Mortgage Loans

The great stock market rally of 2002 through 2007 has been built on liquidity - and much of the liquidity has been based on financial engineering that allowed highly risky investments to be financed by investors who thought they were taking no risks. They were wrong. Now the question is whether the market can continue rising as investors learn that the financial innovations that helped to build the boom were constructed on sand. When Bear Stearns admitted this week that two hedge funds were expected to lose, in round numbers, 100 percent of their value, it blamed "unprecedented declines in the valuations of a number of highly rated [AA and AAA]

Ryland Mortgage Co. has selected Countrywide Home Loans Inc. to service loans made by Ryland."We have chosen the firm that we consider to be the top servicer of mortgage loans in the country as our business partner," said Dan Schreiner, president of Ryland Mortgage Co."This partnership will enable us to better serve our homebuyers with a number of additional services and expanded programs."By logging onto www.countrywide.com, Ryland customers will be able to get payment history, payment status, make mortgage payments online and communicate with a servicing specialist through Countrywide's Internet home page.

Columbia Bancorp's net income jumped 19 percent in the third quarter to a record as the company boosted the bottom line with sales of mortgage loans and by controlling expenses.Columbia made $1.3 million, or 28 cents per diluted share, in the quarter that ended Sept. 30, compared with net income of $1.1 million, or 24 cents per diluted share, for the same period a year earlier.For the first nine months of the year, the Columbia-based banking company made $3.5 million, a nearly 16 percent increase over the $3 million the company made for the corresponding period in 1997.

NAACP President Kweisi Mfume has called upon the Justice Department and congressional leaders to investigate alleged discriminatory practices against African-Americans and Latinos -- in Baltimore and nationwide -- who have been denied mortgage loans.Mfume's remarks came on the heels of Thursday's national release of the 1997 Home Disclosure Mortgage Act report.Compiled by the Federal Financial Institutions Examination Council, which is part of the Federal Reserve System, the report lists the number of home mortgage loans that were granted across the country last year based on racial, geographic and income levels.

First Maryland Bancorp has signed a definitive agreement to sell most of its mortgage loan origination business, which includes 29 offices, to Ohio-based National City Mortgage Co., the companies said yesterday.The Baltimore-based banking company will sell subsidiaries First National Mortgage Corp. and Eastern Mortgage Services Inc. for an undisclosed price.The deal is expected to close in early 1998, the companies said.Frank P. Bramble, president and chief executive of First Maryland, said in a statement that the company is selling the majority of its mortgage loan origination business because most TTC of the loans it generates come from outside the bank's "franchise area."

PeoplePolly Andrews, formerly a mortgage consultant for Provident Bank of Maryland, has been named residential mortgage director for Columbia Bank. She will originate and implement residential mortgage loans, including single-family permanent and construction loans.Brian M. Hare of Elkridge has been appointed director of career services at Lincoln Technical Institute's new Columbia campus. A retired Army major, he was most recently sales manager for Coun- try Fresh Foods in Baltimore.Carol T. Shaner, Certified Association Executive and president of Franklin/Thomas Association Management Inc., Ellicott City, has been selected by the American Society of Association Executives as chairman of the Management and Technology Conference Advisory Committee.

Dear Mr. Gisriel:Some mortgage lenders advertise that their mortgage loans come with "no points, no closing costs."Is this for real? How is this possible?Jean Jenkins Columbia Dear Ms. Jenkins:Any mortgage lender can, and many do, offer a variation of the "no points, no closing" mortgage. Here's how it usually works: The purchase contract with the seller of the house must first be negotiated so the seller, not the buyer, will be paying all the transfer taxes, documentary stamps and loan points, if any.The other normal closing costs and fees are paid for by the lender -- which charges a slightly higher interest rate to make up for the closing costs.

Dear Mr. Gisriel:I have a large principal balance due and a substantial number of years left on the mortgage on my house. Do you recommend increasing my savings for retirement or paying off the mortgage sooner?Joan BallBaltimoreDear Ms. Ball:The ideal solution would be to increase your retirement fund and try to pay off your mortgage early. But if I had to choose, I would recommend that you continue to build your savings or invest a portion of your savings in an IRA, which is tax-deferred, or in stock mutual funds, which have some risk but which might yield more than the interest from a typical savings account.

Two state banks make top thrift listBaltimore-based Loyola Federal Savings Bank and Chevy Chase Bank FSB of Chevy Chase are the only Maryland firms to make the 1994 list of 100 top thrift mortgage originators compiled by Inside Mortgage Finance, a Bethesda mortgage industry newsletter.Loyola Federal ranked 18th with $1.3 billion in mortgages while Chevy Chase placed 24th with $984.8 million in loans to homebuyers.Overall mortgage originations by savings institutions totaled $162.5 billion last year with the top 100 companies accounting for over 68 percent, or $110.

