FHA Refinance Applications Increase Nearly 200 Percent

According to the Single-Family Outlook report for the month of June, there was an increase in the refinance applications for mortgage loans insured by the Federal Housing Administration (FHA) by almost 200 percent from May to June because of the rise in applications for streamline refinance loans.

There were 188,810 FHA loan applications for the month of June, which is up by 52.1 percent from the 124,125 applications submitted one month earlier, and 43.3 percent more than the 131,796 applications submitted in the same month of the previous year.

Moreover, loan applications for refinancing an existing mortgage increased 198.3 percent, from 34,407 applications submitted in May to 102,640 applications submitted in June. It was also up by 190.2 percent compared with 35,367 applications submitted in the same month of the previous year.

In contrast, the number of applications for purchasing a home declined 4.3 percent, from 82,726 applications submitted in May to 79,138 applications submitted in June. It is also decreased by 9.7 percent from 87,674 applications submitted in the same period a year ago.

In terms of completed applications, it decline by 5.7 percent, from 114,008 in May to 107,533 in June. However, June’s completed applications were still 6 percent higher than the 101,469 applications one year earlier.

The loans for purchased homes made up 63.9 percent of the overall completed FHA insured loans in June, which is up by 3.8 percent from May but 7.7 percent lower than June of the previous year.

Refinanced loans made up 31.3 percent of the overall completed loans in June, which is down by 22.3 percent from May but up by 58.5 percent from June last year.

For a home buyer securing FHA loan in June, the average FICO score was 695, which decreased four points from May and five points from the previous year. In addition, the average FICO score for refinanced loans in June was 707, which decreased by four points from May and increased by nine points from last year.

Freddie Mac’s Profit Increases, Taxpayer Funds No Longer Needed

Last Tuesday, Freddie Mac reported an increase in their profits for the second quarter brought about by the decrease in credit losses. The government-owned mortgage-finance company said that it does not need extra funds from the U.S. Treasury to remain solvent.

Moreover, Freddie Mac said that it produced $3 billion in profit for the months April to June, a significant increase from $577 million of net income in the previous period.

Freddie Mac, together with its bigger sister company Fannie Mae, was controlled by the government in the year 2008 following the increase in mortgage losses.

According to Freddie Mac, the loans that were issued from 2005 to 2008, which led to its substantial losses, were becoming a minor part of its portfolio. By the end of quarter two, the loans made up 28 percent of its single-family portfolio. Moreover, the delinquency rate decreased from 3.51 percent in March to 3.45 percent at the end of June.

Freddie Mac is obliged to pay 10 percent of the government loans as dividends every quarter, just like the way credit card borrowers make minimum monthly repayments. During the second quarter, the company’s income was enough to make a $1.8 billion dividend payment to the U.S. Treasury.

Since it was taken over by the government in 2008, Freddie Mac has taken $72.3 billion in taxpayer funds, and has paid approximately $20.1 billion to the Treasury Department. It did not need government funds during the first quarter of 2011 and three quarters in the year 2009.

Meanwhile, Edward DeMarco, the company’s director, believes that letting the companies write down loan principal would increase the cost of the taxpayer bailout. In the previous week, DeMarco refused the administration’s request to help homeowners by using taxpayer funds from the bank bailout program.

Both Freddie Mac and Fannie Mae purchase mortgages from lenders and resell them as securities for investors. The two companies, together with the Federal Housing Administration, offer funds for more or less 90 percent of all U.S. mortgages.

Demand for Mortgage Loans Increases

According to a survey conducted by the Federal Reserve this summer, approximately three out of five U.S. banks said that the demand for mortgage loans is increasing as the housing market becomes stable and mortgage rates decline to record lows.

However, even though there is an increase in mortgage demand, lenders are still strict when it comes to mortgage borrowers and small business loans as well.

The report discovered a large increase in demand from borrowers. 57 percent of banks reported an increase in demand for home-purchase loans during the last three months, which is up from 38 percent during quarter one.

Peter Newland, economist at Barclays Capital, said that the increase in loan demand proves the housing sector is gradually recovering.

In addition, the report discovered that the credit standards of banks are still tough for mortgage borrowers or small businesses. In fact, 93 percent of the loan officers surveyed said that standards for approving mortgages to borrowers with good credit were the same with the previous quarter, and 95 percent said that standards were the same for firms with lower than $50 million annual sales.

Moreover, it was stated in the report that loan terms improved for medium and large companies, commercial real estate deals, auto loans and credit cards.

According to Millan Mulraine, analyst at TD Securities, the improving credit conditions is one of the signs that the economy is recovering.

The respondents of the Fed survey included 64 domestic lenders and 23 U.S. branches of foreign banks from July 3 to July 17.

Based on the survey, banks have been careful in terms of applying the Home Affordable Refinance Program, which is an effort by the Obama administration to encourage refinancing. However, the majority of banks have restricted their participation to loan they already hold. Most banks said that they were getting more refinancing applications than they could handle.

Analysis of Reverse Mortgages

According to Shirley Krohn, a member of the California Senior Legislature advocacy group, reverse mortgages are attracting a lot of people even when other types of loans are much better. As a result, the Consumer Financial Protection Bureau said that it is important to understand the possible consequences of a reverse mortgage.

Recently, the federal watchdog gave a report before the Congress about reverse mortgages, stating that seniors need to be more aware of what loans they are taking on.

Megan Thibos, the primary author of the report, said that it is an essentially confusing mortgage product. A reverse mortgage has a negative amortization, which means the balance on the home loan decreases rather than increases. This is just one example of the many confusing features of a reverse mortgage.

A reverse mortgage is marketed for borrowers aged 62 or older who have paid off their homes are have large equity in them. That equity is used as a bank account, where the senior can draw mortgage principal in monthly payments, as a line of credit or as a lump sum.

Christina Clem, spokesperson for AARP of California, agrees that reverse mortgages can aid seniors, but they are supposed to be a last option when the rest of the options have been exhausted. Moreover, reverse mortgages are intended for people who are rich in terms of equity but poor in terms of cash. However, reverse mortgages can charge high fees and interest.

In addition, Clem said that due to the recession, it is highly possible that there will be more foreclosures based on reverse mortgages. In fact, more or less 46,000 reverse mortgages are in default in the United States. There are a lot of people who, when they took on reverse mortgages, were not aware they still have to pay property taxes and home insurance.

Payday Loans for Borrowers with Poor Credit

Payday loans are offered by lenders to borrowers with poor credit who are in a financial emergency. They usually don’t do a credit check prior to lending you the money so those with poor credit are still qualified for the loan. Payday loans can also be known as cash advance loans, which are short-term financial loans, and can be obtained either through visiting lending websites or going to a payday loan store near you.

Payday loans make up a fairly small part of the total bank loan and its interest rate is typically the highest in the state. This kind of loan does not check your credit score and is based generally only on the profit of the borrower. You will more likely be asked to show your earnings, by faxing in your present paystub or bank statement.

Payday loan lenders give money to the borrower as a substitute of a check out and you get the money at once. The payday loan store or website you visit will ask you to fill out an application and after a couple of minutes, you will be accepted already. They will usually conduct a background check, which is the only verification they do, and look for particular forms of crimes.

Once they evaluate your background check and earnings, they will now decide whether to approve or reject you for the loan. Almost all applicants will be approved since most financial institutions approve 99 percent of borrowers. You should have an income of at least $1,000 and you will be immediately eligible to get a payday loan.

If you are experiencing a financial problem, these loan providers will provide one of the most common options to solve your problem. Even if you only need a small amount of money, a payday loan can be a solution.