Countrywide still the leading mortgage lender

Countrywide Financial Corp. is still country's leading residential mortgage lender.

In 2007, Countrywide (NYSE: CFC) had originated mortgages for $408.2 billion but it was down to what it originated in 2006. In 2006 it had originated $462.5 billion.

We look at the other leading originators last year:

In the ranking at number 2 was Wells Fargo & Co. & it had originated mortgage loans to the tune of $272 billion. Similar to Countrywide, the loan origination was down from what it was in 2006 - $398 billion.

Last year at number 3 spot was JP Morgan Chase & Co. with $207.7 billion in mortgage loan originations. It has been an improvement from 2006, when loan origination was $171 billion.

At number 4 was the Corp. which purchased Countrywide; Bank of America Corp. & it had mortgage loan originations for $188.6 billion, improvement from 2006 when it was at $166.3 billion.

Next at 5th position was Citigroup Inc., with originations up from $142.1 billion in 2006 to $151.9 billion.

Countrywide CEO to forfeit severance package

CEO of Countrywide Financial Corporation, Angelo Mozilo has announced that he is going to forfeit his severance pay & perks retirement package which would be close to $37.5 million.

Mozilo has received quite a bit of blame for Countrywide’s present position & has also been scrutinized by SEC (Securities & Exchange Commission) regarding stock sales he had made.

Even after forgoing severance package, he will be left with lot of money as he is going to get a pension & executive retirement plan which in 2006 was estimated to be $23.8 million. Mozilo also has $5.8 million in company stock & $20 million in deferred compensation.

National Association of Realtors comments on economic stimulus plan

Federal Reserve Chairman, Ben Bernanke is in favor of use of short term economic stimulus measures to stabilize the current situation.

In this context NAR has suggested that some of the constraints on 2 GSEs (Fannie Mae & Freddie Mac) should be relaxed.

Dick Gaylord (NAR President) is of the opinion that conforming loan limits for the 2 GSEs should be increased. NAR wants the limit to be increased to $625,000 from $417,000. The President said that increasing the conforming loan limit would improve liquidity & boost buyer confidence levels.

Gaylord said -






Stanford Group estimates on the maximum loan size which can be guaranteed by Freddie Mac or Fannie Mae for high cost areas according to the stimulus plan by Congress :

Mortgage analysis firm enters cooperation agreement with AG's Office

Clayton Holdings Inc., a mortgage loan analysis firm has entered into an agreement with NY's AG in which it will provide information on how Wall Street firms had disregarded their warnings on quality of mortgage loans being sold to investors.

Clayton is country's biggest due-diligence firm which is hired by investment houses for ensuring that loan blocks are as per seller's own standards.

The firm has entered into cooperation agreement with AG's Office & will give details of what it knows about how firms had sold MIs (Mortgage Investments) even after they warned that the loans were not upto required quality standards.

In a statement released by the firm they have stated that they have also been asked regarding mortgage loans which had exceptions to seler/lender guidelines & were purchased by mortgage backed security issuers.

Mortgage applications increasing

For some weeks now, number of people applying for a mortgage loan, be it for house purchase or refinance has been on the rise.

As per January 11 week ending report from MBA (Mortgage Banker's Association), mortgage activity has jumped to 28.4% week-over-week. It is slightly lower than the increase seen in week ending January 4 where the increase was 32.3%.

Additionally, new mortgage applications have gone up by 11.4% & number of people looking to refinance has increased by 43.4%.

Citigroup writedowns and Washington Mutual Layoffs

Citigroup has recently announced a substantial $18.1 billion writedown. From its inception 10 years ago, for Citigroup it was the first quarterly loss & was basically due to losses from subprime lending.

WaMu has also released bad news; it is going ahead with 2600 job cuts from their home loan section & another 550 from support & corporate positions. Company spokesman have also released information that they are expecting loan related losses to the tune of $1.8 to $2 billion in the first quarter of 2008.

Mortgage rates falling

PMMS or Primary Mortgage Market Survey by Freddie Mac shows that mortgage rates are continuing to fall. The rates for 15 & 30 yr. FRMs are now at their lowest level since July 2005.

30 Yr. FRMs are averaging 5.69% & are down by 18 basis points. Last year these mortgage loans were at 6.23%. Similarly, 15 Yr. FRMs are at 5.21%, which were at 5.98% one year ago.

It is also the first time in 7 years that average rate of 15 yr. frms is at a lower point compared to average rate on 1 yr. arms.

Mortgage Bankruptcy Bill

The Mortgage Bankruptcy Bill was recently signed off by U.S. House Judiciary which tries to help bankrupt homeowners keep their homes. According to this bill, terms of existing mortgages can be changed by bankruptcy courts to help homeowners.

This proposed legislation is only applicable for sub prime mortgages & other non traditional mortgage loans like optional payment & interest only mortgage loans. In addition these loans should have been taken after January 1, 2000 & the homeowner must be filing Chapter 13 bankruptcy relief.

Those who support the bill have figured out the number of homeowners who will get help because of the legislation will be around one-half million.

