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Borrowers, insurers would save with new mortgage insurance

By Jack Guttentag, Monday, May 12, 2008.

(This is Part 2 of a five-part series. Read Part 1, "Lenders wise to beef up default-risk reserves.")

The first article in this series pointed to a serious weakness in the way the mortgage system deals with default risk. Interest-rate risk premiums collected from borrowers that are not needed to meet current losses are paid out as income to investors and not reserved to meet future losses. more...

Lenders wise to beef up default-risk reserves

By Jack Guttentag, Monday, May 5, 2008.

(This is Part 1 of a five-part series.)

The housing finance system, while still functioning, is in a crisis state. Interest-rate risk premiums -- the rate increment on mortgages classified as riskier -- are two to four times as large as they were two years ago. Day-to-day rate volatility, which can cause havoc in the relationships between borrowers and loan providers, is larger than I have ever seen it. more...

Volatile rates make locking a must

By Jack Guttentag, Monday, April 28, 2008.

One of the unpleasant features of the mortgage crisis has been heightened volatility in the prices faced by borrowers. For example, the wholesale rate on 30-year fixed-rate conforming mortgages rose from 5.23 percent on February 6 to 6.16 percent on February 26, dropped to 5.65 percent on March 3, rose to 6.23 percent March 6, dropped to 5.38 percent March 20, and rose to 5.812 percent April 2. These numbers are drawn from the wholesale price data shown daily on my Web site. more...

Why needless foreclosures happen anyway

By Jack Guttentag, Monday, April 21, 2008.

John X had his home foreclosed this year. It cost the investor who held the mortgage about $40,000 to foreclose. It would have cost only $25,000 to make the mortgage affordable to the borrower through a reduction in the interest rate. Modifying the loan contract in this way would have kept X in his home and saved the investor money. This is not an isolated case; preventable foreclosures are happening all around us. more...

Beware of the 1.5% mortgage offer

By Jack Guttentag, Monday, April 14, 2008.

(This is Part 2 of a two-part series. See part 1.)

This is the second of two articles on the characteristics of good mortgage brokers. more...

Good broker will warn against bad refi

By Jack Guttentag, Monday, April 7, 2008.

(This is Part 1 of a two-part series.)

In the last 10 years, I have written almost 50 articles on different mortgage broker topics, but none of them addressed the most basic topic of all: "What makes a good broker?" Perhaps it took 10 years before I was ready to confront this question, along with its obvious corollary: "How do you know a good broker when you see one?" more...

Mortgage concepts every buyer should know

By Jack Guttentag, Monday, March 31, 2008.

Home purchasers sometimes get into trouble because they are not clued into the sequence of steps involved in financing their purchase. These are qualification, preapproval, approval and lock. more...

Key industry players blamed for mortgage mess

By Jack Guttentag, Monday, March 24, 2008.

You have heard the complaint: "In our current home loan system, nobody worries about the risk because they pass it on to the next player in the chain. If everyone in the chain had skin in the game -- something to lose if the loan goes bad -- we wouldn't be in the mess we are in now." more...

Piggyback loans more costly in today's market

By Jack Guttentag, Monday, March 17, 2008.

A piggyback is a second mortgage taken out at the same time as a first mortgage, as a way of borrowing a larger total amount. The first mortgage is for 80 percent of property value, and therefore does not require mortgage insurance, while the piggyback is for 5 percent, 10 percent, 15 percent or 20 percent of value. Instead of a mortgage insurance premium, the borrower pays a higher rate on the piggyback than on the first mortgage. more...

More home sellers stuck paying buyer's closing costs

By Jack Guttentag, Monday, March 10, 2008.

"The market is not doing well here and we agreed to pay up to $8,000 of the buyer's closing costs. Is there anything I can do to keep the amount as far below $8,000 as possible?" more...

Mortgage industry struggles to manage default risk

By Jack Guttentag, Monday, March 3, 2008.

An enormous amount of ink has been spilled on the mortgage market crisis, and I have contributed my share. Yet I am now convinced that the most important factor underlying the crisis, which has been in plain view all along, has been overlooked. It is the way in which the mortgage industry manages default risk.

There are, in fact, two systems for managing default risk. In both, the borrower pays a premium scaled to estimates of the risk of the transaction. But, while one system has worked well, the other has been a disaster. more...

Mortgage Grader: a new way to shop lenders

By Jack Guttentag, Monday, February 25, 2008.

I have been spending time recently kicking the tires of a new Web site, MortgageGrader.com, which has excellent credentials. It has been developed by Jeff Lazerson, an experienced mortgage broker who didn't much like the way most brokers did business. more...

Monthly statements would eliminate loan servicing fraud

By Jack Guttentag, Monday, February 18, 2008.

(This is Part 3 of a three-part series. Read Part 1, "New mortgage underwriting rules will be tough to enforce," and Part 2, "Rebates to mortgage brokers rile regulators.")

Two previous articles examined the Federal Reserve Board's proposals for tightening underwriting requirements and for limiting broker charges to borrowers. These are longstanding areas of board concern. more...

Rebates to mortgage brokers rile regulators

By Jack Guttentag, Monday, February 11, 2008.

(This is Part 2 of a three-part series. Read Part 1, "New mortgage underwriting rules will be tough to enforce.")

Last week, I criticized the Federal Reserve Board's proposed rule to prohibit lenders from making loans that were not affordable, and to require lenders to verify the information on which they base loan decisions. These rules are too vague to be enforceable, and it is too late for them to do any good even if they were enforceable. more...

New mortgage underwriting rules will be tough to enforce

By Jack Guttentag, Monday, February 4, 2008.

(This is Part 1 of a three-part series.)

On Dec. 18 of last year, the Federal Reserve Board released its long-awaited proposals for curbing abuses in the home mortgage market. In this set of three articles, I examine board proposals to curb lax underwriting rules, unfair practices by mortgage brokers, and abusive practices by loan servicing agents. more...

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