The VA guaranteed nearly 360,000 loans last year, a 14-percent increase from FY10. Since FY07, the number of VA loan guaranties has surged an astounding 168 percent. At the same time, these no-down payment loans have been the safest mortgage products on the market for the better part of three years, according to data from the Mortgage Bankers Association.

“The continued strong performance and high volume of VA loans are a testament to the importance of VA’s home loan program and a tribute to the skilled VA professionals who help homeowners in financial trouble keep their homes,” said Secretary of Veterans Affairs Eric K. Shinseki.

Significant Gains

The sustained growth of VA loans comes as lenders have tightened requirements in the wake of the subprime mortgage meltdown. The program features more flexible credit and underwriting criteria than other loan programs. But far and away the most attractive benefit is 100-percent financing. About 9 in 10 VA borrowers purchase a home with no money down, and sellers often pick up most or all of the veteran’s closing costs.

For VA borrowers, who on average have less than $7,000 in assets, that kind of financial boost is tough to find anywhere else. While FHA loans continue to dominate the overall mortgage environment, even that program’s minimum 3.5-percent down payment can prove challenging for veterans and active service members.

Surprising Security

What’s perhaps even more surprising is the VA loan program’s track record in terms of foreclosure and delinquency. Talk of borrowers needing more “skin in the game” has ebbed some recently, but it’s still a common refrain in industry and legislative circles. Granted, VA loans constitute a small slice of the mortgage market, but these no-down payment loans are turning the “skin in the game” argument on its ear.

The VA’s rates for foreclosure and serious delinquency have been the lowest of all loan types, including prime loans, for the last 14 quarters and 11 quarters, respectively, according to the delinquency survey conducted by the Mortgage Bankers Association.

Much of that success stems from the agency’s commitment to keeping veterans in their homes. The VA incentivizes lenders and servicers to work with borrowers to avoid foreclosure and provides individualized help and assistance to homeowners on the edge. The VA also uses some credit and underwriting standards, in particular its residual income requirement, that help lenders assess an applicant’s true ability to handle the financial burden.

But VA borrowers themselves deserve part of the credit, too.

With interest rates still hovering near record lows, not to mention thousands of soldiers set to return home from Iraq and Afghanistan, the VA loan program is likely to see continued growth through FY12 and beyond.

___________________

About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender.

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Dump is really the right word. Fannie Mae and Freddie Mac, says a White House fact sheet, “would be directed to use mark-to-market accounting or other alternatives to manual appraisals for any loans for which the loan-to-value cannot be determined with the GSE’s Automated Valuation Model. This will eliminate a significant barrier that will reduce cost and time for borrowers and lenders alike.”

This sounds great except that the goal of an appraisal is to protect not only borrowers and lenders, it’s also to protect mortgage investors such as pension funds and insurance companies — entities we want to attract or face far-higher interest rates.

The Need For Appraisals

It’s true that appraisals are a cost, but so are food, shoes and tires. The important point is not that appraisal are an expense, it’s that appraisals made by actual humans have value.

For some time there has been an effort to eliminate appraisers from the mortgage process with seers, soothsayers and automated processing. The pretext is that independent appraisals cost money and the computerized systems are pretty good.

Pretty good is an okay standard when you own thousands of loans, but residential borrowers typically have only one or two mortgages. To them, having a property accurately appraised is hugely important so they do not overpay whether they use conventional, FHA or VA financing. Indeed, most real estate sale agreements provide that the deal is off without penalty if the appraisal comes in below the sale price — speak with a buyer broker or attorney for specifics.

But not only home buyers are protected, with a good appraisal the lender does not lend more than it should (thus protecting shareholders) and a mortgage investor does not have excess risk (thus protecting pensions and insurance funds).

If you’re a buyer and make an offer on a property it will not get financed unless the appraiser says the home is worth at least the sale price. Without independent assurance from an appraiser — someone who is paid regardless of the valuation — no lender will provide the mortgage financing necessary to create the sale.

But it’s not just the buyer and the “lender” who are protected, if by “lender” we mean the folks who originate the loan.

Today after most loans are originated they are sold into the secondary market. Packagers gather up 5,000 or 10,000 loans and create a mortgage-backed security or MBS. Investors then purchase a portion of the MBS called a tranche.

One of the most basic protections for buyers, lenders and mortgage investors is an independent valuation of the property. The fact that a buyer and seller have agreed on a price does not mean they have accepted a price that will protect the investor if home values decline or the borrower defaults.

