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Sunday, December 23, 2007
Mortgage brokers lose subprime share to retail, Internet lenders
Retail lenders like banks and direct Internet operations picked up a larger share of subprime loan originations in the first half of 2007, according to a survey of subprime lenders by the Mortgage Bankers Association.
Retail lenders grew their market share of subprime first loans from 23 percent in the last half of 2006 to 36 percent in the first six months of 2007, the survey found.
While mortgage brokers still accounted for the majority of subprime loan originations -- 58 percent, measured by dollar volume -- that's down from 72 percent in the second half of 2006.
Some of that shrinking market share appears to have been lost to direct Internet lenders, who originated 6 percent of subprime loans in the first half of 2007 -- up 50 percent from the latter half of 2006, when 4 percent of subprime loans were originated over the Internet.
The average loan amount originated over the Internet ($135,640) was smaller than those originated by mortgage brokers ($195,200) or retail lenders like banks ($180,732).
When measuring the number of loans made, rather than dollar volume, the survey found direct Internet originations accounted for 8 percent of subprime loans in the first half of 2007, up from 5 percent the previous six months.
Some other trends from first half of 2007 included:
* A growing percentage of subprime loans in the first half of 2007 (64 percent) were refinance, rather than purchase loans. That compares with a 55 percent market share for refinance loans in latter half of 2006.
* The average subprime loan amount shrank 8.4 percent, from $202,295 in the latter half of 2006 to $185,109 in first half of 2007. The difference for the average second loans was even more pronounced -- $15,809, compared with $35,506.
* Some 75 percent of subprime loans were adjustable-rate mortgages (ARMs) in the second half of 2006, compared with 69 percent in the following six months.
The MBA issued a press release summarizing some of the survey's findings
source: lendinguniverse.com
Retail lenders grew their market share of subprime first loans from 23 percent in the last half of 2006 to 36 percent in the first six months of 2007, the survey found.
While mortgage brokers still accounted for the majority of subprime loan originations -- 58 percent, measured by dollar volume -- that's down from 72 percent in the second half of 2006.
Some of that shrinking market share appears to have been lost to direct Internet lenders, who originated 6 percent of subprime loans in the first half of 2007 -- up 50 percent from the latter half of 2006, when 4 percent of subprime loans were originated over the Internet.
The average loan amount originated over the Internet ($135,640) was smaller than those originated by mortgage brokers ($195,200) or retail lenders like banks ($180,732).
When measuring the number of loans made, rather than dollar volume, the survey found direct Internet originations accounted for 8 percent of subprime loans in the first half of 2007, up from 5 percent the previous six months.
Some other trends from first half of 2007 included:
* A growing percentage of subprime loans in the first half of 2007 (64 percent) were refinance, rather than purchase loans. That compares with a 55 percent market share for refinance loans in latter half of 2006.
* The average subprime loan amount shrank 8.4 percent, from $202,295 in the latter half of 2006 to $185,109 in first half of 2007. The difference for the average second loans was even more pronounced -- $15,809, compared with $35,506.
* Some 75 percent of subprime loans were adjustable-rate mortgages (ARMs) in the second half of 2006, compared with 69 percent in the following six months.
The MBA issued a press release summarizing some of the survey's findings
source: lendinguniverse.com
Home sales sink at record levels in two California regions
The median home price in Southern California plunged 10.3 percent while sales fell 42.7 percent in November compared to the same month last year, real estate data company DataQuick Information Systems reported this week. Home sales in the San Francisco Bay Area dropped 36.2 percent from November 2006 to November 2007.
The sales totals for both regions were the slowest on record for the month of November in the history of DataQuick's statistics, which date back to 1988, and the year-over-year price drop in the Southern California area also set a record.
San Francisco-area sales, which cover a nine-county region, have declined on a year-over-year basis for 34 consecutive months, DataQuick reported. The company tracks sales and prices for new and resale houses and condos.
Housing starts in the state, meanwhile, dropped 44.6 percent in November compared to the same month last year, while January-November starts were down 31.5 percent compared to the same period last year, according to a separate report by the California Building Industry Association.
DataQuick reported that sales fell from 23,005 in November 2006 to 13,173 in November 2007 for the six-county Southern California region, while the median price dropped from $485,000 to $435,000.
