be enacted by Royal Decree as early as Saturday, the banks are not obligated to reimburse affected customers, but merely to enter into bilateral negotiation with them. The two sides will have a maximum period of three months (well over double the initial 36 days tabled) to reach a mutually satisfactory arrangement.

If, after that time, the customer is still unsatisfied, he or she can launch legal action against the bank. However, if in the end the amount awarded is less or equal to the amount initially offered by the bank, it is the customer that must cover the legal costs.

The problem with such an approach is that it treats the banks and their customers as equals, says Fernando Herrero, the secretary general of Adicae, an association representing financial end users. It’s a ludicrous proposition given the vast gulf in financial knowledge and expertise of the two sides, not the mention the fact that for the banks “negotiating means flagrantly deceiving the consumer, signing away his or her rights.”

The new proposed legislation has two main goals: to prevent the collapse of a major, cash-strapped bank (such as, say, this one) from the pressure of having to reimburse all its customers all at once, while also reducing the strain on Spain’s already over-burdened judicial system. According to Herrera, the government hasn’t even bothered to contact consumers or their representatives; “it only liaises with the banks.”

And it tells: the government’s new proposal will allow banks to repay customers not only in cash, which will be the most heavily taxed option available, but also by any other “equivalent means.” That apparently includes offering customers “financial products” (subordinated bank bonds, anyone?) of the equivalent value of the money owed, or the possibility of reducing the interest or principal payable on the mortgage, which will have a much less destructive short-term impact on the bank’s balance sheets.

Banks will also be able to offer to swap a customer’s variable mortgage (with floor clause) for a fixed rate one. The consumer association OCU has advised consumers to reject these types of offers, many of which include clauses preventing signatories from undertaking future legal action against the bank in question.

Whatever happens in the coming months, one thing is certain: regardless of what EU law may hold, the banks will do whatever they can to ensure that they refund as little as possible of the billions of euros they surreptitiously overcharged their customers. And they will have the government’s consent throughout.

Source: WolfStreet.com

Wells Fargo Reintroduces 3% Down Mortgages


In the wake of its recent $1.2 billion settlement with the government, whereby Wells Fargo admitted to deceiving the government into insuring thousands of risky mortgages (yet nobody went to jail), the bank has decided to break with the Federal Housing Administration and offer its own minimal down payment mortgage program.

The new program partners with Fannie Mae in order to allow borrowers with credit scores as low as 620 to make as little as a 3% down payment and use income from family members or renters to qualify. Naturally, the intent is to make more loans to low and middle-income borrowers – in the process pushing up home prices countrywide – without going through the FHA.

As a reminder, the FHA insures mortgages made to buyers who would otherwise have a hard time getting loans, but it has been shunned by banks following a wave of lawsuits by the Justice Department that alleged poor underwriting.

Wells Fargo made $6.3 billion in FHA-backed loans last year, and is a top 20 originator for the FHA according to the WSJ. It’s not just FHA however: as we have shown previously, Wells’ own mortgage origination pipeline has been slowing down in recent years, and as such the corner office of the country’s largest mortgage originator is desperate to find new and innovative ways to boost lending.

After being called out for its deceptive practices, the bank has scaled back on FHA backed mortgage lending in recent years. Wells Fargo accounted for just 2.5% of total FHA mortgages in 2015, down from 13% in 2010, and ultimately coming to this end game where the bank has a path forward without the FHA.

Self-Help Ventures Fund, based out of Durham, NC will now be taking the default risk on these low down payment mortgages originated by Wells Fargo.

Self-Help comprises a state and federally chartered credit union as well as the ventures loan fund, and has a total of $1.6 billion in assets. The “fund” has been partnering with Bank of America on insuring loans from their low down payment loan program since February, and has said it is on track to make between $300 million and $500 million in its BofA mortgage product within the first year.

As the WSJ explains, the new Wells Fargo product could save borrowers money

The new Wells Fargo product might save money for some borrowers who would have otherwise taken out an FHA-backed loan. For example, a borrower who buys a $200,000 home and has a credit score of 715 would pay about $1,040 a month with an FHA loan from Wells Fargo, assuming the borrower includes the FHA program’s upfront costs in the loan amount and makes a 3.5% down payment, the minimum the agency requires. The same borrower under the new program would pay about $994 a month with a 3% down payment.

By taking a housing-education course, the borrower could reduce the mortgage rate by an additional one-eighth of a percentage point, making the payment about $979 a month.

Fannie Mae Vice President of Product Development Jonathan Lawless expects other lenders to develop such programs as well, and that he expects the volume of low down-payment mortgages that Fannie backs to grow.

In summary, Wells Fargo didn’t like being taken to task on its deceptive actions and has decided to continue with risky mortgage origination, but shifting the risk to Self-Help instead of the FHA. This sounds like another New Century style lending blowup in the making, only this time one where there is a far more ambiguous relationship with the sponsor bank, in this case Wells Fargo.

Of course, the fact that the loans will be purchased by Fannie Mae means that the risk is still ultimately on the taxpayer if Self-Help is overwhelmed with defaults as happened during the last bubble, so one can probably say that the problem of taxpayers being once again exposed to risky subprime lending practices has just returned with a vengeance. 

Source: ZeroHedge