So, yes, let’s move ahead with new and better housing programs to reduce foreclosures and clean-up a system damaged by too many short-cuts. But while we’re at it, let’s not end a basic protection that makes the market safer for buyers, investors and mortgage insurers.

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Actually, both claims are correct but the bigger issue is whether refinancing is actually worthwhile.

According to the letter my mortgage rate would drop from 4.63 percent to 4.46 percent if I refinance. That’s right, based on the APR or annual percentage rate, my rate would fall .17 percent. Not a partial .17 percent, not a fraction of .17 percent, but a full .17 percent. That’s about 1/6th of 1 percent.

But wait, there’s more.

And, yes, monthly costs would fall. For instance with a fixed-rate, 30-year $200,000 mortgage the monthly expense for principal and interest would go from $1,028.88 to $1,008.62. That’s a savings right there of $20.26 per month or $243.12 annually.

So the lender’s letter is literally true: I would have a lower interest rate and save almost $250 a year in this example.

Mortgage Rates

Despite the accuracy of the lender’s claims — which are subject to change along with the interest rate according to the letter — the offer is unacceptable to me. Here’s why.

How much would I have to spend at closing to save $250 a year? If closing costs $3,000 for transfer taxes, legal fees, title insurance and other expenses than it would take 12 years of mortgage “savings” to get back my money.

And why are mortgage rates at anywhere near 4.46 percent attractive in today’s world? The latest figures from Freddie Mac show that a typical 30-year mortgage is priced at 3.98 percent — that’s almost a half point lower than the offered rate.

Nope, I won’t be taking the lender’s offer.

But here’s the question: Why didn’t the lender simply repeat it’s last refinancing offer — an offer I took. In that case the rate went down almost a point, I saved about $200 a month and the lender paid all closing costs except prepaid taxes and insurance.

The lender and I both benefited. I got the lower monthly payment and the lender got a crisp, new loan to re-sell at a profit in the secondary market.

In other words, everybody won.

Mortgage Prepayments

The new refi offer doesn’t work because it’s one-sided — assuming the lender actually provides the terms mentioned in the letter (remember, they’re subject to change).

If I’m going to spend more money on a loan, I certainly would not pay $3,000 in closing costs to save $250 a year. Instead, I might simply increase the monthly payment by $25. While a $200,000 loan at 4.63 percent costs $1,028.88 per month, I might instead pay $1,053.88.

That would reduce the total interest bill over the loan term by nearly $10,000 — from $170,396.80 to $160,502.20 – and shorten the mortgage term by 18 months. This approach works regardless of whether the loan is an FHA, VA, or conventional fixed-rate loan. The concept also works for fixed-rate jumbo mortgages as well.

As to the lender — hey, write me again. Let’s redo the last deal at today’s rates. You know where I live.

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The Massachusetts official is turning over nearly 32,000 documents to state prosecutors on the grounds that they may be improper. As a result O’Brien says criminal investigations should be started.

If 32,000 documents are questionable in just one recorder’s office, then what is the total nationwide?

In considering this matter, let’s recognize that a sworn foreclosure affidavit is used by judges and courts to throw people out of their homes for not paying FHA, VA or conventional mortgages.

If the affidavit is wrong — or fraudulent — it means an innocent family can unfairly be made homeless by order of the court. This is a big deal, certainly as big as shoplifting or stealing a cow, crimes we seem to prosecute with great zeal.

The O’Brien release is below:

Saying that the time has come for a full scale criminal investigation, Southern Essex District Register of Deeds John O’Brien, today has sent some 31,897 of what he says are fraudulent documents that have been recorded in the Salem Registry to Massachusetts Attorney General Martha Coakley, U.S. Attorney General Eric Holder and U.S. Attorney Carmen Ortiz.

O’Brien said that he is asking these officials to impanel a Grand Jury to look into the evidence that he has presented.

“I am confident that these documents will show a pattern of fraud, uttering and forgery. These documents are signed by known robo or surrogate signers, whose signatures were supposedly witnessed by notary publics. In addition, these documents may contain fraudulent information in the body of the documents. I believe that a criminal investigation is the next step to hold the perpetrators responsible.”

O’Brien praised Attorney General Coakley for her aggressive pursuit of wrongdoing in her civil action but noted that other states such as California, Nevada, Illinois and Michigan have launched criminal investigations, and O’Brien is hopeful that Massachusetts will do the same.

