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Controlling Credit Checks on Leads Generated Online
American Banker (05/29/07) P. 11 ; Launder, William

A number of states are working to prohibit "trigger" leads, in which one lender obtains a credit report on a prospective borrower and the credit bureau that provided the report tips off other lenders, for a price--a practice that has generated concerns about competition and borrowers receiving a flood of unsolicited offers. Low.com Inc. believes its lead generation service will not bombard borrowers, as consumers express interest by inputting their Social Security numbers on the company's Web site. Lenders are given a FICO score range--with Low.com stating that "compliance issues" prevent it from providing actual scores--making it possible for the lenders to purchase only those leads that meet their underwriting guidelines. According to Low.com Vice President Thomas McErlane, "We are standardizing the way credit is going to be pulled" and "establishing best practices for interfacing with a consumer's credit."

Foreclosures Tough to Track
Seattle Times (05/29/07) ; Streitfeld, David

With the U.S. government--and most local and state governments--failing to keep tabs on residential foreclosures, independent companies have stepped in to fill the void; but the different sets of conflicting data have made it even more difficult to measure how bad the problem really is. Two of the biggest private sources of foreclosure data are Irvine, Calif.-based RealtyTrac, which has been criticized for inflated numbers, and La Jolla, Calif.-based DataQuick Information Systems, whose figures sometimes have been deemed overly conservative. The disparity, say analysts, often comes from what point in the process--notice of default, auction, or lender repossession, for example--that a home is considered to be a foreclosure; RealtyTrac's numbers tend to be higher, according to some, because it counts each step in the foreclosure process separately, which may cause a single property to be tallied more than once. Others, like Mortgage Bankers Association chief economist Doug Duncan, suggest that RealtyTrac's business model centers on marketing foreclosed homes and that the company therefore has a vested interest in the numbers being higher; but RealtyTrac's Rick Sharga counters that MBA's own reports probably are on the conservative end, "given their clientele."

Hill Weighs FHA Lifeline to Pressed Borrowers
Baltimore Sun (05/25/07) ; Harney, Ken

A bill approved by the House Financial Services Committee to reform the Federal Housing Administration mortgage program will be considered by the full House next month; and following a rejection of a similar measure by the Senate in 2006, it is unclear whether lawmakers there will lend their approval now that many subprime borrowers are facing higher monthly payments and possible foreclosure. The proposal would increase the maximum loan amount in pricey housing markets, eliminate down payments for certain borrowers, expand homeownership counseling programs, and impose risk-based insurance premiums. Additionally, it would make it easier for struggling subprime borrowers to refinance into fixed-rate mortgages with lower interest rates; and already, applications are on the rise. However, several Republicans are opposed to the bill, particularly a provision that would put some of the agency's profits toward counseling costs, technology upgrades, and an affordable-housing fund--the latter of which has them worried the money will be given to risky borrowers who cannot afford homeownership.

House Backs Fannie, Freddie Bill, But Obstacles Loom in Senate
Wall Street Journal (05/23/07) P. A12 ; Paletta, Damian

The House of Representatives has passed a bill to toughen regulation of Fannie Mae and Freddie Mac by a 313-104 vote, but the Treasury Department has taken issue with an amendment that would limit the ability of the new regulator to control the size of the government-sponsored enterprises' holdings of mortgages and related securities. Reps. Melissa Bean (D-Ill.) and Randy Neugebauer (R-Texas), sponsors of the amendment, are more focused on having the new regulator oversee the safety and soundness of the mortgage holdings of Fannie Mae and Freddie Mac than the risks those assets may pose to the broader economy. Differences over how to regulate the companies remain a factor in the Senate, but Democrats and Republicans are committed to passing a bill this year on an issue that has been debated over the past four years. Implementation of the bill is a concern for Freddie Mac, though, with company spokesman Doug Duvall adding, "especially the possibility of capital requirements not tied to the actual risks of our assets, and business activity regulation that constrains our ability to respond quickly to a changing marketplace."

Internet Becomes the New Home for Closing Loans
Tuscaloosa News (Ala.) (05/29/07) ; Tedeschi, Bob

The Internet-based mortgage settlement service ClosingStream is now being offered by companies like E-Loan, Wachovia and other big lenders. According to Albert Verkuylen, chief strategy officer of Santa Ana, Calif.-based LSI--the provider of the ClosingStream system to lenders--about 1,000 home loans a month are being closed using ClosingStream and approximately 80 percent of the transactions involve refinancing. Filling out documents online for refinanced and home-equity loans is more convenient for borrowers and can save them hundreds of dollars in closing fees, lenders add. Many borrowers are still cautious about making such a big financial transaction over the Internet. However, Celent analyst Dan Schatt believes there will be a gradual increase in the number of those going online to close loans. 

