Mortgage Informer

J. P. Morgan Chase & Company has announced that it will make its own contribution to stemming the tide of foreclosures sweeping the country by modifying around $70 billion of its owned mortgages that are in or nearing default.

The bank’s efforts will focus on restructuring loans for borrowers who are at risk of foreclosure and it has placed a 90 day moratorium on all foreclosures in order to put guidelines for its program in place. The company will hire and train an estimate 300 additional loan counselors (it currently employs about 2,500) and open two dozen new regional counseling centers.

Rates on 30-year mortgages dropped sharply again this week, falling to the lowest level in seven months.

On Thursday, Freddie Mac’s nationwide survey found that 30-year, fixed-rate mortgages had declined to 5.78 percent from 5.93 percent the previous week.

It was the fifth consecutive weekly decline and dropped the 30-year mortgage rate to the lowest level since the week of Feb. 14, when it stood at 5.72 percent.

The big drop in mortgage rates is fueling a boom in refinancing, with mortgage applications up 58 percent since mid-August, according to Freddie Mac.

Mortgages are likely to become more expensive again after the rate at which banks lend to each another surged to its highest level since 2001 on the back of the financial crisis.

This rate, the overnight London Interbank Offered Rate – or Libor, jumped from 5.49 per cent to 6.79 per cent following the collapse of Lehman Brothers investment bank.

This is its highest level since February 2001, when it reached 7 per cent, according to the British Banker’s Association (BBA). The BBA said that banks were focusing on keeping their money, amid fears over the health of other financial institutions.

Sharemarket losses aside, the major impact in New Zealand of the credit crisis so far has been higher mortgage rates as our banks must pay a larger risk premium on money they borrow overseas.

Westpac research economist Dominick Stephens said the events of the past few days would see these risk premiums widen further even as underlying wholesale rates wereeasing. “The Lehman Brothers collapse has taken the credit crunch to a new level, it’s really very big.”

A drop in mortgage rates that’s accelerated since the government said it would take over Fannie Mae and Freddie Mac has raised hopes that more buyers might be drawn into the housing market and help reverse the worst slump in decades.

Analysts caution, however, that the benefits of lower rates will be tempered by stricter mortgage-lending rules and a stubbornly weak economy. The average rate on a 30-year fixed-rate mortgage fell to 5.88% on Tuesday, according to Bankrate.com.

The big four banks have moved quickly to cut variable home loan interests rates after the central bank said it would lower official rates. The banks made their decision amid earlier calls by the Federal Government that they pass on any rates change by the Reserve Bank of Australia (RBA) to borrowers.

The RBA said on Tuesday it would lower the official cash rate to seven per cent, from 7.25 per cent.

The cut is the first since December 2001 and signals the start of an easing cycle, after the RBA increased interest rates 12 times between May 2002 to March 2008.

HSBC Bank Australia has cut its fixed home loan mortgage rates, citing a recent fall in borrowing costs.

The biggest reduction was to the bank’s three-year fixed rate for new customers, which has fallen to 7.99 per cent, from 9.29 per cent previously.

HSBC Australia head of home loans John Lane said the reductions would provide welcome relief from recent increases in variable interest rates.

“Recent weeks have seen a significant reduction in the medium and long-term cost of fixed-rate funds in the commercial market,” Mr Lane said today.

Lloyds TSB has announced it is cutting its mortgage rates for the second time in two weeks amid further signs that competition is returning to the mortgage market.

The group, which also lends under the Cheltenham & Gloucester brand, is reducing its mainstream fixed rate mortgages by up to 0.31%, while tracker deals are being cut by 0.1%.

It is also slashing its two-year fixed rate loan for people borrowing between ?50,000 and ?250,000 by 0.5%, to give a new rate of 5.49%, although borrowers will need a 25% deposit to qualify for the deal.

In addition, Molly L. Heise, an ex-officer of an escrow firm, must pay more than $3.9 million in restitution. Another mortgage fraud mastermind was sentenced to federal prison on Tuesday.

This time, Molly L. Heise, 50, of Chaska, was sentenced to nearly six years behind bars for a money-laundering scheme involving more than $2.5 million from the clients of her real estate closing company, Profile Title and Escrow.

U.S. District Judge John Tunheim sentenced Heise to 70 months in prison and three years supervised release. He also ordered Heise to pay more than $3.9 million in restitution. Personal loan rates hit six-year high.

Abbey, one of the biggest mortgage lenders in UK, has announced another round of cuts in mortgage interest rates for new borrowers.

The cost of two- and three-year fixed and tracker rates is coming down by up to 0.1% after similar cuts last Friday. The past month has seen a series of rate reductions from major lenders as well as some smaller ones. This week the Halifax cut the cost of many of its deals again, by up to 0.38% in the case of a two-year fixed rate.