Riverside and San Bernardino counties suffered the steepest price drops among Southern California counties. The median price in Riverside County fell 16.5 percent from November 2006 to November 2007, while the median price tumbled 13.2 percent in San Bernardino. San Bernardino led Southern California counties with a 48.1 percent year-over-year sales drop in November, followed by Los Angeles County with a 46 percent drop. The other four counties in the Southern California region also experienced year-over-year price drops.
"Some might point to the October-to-November increase as evidence sales have bottomed out," said Marshall Prentice, DataQuick president, in a statement, "but we'll need to see a sustained trend. We also saw November sales rise a bit back in the troubled market of 1994, well before it hit bottom. It's worth noting, though, that sales financed with conforming loans have increased each month since September, and last month we saw signs that the jumbo loan problem, while unresolved, wasn't worsening."
The number of home purchases financed with conforming loans in Southern California dropped 31.2 percent in November compared to the same month last year, and sales financed by jumbo loans dropped 69.3 percent. Prior to the credit crunch, which ballooned in August, about 40 percent of Southern California home buyers used jumbo loans to finance their purchase, while in November that share shrunk to 22 percent.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,064 last month, down from $2,111 the previous month, and down from $2,255 a year ago. Adjusted for inflation, the current payment is 6.2 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 17.7 percent below the current cycle's peak in June last year.
In the San Francisco Bay Area, Solano County had the steepest year-over-year median price drop in November, at 14.8 percent, followed by Sonoma County, down 12.1 percent. The median price fell in five Bay Area counties while rising in four counties. The median price increased 7.2 percent in San Francisco in November compared to November 2006, and rose 4.1 percent in San Mateo. The median price for the nine-county area rose 1.5 percent year-over-year in November.
"This fall's sharp decline in jumbo-loan financing continued to weigh heavily on Bay Area home sales, though we do see evidence the problem has stabilized. The percent of all transactions financed with jumbo mortgages increased slightly in November for the first time since the credit crunch hit in August. We expect sales to pick up at least modestly as the price and availability of jumbo loans improves," Prentice stated.
DataQuick reported that 44.1 percent of all Bay Area home purchases were financed with jumbo loans in November. The number of jumbo-loan purchases dropped 58 percent in November compared to the same month last year, and jumbo loans accounted for 62 percent of all Bay Area home purchases for the first seven months of this year -- prior to the nationwide credit crunch.
The number of Bay Area homes purchased with conforming loans dropped 12 percent in November compared to the same month last year.
The typical monthly mortgage amount that Bay Area buyers committed themselves to paying in November was $2,964, compared with $2,883 in 2006. Current payments are about 13.3 percent above typical payments at the peak of the last housing-market cycle, in spring 1989, DataQuick reported, and are 10.7 below the June 2006 peak of the current market cycle.
Foreclosure activity is at record levels in both the San Francisco and Southern California regions, DataQuick reported. "Down-payment sizes and flipping rates are stable," the company also reported, while financing with adjustable-rate mortgages and multiple mortgages has dropped.
An estimated 24 percent of households in California could afford to purchase an entry-level home in California during the third quarter of 2007, which is flat compared to the same quarter last year, the California Association of Realtors reported.
The California Building Industry Association, citing statistics compiled by the state's Construction Industry Research Board, reported that total building permits issued fell from 153,392 in January-November 2006 to 105,002 for the same period this year.
Among those markets with over 100 building permits issued in November, the Riverside-San Bernardino metro area suffered the steepest year-over-year decline for the January-November period, at 48.1 percent. That market was followed by the Bakersfield area, down 39.5 percent; Oakland-Fremont-Hayward, down 37.7 percent; San Diego-Carlsbad-San Marcos, down 36.2 percent; and San Luis Obispo-Paso Robles, down 31.6 percent.
The Fresno metro area, meanwhile, experienced a 12.3 percent year-over-year gain in housing starts during the January-November period.
Among those markets with more than 100 building permits issued in November, the Riverside-San Bernardino market area had the highest year-over-year decline for the month of November compared to the same month last year, at 76.4 percent. That area was followed by the San Jose area, with a 65.4 percent decline; Visalia-Porterville, down 61.5 percent; San Diego, down 60.9 percent; and Los Angeles, down 51 percent.
Meanwhile, the Santa Ana-Anaheim-Irvine market saw a 75.2 percent gain in building permits issued in November compared to November 2006; Fresno was up 35.9 percent; San Luis Obispo-Paso Robles was up 35.1 percent; Sacramento was up 25 percent; San Francisco was up 23 percent; and Santa Rosa was up 10.2 percent.
source: lendinguniverse.com
The sales totals for both regions were the slowest on record for the month of November in the history of DataQuick's statistics, which date back to 1988, and the year-over-year price drop in the Southern California area also set a record.
