The mortgage market is shrinking under the impact of the continuing problems in the banking system, say lenders.

Figures from the Council of Mortgage Lenders (CML) show that new loans for home buyers fell to 50,300 in January, the lowest level for nine years.

That was 11,700 fewer than in December and 25,500 fewer than in January 2007.

The CML also said that lenders’ tougher loan criteria were forcing borrowers to put down larger deposits and accept smaller mortgage offers than before.

“The wholesale funding markets remain largely closed and mortgage funding still remains constrained,” said the CML’s director general Michael Coogan.

The credit crunch is now having a meaningful impact on the availability of finance for home purchases

Simon Rubinsohn of RICS said: “This is now having a discernible impact on lending criteria and the ability of first-time buyers to get into the housing market.”

The number of new loans being taken by house buyers is just under half that lent a few months ago in August 2007, when there were 103,000 such loans.

According to CNBC.com, the British Bankers’ Association reported that UK mortgage approvals picked up in January from near record low numbers.

More specifically, mortgage approvals in the UK rose from 42,343 in December 2007 to 44, 288 in January of this year. The net mortgage lending also rose from 4.9 billion Pounds in December of 2007 to 5.2 billion Pounds in January.

In the article, the Bank of England policymaker, Kate Barker, further made the encouraging statement that a recession in the UK remains an unlikely prospect.

On the other hand, Alan Monks, an economist at JP Morgan commented, “With credit conditions likely to continue tightening, and the growing expectation that house prices will fall this year, we would still expect to see some further declines in house purchase activity looking forward.” However, he added, “But the rise in the BBA (British Bankers’ Association mortgage approvals) provides some tentative signs that we may be close to the bottom of the current slowing in house purchase activity.”

Mortgage approval rates are widely seen as a forward-looking indicator, and it was reported that the Pound rose in value when news of the approval rate increase was announced, reflecting an increase in confidence in the economy.

The Bank of England has reduced borrowing costs to 5.25% so far in 2008 and economists predict that the interest rates will be reduced further to 4.75% by the end of the year.

Last year, 86,000 jobs were lost nationwide due to the credit crunch, mortgage meltdown, sub-prime slime (or whatever you want to call it).

Where did everyone go?

A number of former brokers have gone into debt settlement business. With homeowners unable to tap into their home equity, more and more troubled consumers are turning to debt settlement firms to reduce their debt by negotiating with creditors on their behalf.

The OC Register recently profiled Ray Kikavousi, an ex-broker who was laid off from former high-flyer Quick Loan Funding. Unable to find a job in the lending industry, he launched his own debt settlement firm. As the article described:

“Debt is something that everybody has, including myself, so it seemed like a new and upcoming business,” he said.

He and a partner, Charles Park, have invested about $50,000 to launch their company, People Debt, which has an office in Irvine. Kikavousi said he cashed in a 401-k, borrowed from friends and family and took out a bank loan to start the business.

In a sense, he said, he’s trying to make lemonade from lemons. During the housing boom, quite a few borrowers overextended themselves. Now that the bubble has burst, why not try to earn a living by helping borrowers pare their debts?

The fees aren’t nearly as lucrative as what he enjoyed in his mortgage days, but Kikavousi says he wants to build a business that will last.

Has anyone else out there gone into debt settlement? How is it working for you? We’d love to hear your feedback.

Also, please visit the debt settlement leads section of BigMortgageLeads for information on getting fresh, real-time debt settlement leads to help drive your business.

Now get out there and close more loan … or, more debt settlements!

So here is MortagageFinders.com, the best stop for the mortgage loans. This is a web portal providing the best deals for home loans. They make the deal for home loans an easy thing. There might be several questions in every mind as to what type of loan to take should a person directly go to the lender or should he deal with the broker first, but here is mortagagefinders.com providing you with a sigh of relief. They provide you with every solution of your problem. The best feature of their service includes the special personalized attention they provide to every client of theirs.

The people operating mortagagefinders.com believe in relieving their customers from every stress and unload their work load. They specialize in finding mortgage loans irrespective of the place you stay; they are here to find loans for you that suit you and your bill. They deliver full guarantee and satisfactory work.

