The Mortgage Bankers Association’s index of refinance applications increased 7.2% in the week that ended last Friday as the average interest rate on 30-year fixed-rate loans fell 19 basis points, to 5.17%.

The climb during the week lifted the refinance index to about 35% over a recent low at the end of June.

The trade group said Wednesday that its index of purchase applications, which has not moved much for three weeks, also increased, by 0.9%.

The MBA’s overall index increased 4.4% and was 18% higher than a year earlier. The share of the total made up of refinance applications increased 16 basis points from the week before, to 54.2%.

Meanwhile, an index of applications in key markets maintained by Mortgage Maxx LLC fell 8.5% in the week that ended last Friday.

The company said Monday that homeowners are “still playing defense” in part because of stiff underwriting terms and predicted a further decrease in the index of more than 10% by Labor Day, reflecting “just how poorly government intervention has assisted to date.”

source: American Banker

Among mortgage types, the new-foreclosure rate worsened the most for prime fixed-rate loans in the second quarter, indicating that unemployment has replaced product category as the biggest driver of defaults, the Mortgage Bankers Association said Thursday.

The foreclosure start rate rose 33 basis points from a year earlier and 6 basis points from the first quarter to 0.67%, the trade group said. By contrast, for subprime adjustable-rate mortgages, the figure fell 52 basis points from the second quarter and 13 basis points from a year earlier, to 4.13%.

In another dismal quarterly report, the MBA said the percentage of all loans that were in foreclosure or at least one payment past due soared to 13.16% in the period, the highest since the survey began in 1979.

The share of loans at least 90 days past due rose 12 basis points from the first quarter and 283 points from a year earlier, to 9.24%.

The percentage of loans in the foreclosure process at the end of the second quarter was 4.3%, up 45 basis points from the first quarter and 155 points from a year earlier.

Jay Brinkmann, the MBA’s chief economist and senior vice president, said he was “a little surprised” that prime fixed-rate loans now account for one in three foreclosures, compared with one in five a year ago.

“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves,” he said. “It’s certainly a problem with employment, but it’s also a function of how far home prices have fallen.”

Four states — Arizona, California, Florida and Nevada — continue to have a disproportionately high share of foreclosure starts at 44% of the all new foreclosures in the second quarter.

Federal Housing Administration-insured loans, a category that had been a bright spot in past surveys, are showing signs of trouble, with record increases in foreclosures started, the percentage of loans in foreclosure and loans 90 days or more past due.

The percentage of FHA loans in the foreclosure process rose 22 basis points from the first quarter and 74 points from a year earlier to 2.98%.

A state-by-state breakdown shows that Florida remained a standout for the worst mortgage performance, with 12% of all mortgages in the second quarter somewhere in the process of foreclosure and another 5% that were 90 days or more past due at the end of June.

But other states are showing signs of weakness.

After being spared somewhat from problems, both Maryland and Washington stood out for having high foreclosure start rates in the second quarter, with Maryland at 1.31% and Washington at 1.09% because of increased defaults in pay-option adjustable-rate mortgages, Brinkmann said.

He cautioned that the problems are far greater in states that had the biggest price increases during the housing boom. “We’re seeing that in those states that now have huge price declines, when a loan goes delinquent, it’s almost going straight to foreclosure,” he said.

Brinkmann said he expected foreclosures to peak at the end of 2010, or roughly six months after unemployment.

He also emphasized that only seven states had foreclosure start rates higher than the national average of 1.36% in the second quarter. “It’s a big country and we have multiple bottoms, with some markets recovering faster than others, so it’s problematic to look only at the national numbers.”

source: American Banker

Although delinquencies for residential properties continued to climb in the second quarter of 2009, the rate of new foreclosures started was essentially unchanged from last quarter’s record high, according to the Mortgage Bankers Association’s national delinquency survey.

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a rate of 9.24% of all loans outstanding at the end of the second quarter of 2009, up 12 basis points from the first quarter of this year and up 283 basis points from the second quarter one year ago. According to the MBA, the percentages of loans 90 days or more past due and loans in foreclosure both set new record highs, breaking records set last quarter.

