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Seattle mortgage broker adopts U.K. model

By Jack Guttentag, Sunday, June 22, 2008.

(This is Part 2 of a two-part series. Read Part 1, "Transparency is king in U.K. mortgage system.")

Last week I noted that the pricing of mortgage broker services in the United Kingdom was much more transparent than in the United States. As a result, the U.K. system provides no leeway for brokers to price opportunistically, meaning to vary the price according to what the borrower can be persuaded to pay. In the U.S., however, opportunistic pricing is pervasive and average broker fees are much higher. more...

Transparency is king in U.K. mortgage system

By Jack Guttentag, Sunday, June 15, 2008.

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

To gain perspective on institutional practices, nothing beats seeing how the practices differ somewhere else. Recently I looked at how mortgage brokers and the lenders they deal with operate in the United Kingdom. I have had invaluable help from Richard Hobson, a broker in the U.K. for many years who is now a broker in the United States.

The basic economics of the industry are essentially the same on both sides of the Atlantic. Assuming that the lender is satisfied that the broker is properly licensed or certified, the arrangement between them is very simple. more...

Will mortgage insurance protect against job loss?

By Jack Guttentag, Sunday, June 8, 2008.

Does mortgage insurance protect me if I'm disabled or lose my job?

No, mortgage insurance protects the lender against loss in the event that you default. You pay the premium, but the lender receives the protection. The sole benefit to you is that, with mortgage insurance, lenders are willing to make loans with down payments smaller than 20 percent of purchase price or appraised value. I should add that a few mortgage insurers have experimented with programs that provide the kind of protection to borrowers that you are asking about, but they have never caught on. more...

Struggling borrowers get fresh start under new plan

By Jack Guttentag, Sunday, June 1, 2008.

(This is Part 5 of a five-part series. Read Part 1, "Lenders wise to beef up default-risk reserves"; Part 2, "Borrowers, insurers would save with new mortgage insurance"; Part 3, "Mortgage insurance cheaper under new plan"; and Part 4, "Help from feds not a bailout.")

This series of articles introduced a new type of mortgage insurance called mortgage payment insurance, or MPI. Under MPI, insurers guarantee timely receipt of the mortgage payments after the borrower defaults, as well as protection against loss if the loan goes to foreclosure.

Despite the fact that the insurer under MPI assumes virtually the entire risk of default, because MPI also reduces the rate on high-risk loans, MPI on such loans will cost the insurer less than traditional mortgage insurance (TMI). more...

Help from feds not a bailout

By Jack Guttentag, Monday, May 26, 2008.

(This is Part 4 of a five-part series. more...

Mortgage insurance cheaper under new plan

By Jack Guttentag, Sunday, May 18, 2008.

(This is Part 3 of a five-part series. Read Part 1, "Lenders wise to beef up default-risk reserves," and Part 2, "Borrowers, insurers would save with new mortgage insurance.") more...

Borrowers, insurers would save with new mortgage insurance

By Jack Guttentag, Sunday, May 11, 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, Sunday, May 4, 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, Sunday, April 27, 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, Sunday, April 20, 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, Sunday, April 13, 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, Sunday, April 6, 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, Sunday, March 30, 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, Sunday, March 23, 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...

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