Refinance Faster, Lower Rates using Small Lenders (Like Marketline Mortgage!)

Large Banks Clogged!

70 Days on Average for Refinancing vs. Local Small Lenders Averaging 21 - 30 Days

When Craig Foyer called Bank of America Corp. BAC -1.95% in March to ask about refinancing the mortgage on his Oconomowoc, Wis., home, a saleswoman told him the company was "swamped with business" and that it would call him back in 60 to 90 days, he says.

"That doesn't do much for someone interested in the market right now," said Mr. Foyer, 46 years old, who works in software development.

Clogged mortgage pipelines have created headaches for hundreds of thousands of Americans trying to take advantage of low mortgage rates, which averaged 4.05% for the week ending April 27, according to the Mortgage Bankers Association.

Those rates have helped thousands of Americans free up cash or retire debt. On average, borrowers that refinanced during the first quarter of 2012 reduced their first-year interest payments by $2,900, according to mortgage-finance giant Freddie Mac. Overall, refinancing over the past three years has unlocked savings worth $46 billion in their first year, according to Moody's Analytics.

Clogged mortgage pipelines have created headaches for hundreds of thousands of Americans trying to take advantage of low mortgage rates, Ruth Simon reports on Markets Hub. (Photo: Joe Raedle/Getty Images)

But considering how far mortgage rates have dropped, the refinancing burst has been lackluster by historical standards. A surge in demand has come at a time when fewer banks control a larger share of the mortgage market than they did before the financial crisis. Banks also are being more careful about whom they lend money to and how they process loans. It now takes the nation's biggest mortgage lenders an average of more than 70 days to complete a refinance, according to Accenture Credit Services, up from 45 days a year ago.

There is another factor. Amid reduced competition, some large lenders have boosted their rates in a bid to hold down volumes while bolstering profits. That limits the savings for many applicants.

In March, Mark Morrison says he was offered a 4.63% rate by his mortgage company, Ally Financial Inc., when he asked about refinancing. That would have resulted in monthly savings of just $87, before figuring in $1,500 in upfront fees. Rates that week were being quoted at 4.13% in the local newspaper, and the Waukesha, Wis., resident says he "got the runaround" when he asked why his mortgage company couldn't offer him a more competitive rate. An Ally spokeswoman declined to comment.

After shopping around, Mr. Morrison locked in that lower rate with a smaller lender. Accunet Mortgage in Butler, Wis., also offered to pay closing costs, providing Mr. Morrison a monthly savings of $167. He closed on the loan last month after a wait of about three weeks. "It really is a rat's maze for the consumer," says Brian Wickert, Accunet's president. The bigger banks, he says, "have enough people saying 'yes' to those offers that they're taking super-high profit margins."

Bank of America mortgage services representatives help register people looking for help with their mortgages during the Help for Homeowners Community Event in Miami in February.

While it is taking lenders of all sizes longer to process loans today, some smaller, more nimble mortgage lenders are turning around loans more quickly because they quickly staffed up or never cut back.

The housing bust wiped away $7 trillion in household equity, leaving many homeowners with too much debt to qualify for new loans. But the mortgage sector's limitations are further undermining the Federal Reserve's effort to boost the economy by holding short-term interest rates near zero.

Normally during a downturn, refinancing activity "really gets the economy going, and it isn't happening right now," says Alan Boyce, a bond-market veteran who runs Absalon, a company backed by billionaire financier George Soros that is pushing to change how U.S. mortgages are financed.

While refinancings from the drop in interest rates since 2009 have produced $46 billion in savings, Mr. Boyce estimated last year that in a normal market, refinancing could have generated an additional $67 billion in annual savings.

Part of the reason is that lenders are being more cautious in the wake of the financial crisis. The two government-controlled mortgage companies, Fannie Mae and Freddie Mac, have added new requirements designed to improve loan quality for all mortgages. Appraisal packages, for instance, must now include a photograph of bathroom toilets as proof the house actually has a bathroom.

Demand for refinancing also has surged in recent months amid a push by the Obama administration to make it easier for homeowners with loans backed by Fannie Mae and Freddie Mac to refinance, even if they don't have any equity in their homes or strong credit. That initiative, called the Home Affordable Refinance Program, has accounted for as much as one-third of refinance applications in recent weeks, according to the Mortgage Bankers Association.

