Gulf Coast Associates' Blog: Mortgage Information

Two things are for sure in 2008 for the mortgage lending industry; higher borrowing costs and more government regulations. While many say these are the necessary reforms needed to deal with the mortgage debacle of 2007, we see them as the consequences of an industry unwilling to regulate itself. The problem is, the only ones who will truly pay for an industry that ran amok, are the people looking to borrow money to buy a home.

So, in order to right the ship, here are some of the things that will happen, or, are proposed to happen to the industry in 2008. Some are sound changes and should be welcomed. Others are onerous or shortsighted as are most new regulations when the government has to intervene to correct abuses in the marketplace.

Higher Mortgage…

President Bush signed into law today a new measure to provide tax relief for homeowners facing foreclosure or bankruptcy. The bill eliminates federal taxes due from homeowners who have had mortgage debt forgiven as part of a foreclosure or the renegotiation of a loan on their primary residence. Currently such debt forgiveness has been treated as taxable income.

The bill arose in response to the current mortgage crisis and is anticipated to reduce taxes on strapped homeowners by $650 million. "When you're worried about making your payments, higher taxes are the last thing you need to worry about," Bush said at the bill-signing ceremony. With some 2+ million adjustable-rate mortgages scheduled to reset through 2008, the new law will be a nice holiday gift…

I can hardly put into words (at least not publicly) of how sick I am of some of the mortgage and real estate crowd who are taking the new government rate freeze plan as another opportunity to bash President Bush and the Investors who hold the paper on those loans. What a bunch of sad sacks they all are. Anyone with half a brain can see right through their so called criticisms and understand that all they are really doing is showing their true partisan agenda. And just what is that agenda? Simple, blame the Bush administration for everything that happens. How politically correct they all are. Then, just to show how progressively minded they are too, they bash the greedy investors, who are going to lose money no matter what happens as we move forward.

Now,…

Today, the Bush administration and the Lending Industry announced their plan for helping homeowners who are facing higher mortgage payments when their upcoming subprime ARM loans reset. Faced with the prospect of 2 million subprime mortgages scheduled to reset at higher interest rates in the coming years, the agreement will freeze the loans' current interest rate for the next five years. The administration stressed that the deal is not a bailout because no government money is involved and limits will be put in place as to exactly what type of borrowers will be eligible for the program.

By adopting such limits, only those borrowers who are current on their payments and can't afford the higher reset interest rates will qualify. Borrowers who have been …

Treasury Secretary Henry Paulson announced on Monday there could soon be an agreement between the government and the major players in the mortgage industry to help thousands of American homeowners avoid mortgage defaults by temporarily freezing borrower’s lower introductory rates to keep them from resetting to higher levels for a period of years.

Paulson was addressing a national housing conference and said in his speech that this effort was a “pragmatic response” to the current realities of the worst housing slump in more than two decades. He also noted that the number of homeowners unable to meet their higher monthly mortgage payments because of their rates resetting is currently soaring and will continue to do so unless something is done to help…

The Office of Federal Housing Enterprise Oversight (OFHEO) announced today that the maximum 2008 Conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac will remain at the 2007 level of $417,000 for one-unit properties. Higher limits will continue to apply for Alaska, Hawaii, Guam and the U.S. Virgin Islands, as well as for properties with more than one unit.

The Conforming Loan limit determines the maximum size of a mortgage that Fannie and Freddie can purchase. By law, the limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey of the Federal Housing Finance Board. While the average house price in the survey declined by 3.49% over the last year, the OFHEO once again…

House Bill HR-3915 Passes, Now Heads to Senate

Well, after a few agonizing days, and a relentless email campaign by many in our industry, the House of Representatives finally passed the new Mortgage Reform and Anti-Predatory Lending Act of 2007 (HR-3915) on Thursday. Thankfully, the final Bill was amended to remove the controversial ban on the use of yield spread premiums, which would have crippled the mortgage lending industry; and, in turn, further promoted the current housing slump by raising interest rate costs to anyone looking to finance a new mortgage loan.

 While we agree that some of new Bill's proposed changes will be good for our industry as a whole, we totally disagree that Congress should be in the business of trying to legislate good…

Now that a Federal Judge has at least temporarily blocked HUD from doing away with Down Payment Assistance Programs (DAP), we thought it might be a good time to review their requirements. Many first time homebuyers need this type of help and since HUD has filed an appeal, using this window of opportunity might make sense, especially with the recent drop in mortgage interest rates.

DAP programs permit the seller to contribute up to 6% towards down payment and closing costs for the buyer for a small charge collected as a fee by the non-profit organization. The typical charge is from $250-$500, depending on the provider and the amount of the assistance.

When used in combination with a FHA loan program, buyers can essentially purchase a new home with very…