San Francisco-area sales, which cover a nine-county region, have declined on a year-over-year basis for 34 consecutive months, DataQuick reported. The company tracks sales and prices for new and resale houses and condos.
Housing starts in the state, meanwhile, dropped 44.6 percent in November compared to the same month last year, while January-November starts were down 31.5 percent compared to the same period last year, according to a separate report by the California Building Industry Association.
DataQuick reported that sales fell from 23,005 in November 2006 to 13,173 in November 2007 for the six-county Southern California region, while the median price dropped from $485,000 to $435,000.
Riverside and San Bernardino counties suffered the steepest price drops among Southern California counties. The median price in Riverside County fell 16.5 percent from November 2006 to November 2007, while the median price tumbled 13.2 percent in San Bernardino. San Bernardino led Southern California counties with a 48.1 percent year-over-year sales drop in November, followed by Los Angeles County with a 46 percent drop. The other four counties in the Southern California region also experienced year-over-year price drops.
"Some might point to the October-to-November increase as evidence sales have bottomed out," said Marshall Prentice, DataQuick president, in a statement, "but we'll need to see a sustained trend. We also saw November sales rise a bit back in the troubled market of 1994, well before it hit bottom. It's worth noting, though, that sales financed with conforming loans have increased each month since September, and last month we saw signs that the jumbo loan problem, while unresolved, wasn't worsening."
The number of home purchases financed with conforming loans in Southern California dropped 31.2 percent in November compared to the same month last year, and sales financed by jumbo loans dropped 69.3 percent. Prior to the credit crunch, which ballooned in August, about 40 percent of Southern California home buyers used jumbo loans to finance their purchase, while in November that share shrunk to 22 percent.
The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,064 last month, down from $2,111 the previous month, and down from $2,255 a year ago. Adjusted for inflation, the current payment is 6.2 percent lower than the spring of 1989, the peak of the prior real estate cycle. It is 17.7 percent below the current cycle's peak in June last year.
In the San Francisco Bay Area, Solano County had the steepest year-over-year median price drop in November, at 14.8 percent, followed by Sonoma County, down 12.1 percent. The median price fell in five Bay Area counties while rising in four counties. The median price increased 7.2 percent in San Francisco in November compared to November 2006, and rose 4.1 percent in San Mateo. The median price for the nine-county area rose 1.5 percent year-over-year in November.
"This fall's sharp decline in jumbo-loan financing continued to weigh heavily on Bay Area home sales, though we do see evidence the problem has stabilized. The percent of all transactions financed with jumbo mortgages increased slightly in November for the first time since the credit crunch hit in August. We expect sales to pick up at least modestly as the price and availability of jumbo loans improves," Prentice stated.
DataQuick reported that 44.1 percent of all Bay Area home purchases were financed with jumbo loans in November. The number of jumbo-loan purchases dropped 58 percent in November compared to the same month last year, and jumbo loans accounted for 62 percent of all Bay Area home purchases for the first seven months of this year -- prior to the nationwide credit crunch.
The number of Bay Area homes purchased with conforming loans dropped 12 percent in November compared to the same month last year.
The typical monthly mortgage amount that Bay Area buyers committed themselves to paying in November was $2,964, compared with $2,883 in 2006. Current payments are about 13.3 percent above typical payments at the peak of the last housing-market cycle, in spring 1989, DataQuick reported, and are 10.7 below the June 2006 peak of the current market cycle.
Foreclosure activity is at record levels in both the San Francisco and Southern California regions, DataQuick reported. "Down-payment sizes and flipping rates are stable," the company also reported, while financing with adjustable-rate mortgages and multiple mortgages has dropped.
An estimated 24 percent of households in California could afford to purchase an entry-level home in California during the third quarter of 2007, which is flat compared to the same quarter last year, the California Association of Realtors reported.
The California Building Industry Association, citing statistics compiled by the state's Construction Industry Research Board, reported that total building permits issued fell from 153,392 in January-November 2006 to 105,002 for the same period this year.
Among those markets with over 100 building permits issued in November, the Riverside-San Bernardino metro area suffered the steepest year-over-year decline for the January-November period, at 48.1 percent. That market was followed by the Bakersfield area, down 39.5 percent; Oakland-Fremont-Hayward, down 37.7 percent; San Diego-Carlsbad-San Marcos, down 36.2 percent; and San Luis Obispo-Paso Robles, down 31.6 percent.
