Option ARM mortgages, which allow home buyers to make very low payments for the first five years of the mortgage term became widespread in the year 2005. After the first five years, these mortgages ‘recast’, requiring the buyer to make full payments on the principal and interest until the loan is paid. These option ARMs are predicted to set off the next big wave of foreclosures next year. Since they became widespread in 2005, the five year low payment windows will begin to shut next year in 2010. The expected foreclosures are not evenly dispersed geographically or across the continuum of loan values. In fact, these option ARMs were used more commonly in higher cost areas like California. Even within pricier states, these loans are more prevalent among higher loans. It’s estimated that the San Francisco bay area probably holds about 30 billion dollars worth of option ARMs that will recast beginning next year; That’s as high as 1 in 5 mortgages in some bay area cities.

Housing is not going to be the engine to get us out of this recession,” said Robert Eisenbeis, chief monetary economist for Vineland, New Jersey-based Cumberland Advisors Inc., and former research director at the Federal Reserve Bank in Atlanta.

Interest rates have dropped in an effort to incentivize a mortgage re-boom. But it’s not enough for homeowners, who increasingly have their eyes on a 4% interest rate. With mortgage defaults still at record highs. and home prices dropping, it’s becoming ever clearer that there’s not enough fuel in the housing furnace to generate any kind of heat for the economy at large.

With less refinancing going on than expected, there is less extra cash in the pockets of homeowners to be thrown around to reinvigorate the economy. President Obama’s $8000 tax credit is falling short of expectations in terms of motivating people to buy new homes. Freddie Mac estimates 73 percent of the projected $2.7 trillion of mortgage originations in 2009 will be for refinancing.

Without a recovering housing market to single-handedly drive the economy back to health, it seems the economic recovery will consist of myriad efforts, fanning whatever flames can be found in the embers of our erstwhile prosperity.  

Sheila Bair, Chairman of the FDIC indicated that there’s still distress in the Mortgage market, to be sure. But loan modifications are having a positive affect. Typically people are willing to stay in their homes and honor commitments even if they are in a state of negative equity. The cases when homeowners are more likely to walk away from a mortgage are when they fall on hard times due to personal issues, like a lost job, or health problems. Loan modifications are not going to be the source of the larger economic recovery but they seem to be enabling troubled homeowners to ride the apparent rising tide of the economic stability.

Ending a two day slide, traders bought insurance and housing stocks as a result of some indications that the housing market may be close to a rebound. The recent slide seems to be the result of jittery investors worries about upcoming quarterly earning reports.

Today a $1.3 billion deal between Pulte Homes Inc. and rival Centex Corp. gave investors some reason to think that the new company, now America’s largest homebuilder was a reason for optimism in the homebuilding sector. The optimism didn’t ripple throughout the rest of the industry as other homebuilders, were mixed.

Insurers enjoyed a bump in sales today in the wake of a report by the Wall St. Journal that the government may be providing bailout funds for a struggling life insurance industry. An announcement is expected as soon as tomorrow.

Homeowners are increasingly falling into delinquency in spite of programs implemented by mortgage lenders intended to prevent further foreclosures.

The report, by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulate mortgage lenders, has shown that in spite of a massive effort on the part of the government and Lenders, it has not been possible to draw a line in the sand and prevent further foreclosures. Moreover, decreasing labor markets are expected to exert upward pressure on foreclosure rates.

The financial services industry has been increasingly focused on Loan Modification, trying to find ways to keep homeowners in their homes. The modifications however have been subject to a re-default rate as high as 58%.

There have been increases in delinquency in prime mortgage holders, which have been considered low risk historically. Also on the rise are mortgages where the borrower is delinquent before making a single payment on the loan. Fraud is considered a possible cause in these cases of delinquency.

As Reported in Reuters, Moody’s Economy.com published a report today with some hopeful news about U.S. housing markets. While the report first predicts declines in home values exceeding 20% in 100 metropolitan areas nationwide, it goes on to predict that the housing markets may bottom out in the fourth quarter of 2009. This depends on the government taking some drastic steps to stabilize the greater economy. It’s been three years since prices began correcting and it appears as though the end may finally be in sight. How this news affects individual communities around the country will vary. New York is only just beginning to see a downturn in their robust housing markets. Meanwhile places like Stockton, California, that had relatively high rates of exposure to subprime and investor lending and have long since hit catastrophic foreclosure rates.

Millions of low income children and certain groups of legal immigrants are the first recipients of the sweeping change that was the foundation of Barack Obama’s campaign. Acknowledging that it falls short of far reaching healthcare reform, California Democrat Henry Waxman called it a ‘down payment’. The passage of the bill is further evidence of the changing climate in Washington. Only six months ago, George W. Bush was threatening states who insured too many children through the State Children’s Health Insurance Program with penalties. Under this bill, as many as four million children will be insured by 2013. Expansion of this program has been resisted by Republicans. Steve King (R Iowa) has called it “a foundation stone for socialized medicine.” Dissenters aside, the bill passed with the votes of 40 house Republicans.

The US trade gap narrowed in the third quarter to just over $174 billion (4.8% GDP) from a downwardly revised $180.9 billion (5.1% GDP )in the second quarter. After a long dry spell, mortgage applications began to increase last month. The mortgage rates being offered were so low that almost everyone who’s not in a state of negative equity could benefit. Lending standards have tightened, so there are many individuals who can’t benefit from the low rates, or the market stimulus that came from the Fed’s pledge to buy billions of dollars of mortgage bonds. The Fed’s rate cut to near zero has put the dollar at near record lows against the Japanese Yen which has also stimulated the mortgage market. All in all, the  application activity index maintained by the Mortgage Bankers Association rose 2.9 percent to a 841.4 (seasonally adjusted) in the week ending December 12.

In the wake of the mortgage meltdown, many mortgage professionals are starting over and there is no better way to start than simple, quick and easy. Only that and those which are guaranteed to drive revenue remains.

So in the world of rationing, how do you survive on so little for so long? You find purposeful and inexpensive or, heck, even free technology and services to help you manage the workload.

Well, Lead Management Software should be no stranger to the trend. Leads360, recognizing the needs of small mortgage shops, launched its new product for companies in need of affordable, easy-to-use lead management that is ready to go on day one.   Check out Leads360 Express for a free 60-day trial (it’s always free for 1 user!).

Through planning software development around the specific needs of emerging businesses, we have learned what experienced mortgage professionals are looking for in any technology solution:

•    Affordability
•    Speed
•    User-friendly Interface
•    Intuitive, Integrated Best Practices
•    Performance Tracking

If your current mortgage LMS does not at least have these fundamental elements, whatever you are paying it is too much for not enough functionality. With limited resources and budget, it is imperative that you contact leads before your competition, know the quality of your leads and monitor the performance of your loan officers. These elements will get you back on your feet and have you headed towards success in no time.

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