Mortgage Rate News

Image via Wikipedia

California is ready to enact tough laws aimed at restricting predatory lending practices. While over-reaching consumers certainly deserve some of the blame for the foreclosure crisis, some of the things mortgage lenders and brokers did in order to close deals were not above board. Many took advantage of their positions of trust to encourage borrowers to agree to mortgages that were not in their best interest. And while due diligence should be expected from borrowers, the fact of the matter is that there is a lot of paperwork, fine print and legalese to wade through. Even the best efforts can come up short.

In order to provide a little more protection to consumers, California Governor Arnold Schwarzenegger signed eight different laws. The Modesto Bee reports on some of the provisions in the laws:

• Loan modification firms cannot collect fees up front.
• Mortgage lenders must adhere to standardized licensing requirements.
• Reverse mortgages will have new consumer protections built in.
• Fraud in connection with a home mortgage loan application will be considered a felony.
• Mortgage documents must be available in other languages besides English.
• Buyers who purchase foreclosed homes will be able to choose their escrow and title companies.

Hopefully, the laws will discourage some of the deceptive practices that helped contribute to the foreclosure crisis. The new regulations should also hopefully cut down on scams perpetrated by loan modification and foreclosure prevention companies that take upfront fees and then do nothing. Additionally, it should give buyers a little more freedom and help as they choose companies of their choosing.

In the end, there needs to be a good balance between consumer protection and consumer responsibility. At first glance, it appears these laws should do that, providing consumer protections while at the same time not putting everything on mortgage lenders and brokers. It will be interesting to see if other states follow suit, adopting harsher laws aimed at curbing predatory lending practices.

Image via Wikipedia

Just a couple of days ago, JP Morgan reported significant profits in the third quarter of 2009. This news was greeted with enthusiasm from investors, and sent the Dow above 10,000. The thought was that the financial system was improving, and that things were on the verge of improving. Yesterday, though, Citi announced that it is still struggling with bad debts and mortgages, and that put a damper on the party. Today, the stock market is in rout mode as Bank of America announces its third quarter was a rather dismal one. MarketWatch reports the bad news about Bank of America:

Bank of America said on Friday that it lost more than $2 billion in the third quarter as its provision for credit losses almost doubled, reflecting stressed consumers.

Bank of America said its net loss applicable to common shareholders was $2.24 billion, or 26 cents a share, in the third quarter, compared to a profit of $704 million, or 15 cents a share, a year ago.

The loss applicable to common shareholders includes preferred stock dividends of $1.24 billion in the latest quarter, compared to $704 million a year ago.

Before the accounting for preferred dividends, the company reported a loss of $1.00 billion in the third quarter, versus a $1.78 billion profit a year ago

It is clear that the financial sector may not really be ready to come roaring back. The news has sent the Dow back below 10,000 today as bears react to the sentiment. In the end, the financial sector is still trying to recover from the losses inflicted by the subprime mortgage market implosion and the financial crisis. These mortgage lenders are in tough shape, still. Even JP Morgan, which saw great profits, had to qualify its earnings report with the fact that non-performing assets are still on the balance sheet. Until the foreclosures stop, it is unlikely that the financial sector will be able to lead the economy to recovery.

Image via Wikipedia

There is speculation that October will be a good month to buy a home. Mortgage interest rates are back below 5%, and people are having a fire lit under them by the prospect of the end of the first time home buyer tax credit. But will it really be the end? There are debates going on right now about extending the first time home buyer tax credit. There are two main proposals on the table right now:

1. Six-month extension: This would extend the deadline for the first time home buyer tax credit to May of 2010, without changing much about the program. This is the plan favored by Senator Ben Cardin, and backed by Majority Leader Harry Reid.
2. Year extension, and tax credit for every home buyer: Senator Johnny Isakson is ready to one-up the other plan. He proposes that the home buyer tax credit be extended to December 1, 2009, and available to everyone who buys a home. He also feels that the tax credit amount should be $15,000.

Clearly, both plans would cost money (though #2 would cost more). Even though #2 would be much more expensive than merely extending the deadline, it would open up another segment of the housing market, resulting in an increase in homes for those who are “moving up”. If they did decide to go with #2, I’d even consider selling and moving into a different house. Assuming they let the immediate use ability of the current tax credit to go through, it would mean at least $15,000 as a substantial down payment.

These extensions, though, also bring us close to another thought: Will a tax credit for buying a home become standard, like the tax credit for mortgage interest? That is a possibility, since taking away the credit might send the housing market back into a nosedive.

What do you think? Should the first time home buyer tax credit be extended?