Mortgage Lowdown

New Century Financial Corp. has stopped taking mortgage loan applications because some its financial backers have refused to continue financing its loans. New Century appears to be the latest victim in the subprime mortgage sector which is taking a battering at the moment. Lenders such as New Century have suffered because house prices have stopped rising and mortgage rates have increased slightly. These lenders would have to rely on bigger financial institutions to take some of the risk on these risky mortgages and home equity loans and to provide finance for their operations. These institutions require subprime lenders to meet minimum financial targets and would have the right to cease their backing if these targets aren’t met.

“As a result of the current constrained funding capacity, the mortgage lender has elected to cease accepting loan applications from prospective borrowers effective immediately, while the company seeks to obtain additional funding capacity,” New Century said in a statement.

Not only has New Century breached one of these regulations but they have also revealed that they are the subject of a federal investigation. The company is in a difficult position as when one of these bigger lenders stop their relationship, it is likely that other lenders will be skeptical about forming any relationships with New Century. Other subprime lenders will find themselves in similar positions in the coming months.

It is usual practice for subprime lenders to sell their loans on to bigger banks and these banks have the right to force New Century to repurchase these loans if certain guarantees aren’t met. This is exactly what happened last week. New Century also announced that it has borrowed more money to help refinance approximately $710 million in mortgage loans which is currently financed through another lending institution.

There could be tough times ahead for subprime lenders as they try and figure out a way to soften the burden and find a solution to this problem.

–By Priya Jestin, Staff Writer

Shopping for a mortgage that will meet your requirements and will also go easy on your wallet? You’ve probably done the rounds of a couple of mortgage firms. So how about getting comfy while you shop? For starters, you will need to be home for this. All you need to do is switch on your PC and get online.

Shopping for a mortgage on-line has now become one of the easiest and best means of finding the best mortgage available. It involves finding the best price among the different single-lender web sites that price your mortgage. There are numerous benefits of shopping for mortgage on-line.

One of the first things you will notice is that on-line prices are easier to find and to shop. You can easily find and compare different quotes from various sites at the same time.

You will also find that you can get better pricing online than off it. When you acquire a loan through a website, you will often be able to avail of lower prices. This is because online lenders manage to avoid the costs of maintaining retail-lending facilities and they pass on this cost advantage to buyers like you.

Another advantage is that you can avoid getting caught in the inherently volatile mortgage market. Usually, lenders reset their prices every morning. So unless you get price quotations from different loan providers at the same time, you will be running from one to the other. On the Internet, you can be assured that the rates are updated as soon as they are changed. So, you can compare almost immediately and choose the best rate available.

I know you’ve heard the warning that it is not good to ignore payments on mortgage loans and that you could lose your home, blah, blah… Well, we all know this fact, but there is another pressing fact — lack of funds or funds not being sufficient enough to stretch through the month. In such and other circumstances, you may be forced to miss a home payment.

What should you do when you miss a payment?

• The first thing to do is NEVER try to ignore it — one missed payment is the first step of a downward spiral that could end up with you losing your home.
• Next, immediately call your lender and inform them, and explain the reasons for missing the payment.
• Thirdly, try to come to some arrangement with the lender: you could make the payment the following month or in installments if it is a large sum.
• If you think you still cannot handle the payments, you need to sit down with your lender and discuss other options like for instance a new payment plan with a lower sum.

Looking to buy a home but rising mortgage rates giving you sleepless nights? Here are a few tips to help you smooth out problems and enjoy sound sleep:

Know Yourself: I’m not trying to be cryptic or smart. Just a simple way of saying that you should know how good or bad your credit standing is BEFORE a lender comes to know of it. Why? So there are no nasty shocks when you apply for a loan. What you need to do is pull your credit report (AnnualCreditReport.com). Once you know how you stand, you could even make certain adjustments to help you get that loan like changing your housing budget, etc.

Shop ‘n Compare: This is the best part of taking any loan. You don’t have to accept the first offer you get. You can shop for the best terms available. You can easily get online and shop for the best loan programs as well as title and escrow fees.

Lock rates: It may not seem like such a good idea in the short run, but now with the markets shifting considerably, a fixed rate is quite helpful. They are even more crucial now as experts expect the upward trend in interest rates to continue. When you get a rate lock, ensure that you get it in writing. You must also try to lock in as many costs and terms as possible.

