Thought It Was Much To Easy Getting a Mortgage? You Were Right

My very first article on this informational site talks about "Only Needing a Pulse
to Purchase a home." Well it's all catching up to us now:

WASHINGTON -- Mortgage finance giant Freddie Mac has committed to buy as much as $20 billion in mortgages to help borrowers with high-priced loans stay in their homes, the company's chief executive said Wednesday.

The initiative by the government-sponsored company, the second-largest buyer and guarantor of home loans in the country, was disclosed by Freddie Mac Chairman and Chief Executive Richard Syron at a meeting on Capitol Hill. It came a day after federal regulators called on lenders to work with distressed borrowers unable to meet payments on high-risk mortgages to help them keep their homes.

Syron and the head of No. 1 mortgage financer Fannie Mae said Tuesday that the companies are developing new types of loans to aid homeowners in avoiding default. In a congressional hearing, Syron alluded to "a major effort to develop more consumer-friendly subprime products that will provide stable financing alternatives going forward."

The new products to be offered by Freddie Mac, and expected to be available by midsummer, will include fixed-rate mortgages as well as adjustable-rate mortgages with longer fixed-rate periods before resetting to higher rates.

Home-mortgage delinquencies and foreclosures have been surging in recent months, especially for people who took out subprime mortgages -- higher-priced loans for people with tarnished credit or low incomes who are considered greater risks. The distress has roiled financial markets and stoked anxiety that it could spill over into the broader economy.

Adjustable-rate mortgages, or ARMs, are especially prevalent in the subprime market. They are considered higher-risk loans because they typically draw borrowers in with an initial low "teaser" interest rate, which can spike upward after the first few years.

About 1.8 million adjustable-rate mortgages are resetting to higher rates this year and next, making foreclosures sure to continue rising, according to a new report by Congress' Joint Economic Committee.

"We'd better move long before that," Sen. Christopher Dodd, chairman of the Senate Banking Committee, said at a news conference following a "summit" he convened of regulators, mortgage industry executives and civil rights and consumer groups. The participants agreed "that we want to do everything possible to avoid foreclosures," said Dodd, a Connecticut Democrat.

In another move Wednesday, Washington Mutual Inc., one of the country's largest financial institutions, said it will refinance up to $2 billion in subprime mortgages to help borrowers avoid default and foreclosure, allowing them to apply for discounted fixed-rate home loans or other refinancing alternatives.

Subprime loans make up only about 6 percent of Seattle-based Washington Mutual's mortgage holdings, but they dealt a heavy blow to its first-quarter earnings, which slid 20 percent.

As housing prices continue to fall in many regions around the country, Washington Mutual has an interest in seeing borrowers repay rather than default because of the declining value of the collateral backing the loans. The Federal Reserve estimates it costs a bank $50,000 to foreclose on a home.

Foreclosures nationally in March spiked to 149,150, a 47 percent leap from March 2006, according to a survey conducted by RealtyTrac Inc. that was released Wednesday. Lenders repossessed one out of every 775 homes in March.

In California, recent surveys show foreclosures are mounting, with 11,033 recorded in the first three months of 2007. An estimated 1,505 of them were in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to La Jolla-based DataQuick Information Systems.