Category Archives: Mortgage

also referred to as a mortgage, is used by purchasers of real property to raise funds to buy real estate; or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged

Bank of America’s Newest Mortgage: 3% Down and No FHA

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Mortgage – refinance home News – Bank of America Corp. is rolling out a new-mortgage product that would allow borrowers to make down payments of as little as 3%, in a move that would represent an end run around a government agency that punished the bank for making errors on similar loans.

The new mortgage program, which the Charlotte, N.C.-based lender plans to unveil on Monday, will let borrowers avoid private mortgage insurance, a product to protect mortgage lenders and investors that is usually required for low-down-payment loans.

That could make the new loans cheaper than those offered through the Federal Housing Administration, the government agency that has won big settlements from banks in recent years for what the lenders describe as minor errors.

The FHA doesn’t make loans but insures lenders against default on mortgages that can have down payments of as little as 3.5% and a credit score of as low as 580, on a scale of 300 to 850. When lenders make the loan, they have to certify that everything in a loan file is accurate.

Bank of America’s new mortgage cuts the FHA out of the process. Instead, the new loans are backed in a partnership with mortgage-finance giant Freddie Mac and the Self-Help Ventures Fund, a Durham, N.C.-based nonprofit.

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Mortgage – refinance home News – Bank of America agreed to pay $800 million to settle claims of making errors on FHA-backed loans in 2014. This month, Wells Fargo & Co. said it would pay $1.2 billion to settle similar claims, joining J.P. Morgan Chase & Co., which settled in 2014, and other big lenders which have settled over the past few years. Nonbank lender Quicken Loans Inc. is currently fighting such claims.

Many big banks have pulled back sharply from FHA-insured lending in the past few years, citing the risk of being hit with penalties for minor errors. A raft of nonbank lenders have rushed in, but the banks’ retreat from the program has made it more difficult for low-income borrowers to get home loans.

“We need an alternative in the marketplace that helps creditworthy borrowers with a track record of paying debts on time,” said Bank of America managing director D. Steve Boland, who noted that “We think there are still a lot of uncertainties out there in working with FHA.”

After making a mortgage under the new program, Bank of America will sell it to Self-Help, which then sells it to Freddie Mac. If a mortgage defaults, and Self-Help isn’t able to recover the full amount owed, Self-Help takes a big chunk of the losses before Freddie Mac starts to take a loss, which lets borrowers avoid paying mortgage insurance.

Self-Help also gives counseling to borrowers who struggle to pay, which it believes will help more people avoid foreclosure.

“We believe the mortgage-lending sector is underserving families of modest means,” said Self-Help CEO Martin Eakes. Mr. Eakes said that his fund also is in talks with other large and small lenders to roll out similar programs.

Mr. Eakes said Self-Help didn’t need new funding for the Bank of America program, but in the past the organization has received funding for other loan programs from foundations, the government and companies.

Mr. Eakes is also CEO of the Center for Responsible Lending, a nonprofit advocacy group for borrowers that in the past has also asked the FHA to limit lenders’ damages for some errors.


To get the loans under Bank of America’s new program, borrowers must have a credit score of at least 660, which is higher than FHA’s requirement, and an income that is less than the area’s median.

Bank of America said that for now it is capping loan production at $500 million annually under the program and that it expects that three out of four mortgages in the new program would have otherwise been backed by the FHA.

Last year, Bank of America made $1.36 billion in FHA-backed loans, according to trade publication Inside Mortgage Finance, making it the 22nd biggest FHA lender. The bank used to be in the top 10.

Freddie and competitor Fannie Mae in 2014 said they would roll out mortgages with down payments of as low as 3% to improve mortgage availability for low-income borrowers. But because the mortgages often cost more than FHA-backed loans, the programs had little volume last year.

As lenders become more wary of the FHA program, lenders and Fannie and Freddie executives said that their programs’ volume could rise.

In October, Quicken Loans, which is in the midst of FHA-related litigation, announced a partnership with Freddie to originate more Freddie-backed low-down-payment loans.