Pre-approved mortgage: A pre-approved mortgage guarantees in writing a loan amount, interest rate and as much of the other loan terms as possible. This kind of a pre-approval allows you to shop for a home with a mortgage in hand and it will give you a negotiating edge with the seller.

Nearly 300,000 Americans lost their homes through foreclosure last year. And that is not the disturbing fact — Nearly half of these people never tried to even talk to their lenders! Delawareonline.com reports:

People in financial jeopardy often are embarrassed to talk about their problems. They don’t think their lender will help them, and some are even afraid the lender will use any information against them to foreclose faster. "There is a huge myth out there that financial institutions want to take the property back, that that is their real intention," says Marietta Rodriguez, interim director of the NeighborWorks Center for Foreclosure Solutions. In fact, foreclosing on a home and then reselling it costs a lender almost $59,000 on average, according to Freddie Mac.

Read more: Talk to lender to forestall foreclosure

There’s one good thing about bad news — more often than not, it sends you some form of warning before arriving. No, I’m not joking. If you look hard enough, you’ll find a pattern just about everywhere — from natural storms to stock market crashes. Well, I’m dealing with neither but with something more closer home — foreclosure. It is important to know the warning signs of foreclosure to prevent it from happening to you. So, what exactly are these signs?

Is your house worth less than what you owe? I know this sounds odd especially when house prices are not exactly crashing. But this is a very real possibility. The risk of foreclosures is very high if you’ve taken a loan in excess of 80 percent of your home’s purchase price. The problem is that you are stretching your budget well beyond your means. And in the event of a fall in prices, you could be badly stuck.

Exotic Mortgages: I think I’ve written more and enough about Adjustable Rate Mortgages, other exotic loans and the risks associated with them. For a short period of time, monthly payments are quite low and bearable, and then the problems begin.

Behind on mortgage payments: This is one of the biggest indicators of a coming problem. There could be many reasons like loss of job, illness, death in the family — of the earning member. Just about anything that contributes to reduction in income could adversely affect your payment capacity.

You can address all these factors. But time is of essence. It is important to contact a skilled lawyer before foreclosure starts.

You would think that with the housing market in such a big mess, investment banking’s biggest and smartest players would be hurrying for the exits. However, some of the biggest names in the business have spent hundreds of millions of dollars to snap up mortgage lenders! Investmentnews.com reports:

Investment banks see these acquisitions as a way to lock up a steady supply of home loans that they can bundle together and sell to investors for a big profit. In addition, with share prices for many mortgage lenders down steeply, the banks are getting real bargains, they say.

Read more: Investment banks enter mortgage market

BankAtlantic has launched a new commercial mortgage banking division. The bank’s new division — Commercial Mortgage Banking — will focus on long-term, non-recourse, fixed-rate mortgages for acquisition and refinancing of income-producing commercial real estate. Bizjournals.com reports:

"This new division allows us to expand our mortgage offerings into the long-term commercial loan arena — adding another dimension of customer service and convenience to the bank," says Marcia Snyder, executive vice president of commercial lending, in a release.

Read more: BankAtlantic debuts commercial mortgage banking division

As home foreclosures continue to rise across the East Bay, with Alameda, Contra Costa and Solano counties, mortgage bankers can no longer suppress their concern. They are commissioning classes and producing publications to stem the rash of defaulted loans predicted for next year. Contracostatimes.com reports

Aside from the financial problems, many defaultees report a feeling of loss, numbness and denial that keeps them from acting during default and foreclosure — worse, they become easy prey for con artists.

Read more: East Bay Foreclosures On The Rise

If you were like most Americans, you would think that owning a house is something that would seem just a matter of time. As soon as you graduate from college, you get a good job and then the house follows. Simple. But modern life is not as simple as it seems. A recent study shows that nearly 75% of college graduates with student loans felt the loan payments prevented them from buying a house or car.

Painful when you come to think of it. Imagine not being able to buy the necessities of life because of loan repayments, which could go on for years. But that need not be the case for you. A house would mean a mortgage and repaying two loans at the same time may not be easy. Rising interest rates will also make qualifying for mortgages more difficult for many people, but could really put the squeeze on those with student loans, who may have trouble qualifying even at lower interest rates.