Mortgage Market

WASHINGTON -- The bad apples did it. The subprime mortgage market was spoiled by bad guys who tried to make a quick buck in an otherwise reputable business, John Robbins, president of the Mortgage Bankers Association, said yesterday. "It's not just our reputations that have been damaged. People have been hurt ... all because of a very few unethical actors," Robbins said in a speech at the National Press Club, where he called for tougher licensing standards. "Frankly, it's too easy to hang a shingle and call yourself an expert in mortgages," said Robbins, whose trade group represents the real estate finance industry.

WASHINGTON - The Bush administration, moving to prevent an economic cataclysm, urged Congress yesterday to grant it far-reaching emergency powers to buy hundreds of billions of dollars of distressed mortgages despite many unknowns about how the plan would work. Treasury Secretary Henry M. Paulson Jr. made it clear that the upfront cost of the rescue proposal could easily be $500 billion, and outside experts predicted that the bill could reach $1 trillion. The outlines of the plan, described in conference calls to lawmakers yesterday, include buying only from U.S. financial institutions - but not hedge funds - and hiring outside advisers who would work for the Treasury, rather than creating a separate agency.

You're foraging for a mortgage lender to finance or refinance a home when you encounter a small lender offering attractive terms. Should you feel at ease doing business with a tiny mortgage company?Yes, if you've checked on the company's reputation, real estate specialists say."It's not so much whether you deal with a small firm or a big behemoth lender. What's important is whether the firm can deliver what it promises and deliver on time," says Gene Gallagher, principal broker at ERA-Gallagher & Co., a Bethesda-based realty firm.

To understand the recent turmoil in the real estate and stock markets, you have to understand humanity's relentless efforts to harness risk. People have been calculating risk since they dwelled in caves and, to be sure, risk-taking can be Darwinian. Imagine a cave man weighing the dangers of spear-hunting woolly mammoth against the need to eat. Today's risk-taker is more likely to be in a suit and on Wall Street than in hides on the tundra, though the basic goal of minimizing risk and maximizing gain remains the same.

A record number of homeowners entered foreclosure at the end of last year and more are making late mortgage payments, especially those with high-risk subprime and government-financed loans, according to a quarterly survey by the Mortgage Bankers Association released yesterday. In other developments, subprime lender New Century Financial Corp., of Irvine, Calif., said yesterday that the Securities and Exchange Commission had demanded documents and that the New York Stock Exchange had suspended the company from its stock listings.

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building. Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults. The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier.

Almost everything seems to be going wrong for the American economy at once. People are buying less, but most things are costing more. Mortgage rates are rising, the dollar is falling and prices of key commodities such as oil are leaping from one record high to the next. Yesterday, the dollar plumbed new lows against the Japanese yen, the euro and other major currencies; the price of an ounce of gold rose above $1,000 for the first time, and lenders raised home loan rates once again. Government figures showed retail sales fell in February as consumers cut back on cars, furniture and electronics.

CONGRESSIONAL housing leaders are on the verge of announcing a new concept in home mortgages that promises to cut interest rates and application costs for homebuyers who can't afford a large down payment. Dubbed "Choice," the plan would target borrowers who have less than 20 percent down payments to put into their home purchases. High on the list of intended beneficiaries are first-time buyers, consumers with high debt-to-income ratios, minority home buyers and consumers with slight imperfections in their credit histories.

WASHINGTON-- Picture this money-saving scenario for 1996 if you plan to shop smart for a new home. The sellers of the property you want to buy have listed it for $225,000 -- a price their real estate agent insists is backed up by a comparative marketing analysis she's prepared of similar houses for sale.But you bring to the negotiating table a new, high-tech weapon that blows away the sellers and their Realtor: a professional appraisal of the property, complete with detailed sales comparables and a cost-to-reconstruct and lot valuation analysis.

The collapse of PHH Corp.'s deal to sell itself is a lesson for these credit-crunched times: If you're in the mortgage business, don't count on anyone getting the money to buy you - no matter how decent your prospects look. PHH agreed in March to sell out for $1.8 billion to General Electric Co., which wanted the company's Baltimore County-based vehicle fleet leasing arm and had agreed to immediately resell PHH's mortgage business to the Blackstone Group. But the complex deal began to unravel in September as the outlook for mortgage companies sharply worsened.