“The housing bust wiped away $7 trillion in household equity, leaving many homeowners with too much debt to qualify for new loans. But the difficulties in refinancing are further undermining the Fed's effort to boost the economy.”

President Barack Obama is set to renew a legislative push to enable refinancing for underwater borrowers, or those who owe more than their homes are worth, whose loans aren't backed by Fannie and Freddie during a visit to Reno, Nev., on Friday, according to a White House official.

In the past, mortgage companies relied on independent mortgage brokers to help pick up some of the added demand when refinancing spiked. But mortgage brokers now account for less than 10% of originations, down from roughly 31% in 2005, according to Inside Mortgage Finance. The shakeout helped rid the industry of brokers who were making questionable loans, resulting in sounder lending. But it also means there are fewer places for borrowers to turn to find the lowest rates.

"You have more loans going through a pipeline that is too small," says Terry Moore, global managing director of Accenture Credit Services, which provides consulting and mortgage-processing services to banks.

The nation's four largest banks now account for 55% of all loan originations, up from 38% in 2004.

Wells Fargo WFC +0.36%& Co., the nation's largest mortgage lender; third-ranked Citigroup C -4.24%Inc.; and fourth-ranked Bank of America now routinely advise borrowers to expect refinances to take as long as 90 days. Wells Fargo and Citigroup say they are generally picking up the extra cost of locking in the rate for the longer-than-normal period so that customers are protected if rates rise. Wells Fargo says it has also added staff in response to higher loan volumes.

J.P. Morgan Chase JPM -9.28%& Co., the country's second-largest mortgage lender, says it is telling borrowers to generally expect their refinances to close within 45 to 60 days. The bank says it hired more than 1,100 new employees to handle mortgage originations in late 2011 and continues to hire loan officers, underwriters and processors.

Citigroup has been adding staff and streamlining its processes in an effort to cut its average refinance time from 77 days to less than 50 days, says CitiMortgage chief executive Sanjiv Das.

Bank of America says beginning in April it no longer put customers like Mr. Foyer on a wait list because it has added 500 employees to handle the latest surge in business. Delays are "vastly improving" from late last year, when a drop in rates caught much of the industry by surprise, said Matt Vernon, who heads retail sales for Bank of America Home Loans.

Mr. Foyer ultimately settled on a no-cost refinance with a local mortgage bank for a 3.5% rate on a 15-year mortgage, down from the 4.3% rate on the previous 20-year loan. Mr. Foyer estimates it will save him about $12,000 over the life of the loan. He closed on the loan in April some three weeks after he applied.

Before the mortgage crisis, the spread between the rate lenders paid investors and the rate they charged borrowers averaged around 0.5 percentage point. But that gap has nearly doubled since 2009.

At U.S. Bancorp, USB +0.94%mortgage-banking revenue more than doubled during the first quarter from the year-earlier period to $452 million in the first three months of 2012. "It is just a function of supply and demand in the current market and that gives us some pricing opportunity," said Andy Cecere, the bank's chief financial officer on a call with analysts in April.

The mortgage industry has long suffered from boom and busts, with loan processing times increasing as refinancings climb. That is being compounded today by the fallout from the mortgage bust.

Lenders have become far more cautious about making new loans because they may have to repurchase bad loans from mortgage giants Fannie and Freddie. The government-controlled firms can force banks to buy back mortgages that run afoul of underwriting rules, and they have stepped up those demands in the aftermath of the mortgage bust.

Fannie asked banks to buy back $24 billion in defaulted mortgages last year, up from $13 billion in 2010. The company didn't report data on repurchases before the crisis, when they were viewed as a minor nuisance.

Lenders have responded to buyback pressures by scrutinizing anything that could be used to justify a costly loan repurchase. CitiMortgage, for instance, now triple-checks borrower income and assets and the appraisals used to determine a property's value.

The normal gridlock can be exacerbated if the borrower is self-employed or if the appraisal comes in lower than expected. A disputed appraisal value spawned Amy Sperrazza's six-month battle before securing a 3.75% fixed rate for her Dawsonville, Ga., home in February.