The Fresno metro area, meanwhile, experienced a 12.3 percent year-over-year gain in housing starts during the January-November period.
Among those markets with more than 100 building permits issued in November, the Riverside-San Bernardino market area had the highest year-over-year decline for the month of November compared to the same month last year, at 76.4 percent. That area was followed by the San Jose area, with a 65.4 percent decline; Visalia-Porterville, down 61.5 percent; San Diego, down 60.9 percent; and Los Angeles, down 51 percent.
Meanwhile, the Santa Ana-Anaheim-Irvine market saw a 75.2 percent gain in building permits issued in November compared to November 2006; Fresno was up 35.9 percent; San Luis Obispo-Paso Robles was up 35.1 percent; Sacramento was up 25 percent; San Francisco was up 23 percent; and Santa Rosa was up 10.2 percent.
source: lendinguniverse.com
Tax relief granted for forgiven debt, private mortgage insurance
President Bush signed into law Thursday a bill creating a temporary tax break for homeowners who are able to persuade lenders to forgive part of their debt, and extends a tax deduction for some families with private mortgage insurance.
For the next three years, the IRS won't count as income debt forgiven by lenders when troubled borrowers negotiate short sales or workouts on their primary residence that involve forgiveness of part of their debt.
HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, also extends for three years a tax deduction allowing families earning $109,000 or less to deduct all or part their private mortgage insurance premiums from their taxable income -- which could save them an average of $350 a year.
In signing the bill, Bush said that not counting forgiven debt as income for tax purposes "will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Richard Gaylord, president of the National Association of Realtors, said NAR has been advocating for such a change to the IRS tax code for nearly 10 years.
"We have always believed that it is clearly an issue of fairness and of not kicking people when they are down," Gaylord said in a statement.
As originally passed by the House Oct. 4 in a 386-27 vote, HR 3648 would have made the exemption permanent, and extended the tax deduction for private mortgage insurance until 2014. But those steps would have eliminated about $2 billion in tax revenue over a 10-year period, a problem the bill sought to offset tightening the rules for claiming a deduction on the sale of a second home.
The Bush administration argued that an exemption for forgiven debt should be temporary, and objected to provisions raising taxes on the sale of second homes. The Senate amended HR 3648 to address those concerns, and those changes were agreed to by House lawmakers in a Dec. 18 voice vote.
The deduction for private mortgage insurance allows families with an adjusted gross income of $100,000 or less to deduct all of their premium payments. Families with incomes up to $109,000 are eligible for partial deductions.
The private mortgage insurance deduction was first approved late in 2006 and initially applied only to the 2007 tax year. With the passage of HR 3648, the deduction has been extended to mortgages originated between 2007 and 2010.
Extension of the tax deduction for mortgage insurance premiums was part of the Mortgage Forgiveness Debt Relief Act of 2007 approved earlier this month by both the U.S. House of Representatives and the U.S. Senate.
Kevin Schneider, president of the Mortgage Insurance Companies of America (MICA), said borrowers who can claim the deduction could save an average of $350 a year.
The cost of private mortgage insurance -- required by most lenders on loans with less than a 20 percent down payment -- is going up, as companies that provide it raise their rates in the face of mounting losses.
PMI Group Inc. and MGIC Investment Corp. have raised or will soon raise rates for borrowers with lower credit scores and loan-to-value (LTVs) ratios above 95 percent. The companies have stopped insuring loans with LTVs above 95 percent for borrowers with credit scores below 620.
MICA reports there was $790.5 billion in primary private mortgage insurance in force as of October, up 17 percent from $650.2 billion a year ago. The number of primary insurance defaults in October hit 59,308, up 28 percent from the same month a year ago.
source: lendinguniverse.com
For the next three years, the IRS won't count as income debt forgiven by lenders when troubled borrowers negotiate short sales or workouts on their primary residence that involve forgiveness of part of their debt.
HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, also extends for three years a tax deduction allowing families earning $109,000 or less to deduct all or part their private mortgage insurance premiums from their taxable income -- which could save them an average of $350 a year.
In signing the bill, Bush said that not counting forgiven debt as income for tax purposes "will increase the incentive for borrowers and lenders to work together to refinance loans -- and it will allow American families to secure lower mortgage payments without facing higher taxes."