A new report says that outright discrimination known as "redlining" has become rare, but barriers to black homeownership remain."Middle-income black applicants from mostly minority areas were more than twice as likely to be rejected for mortgage loans as middle-income whites living in mostly white areas," says a report of a six-month investigation in the April 17 issue of U.S. News & World Report. "For blacks, the rejection rate was 37 percent; for whites, just 18 percent."The magazine also said that homeowners' insurance on average costs more than twice as much in poor black neighborhoods than in nonminority middle-income neighborhoods.

Reports of mortgage fraud reached record highs in Maryland and the United States last year as more loan originators and borrowers resorted to falsifying documents and the home lending industry worked harder to detect problems, a study released yesterday showed. Maryland jumped to fifth place in reported incidents of fraud, after ranking 15th in 2007, the Mortgage Asset Research Institute said in its 11th annual fraud case report, based on data submitted by mortgage lenders, bankers, insurers and others.

Area mall owner and Columbia master developer General Growth Properties Inc. said yesterday that it is still negotiating for an extension of the maturity date on $900 million in mortgage loans for two Las Vegas malls. The real estate investment trust, which is the second-largest U.S. mall owner, failed to reach unanimous agreement with lenders on extending the loans for the Fashion Show and Palazzo malls in Las Vegas. The loans were due Friday after the Chicago-based company received a two-week extension.

Exotic mortgages, as well as some lenders, are a thing of the past. But the need to borrow to buy a home is very much present. The lending landscape keeps changing fast, economists, mortgage brokers and lenders say, so homeowners and potential buyers need to stay current. "I think the choices consumers will have will be much more constrained, as will the number of lenders," said economist Anirban Basu, chairman and CEO of the Baltimore-based Sage Policy Group. Fixed-rate mortgages, the predictable 15- or 30-year kind your parents had, are making a comeback, with adjustable-rate loans getting a smaller share of the market, Basu said.

The Federal Reserve says more banks are making it harder to borrow money, as defaults and delinquencies on home loans soared and the economy faltered. Most "domestic institutions reported having tightened their lending standards and terms on all major loan categories over the previous three months," the Fed said yesterday in its quarterly Senior Loan Officer Survey. Funds became scarcer for home purchases, credit card loans became tougher to get and even banks' best customers were subject to stricter scrutiny.

Nothing down. To a first-time buyer who doesn't have a lot (or any) cash for a down payment, mortgage loans that allowed you to skate by without having any skin in the game were a fast ticket to homeownership over the past decade. Thousands of home buyers chose a 100 percent mortgage to grab their piece of the American dream, neatly side-stepping the single biggest obstacle to homeowners: cash for a down payment. Too bad the credit crunch has almost completely wiped zero-down mortgage loans off the table.

The Federal Reserve's dramatic steps to shore up America's financial markets and avert a crisis of the global financial system had to be done. Not to have acted would have threatened a far more precarious situation on Wall Street and beyond. The Fed's moves, including making secured loans available to every major investment firm, were prudent steps to protect broader markets and instill confidence in the system. The actions were announced Sunday as the Fed directed a negotiated sale of Bear Stearns, an investment house that found itself unable to borrow needed cash last week because of rumored losses on its subprime mortgage bond holdings.

Novastar Financial Inc. Shares declined $2.51, or 54 percent, to $2.08. The possibility of bankruptcy grew as the Kansas City, Mo., company said it lost $598 million in its third quarter on losses on mortgage loans.

It is remarkable how many political "solutions" today are dealing with problems created by previous political "solutions." Three examples that come to mind immediately are the housing market crisis, the wildfires in Southern California and the water shortages in the West. Congress and the Bush administration are vying with each other to come up with a solution to the housing crisis, brought on by widespread defaults on home mortgage loans - especially defaults by those who took out risky "subprime" loans.

Amid all the hand-wringing and finger-pointing as housing markets collapse, mortgage foreclosures skyrocket and financial markets panic, there is very little attention being paid to the fundamental economic and political decisions that led to this mess. The growth in risky "subprime" mortgage loans by people buying homes they could not really afford has been a key factor in the collapse of housing markets, when the risks caught up with both borrowers and lenders. But why were home buyers suddenly taking out so many risky loans and lenders suddenly arranging so much "creative" financing for these borrowers?

Mortgage lenders such as Wells Fargo & Co. and Wachovia Corp. are raising rates and imposing stricter standards on some of their most creditworthy borrowers as slumping demand in the mortgage bond market chokes off funding. Wells Fargo, the second-biggest U.S. home lender, curbed its funding of Alt-A loans, made to borrowers with near-prime credit ratings or prime borrowers who don't document income. Wachovia, the fourth-largest U.S. bank, also stopped making Alt-A loans through brokers and smaller lenders and curtailed some adjustable-rate mortgages, spokeswoman Christy Phillips-Brown said.