"It was one thing after another," says Ms. Sperrazza, who began the refinance process last August. She and her husband both are employed and have good credit, but they spent months haggling over the appraisal, which valued the home using the sale of foreclosed properties from a different county.

By NICK TIMIRAOS And RUTH SIMON
—Robin Sidel contributed to this article.

Marketline Mortgage: Preview "Refinance Faster, Lower Rates using Small Lenders (Like Marketline Mortgage!)"

Marketline Mortgage: Preview "Refinance Faster, Lower Rates using Small Lenders (Like Marketline Mortgage!)"

Social Security Number Process Change

The Social Security Administration (SSA) is changing the way Social Security Numbers (SSNs) are issued. This change is referred to as "randomization." The SSA is developing this new method to help protect the integrity of the SSN. SSN Randomization will also extend the longevity of the nine-digit SSN nationwide.

The SSA began assigning the nine-digit SSN in 1936 for the purpose of tracking workers' earnings over the course of their lifetimes to pay benefits. Since its inception, the SSN has always been comprised of the three-digit area number, followed by the two-digit group number, and ending with the four-digit serial number. Since 1972, the SSA has issued Social Security cards centrally and the area number reflects the state, as determined by the ZIP code in the mailing address of the application.

There are approximately 420 million numbers available for assignment. However, the current SSN assignment process limits the number of SSNs that are available for issuance to individuals by each state. Changing the assignment methodology will extend the longevity of the nine digit SSN in all states. On July 3, 2007, the SSA published its intent to randomize the nine-digit SSN in the Federal Register Notice, Protecting the Integrity of Social Security Numbers [Docket No. SSA 2007-0046].

1. 
   SSN randomization will affect the SSN assignment process in the following ways:
   It will eliminate the geographical significance of the first three digits of the SSN, currently referred to as the area number, by no longer allocating the area numbers for assignment to individuals in specific states.


2. 
   It will eliminate the significance of the highest group number and, as a result, the High Group List will be frozen in time and can be used for validation of SSNs issued prior to the randomization implementation date.


3. 
   Previously unassigned area numbers will be introduced for assignment excluding area numbers 000, 666 and 900-999.

These changes to the SSN may require systems and/or business process updates to accommodate SSN randomization.If you have any questions regarding SSN randomization or its possible effects to you or your organization, please see the related Frequently Asked Questions or email your question(s) to ssn.randomization@ssa.gov

Rates are incredibly low today

It's a great time to lock in if you need financing!

15 year fixed 3.625% APR 3.675%

30 year fixed 4.25% APR 4.3%

Give me a call with any questions.

Taum
480-967-8286

Can You Get a Loan Now?

The credit crunch is history, the recession is officially over, and banks are sitting on something like $1.5 trillion in cash. So why is it still so hard for many people to get loans?