O’Brien strongly suggests that the Grand Jury should subpoena both the past and present Chief Executive Officers (CEOs) of the Mortgage Electronic Recording Systems, Inc. (“MERS”), Bank of America, JP Morgan Chase, Citibank, Wells Fargo, Countrywide, Washington Mutual among others. In addition, he is asking that the top officials of DOCX, Nationwide Title Clearing, Inc. and LPS also be subpoenaed.

“These companies have been retained by MERS and its member-banks to produce the documents that I am alleging contain fraudulent information. It is one thing to go after these institutions with a civil action, but the only way to let them know that you are serious is to call them before a Grand Jury.” O’Brien said,

“There is no question in my mind that the officers of these banks and loan processing servicers made a conscious decision to commit fraud and participate in a scheme to deprive the public from knowing the true holder of their mortgage while at the same time avoiding paying billions of dollars in recording fees. It is my opinion that they acted as a criminal enterprise, crossing state lines to commit their crimes and in most cases using the U.S. Postal Service to send these documents to registries of deeds, thereby committing mail fraud. We need to know what they knew and when they knew it. Until the CEOs who allowed these fraudulent activities to happen under their watch are sent to jail for what they did, these types of illegal behaviors will continue.”

Just last week, O’Brien’s Registry received 3 documents from Bank of America, all signed by a known robosigner, Linda Burton.

O’Brien said, “If they are sending them to me, of all people, it is safe to assume that they are sending them to registries across the country.”

O’Brien refuses to record any documents signed by a robo-signer on his list unless those documents are accompanied by an affidavit attesting to the signature. So far, he has not received one affidavit.

“That clearly shows me that those documents were in fact fraudulent.” O’Brien said that if he or anyone else went into one of these major banks and forged a signature on a loan document they would be arrested and sent into jail.

So it begs the question, why haven’t these CEO’S been held accountable? O’Brien cited the case of the individual who walked into a Walmart and tried to make a purchase using a fraudulent One Million Dollar bill. He was arrested and charged with attempting to obtain property by false pretence and uttering a forged instrument.

O’Brien said, “As far as I am concerned, this is what these banks have been doing for years. Make no mistake, MERS and its member-banks are taking people’s homes using fraudulent documents and that is something we do not do in America.” In addition, O’Brien is zeroing in on the major foreclosure law firms that he believes have acted as a co-conspirator in flooding the registries of deeds with these fraudulent instruments.

“These attorneys should know better. They have acted as co-conspirators in perpetrating this fraud. I am sending a letter to the Massachusetts Board of Bar Overseers asking that they conduct an independent investigation into the activities of these firms. Unlike our Massachusetts Attorney General Martha Coakley, I understand that there are other Attorneys General and other public officials across the country who would like nothing better than to sweep this matter under the rug and grant these lenders, loan servicing companies and their foreclosure-mill attorneys immunity for the damage that they have caused, not only to our
economy but to people’s property rights. They would be willing to accept pennies on the dollar, a slap on the wrist, and a promise to never do it again.

“If that should happen, it would be the biggest sellout of the American People that I have ever seen. It would send the wrong message that the big boys can get away with anything. As I have been saying all along, they may think they are too big to fail, but as far as I am concerned, they are not to big to go to jail. The top officials at MERS, its member-banks, servicers and foreclosure-mill attorneys must be prosecuted and held accountable for their fraudulent schemes that brought profits to their institutions by cutting corners, circumventing land recordation systems through fraud, uttering and forgery.”

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“The investigations,” said HUD, “are in response to 22 complaints the National Community Reinvestment Coalition (NCRC) filed with HUD alleging that the loan activities of the mortgage originators showed that their home lending practices deny FHA- insured loans to African Americans and Latinos with credit scores as high as 640. Federal Housing Administration (FHA) guidelines allow mortgages to borrowers with credit scores above 580, provided the borrowers have down payments equaling 3.5 percent of the loan amount, or above 500, provided the borrowers have down payments equaling 10 percent of the loan amount.”

In the usual case lenders can set whatever terms they want to underwrite a loan. However, the FHA loan program is an important exception. Here’s why:

“This decision is arbitrary,” says John Taylor, president & CEO of the National Community Reinvestment Coalition, “because the loans are 100% guaranteed, whether the borrower’s credit score is 580 or 780. That means the loans with lower credit scores don’t pose additional risk to the company, so there’s no legitimate business defense for this across-the-board practice.”