Richard Gaylord, president of the National Association of Realtors, said NAR has been advocating for such a change to the IRS tax code for nearly 10 years.
"We have always believed that it is clearly an issue of fairness and of not kicking people when they are down," Gaylord said in a statement.
As originally passed by the House Oct. 4 in a 386-27 vote, HR 3648 would have made the exemption permanent, and extended the tax deduction for private mortgage insurance until 2014. But those steps would have eliminated about $2 billion in tax revenue over a 10-year period, a problem the bill sought to offset tightening the rules for claiming a deduction on the sale of a second home.
The Bush administration argued that an exemption for forgiven debt should be temporary, and objected to provisions raising taxes on the sale of second homes. The Senate amended HR 3648 to address those concerns, and those changes were agreed to by House lawmakers in a Dec. 18 voice vote.
The deduction for private mortgage insurance allows families with an adjusted gross income of $100,000 or less to deduct all of their premium payments. Families with incomes up to $109,000 are eligible for partial deductions.
The private mortgage insurance deduction was first approved late in 2006 and initially applied only to the 2007 tax year. With the passage of HR 3648, the deduction has been extended to mortgages originated between 2007 and 2010.
Extension of the tax deduction for mortgage insurance premiums was part of the Mortgage Forgiveness Debt Relief Act of 2007 approved earlier this month by both the U.S. House of Representatives and the U.S. Senate.
Kevin Schneider, president of the Mortgage Insurance Companies of America (MICA), said borrowers who can claim the deduction could save an average of $350 a year.
The cost of private mortgage insurance -- required by most lenders on loans with less than a 20 percent down payment -- is going up, as companies that provide it raise their rates in the face of mounting losses.
PMI Group Inc. and MGIC Investment Corp. have raised or will soon raise rates for borrowers with lower credit scores and loan-to-value (LTVs) ratios above 95 percent. The companies have stopped insuring loans with LTVs above 95 percent for borrowers with credit scores below 620.
MICA reports there was $790.5 billion in primary private mortgage insurance in force as of October, up 17 percent from $650.2 billion a year ago. The number of primary insurance defaults in October hit 59,308, up 28 percent from the same month a year ago.
source: lendinguniverse.com
SEC, OTS looking at WaMu lending practices
The Securities and Exchange Commission and the Office of Thrift Supervision are looking into allegations that Washington Mutual Inc. originated, securitized and sold mortgages that were made using inflated appraisals.
The allegations were made in a lawsuit filed against WaMu's appraiser by New York Attorney General Andrew Cuomo.
WaMu said in a statement that it is cooperating fully with SEC and OTS inquiries, although the company has spent "a month and a half investigating these allegations (and) we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals."
The New York attorney general's office filed suit Nov. 1 against First American Corp. and its subsidiary eAppraiseIT, accusing the companies of providing inflated property appraisals for WaMu. The lawsuit alleges the companies were pressured by WaMu to use a list of preferred appraisers who provided inflated property valuations
First American Corp. denies wrongdoing and has asked that the suit be thrown out. WaMu was not named in the lawsuit, and has also denied wrongdoing.
Cuomo has also subpoenaed Wall Street firms that securitize mortgages, and government-chartered mortgage repurchasers Fannie Mae and Freddie Mac, as part of the 10-month probe, which is focused on appraisals and the packaging of loans into mortgage-backed securities (MBS) for sale to investors.
WaMu announced Dec. 10 it planned to lay off 3,150 workers, slash dividends, and issue $2.5 billion in preferred stock to cut costs and raise cash, after fourth quarter charge-offs for loan losses hit $1.6 billion -- twice the amount previously expected.
The Seattle-based bank hopes to reduce expenses by $500 million in 2008 and raise $3.7 billion in equity, having boosted provisions for first quarter 2008 loan losses to between $1.8 billion and $2 billion.
source: lendinguniverse.com
The allegations were made in a lawsuit filed against WaMu's appraiser by New York Attorney General Andrew Cuomo.
WaMu said in a statement that it is cooperating fully with SEC and OTS inquiries, although the company has spent "a month and a half investigating these allegations (and) we can say with confidence that there has been no systematic effort by WaMu to inflate home appraisals."
The New York attorney general's office filed suit Nov. 1 against First American Corp. and its subsidiary eAppraiseIT, accusing the companies of providing inflated property appraisals for WaMu. The lawsuit alleges the companies were pressured by WaMu to use a list of preferred appraisers who provided inflated property valuations
First American Corp. denies wrongdoing and has asked that the suit be thrown out. WaMu was not named in the lawsuit, and has also denied wrongdoing.