The Federal Reserve says most lenders have stopped raising their standards, but that's not the same as throwing wads of cash at people, economists note.
"If you're already extremely tight and you stop tightening, that's not easing," said Paul Kasriel, the chief economist for Northern Trust. Furthermore, he doesn't expect conditions to dramatically improve borrowers' prospects anytime soon. "There's no magic bullet that will change this," he says.
What's happening is continued fallout from the financial crisis and recession. Commercial real estate loans continue to go bad, and foreclosures in the residential market are far from over. As home values keep dropping, more people who could afford to pay their mortgages are choosing not to, allowing their homes to go into foreclosure. Currently, these strategic defaults are responsible for about one out of three foreclosures.
From a banker's perspective, these trends are reason enough to be cautious about lending right now.
"Some loans you thought were good on your books may not be good," Kasriel said. "If you use your capital today to make loans and you have more write-downs, you could find yourself undercapitalized."
Banks are required to keep some money in reserves against losses. Falling below these required levels could cause the banks to face regulatory scrutiny or even takeover. So lenders cling to tough standards, focusing most of their attention on low-risk lending to those with good to excellent credit scores.
Here's a look at three major areas of lending -- and how you can improve your chances in each if you need a loan.
Mortgages
A quick history lesson, for those of you who weren't paying attention: Until 2006, when home prices peaked, lenders competed fiercely for customers, and their lending standards were loosened considerably -- to the point where you could get a mortgage without proof of your income or assets. Even those with lousy credit scores could usually find someone to lend them money.
Those loose lending standards came back to bite lenders as first subprime mortgages and then mortgages in general started defaulting in huge numbers. Derivatives and other financial products created by Wall Street firms to amplify profit from these mortgages wound up multiplying the risk and nearly brought down the financial system.
Since the crisis, investors have balked at buying mortgages that don't come with government guarantees. Today, 90% of home loans have those guarantees. Fannie Mae and Freddie Mac, government-sponsored entities created to encourage mortgage lending, and the Federal Housing Administration buy loans from lenders and repackage them for sale to investors with guarantees to make them whole if borrowers default. Before the recession, about two-thirds of loans made had government guarantees attached.
The reduction in the market for mortgages made outside the government-backed system means fewer options for borrowers. The only good news, said Matt Hackett of direct lender Equity Now, is that Fannie, Freddie and the FHA are no longer constantly changing their lending standards, so borrowers are encountering fewer surprises and last-minute demands for documents than they might have a year ago.
"It's much easier to get a handle on it," Hackett said. "The guidelines don't change every week or every day."
Fannie and Freddie guidelines favor those with decent credit scores (FICOs of 680 and above), a 10% down payment and steady incomes documented by two years' worth of tax returns. Those with lower credit scores or smaller down payments often wind up directed to FHA loans, as the FHA handles nearly all lower-credit-score applications.
Advice for mortgage seekers now includes:
³Polish those credit scores. Pay down credit card debt, get collections cleared up by disputing them or paying them in return for removal and keep making payments on time to boost your scores. To see where you stand, buy your FICO scores from myFICO for $19.95 each. It's the only site that sells scores made from the same FICO formula most mortgage lenders use.
³Build up your down payment. It's possible to buy a home with as little as 3.5% down, but you'll be instantly "underwater" once you consider how much it costs to sell and move (usually 6% to 10% of a home's value). A bigger down payment can help keep you right-side up and win you a better interest rate. If you can save 20%, you can do without private mortgage insurance.
³Consider waiting. Home prices are still falling in many areas, and interest rates aren't expected to climb soon, so there may not be a huge penalty for waiting if you need time to boost your scores or your down payment, or both.
Car loans
Lacey Plache, the chief economist for Edmunds.com, sees "a definite easing" in auto lending standards over the past year, with more loans being made to people with less than perfect credit.
In the first three months of 2010, for example, 70% of car loans went to people with "superprime" credit -- FICO scores of 740 or above. During the same quarter this year, the percentage was down to 65.6%, Plache said, with lower credit ranges all seeing a slight increase.
That still means the majority of loans are going to the lowest-risk customers, a fact that helps explain why auto sales remain depressed. Other contributors include the fact that people are hanging on to their cars a year longer on average than before the recession, plus supply disruptions from the disasters in Japan.
If you're in the market for an auto loan:
³Understand your credit scores' impact. People with credit scores in the good-to-excellent range -- 720 to 850 on the FICO scale -- are landing interest rates averaging 4.37% on three-year auto loans. Those with scores in the 660 to 684 range pay more than 3 extra percentage points -- 7.74% -- for the same loan, according to myFICO, which uses Informa Research Services to poll auto lenders. That's a difference of more than $1,000 on a $20,000 loan. If your credit scores won't win you a great rate, consider delaying your auto purchase until you can boost your scores -- a strategy that also will give you time to save up a bigger down payment.
³Check with your credit union first. Before you walk onto a car lot, you should know how much car you can afford to buy and what rate you should be getting on a loan. Ignorance on either point can cost you dearly once you sit down to negotiate. A smart strategy, recommended by Edmunds.com, is to get approved for an auto loan from your local credit union (credit unions often offer their members better rates and terms than many banks). If the dealership can find you better financing, you can take it and cancel the credit union application. Otherwise, your funding is secure, and you don't risk getting a higher interest rate or worse terms than you deserve.
Credit cards
Credit card companies are brawling to attract the high-FICO-score crowd with 0% balance transfer offers and lavish new rewards programs. Less heralded is the return of some credit card issuers to the subprime market.
"Certain major card issuers have delved back into offering cards to those with fair credit, little credit history and bad credit," said Ben Woolsey, the director of marketing and consumer research for CreditCards.com.
Capital One and HSBC, big players in this market before the recession, have returned, with Capital One sending credit offers to those with recent bankruptcies and foreclosures. A number of smaller banks now offer credit cards to those with troubled or short credit histories.
The credit card reform law limited the fees issuers can charge for such cards, so many of these offers come with "shockingly high" interest rates. A First Premier Bank secured credit card with a $300 limit, for example, comes with a 49.9% interest rate if you carry a balance. An unsecured card with a $700 limit for those with fair credit has a 36% interest rate.
Woolsey credits a variety of factors for the credit card industry's new willingness to lend.
"A robust return to profitability, significant reduction in credit losses, lower unemployment, less uncertainty about the legislative climate and competitive pressures have all factored into the card industry ramping up its account acquisition activities," Woolsey said. "This has been more pronounced for the superprime and prime segments of the market, but for certain issuers with the right product set and risk tolerance, it has begun to include near prime and subprime markets as well."
Here's what you need to know if you're in the market for a credit card:
³The best offers are reserved for those with FICOs over 750. If you have excellent credit, you'll have plenty of offers to choose from. If you're still carrying a balance, you can use a low-rate balance transfer offer to pay off your debt. If you pay your balance in full, shop around to find the best card for your spending habits.
³Rebuild bad credit with a secured card. Those sky-high interest rates won't affect you if you don't carry a balance. Instead, charge 10% or less of the card's limit and pay it in full every month to slowly rebuild your scores. Make sure the card reports to all three credit bureaus.
By: Liz Weston, www.money.msn.com

