Loan Experts

White House is considering expanding the current interest rate freeze program which was announced in December. Secretary of the Treasury Henry Paulson mentioned that borrowers with adjustable rate mortgages not from the subprime category may become eligible.
Originally, this program would only freeze interest rate increases on sub-prime mortgages. The number of people affected by this freeze would be limited. Current consultations involve adding consumers who have adjustable rate mortgages at prime rates. Subprime rates are usually given to consumers with problematic credit.

Fed Chairman Bernanke says they are ready to decrease rates as needed. This comment has been made in a speech to a housing and economic forum in Washington, DC. He analyzed the causes for the housing slowdown and the credit crunch and the some moves by the Federal Reserve to stabilize the situation, including lowering interest rate three times last year to a two year low of 4.25 percent and bringing in a term auction facility (TAF), successfully utilizing $40 billion to eligible banks in December.

Year started with the significant increase in new mortgage applications due to low interest rates. As declared by The Mortgage Bankers Association, loan applications increased more than 30% from last week of 2007. Applications for refinancing increased as well, whose share in total number of applications rose from around 50 to 57%. As expected, number of loans with adjustable rates has dropped and is around 9% of all mortgage applications.

Fair Isaac Corporation, a company responsible for the FICO credit score system introduces new model called FICO08. Lenders were asking for a new way to determine borrowers’ financial strength and a probability of risks associated with defaults on payments.
FICO is used by most banks not only to make a decision whether to provide a borrower with a credit, but to determine interest rates and other terms. FICO is also used when making decisions by insurance carriers, utility and cell phone providers, and other companies.

Bank of America Corp., one the largest banks in the United States agreed to acquire Countrywide Financial Corp. for almost $4 billion, approximately $7.16 per share in stock. Countrywide's market value has decreased by more than 6 times to $3.66 billion during the past year due to first quarterly loss in 25 years.
After this deal Bank of America will become the nation's largest mortgage lender, having about 25% of the mortgage industry’s market share and combined assets will exceed $1.8 trillion, second to Citigroup, which has more than $2.35 trillion in assets.

Stocks rose after the report that the economy is fighting but not as strong to avoid another rate cut by the Federal Reserve. The Dow Jones rose almost 200 points.
The report by ADP, which showed that 189,000 jobs were added during November raised hopes that the report by the Labor Department will be strong as well.
The economy is not that strong though, which might persuade the Federal Reserve that the lower rates are necessary. The argument is whether the Feds will cut the rates by a quarter or as much as half a point this time.

Last week’s rates went down to their two-year low and that prompted for an increase in activity by borrowers. According to a report by Mortgage Bankers Association, applications for mortgages to purchase new homes rose by 22 percent compared to a week before. Refinancing applications went up as well by 32 percent.

Option One Mortgage, a division of H&R Block declared a loss of $192 million, which impacted the deal between HRB and Cerberus Capital Management LP under the current mortgage market environment.
HRB announced that the companies decided to terminate the transaction because they couldn’t agree on how to modify agreement due to changes in mortgage market conditions and considerable decline in new lending by Option One.

Current credit industry meltdown encouraged borrowers to evaluate all possible alternatives. One of the options for new home buyers and an outstanding option for home buyers and existing property holders trying to fight it are FHA loans ( Federal Housing Administration ). The problem is that a lot of people do not understand these types of loans while it can be exactly what they need.

Two reports on home sales, existing home sales and new home sales reports have been issued last week. While existing home sales report was a bit depressing, new home sales report brought some optimism.
Existing home sales report, issued by National Association of Realtors shows that the sales dropped by 1.2 percent compared to October to 4.97 million units from October’s 5.03 million units, which is 20 percent lower than in last year’s September.
The prices fell as well, as the national median price dropped by 5.1 percent from $219,000 to $208,000.