Frank Nothaft, Vice President and Chief Economist of Freddie Mac:
“In the fourth quarter of 2007, 81% of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least 5% higher than the original mortgage balances, according to Freddie Mac’s quarterly refinance review. The revised share for the third quarter of 2007 was 86%.”
Looks like people are increasing their debt load (and/or shifting the toy debt to housing debt).
In other news…..
Project Lifeline (up for debate is “just who’s lifeline is it?”)
The new “plan” revealed today by the Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson outlined policy in which several leading lenders are working to stem the delinquent and foreclosure crisis by providing a short term moratorium for borrowers currently in or very close to foreclosure.
Matt Carter from Inman News describes the program:
“Participating Project Lifeline lenders — Bank of America, Citigroup, Countrywide Financial Corp., Chase, Washington Mutual and Wells Fargo — are sending letters to seriously delinquent borrowers. Borrowers who receive the letters must call their mortgage servicer within 10 days, agree to seek financial counseling, and provide updated financial information that can be used to draw up a workout plan.
In cases where lenders think a workout may be a better alternative than foreclosure, pending foreclosures will be put on hold for up to 30 days while a review process is undertaken and a new payment plan is drawn up. Borrowers who are approved for a workout plan that lowers their monthly payments will have their loan terms formally modified if they can prove they’re able to meet the new terms by making payments for three consecutive months.”
The end result of this policy will be debated.
As a market enthusiast, one of the items I find of interest is the change of tone and posturing by statements from various CEO’s whether in lending or in housing/building industry. For example, today in the New York Times, Indy Mac CEO Michael Perry was brought to task after revealing significant losses for the company. In 2007, Mr. Perry remarked that IndyMac would largely escape the turmoil in the lending industry due to the health of it’s lending practices and focus on Alt-A products.
Speaking of lending…. it appears that the largest mortgage insurer, MGIC Investment Corp., will impose stricter guidelines for the loans it insures in weaker markets. Beginning on March 3rd, MGIC will require larger down payments and higher FICO scores. Softer markets named include all of California, Nevada, Florida and Arizona. For condominiums, borrowers will be required to put down at least 10%.
All that to say, today’s borrowers are going to have to have some FICO and down payment mojo.
Notable Quote of the day: Mrs. S-Crow says, “Lenders…should have been doing this all along. People with no money should not have been getting loans for homes.” I like that lady!