Cuomo has also subpoenaed Wall Street firms that securitize mortgages, and government-chartered mortgage repurchasers Fannie Mae and Freddie Mac, as part of the 10-month probe, which is focused on appraisals and the packaging of loans into mortgage-backed securities (MBS) for sale to investors.
WaMu announced Dec. 10 it planned to lay off 3,150 workers, slash dividends, and issue $2.5 billion in preferred stock to cut costs and raise cash, after fourth quarter charge-offs for loan losses hit $1.6 billion -- twice the amount previously expected.
The Seattle-based bank hopes to reduce expenses by $500 million in 2008 and raise $3.7 billion in equity, having boosted provisions for first quarter 2008 loan losses to between $1.8 billion and $2 billion.
source: lendinguniverse.com
Five banks commit $125M for New England refis
Five banks have committed $125 million to help New England homeowners with good payment histories refinance out of high-cost loans or avoid interest rate resets on adjustable-rate mortgages.
At least 38,000 borrowers in six New England states may be eligible for help under the program, but the initial funding pledged by Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America would only fund about 500 mortgages.
The Federal Reserve Bank of Boston, which organized the Mortgage Relief Fund, is hoping it will be expanded to include more banks and more funding.
"If the demand proves to be greater than the initial $125 million commitment, we will try to go further -- especially if the mortgages can be securitized," participants in the program said in a press release.
Backers said outreach is a key part of the initiative, and the banks have created a Web site, www.MortgageReliefFund.com, providing more information for borrowers and information on contacting the banks.
"It is particularly important to find and locate the borrowers who may be eligible for a better rate and a healthier relationship with their lender," said Boston Fed president Eric Rosengren in a statement.
Rosengren said participating banks will tap state programs and Federal Housing Administration loan guarantees, which include flexible underwriting and eligibility guidelines. Those programs will help banks offer troubled borrowers lower interest rates, similar to those paid by prime borrowers.
The Boston Fed estimates that 38,000 subprime borrowers in New England may qualify for the program, because they had 10 percent equity in their homes when they took out a loan, had credit scores over 620, and took out fully documented loans on owner-occupied houses.
Those criteria provide a "conservative estimate" of the number of subprime borrowers who might qualify for the program, Rosengren said, including more than 15,000 households in Massachusetts, 10,000 in Connecticut, 3,800 in New Hampshire and Rhode Island, 3,400 in Maine and nearly 1,000 in Vermont.
The program is "not designed for borrowers who are seriously delinquent on their mortgage payments or facing imminent foreclosure," although those borrowers may be eligible for refinancing under the new FHASecure loan guarantee program
source: lendinguniverse.com
At least 38,000 borrowers in six New England states may be eligible for help under the program, but the initial funding pledged by Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank and Bank of America would only fund about 500 mortgages.
The Federal Reserve Bank of Boston, which organized the Mortgage Relief Fund, is hoping it will be expanded to include more banks and more funding.
"If the demand proves to be greater than the initial $125 million commitment, we will try to go further -- especially if the mortgages can be securitized," participants in the program said in a press release.
Backers said outreach is a key part of the initiative, and the banks have created a Web site, www.MortgageReliefFund.com, providing more information for borrowers and information on contacting the banks.
"It is particularly important to find and locate the borrowers who may be eligible for a better rate and a healthier relationship with their lender," said Boston Fed president Eric Rosengren in a statement.
Rosengren said participating banks will tap state programs and Federal Housing Administration loan guarantees, which include flexible underwriting and eligibility guidelines. Those programs will help banks offer troubled borrowers lower interest rates, similar to those paid by prime borrowers.
The Boston Fed estimates that 38,000 subprime borrowers in New England may qualify for the program, because they had 10 percent equity in their homes when they took out a loan, had credit scores over 620, and took out fully documented loans on owner-occupied houses.
Those criteria provide a "conservative estimate" of the number of subprime borrowers who might qualify for the program, Rosengren said, including more than 15,000 households in Massachusetts, 10,000 in Connecticut, 3,800 in New Hampshire and Rhode Island, 3,400 in Maine and nearly 1,000 in Vermont.
The program is "not designed for borrowers who are seriously delinquent on their mortgage payments or facing imminent foreclosure," although those borrowers may be eligible for refinancing under the new FHASecure loan guarantee program
source: lendinguniverse.com
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