To its credit, at least one lender — Quicken — has said it would stick with FHA credit score standards. Quicken was not among the 22 lenders named by the NCRC in its layering study.

“In an effort to make homeownership possible and more affordable for families across the country, Quicken Loans Inc, the nation’s largest online retail mortgage lender, announced they have eased the minimum credit score necessary to qualify for an FHA loan to 580. This change allows more consumers to qualify for an FHA loan, as previous guidelines required a minimum credit score of 620.”

Quicken also makes a good point regarding credit scores in general.

“There are folks who have steady incomes, and a solid payment history but were temporarily affected by the economy or a life event in some way. These challenges can lower their credit score significantly. We believe that a credit score, on its own, is not the sole arbiter of a person’s credit worthiness,” said Bob Walters, Quicken’s chief economist. “This change will open up credit to a significant group of people and allow them to again have access to purchase or refinance a home.”

Tight Credit Standards

With all the complaining about allegedly-tight loan standards — much of which is nonsense — there is simply no justification for FHA layering. FHA mortgages must conform to standards set by HUD, not artificial and arbitrary standards above and beyond what HUD requires. Lenders who simply follow HUD guidelines can be rewarded with originations, profits and 100-percent loan guarantees.

That’s not a bad deal for lenders, borrowers or the FHA. The evidence? For the third quarter of 2011 the Mortgage Bankers Association reports that the general foreclosure rate was 4.43 percent — but the foreclosure rate for FHA loans was 3.27 percent.

So do FHA mortgage borrowers still face credit score layering? The betting here is no. Expect the results of the HUD investigation in about a month.

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This, as the expression goes, should be interesting.

Teutul is likely to be a strong competitor because — whether a fan or not — he’s an actual, real-life entrepreneur, someone who started with nothing and went on to create several working businesses as well as a TV franchise. His American Chopper series on Discovery has been a major cable TV hit and ended the season strongly with a three-way bike build-off between Jesse James, son Paul Jr. and himself. In the end, Paul Sr. and his Orange County Choppers finished a distant third in the motorcycle design contest with the winner being his son and PJD Designs

Teutul has also known his share of adversity, including an impoverished and difficult childhood, as a mortgage borrower who faced the foreclosure of his headquarters building by the lender, and as a father who has been publicly estranged from his sons Dan, Paul, Jr., and Mikey.

As much as his successes, it’s probably his faults and failures which make Teutul interesting — and human.

Each of the contestants vies not only for Trump’s adoration but also for a charity. Teutul will use his winnings to support the Make-A-Wish Foundation, an organization which provides grants to support the wishes of children with life-threatening medical conditions.

Questions

Having Paul Sr. on Celebrity Apprentice raises several questions.

First, did the Celebrity Apprentice get the right Teutul? There’s an argument to be made that Paul Jr. would have been the better contestant because of his popularity and success.

Second, does the appearance on the Trump program signal that Paul Sr. will have a different role on the next edition of American Chopper; that is, will the program be more focused on his son? Will there be an expanded role for Jesse James or no role?

Third, which program benefits more — American Chopper or Celebrity Apprentice — from the appearance of Paul Sr?

Fourth, can anyone see a Trump cycle in the future? Even better, can anyone imagine Trump riding down Fifth Avenue on such a creation, hair blowing in the wind….

Fifth, what happens if Trump gets involved in a contentious political debate? How will that impact Celebrity Apprentice? Will there be higher instant ratings but less long-term appeal?

Contestants

For the 2012 edition of the show, NBC Entertainment says the new cast will be the largest ever with 18 contestants waiting to hear who will be fired by Trump on each segment.

The men are: late-night legend Arsenio Hall, pop star Clay Aiken, radio host Adam Carolla, the “Incredible Hulk” Lou Ferrigno, magician/comedian Penn Jillette, rock star Dee Snider, actor George Takei, IndyCar legend Michael Andretti, and star of “American Chopper,” Paul Teutul, Sr.

The women are: supermodel Cheryl Tiegs, pop star Debbie Gibson, actress and multi-Grammy winner Tia Carrere, author and reality star Victoria Gotti, comedienne Lisa Lampanelli, former Miss Universe Dayana Mendoza, singer and actress Aubrey O’Day, actress and model Patricia Velasquez, and star of “Real Housewives of New Jersey,” Teresa Giudice.