The site also contains lots of articles that might prove worth reading before you opt for a loan. The articles are written with proper care and keeping in mind every need of the person requiring the loan. There are several blog too written by people that might also help you to decide which way to go for a loan.

So if you are searching for a good deal for loans then mortagagefinders.com proves a good option.

The consequences of the subprime mortgage mess roll on and on.  America’s economy is sputtering, housing markets in Europe are stalling, and financial markets around the world are feeling poorly.  How did it all get so out of hand?

I found myself thinking about this when I was out in the barn one evening, with a goat that wasn’t feeling so well.  My wife raises dairy goats, and I try to pitch in when I can.  Goats are not the biggest marketplace for veterinary medicine in the United States, so you don’t have that many treatments made specifically for goats.  So, when we have a goat that’s really ill, often enough the vet will suggests a treatment designed for sheep, or for horses, but which seems to work well on goats.

Veterinarians, like medical doctors, have the privilege of “off-label prescribing.”  Once a medicine has been approved for one use, it can be used for other purposes, with caveats.  Sometimes these other purposes become a major part of the market for a medicine.

That’s innovation, after all–discovering that a product designed for one need can also serve another.  Of course, you want your people to be on the lookout for those opportunities.  The ROI for this kind of innovation is usually very attractive.

That’s pretty much what happened with sub-prime mortgages.  They’re great medicine for certain conditions.  (OK, many of these potions were taken on the false assumption of continuing real estate price increases.)  But then mortgage brokers found major new uses for these instruments.  The off-label prescribing of alternative loans gotw ay out of hand.

So why doesn’t the same thing happen with veterinarians?  I think the key difference is that veterinarians are licensed professionals, with professional codes, continuing education requirements, and reputations to protect.  By contrast, too many loan originators take a “churn and burn” approach to their sales force.  Salespeople make their quota or they don’t get paid, and don’t stick around long.  Honestly, why worry about long-term consequences (even if I realize what might happen) if you likely won’t be around by that point?  By contrast, if loan originators viewed their salesforce as valuable sales professionals who were not only making sales but building relationships and expertise–and if there were the continuing investment to maintain the currency and integrity of these professionals–it is hard to imagine that we would have this mess today.

Yes, there would be a certain percentage of loas gone sour–if you never regret a deal, then you’ve been too cautious–with more gone sour among borrowers with weaker finaces.  But a worldwide epidemic of bad loans?  I don;’t think a community of licensed financial doctors would let that happen.

–Ed Rigdon

Kristi Collins is one of my favorite loan officers. You can reach her by phone at 602-750-8594 or by email at Kristi.Collins@MortgageFamily.com

Coincidentally she’s with Coldwell Banker Home Loans, my partner company. But I don’t recommend her only because our companies are partners. I’ve used her loans and used other companies. CB Home Loans has one of the smallest, most no-nonsense loan document packages I’ve ever seen. They’re a conservative lender too, and never got into the subprime market.

If they issue a buyer an LSR, they guarantee the loan will fund and close, even if that particular loan program is discontinued between contract date and closing date. In today’s market this can be crucial. The lending world is still adjusting to a new credit climate. Loan programs disappear without notice. Buyers sometimes get to the closing table only to find their lender yanked their loan program out from under them.

CB Home Loans also guarantees an on-time close. If they’re the cause of a late closing, they’ll give the buyer a 1/4 point discount for the life of the loan.

Starting today, a regular Tuesday feature will be Kristi’s report on the mortgage world and current rates.

Having trouble making your mortgage payments? or know someone who is having trouble? Worried about possible bankruptcy or foreclosure?

Well there may be some hope and the name of that hope is, “Hope Now Alliance“.

What is Hope Now Alliance?

It is a collaboration of industry leaders to help people facing mortgage crisis, formed specifically to help speed up delivery of help during this worst mortgage crisis to befall this nation in years.

In their own words, “HOPE NOW is an alliance between counselors, servicers, investors, and other
mortgage market participants. This alliance will maximize outreach efforts to
homeowners in distress to help them stay in their homes and will create a unified,
coordinated plan to reach and help as many homeowners as possible. The
members of this alliance recognize that by working together, they will be more
effective than by working independently.”