The percentage of loans 30 days past due is still well below the record set in the second quarter of 1985.

The percentage of loans in the foreclosure process at the end of the second quarter was 4.3%, up 45 basis points from the first quarter of 2009 and 155 basis points from one year ago. The combined percentage of loans in foreclosure and at least one payment past due was 13.16% on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

The percentage of loans where foreclosure actions were started during the second quarter was 1.36%, down one basis point from last quarter and up 28 basis points from one year ago. “There was a major drop in foreclosures on subprime ARM loans,” said MBA’s chief economist Jay Brinkmann. “The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase.”

California, Florida, Arizona and Nevada continue to have a disproportionately high share of foreclosure starts, although the share has fallen slightly from last quarter. Those states had 44% of all new foreclosures in the U.S. during the second quarter 2009, down from 46% in the first quarter 2009.

A man from Mesa Arizona, Jake David Abegg Whitman, recently pleaded guilty to federal fraud charges related to his participation in a cash-back mortgage fraud scheme involving 19 unimproved residential properties in the greater Phoenix area.

According to John J. Tuchi, U.S. attorney for the District of Arizona, Whitman played a leadership role in a conspiracy to obtain mortgage loans that were substantially larger than the actual value of the properties. Whitman owned 10 of the properties and served as branch manager of the mortgage broker Academy Mortgage that processed the loans.

Whitman worked with an appraiser to obtain inflated appraisals for the properties and recruited buyers to purchase the properties at the inflated prices. To overcome the buyers’ inability to provide the down payment, Whitman secretly supplied the down payment to the buyers and also provided cash back to the buyers at closing.

The properties eventually went into foreclosure and cost lending institutions nearly $1 million in losses. Whitman is cooperating with authorities in the prosecution of others. U.S. District Judge G. Murray Snow has scheduled sentencing for Oct. 26.

In Indianapolis, Robert Andrew Penn and Keven M. Lafavers, were indicted for federal mortgage fraud charges and have a trial date set for this fall.

According to Timothy M. Morrison, U.S. attorney for the Southern District of Indiana, Mr. Penn and his numerous business entities, with the assistance of Mr. Lafavers and others, allegedly obtained at least 112 fraudulent loans, totaling $12.6 million.

Participants in the schemes allegedly located straw purchasers who invested their good credit, but no money, to be the purchasers of properties at a much higher price than that negotiated with the seller. Seven other individuals were charged earlier this year with allegedly participating with Mr. Penn and Mr. Lafavers in their mortgage fraud crimes. The investigation is continuing. Trial is currently set for both defendants, who were unavailable for comment, before U.S. District Court Judge David F. Hamilton on Sept. 21.

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Adjustable Rate Mortgage: a better option over fixed rate for the
mortgage seekers

Adjustable rate mortgage loan is also called as-ARM loan. It is a kind of loan, where the interest rate of repayment is adjustable, as per the mortgage plan…..it is not fixed. This is its main difference with Fixed rate mortgage Loan. Now a days, many people in US are increasingly taking to ARM- who seek mortgage loan at affordable rate. ARM has become a more preffered option over fixed rate loans. Because, here the rate may be adjusted as per the borrower’s affordability. Adjustable rate mortgage loan is also useful for better mortgage management of people. Like fixed rate mortgage loan, it also has got some salient features & important points.

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In an interesting turn, recently the number of fixed rate loans moving to foreclosure has become a larger part of the overall foreclosure pie. This is particularly interesting because we have been told that the reason behind our crisis are the terrible adjustable rate mortgages (”ARM’s”) that were sold to us by banks. Lately in fact, the stable, conservative fixed rate loans have seen a significant spike in delinquencies and foreclosures. Experts say this is due to the overall economy, job losses, etc. Apparently no type of mortgage borrowing has been safe over the last few years. Makes you wonder… mortgage losses, both fixed rate and ARM are through the roof, auto and credit card losses are through the roof – what are our banks and other financial institutions using to underwrite? Are they really underwriting for risk, or is it just for proft? And why not just for profit if Uncle Sam will come in and bail you out for all your bad decisions? Those bad decisions start to look really smart. All the upside and no downside…