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Think of it as a back-door tax increase. While the public was watching the payroll debate in Washington Congress was actually increasing the cost to finance or refinance a home.

The Temporary Payroll Tax Cut Continuation Act of 2011 was widely applauded because it prevented the Social Security withholding from increasing to 6.2 percent from 4.2 percent of wages. However, the extension is only for two months and is set to end as of February 29, 2012. In other words, the payroll tax debate will be renewed once Congress returns from the mid-winter recess.

New Borrower Costs

Buried in the payroll compromise are new costs for borrowers. Specifically, these new costs come in two forms.

First, Congress has directed Fannie Mae and Freddie Mac to increase the fees lenders pay by ten basis points or .10 percent. This new cost — called the g-fee — will begin April 1, 2012.

This increase is substantial. According to Market Watch, lender fees now amount to .26 percent of the loan amount. The congressional increase will cost borrowers with a $200,000 mortgage an additional $5,400 over a 30-year loan term.

Second, Congress has directed the FHA to increase its annual mortgage insurance premium or MIP by .10 percent.

The FHA, which is an insurance program, has two borrower charges.

• There is an up-front mortgage insurance premium which is now equal to 1 percent of the mortgage amount.
• There’s also an annual mortgage insurance premium which in 2011 was increased to 1.15 percent for most borrowers. It will now rise to 1.25 percent.

The annual MIP increase will be costly to borrowers. The expense of a $200,000 mortgage will grow by about $4,200 over the life of the loan.

Taken together, the two increases created in the payroll tax bill will raise the cost of a $200,000 mortgage by roughly $9,600 over the life of the loan.

Impact

The result of the congressionally-mandated increases is that FHA loans will be artificially less attractive.

So is the MIP increase necessary?

The purpose of the MIP is to collect money from FHA borrowers which is placed in a reserve called the Mutual Mortgage Insurance Fund. This fund is supposed to equal 2 percent of the FHA loans outstanding but is now below the required level.

However, HUD has reported to Congress that under the current MIP structure the reserve fund will grow to the required 2 percent by 2014.

Moreover, the policies and programs which created problems for the FHA loan system — policies and programs and put in place by the Bush Administration prior to 2009 — have been changed. For instance, the required down payment has been raised, the mortgage insurance premium schedule has been changed, “seller-funded downpayment assistance loans” have been eliminated and lender standards have been tightened. The results are plainly visible when looking at the FHA’s book of business

Lenders will pass through the new charges, raising home financing costs nationwide at a time when the housing market remains stalled. Higher mortgage costs mean borrowers will qualify for less financing so they will have less ability to pay higher prices. Home sellers will thus feel part of the fee increase in the form of less buyer demand and reduced pressure to raise prices.

The net result of the congressional action is that borrowers will needlessly pay more for FHA financing and home sales will suffer. Various politicians will no doubt explain how the legislation made the FHA reserve fund “more secure” when, in fact, it was becoming more secure without a further increase in borrower costs.

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The filing decline may seem like good news and surely it’s a welcome relief for many families, however behind the lower numbers is the reality that foreclosure activity has been delayed by the continuing inability of loan servicers to get their paperwork right. The robo-signing scandal which first slowed the market last winter continues to hobble foreclosure activity. This means recovery in the housing market will remain stalled until the inventory of distressed properties is substantially reduced.

Robo-signing — the practice of having clerks sign foreclosure affidavits without actual knowledge of loan ownership or borrower default — has been discovered nationwide. Some of the results include foreclosing on active-duty military personnel and at least one case where a homeowner faced foreclosure — even though the property had been bought for cash and was mortgage-free!

“Despite a seasonal slowdown similar to what we’ve seen in each of the past four years, November’s numbers suggest a new set of incoming foreclosure waves, many of which may roll into the market as REOs or short sales sometime early next year,” said James Saccacio, co-founder of RealtyTrac. “Overall foreclosure activity is down 14 percent from a year ago, the smallest annual decrease over the past 12 months, and some bellwether states such as California, Arizona and Massachusetts actually posted year-over-year increases in foreclosure activity in November.

“Scheduled foreclosure auctions reached a nine-month high in November, corresponding to a recent surge in default notices that began back in August,” Saccacio continued. “Many of the new defaults that started the foreclosure process over the past few months are now being scheduled for public foreclosure auction.”