They have set out to accomplish the following as part of their action plan:

• The alliance will conduct a new, national direct mail campaign to contact
  at-risk borrowers, encouraging them to either call their lender or a credit
  counselor.
• This alliance has agreed to adopt a standard process model that will
  strengthen and speed work flow, productivity, and communications
  between servicers and counselors.
• The alliance will work to expand the capacity of an existing national
  network to receive, assess, counsel, refer, and connect borrowers to
  servicers.
• The American Securitization Forum, which represents servicers, investors,
  and other secondary market participants, has announced that counseling
  fees can be reimbursed from securitization transactions in appropriate
  circumstances.
• The alliance will develop common communications guidelines that will be
  used to respond to at-risk borrowers in order to offer them the best possible
  solutions, customized for each borrower.
• The servicers have agreed to work toward cross-industry technology
  solutions to more effectively connect servicers and counselors together in
  order to better serve the homeowner.
• The alliance will develop a common set of metrics to measure the
  initiative’s progress.

The Bottomline:

The alliance is offering to help people in trouble. If you or anyone you know is facing foreclosure or having difficulty making mortgage payments, then they need to take advantage of this offer of help. So please spread the word about this to those in need and have them call the alliance’s hotline number to speak to a live counselor.

It’s estimated that every day over the next 20 years at least 10,000 Americans will turn 62, according to Joe Salpietra, owner of Star Mortgage Inc. in Newburgh.

The statistic, he said, interests him; he believes his business could indirectly benefit from it.

He said he expects some of the birthday celebrators will help grow his number of reverse-mortgage clients.

A reverse mortgage is a loan available to people 62 and older to release equity in their property as one lump sum or in multiple payments. The applicant typically has paid off his mortgage or has only a small mortgage balance remaining.

The homeowner’s obligation to repay the reverse mortgage is deferred until the owner dies, the home is sold or the owner leaves for, say, an aged-care facility.

The concept was first introduced by the Federal Housing Authority several decades ago, but then the federal agency would only insure up to 2,500 of the loans in the entire nation.

Since then mostly mortgage companies, not banks, in the Tri-State have begun to offer the reverse mortgage.

Last year, 113,000 of the mortgages closed nationwide, said Salpietra.

Though people have seen actors Robert Wagner and James Garner in TV commercials talking about the reverse mortgage, most of them don’t grasp the concept and haven’t taken one of the loans.

Salpietra said he has noticed the reverse mortgage has gained popularity among some Tri-State residents over the past three to four years, however.

“I have done probably two dozen of the loans over the last two years,” he said.

Shannon Bartnick, owner of Mortgage Masters on Evansville’s East Side, said “I have not closed on one reverse mortgage ever, though there are lots of people who inquire about them.”

“The sad part is most people don’t understand the program and, therefore, are afraid of it,” Salpietra said.

He advised that people talk with a professional in reverse mortgages.

“Sometimes it takes several conversations before the senior person understands the loan,” Salpietra said.

Bartnick said she believes the reverse mortgage would be most beneficial to a person who owns his home and wants to take some monthly income to offset expenses or to pay off debt.

Otherwise, depending on the amount of equity a person has in his home and his life expectancy, as determined by different sets of actuary estimates, the loan amount is typically conservative, she said.

The person who has his house paid for can typically access up to 50 percent of its value through a reverse mortgage.

The action could diminish the amount of future inheritance for the person’s heirs, but it could allow the homeowner to continue to live in his home, she said.

By increasing the amount of income through the loan, hopefully the senior citizen’s lifestyle will improve, said Salpietra.

“Or, he could not take the loan and sit and struggle and die in a house that is free and clear (paid for),” he said.

According to Salpietra, a senior citizen can be behind on his mortgage payments and - if he has enough equity in the property - can get a reverse mortgage to pay off the loan, even if it is in foreclosure.

“That then would save his house and allow him to live in it until he dies,” he said.

Most reverse mortgage notes allow for up to 30 days for putting a house up for sale. And, it generally allows for up to six months to get the house sold, Salpietra said.

After six months it is a case-by-case basis with each customer and lender to determine if the period may be extended, he said. If a house doesn’t sell within a reasonable time, the lender can foreclose to get the balance paid, Salpietra.

He said the costs and fees for getting a reverse mortgage sometimes are higher than those of a regular mortgage.