No Seasoning on Cash Out Refi after Cash Purchase

Effective immediately on Fannie Mae loans:

Borrowers who purchased the subject property within the past six months are eligible for a cash-out refinance if all of the following requirements are met:

1. The new loan amount is not more than the actual documented amount of the borrower's initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).


2. The purchase transaction was an arms-length transaction.


3. The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property.


4. The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property). Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1.


5. All other cash-out refinance eligibility requirements are met and cash-out pricing is applied.

Note: The preliminary title search must not reflect any existing liens on the subject property. If the source of funds to acquire the property was an unsecured loan or HELOC (secured by another property), the new HUD-1 must reflect that source being paid off with the proceeds of the new refinance transaction

7 Nasty Credit Myths that Won't Die

A decade has passed since the vault cracked open and we started learning how credit scores really work.

For years, the creators of the leading credit scoring formula, the FICO, didn't want consumers to know the scores existed, let alone what went into them. In early 2000, however, E-Loan started letting customers see their FICO scores. That free experiment was quickly shut down, but the secret was out.

Pressure from consumer advocates and lawmakers finally persuaded the FICO creators -- a company named Fair Isaac, now known as FICO -- to reveal later that year the 22 factors, grouped into five categories, that went into creating its scores.

We've been adding to our knowledge ever since. But 10 years later I'm still hearing many of the stupid myths about credit and credit scoring that prevailed 10 years ago, plus some that have sprung up since.

These myths aren't just annoying. Their prevalence is keeping people from understanding one of the most important numbers in their financial lives. Credit scores are used:

-By lenders, to determine whether you're approved for loans or credit cards, along with the interest rates and terms you get.
-By insurers, to set premiums.
-By cell phone companies, to see who qualifies for a contract and who doesn't.
-By utilities, to determine whether you need to leave a deposit and how much.
-By landlords, to decide who gets apartments and rental houses.
-Failing to understand credit scores and how they work, in other words, really can put a dent in your financial life.

Here are the seven most dangerous myths that need to be dispelled:

Myth No 1: "If you handle your finances responsibly, your credit scores will take care of themselves."
Fact: A credit score is not a financial-health score. It doesn't measure your income, assets or financial savvy. There are some behaviors that may be good for your wallet that aren't good for your scores.