RealtyTrac also provided the following information

Nevada, California, Arizona post top state foreclosure rates

Nevada posted the nation’s highest foreclosure rate for the 59^th straight month in November despite artificially low foreclosure activity caused by a new state law passed in October (AB 284) that alters the foreclosure process in the state. A total of 6,512 Nevada properties received a foreclosure filing in November, up 3 percent from a 45-month low in October, but still down 43 percent from November 2010. One in every 175 Nevada housing units had a foreclosure filing in November, more than three times the national average.

Scheduled trustee’s sales in California hit a 10-month high in November, helping the state maintain the nation’s second highest foreclosure rate: one in every 211 properties with a foreclosure filing during the month. A total of 26,509 trustee’s sales were scheduled in California in November, up 14 percent from November 2010 — the first year-over-year increase in scheduled foreclosure auctions in California since March 2010.

Arizona foreclosure activity increased on a year-over-year basis in November for the first time since October 2010, and the state posted the nation’s third highest foreclosure rate for the fifth month in a row. One in every 256 Arizona properties had a foreclosure filing in November, more than twice the national average.

Substantial monthly increases in foreclosure activity in Utah and Georgia lifted those states’ foreclosure rates into the nation’s top five in November. Utah’s foreclosure rate of one in every 290 housing units with a foreclosure filing ranked No. 4 thanks to a 74 percent monthly increase in foreclosure activity, andGeorgia’s foreclosure rate of one in every 330 housing units with a foreclosure filing ranked No. 5 thanks to a 23 percent monthly increase in foreclosure activity.

Other states with foreclosure rates ranking among the top 10 were Michigan, Florida, Illinois, Ohio and South Carolina. South Carolina cracked the top 10 for the first time since RealtyTrac began issuing its report in 2005.

California, Florida, Michigan document highest foreclosure activity totals

There were a total of 63,689 California properties with foreclosure filings in November, the most of any state and 28 percent of the national total.

Florida foreclosure activity in November decreased 25 percent from a 13-month high in October, but the state still had 24,739 properties with foreclosure filings during the month — the nation’s second highest total.

There were total of 13,777 Michigan properties with foreclosure filings in November, the nation’s third highest state total despite a 14 percent decrease from October.

Illinois documented the fourth highest state foreclosure activity total in November, 12,398 properties with foreclosure filings, and Georgia documented the fifth highest state foreclosure activity total, 12,327 properties with foreclosure filings during the month.

California cities account for nine of top 10 metro foreclosure rates

Nine out of the nation’s 10 highest foreclosure rates among metropolitan areas with a population of 200,000 or more were in California. The only exception was Las Vegas, which ranked No. 6 with one in every 150 housing units with a foreclosure filing in November.

With one in every 120 housing units with a foreclosure filing during the month, Stockton, Calif., posted the nation’s highest metro foreclosure rate for the second month in a row. There were a total of 1,913 Stockton properties with a foreclosure filing in November, up 20 percent from the previous month and up 9 percent from November 2010. The increase in Stockton was driven largely by a 65 percent month-over-month increase in scheduled foreclosure auctions.

The eight other California cities with foreclosure rates ranking among the top 10 all posted double-digit percentage increases in scheduled foreclosure auctions in November, ranging from a 37 percent month-over-month increase in Modesto to a 100 percent month-over-month increase in Fresno.

Cities outside of California and Nevada with foreclosure rates ranking among the nation’s 20 highest metro foreclosure rates included Phoenix at No. 13 (one in every 209 housing units); Salt Lake City at No. 15 (one in every 223 housing units); Detroit at No. 17 (one in every 242 housing units); and Atlanta at No. 18 (one in every 244 housing units).

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“If somebody wants to buy a house,” he told CNN’s Piers Morgan, “it’s virtually impossible to get the money from a bank. And it’s — even if they have good credit. Even when mortgages are coming due, and people that have been paying a mortgage for 10 and 15 and 20 years, they can’t get money or they can’t get an extension from a bank. So the banks are really not behaving properly, that can I tell you.”

Really? I’d argue that mortgages today are widely available, as millions of people in just the past year can attest.

For instance, the National Association of Realtors says existing home sales were running at an annual rate of 4.97 million units in October — that’s up 13.5 percent from a year ago. If people can’t get mortgages then how are they buying homes? Yes, some buyers pay cash — 29 percent — but that means 71 percent got financing when they bought and 71 percent of 4.97 million existing home sales tells us that 3.5 million existing home transactions involved a mortgage.

