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Tag Archives: ARM

CFPB’s New Rules Ban Incentives for Risky Mortgages

While the foreclosure crisis has more than one culprit, the Center for Responsible Lending (CRL) pointed to the significant role of predatory lending practices in a report on the state of lending. According to data from CRL, among hybrid or ARM option loans originated between 2004 and 2008, 24.7 percent are either seriously delinquent or have become completed foreclosures as of February 2012. To prevent loan originators from directing borrowers toward risky mortgages, the Consumer Financial Protection Bureau issued new rules Friday to ban incentives for selling risky mortgages.

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Settling the Debate: Payment Size Matters, Fed

The Federal Reserve Bank of Boston recently conducted a study to clarify the effect of mortgage payment size on likelihood of default, and the researchers concluded ""interest rate changes dramatically affect repayment behavior."" Researchers compared homeowner payment behavior both before and after payment reductions and compared them to similar loans that did not receive simultaneous reductions. According to the findings, a payment reduction of about 2 percentage points results in a 50 percent decline in default probability.

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Alabama Homeowners File Suit for Rigged Rates in LIBOR Scandal

Five homeowners based in Alabama filed a class action suit against a group of 12 financial institutions, including Bank of America Corporation, Barclays Bank, and Citigroup, claiming the interest rates for their adjustable rate mortgages (ARMs) were raised as result of the rigged London Interbank Offered Rate (LIBOR).

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CFPB to Propose Rules for Servicers to Tackle Problems

The Consumer Financial Protection Bureau (CFPB) is looking to propose mortgage servicing rules to keep borrowers from costly surprises and prevent servicers from giving customers the runaround. Lack of transparency and lack of accountability are the two issues motivating the new rules, and to create more transparency, the CFPB is proposing clear monthly mortgage statements, a warning before interest rates adjust, options to avoid force-placed insurance, and early information to keep customers out of foreclosure.

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With 10M at Risk of Default, CFPB’s Primary Focus Is Mortgages

As many as 10 million homeowners are at risk of default, according to Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB). In an op-ed piece, Cordray recounts the type of behavior and practices that put so many Americans in danger of losing their homes - it's what he describes as ""the wild West of lending."" Enter the CFPB. While the agency is charged with overseeing all consumer-facing financial products and services, Cordray says its greatest focus is on the mortgage market, and servicing in particular.

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Report: 30-year Fixed Rate Unchanged, Other Rates Climb

While the 30-year fixed rate mortgage remained at a record low, data released Thursday by Freddie Mac reported other rates are steadily moving upward. A strong January employment report added upward pressure to most mortgage rates this week, Frank Nothaft, VP and chief economist for Freddie Mac, said.

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Foreclosure Crisis Isn’t Even Halfway Over: Study

The foreclosure crisis has had a long and destructive run - five years and counting, with millions put out of their homes. According to the Center for Responsible Lending (CRL), we're not even halfway through the devastation. The organization's analysis of 27 million mortgage loans originated over a five-year period found that 6.4 percent of mortgages made between 2004 and 2008 have ended in foreclosure, and an additional 8.3 percent are at immediate, serious risk.

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Economist: ARMs Not as Risky as Some Think

Long-term, fixed-rate mortgages are often seen as a safe loan product, but one Federal Reserve economist says adjustable-rate mortgages (ARMs) are not as risky as some perceive them to be and did not play a major role in the recent housing crisis. To those who believe payment shocks caused by ARMs were a major player in the foreclosure crisis, Paul Willen, senior economist at the Federal Reserve Bank of Boston, says, the ""data refute that theory."" He says those with ARMs were almost as likely to have seen a payment reduction as a payment increase.

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New Mortgage Disclosure Form to Help Safeguard Against Default: CFPB

The new Consumer Financial Protection Bureau (CFPB) aims to avert at least one hitch in the home loan process that some market experts say started a whirlwind of mortgage delinquencies - ensuring consumers have a clear understanding of the cost associated with their mortgage. CFPB unveiled two prototypes for a new regulatory disclosure form Wednesday that the agency will begin testing this week. Each of the prototypes combines the two-page TILA disclosure and the three-page RESPA disclosure into a single, abbreviated form.

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Adjustable-Rate Mortgages Likely to Gain Favor with Borrowers: Report

Since the onset of the mortgage crisis, homebuyers have shied away from adjustable-rate mortgages (ARMs) but these loan products are slowly gaining back lost market share, according to Freddie Mac's chief economist, Frank Nothaft. In June 2004, ARMs hit a peak share of 40 percent of the home-purchase market but by early 2009, that share had fallen to just 3 percent. Today, ARMs are financing approximately 7 percent of new home-purchase loans, and Nothaft says he expects that number to rise to 9 percent in 2011.

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