Keep in mind that credit scoring formulas have one primary purpose: to help lenders gauge the likelihood you'll default -- based on how you handle credit. If you stop using credit or use it in a way the formulas don't like -- using only one card, shutting down a bunch of accounts or maxing out your cards, even if you then pay them off in full -- your scores could suffer.

Myth No. 2: "Checking your credit hurts your credit scores."
Fact: Checking your own credit reports and scores does not affect your scores. Period.
A credit check could hurt you if you asked a friend at a bank or car dealership to pull your credit reports. Such transactions probably would be coded as "hard" inquiries, or as applications for credit, which could ding your scores. But checking your own credit is otherwise a non-event.

This persistent myth is particularly destructive, because it discourages people from knowing what's going on with their credit reports and scores. Many reports contain serious errors that result in your being turned down for a loan or paying a much higher interest rate than you deserve. You need to visit AnnualCreditReport.com at least once a year to view your free credit reports from the three bureaus and dispute any serious errors. If you'll be in the market for a major loan, such as a mortgage or an auto loan, you'd be smart to buy your FICO scores from myFICO.com to see how lenders are likely to view your application and get tips from improving your numbers.

Myth No. 3: "Asking for lower limits will help your credit."
Fact: Having sizable credit limits is a good thing for your scores, as long as you don't use them to run up debt.

Lenders like to see a big gap between your available limits and the amount of credit you're actually using. A lower limit reduces that gap, which can be bad news for your credit scores. Of course, if you can't trust yourself not to use your available credit, the damage to your credit scores may be the least of your worries. Otherwise, though, you probably should leave your credit limits alone.

Myth No. 4: "You need to carry a credit card balance to have good scores."
Fact: You don't need to be in debt or pay a penny of interest to have good credit scores.
Your credit reports and scores don't "know" whether you're carrying a balance or paying it off in full every month. That's because the balance reported to the credit bureaus typically is the balance from your last statement, not what was left over after you got that statement and paid the bill. So you might as well pay in full and save yourself the interest.

This myth encourages people to carry unnecessary debt, putting them at the mercy of credit card issuers and eroding their financial security.

Myth No. 5: "You should never close an account if you can help it."
Fact: The prevailing myth used to be that closing accounts could help your scores, which, we've learned, isn't true. But the knowledge that shutting accounts can hurt your scores has caused some people to balk at closing credit accounts, even when they probably should.

If your issuer is charging you a fee you don't want to pay, for example, closing a card or two shouldn't be a crisis if you have good scores, other open accounts and no plans to apply for credit in the immediate future. If you do plan to apply for a mortgage, car loan or new credit card, though, you should hold off on closing any accounts until after you've been approved.

Myth No. 6: "How you handle credit indicates how trustworthy you are."
Fact: People get in financial trouble for all kinds of reasons, including simply getting sick (medical bills were a factor in nearly two-thirds of consumer bankruptcies in 2007, according to Harvard University researchers).

There's no evidence of a link between information on credit reports and the likelihood an employee will commit fraud, but employers persist in thinking there is. (By the way, employers typically use credit reports to evaluate applicants, not credit scores.)

Furthermore, there is evidence that employers are abusing their power to review credit reports. Some states have already banned or limited pre-employment credit checks, and a bill was introduced in 2009-2010 session of Congress to do the same, although the legislation didn't go anywhere.

Myth No. 7: "All credit scores are pretty much the same."
Fact: There are hundreds of different credit scoring formulas. Even the scoring formula used by most lenders, the FICO, comes in different iterations. One lender may use the most up-to-date formula while another might use an older version that gives a different result. There are FICOs tweaked to accommodate car lenders, credit card lenders and finance companies, in addition to the "classic" FICO used by most mortgage lenders.

Some purveyors of other scoring formulas point to these different versions to try to convince people that it doesn't matter which score you get, since there are so many variations. Indeed, if you're simply looking for a guidepost as you try to shore up your finances, any of them can give you an idea of your credit's relative strength.
But if there's real money at stake, you want to get a score that's at least in the same ballpark as the one your lender will be using, and that's typically a FICO. If you're buying a credit score that doesn't say it's a FICO, it's not a FICO -- and it could be dozens or even hundreds of points different from the one your lender sees.

Liz Weston, www.money.msn.com