Of course, people use mortgage money not only to buy real estate but also to refinance. The Veterans Administration, as one example, reports in fiscal 2011 that the government guaranteed 357,600 VA loans, including 186,600 purchase money mortgages and 171,000 refinances. Obviously, for these folks, mortgages were not “virtually impossible” to get, they are instead entirely accessible.

The same is true with FHA loans. In fiscal 2011 the government insured 777,521 purchase money mortgages and 420,561 loans to refinance, a total of 1,271,211 FHA loans.

Not everyone got an FHA loan. But roughly four out of five applicants did. There were 1,603,669 FHA mortgage applications in fiscal 2011, meaning 332,458 did not go through. But in any year some portion of all loans applications are declined or withdrawn, often for reasons which have nothing to do with the financing — think of a home with a structural problem or title issue.

And surely the mortgage business is not so bad for mortgage bankers. The Mortgage Bankers Association reports that “independent mortgage banks and subsidiaries made an average profit of $1,263 on each loan they originated in the third quarter of 2011, up from $575 per loan in the second quarter of 2011.”

In addition, said the MBA, “average production volume was $237 million per company (or 1,114 loans per company) in the third quarter of 2011, up from $174 million per company (or 866 loans per company) in the second quarter of 2011.”

You have to ask: If mortgages are “virtually impossible” to get then why have origination profits more than doubled? Why are originations up?

Loan Rates

It’s hardly a tough time to get a mortgage because home prices are about 19.1 percent lower nationwide than in April 2007 and mortgage rates are in the dumper. In recent weeks Freddie Mac has reported that both fixed rate mortgages and ARMs have been at record lows.

NAR says that as a result of falling home prices and low mortgage rates that affordability is at its highest and best level in years — something that could not happen without the ready availability of FHA, VA and conventional mortgage financing.

For background and more information, see Four Foreclosure Financing Myths on RealtyTrac.com.

Why Trump Is Wrong On Mortgages is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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At first it might seem as though higher premiums are in order given that the FHA reserve fund — the Mutual Mortgage Insurance Fund or MMI — is well below the 2 percent required reserve. While that may be true, one must also look at trends and directions.

HUD Secretary Shaun Donovan says his department is now looking at five potential changes in the FHA program — including higher mortgage loan premiums.

According to Donovan, the “FHA is constantly evaluating the appropriate level of premiums given the potential risks to the MMI Fund, and any action regarding premiums will be considered in the context of balancing access to credit in today’s economic environment with the need for added revenue generation to protect the Fund.”

The reserve fund gets its money from the up-front and annual mortgage insurance premiums (MIP) paid by FHA borrowers. The fund is reduced each time there’s a foreclosure claim — and given today’s market there have been a lot of lost homes.

Donovan points out that “FHA’s current premium levels are the highest they have ever been in the agency’s history” so can they really go higher?

That said, you have to wonder if there is any need for higher premiums to increase the MMI fund.

HUD says that without a premium increase the reserve fund will reach 2 percent (1.99 percent) by fiscal year 2014 — we are now in fiscal year 2012.

One of the central results of higher FHA premiums is that they will drive away prospective borrowers. Higher premiums will make the FHA program less attractive and less competitive.

The Mortgage Insurance Companies of America (MICA) — the trade association that represents the private mortgage insurance industry in Washington — says the “FHA should increase its premiums, raise its minimum borrower down payment to 5 percent, and change the way FHA area loan limits are calculated.”

One by-product of such proposals is that the FHA program will become more expensive and thus less attractive to borrowers.

The truth is that the FHA program has changed substantially during the past three years.

For instance, the Mortgage Bankers Association points out that “in 2008, Congress passed the Housing and Economic Recovery Act. That legislation terminated the failed seller-funded downpayment assistance programs that were responsible for a disproportionate level of FHA’s defaults.”

In addition, the down payment requirement has been increased to 3.5 percent and insurance premiums have grown.

Because the FHA program has changed under the Obama Administration the huge risks and losses run up from 2000 through 2008 have been replaced with a more stable and financially-positive system. There’s no need to raise premiums, no need to make the FHA program less attractive and no need to help special interests.

Why FHA Premiums Should Not Be Raised is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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