“Many lenders, including us, are looking at the Fannie and Freddie programs as an alternative to the FHA,” said Quicken CEO Bill Emerson.

Bank of America says that for a borrower with a $150,000 mortgage, a credit score of 680 to 719 and a 3% down payment, the monthly cost of the new mortgage would be about $782. A comparable FHA borrower with Bank of America would pay $887 a month, the bank said.

The FHA has been working for months to attempt to clarify the liabilities lenders could face when making an FHA-backed mortgage, including changing the certification that lenders must make in order to limit major penalties. An FHA spokesman said that the agency plans to unveil the final version of the certification by the spring. Read more

Two more signs a recession could be coming

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Credit card and finance news  –

Stocks have gotten a lift lately in part from hopes that fears over a recession are overdone. That optimism could be a little premature.

In addition to several other trouble spots, two key indicators are flashing warning signs: income tax withholdings and corporate profits.

The withholdings data show taxes taken out of worker paychecks and are considered by some economists to be a strong indicator of overall economic growth. Released daily by the Treasury Department, the count is a simple nonadjusted measure of how much wages are growing.


The latest numbers showed a 0.2 percent annualized decline over the past four weeks, compared to growth rates of 2 percent in December and 3 percent in January, according to market research firm TrimTabs.

The data show “the U.S. economy is already stalling out,” TrimTabs CEO David Santschi said. He pointed out that the slowdown in withholdings comes as “credit markets are flashing clear warning signs about future growth, growth in building permits and housing starts has pulled back, and manufacturing activity continues to contract.”

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A continuation in the trend would be a recession flag, Trim Tabs pointed out in a release, though Santschi noted that the month-to-month numbers are volatile.

On top of the other economic problems, corporate profits continue to wane, providing a headwind both for the economy and stock market. Estimates through the year show that the earnings recession is far from over and could last at least two more quarters.

Read More Challenges loom for producers to stabilize the oil market

With 87 percent of the S&P 500 (^GSPC) reporting, total blended fourth-quarter earnings have shown a decline of 3.6 percent, according to FactSet. Assuming the trend holds up, it will mark the first time profits have fallen for three straight quarters since 2009.

But the road ahead doesn’t get any easier.

FactSet is now projecting that earnings will decline 6.9 percent in the first quarter, a stunning move lower over time considering that in September the expectation was for 4.8 percent growth. S&P Capital IQ had been estimating the quarter to post a 15.1 percent gain in initial projections made in April 2015.

FactSet is not expecting profits to turn positive until at least the third quarter.

There are two primary culprits for the earnings weakness: Energy, which fell 74 percent in the fourth quarter and is expected to slide 93 percent in the first quarter, and the strong U.S. dollar. Companies with more than 50 percent of sales outside the U.S. fell 11.2 percent in the fourth quarter, while those with a majority of sales at the domestic level actually grew 2.7 percent.

In the most recent rally , which has brought the S&P 500 back to even for February, investors are hanging their hopes on a rebound in energy prices that will raise economic hopes and lift the market.

However, more sobering economic news could be only a few days away.

On Friday, the government will release the first revision to the fourth quarter’s gross domestic product growth. Joe LaVorgna, Deutsche Bank’s chief U.S. economist and a Wall Streeter who has been warning of recession risk, said the new number is likely to show the economy grew just 0.1 percent in the quarter, down from the original 0.7 percent and perilously close to contraction.

To be sure, a recession is not the consensus call on Wall Street, with projections in recent days showing increased optimism. Bob Doll, chief equity strategist at Nuveen Asset Management, said financial markets are pricing in a 50 percent chance of recession, while he sees a likelihood that GDP will rise 2.5 percent in 2016, though not without stumbles.

“Fears over the prospects of a recession are rising. We do not believe a recession is likely, but we acknowledge that it will take time for financial markets to stabilize and better data to emerge,” Doll said in a recent commentary. “Unfortunately, this means confusion and turmoil could be the order of the day for several more weeks or even months.”

Source : CNBC