Through this legislation courts will be able to:

• Cancel excessive & most often secret fees charged by unfair lenders.

• To reflect actual value of the house, modify mortgage’s principal amount.

• Remove harsh prepayment penalties and

• Bring down very high interest rates on the mortgage.

Mortgage Rate Trend

The following figure shows how different type of mortgages have been moving for the last 1 year. we can clearly see that most of them have lower rates compared to what they were 1 year ago.

Job cuts by National City Corporation

National City Corporation is going to eliminate 900 jobs and has also announced suspension of brokered mortgage operations.

This is going to be 2nd major layoff in little over a year & is going to affect one-seventh of its mortgage staff. In 2006, 2500 positions were cut when their mortgage lending and home equity operations were merged. They are also cutting its common stock dividend to .21 from .41 & have also planned seeking more capital for coping with credit market fluctuations.

Schwarzenegger wants a raise in conforming loan limit

California Gov. Arnold Schwarzenegger has joined others in raising his voice for increase in conforming loan limit which currently is at $417,000. This is the present ceiling for mortgage loans which are eligible for guarantee or purchase by Freddie Mac & Fannie Mae.

Arnold Schwarzenegger has urged for clearing of legislation to raise this loan limit to $625,000 (considered as jumbo loans) for markets called as high-cost housing markets. He made this request through a letter to congressional leaders & if the conforming loan limit is increased it would allow government chartered mortgage companies to have a major role jumbo loan market in California.

In the letter to House & Senate leaders Schwarzenegger said:

Mortgage Portfolio Loan purchase process

The following chart shows the process by which mortgage portfolio loans are purchased.

Lenders originate loans & can select to sell them as whole loans. On the other hand Fannie Mae purchases the mortgages for its portfolio & to fund the purchases, issues debt in capital markets.

Federal Reserve cuts federal discount rate

Recently Federal Reserve has made a single largest rate cut in the last 20 years. The federal discount rate was cut by .75 of a point. This move was a result of the conditions presently existing in foreign stock exchanges.

Calculate your mortgage payments

Borrowers interested in knowing how much payment they would have to make on their mortgage can use this formula. This formula can be inserted in a spreadsheet and by providing values for interest rate, term & principle borrowers can figure out their payment amount.

ARMs are less appealing now

According to the twenty fourth annual Adjustable Rate Mortgage Survey done by Freddie Mac the starting rates for ARMs have not changed much from what they were at the time of 2006 survey even after Federal Reserve has lowered federal funds target. In comparison to it fully indexed rates have fallen to their lowest rates in 3 years, causing erosion in rate discounts that are offered initially on the mortgage & were common in 2006 & 2007 time period.

The survey was done during December 17 to December 21 & was based on data from 112 Adjustable Rate Mortgage lenders.

In the survey it was also found that market share of ARMs is going down because interest rate savings compared to FRMs has narrowed in the last few years. In addition to it lenders are now offering smaller discounts on rates for introductory adjustable rate mortgages.

Mortgage Regulatory System – Nationwide Mortgage Licensing System

American Association of Residential Mortgage Regulators (AAMR) & CSBS (Conference of State Bank Supervisors) through a press release have informed that the (NMLS) Nationwide Mortgage Licensing System is now operational.

NMLS will work as a base for coordination between states on consumer protection & mortgage supervision. Initially 7 seven states (Kentucky, Massachusetts, Idaho, Iowa, Nebraska, Rhode Island & New York) are participating in this program but eventually all states will start using this system.

Using this system mortgage companies will be able to electronically apply for & manage their licenses. NMLS will also reduce department & industry costs related to processing licenses. It will help in streamlining licensing application & renewal process for professionals & companies.

After some time consumers will get access to the system’s enforcement & public licensing information. It would help them in checking credentials and history of loan officers before selecting them.

Countrywide to be purchased by Bank of America

BofA is in the process of buying Countrywide. According to Reuters & Wall Street Journal, Bank of America is preparing for an outright purchase of Countrywide.

BofA has offered $4 billion in stock for the purchase. Shareholders of Countrywide will get 0.1822 of a share of BofA stock for every share owned in Countrywide. The purchase is expected to be completed by third quarter of this year.

If this purchase is successful Bank of America will become the biggest lender & servicer in the country.

National average for mortgage rates

Freddie Mac's weekly PMMS. Every week one twenty five lenders are surveyed by Federal Home Loan Mortgage Corporation (Freddie Mac) & different type of lenders ( commercial banks,mortgage lending companies, and thrifts) are equally surveyed to get the weekly values.

Washington Mutual (WaMu) is being accused of appraisal fraud

One former WaMu appraiser (Jeniffer Wertz) is suing the bank & has claimed that as she forecasted a gloomy housing market, she got blacklisted.

From mid-2007, her appraisal were not accepted by Washington Mutual . Only a month before that she had reported that there was a decline in local housing market in her area.

Mortgage Info

Many people are confused about which type of mortgage to take when buying a house. We will help them select the option most suitable for them according to current market situation.