Mortgage Bankers Group Chief Cautions Against Excessive Rules
Los Angeles Times (05/23/07)

As authorities brainstorm for ways to counter recent turmoil in the subprime lending sector, Mortgage Bankers Association Chairman John Robbins said his group hopes that federal lawmakers "take a realistic view and allow the industry to deal with the issue." In a May 22 speech before the National Press Club in Washington, D.C., Robbins warned that overzealous regulation or legislation would dry up financing for millions of people in this country. The industry figure did, however, endorse the idea of a national licensing system for mortgage brokers--which he said would help shake out "scam artists" and "unethical actors" that have put a stain on the industry. "Who made this mess?" Robbins asked. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commissions." National Association of Mortgage Brokers President Harry Dinham bristled at the remarks, countering that the blame is more deserving of "Wall Street, federally chartered banks, state-chartered lenders and underwriters."

Mortgage Brokers: Friends or Foes?
Wall Street Journal (05/24/07) P. D1 ; Hagerty, James R.

A few other states and the federal government might follow in the footsteps of California and Minnesota by passing legislation declaring that mortgage brokers have a fiduciary duty to borrowers--a move that is opposed by the National Association of Mortgage Brokers and other industry interests. According to Colorado Mortgage Lenders Association President Chris Holbert, "The mortgage broker does not represent the borrower. We sell access to money." Nonetheless, there are concerns that mortgage brokers orchestrate more costly loans than borrowers can afford in order to boost their own compensation, which Harvard Law School professor Howell Jackson says could exceed 3.5 percent of the mortgage amount. They accomplish this through a yield-spread premium paid by the lender for securing a high interest rate as well as bonuses for mortgages with prepayment penalties, among other practices. Borrowers are urged to obtain offers from both individual lenders and mortgage brokers to secure the best deal, asking brokers to disclose their fees and the number of lenders they look at; however, experts note that varying fees and terms makes comparisons difficult.

New-Home Sales Rise 16.2 Percent as Prices Decline
Wall Street Journal (05/25/07) P. A3 ; Corkery, Michael

New-home sales surged 16.2 percent to an annual pace of 981,000 in April from the previous month, according to the Census Bureau, marking the biggest month-to-month jump in 14 years. Regionally, activity was up 27 percent in the South, 8.5 percent in the West, and 3.8 percent in the Northeast but down 4 percent in the Midwest. The increase in sales accompanied a 10.9-percent slide in the median new-home price to $229,100, which National Association of Home Builders chief economist David Seiders said is indicative of the success of discounts and other incentives offered by builders. Economists say it remains to be seen whether the market is on the rebound, but some believe the Census report shows that price drops could stimulate demand.

State Law Urged to Reduce Home Foreclosures
Times Union (05/24/07) ; Anderson, Eric

A coalition of community and civic groups in New York are mobilizing to propose legislation requiring lenders to fully assess the ability of borrowers to repay their mortgages. The move by New Yorkers for Responsible Lending comes as the state Assembly prepares to hold a series of hearings on the issue of reducing home foreclosures, with the first session scheduled for May 29. The group's proposal also would force mortgage brokers to act in the best interest of borrowers and would ban terms such as balloon payments, but some housing advocates also want a freeze on foreclosures. "We are seeing a range of abusive and fraudulent mortgage-lending practices, from rampant broker fraud to lenders making unaffordable, high-cost mortgages that virtually guarantee homeowners will lose their homes," says Meghan Faux, co-director of the Foreclosure Prevention Project at South Brooklyn Legal Services.

Stated-Income Loan Peril Seen
American Banker (05/24/07) P. 4 ; Hopkins, Cheyenne

Close to half of the subprime mortgages written in 2006 were stated-income loans, according to Comptroller of the Currency John Dugan, who recently said the practice would be included in final regulatory guidance due out in a few weeks. Dugan, speaking to New York-based Neighborhood Housing Services, said, "The higher a loan's credit risk, either from loan features or borrower characteristics, the more important it is to verify the borrower's income, assets, and outstanding liabilities--and, by definition, subprime loans as a class present elevated credit risk." In a separate speech, Office of Thrift Supervision director John Reich said the forthcoming subprime guidance likely would provide the flexibility needed for lenders to refinance subprime mortgages whose interest rates are coming up for reset. "There is a concern among institutions that they need to have some flexibility in rewriting these loans when they reset, that if they have to rewrite in accordance with the original guidance that their borrowers may not be able to afford those payments," noted Reich.

Mortgage Lead Generator Taps Into Credit Scores
Inman Real Estate (11/27/06) ; Carter, Matt

LowerMyBills.com recently announced plans to tap into credit scores generated by Experian, its parent company, in order to improve the quality of its leads. The Internet-based lead generator recorded slower growth during the first six months of this year, partly due to contraction at Ameriquest Mortgage Co.--one of its biggest clients--but earnings have slowly rebounded as LowerMyBills.com has improved its marketing and used Experian data more. LowerMyBills.com now calls for a Social Security number with all requests for home loans, which enables the service to obtain credit scores and credit reports. As a result, lenders are better able to zero in on poorer-credit borrowers and market higher-cost loans, which are more profitable, to them. Among the lending companies that purchase leads from LowerMyBills.com are Champion Mortgage, Countrywide Financial Corp., IndyMac Bank F.S.B., Quicken Loans, and Wells Fargo Bank.