Salpietra said the costs and fees on the reverse mortgage are set by the government. “So it costs the same no matter which company the client uses to get the loan,” he said.

Doug Diekmann, president of Farmers State Bank in Evansville and Warrick County, said he understands the need for the reverse mortgage.

“People have their primary equity tied up in their home and a reverse mortgage can provide them with a way to receive income,” he said.

He said a downside is the program may play odds with a person’s presumed age of death - via actuary tables - depending on how the loan is structured.

Farmers State Bank doesn’t offer the reverse mortgage because of the plans’ many variations that make bank officials feel uncomfortable, Diekmann said.

“True, the lender will hold up to its word to pay the income in a reverse mortgage. Rest assured, the bank holds the cards if the property owner dies,” he said.

“That is another reason we don’t offer the loans. We don’t want to push small people around,” Diekmann said.

Posted by admin in Reverse Mortgage Info

Nicole Gelinas (”The Rise of the Mortgage ‘Walkers’,” op-ed, Feb. seems to not only justify, but endorse, the “mortgage walker” behavior as a market-driven response. This results not from the irresponsible behavior of people who should have known better. Or people who can afford the payments, but who choose to default on the grounds that they can escape either prosecution or bad credit, blaming the nefarious machinations of financial institutions and the government, which conspired to make credit affordable.

I don’t know what generation Ms. Gelinas belongs to, but her rationale epitomizes the irresponsibility and blame-shifting that seems on the increase in recent generations. When our children were in college, 15 years or so ago, banks were mailing wholesale quantities of credit cards to them and their classmates. Some ran the cards out to the limit (usually less than $200) and defaulted on the payment, knowing that there would be no tangible consequences. Surely, these young adults’ behavior was a reflection, in many cases, of their home upbringing. Our children, like many others, took scissors to the unsolicited cards.

It is also notable that statistics show that people of modest means, but rich in ethics, continue to make mortgage payments, while wealthy speculators default on their obligations and thus continue to increase their wealth.

It is a dark day for America when educated, and presumably influential, people like Ms. Gelinas not only condone, but extol, this disgraceful behavior as a self-leveler in the mortgage crisis.

Readers Question: Does mortgage equity withdrawal enhance economic growth?

There is good evidence that mortgage equity withdrawal can lead to higher levels of consumer spending and economic growth

Definition of Mortgage equity withdrawal - Mortgage equity withdrawal occurs when homeowners remortgage taking out bigger loans to take advantage of rising property values.

• Suppose you bought a house for £100,000 with a £95,000 mortgage. (+ £5,000 cash deposit)
• 10 years later the house might be worth £160,000. Yet, you only owe the remainder of your £95,000 mortgage. If the bank is still willing to lend 95% of the value of your house. You could remortgage for say £150,000. This means you will have a bigger mortgage and will have to pay extra monthly mortgage payments, but you can now spend the extra £50,000 on holidays and cars. Remortgaging is a way for consumers to increase spending. It has become quite common in the UK.

·         Mortgage Equity Withdrawal in the UK

According to the Council of Mortgage Lenders equity withdrawal increased from £10 billion in 1984 to £23 billion in 1988. http://www.cml.org.uk/cml/filegrab/pdf_pub_resreps_35full.pdf.pdf?ref=3854

After the recession (and fall in house prices) of 1992 equity withdrawal fell to £12.5 billion.

By 2000, equity withdrawal had increased to £30 billion. During this period there was a steady rate of economic growth.

The Bank of England report that mortgage equity withdrawal has continued to rise since 2000, reaching a peak in the 3rd quarter of 2003 of nearly £9 billion. This was also equal to nearly 10% of post tax income. A considerable determinant of consumer spending in the UK. Bank of England MEW

Mortgage Equity Withdrawal does increase Aggregate Demand and can finance higher economic growth. However, we should make some qualifying remarks.

Problems of Mortgage Equity Withdrawal

• MEW increases AD, but it does not increase the productive capacity of the economy.
• MEW increases the debt burden of consumers. If interest rates had to rise, it would mean many consumers are susceptible to falling disposable incomes.
• Now that house prices are falling, an increased number of homeowners may face the problem of negative equity. Therefore, although MEW helped growth in the past, it could also contribute to a recession in the future.