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Martin_Harris

Former Taylor Bean Chairman Lee Farkas Gets 30 Years in $3 Billion Mortgage Fraud Scandal


By Martin Harris in Consumer Advocacy, Mortgage and Lending
July 1st, 2011

Former Taylor, Bean & Whitaker Mortgage Corp, Lee Farkas was sentenced to 30 years in prison for his role in a $3 billion fraud that has rocked Fannie Mae and Freddie Mac.

Lee Farkas On Thursday, a federal judge sentenced Lee Farkas, former Chairman of Taylor, Bean & Whitaker Mortgage Corp. to 30 years in prison for operating a multi-billion dollar fraud scheme that led to the collapse of the mortgage lender and one major bank.

The first signs of what would eventually lead to a $3 billion fraud surfaced in January 2000, when Fannie Mae executive Samuel Smith discovered Taylor, Bean & Whitaker Mortgage Corp. sold him a loan owned by someone else.

Over the next two years, Fannie Mae, the government sponsored enterprise which issues nearly half of all mortgage-backed securities, determined in excess of 200 loans acquired from Taylor Bean were bogus, non-performing or lacked certain critical components such as mortgage insurance.

It has come to the surface, that Fannie Mae officials never reported the fraud to law enforcement or anyone outside the company. Internal memos, public testimony and court papers show Fannie Mae only tried to rid itself of liabilities and cut ties with Taylor Bean.

Fannie Mae’s cutoff, Freddie Mac began picking up Taylor Bean’s business within a week. Freddie Mac soon became Taylor Bean’s largest customer and the mortgage company grew to be one of its biggest revenue producers, accounting for about 2 percent of single-family home mortgages by volume in 2009.

The trial of Farkas and his Taylor Bean cronies resulted in the only major criminal conviction stemming from the financial crisis. A crisis that followed the September 2008 collapse of Lehman Brothers, the US government takeover of Fannie Mae and it’s rival Freddie Mac.





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Brett_Goldfarb

Low Mortgage Rates and Slumping Home Sales are Bad for the Economy


By Brett Goldfarb in Mortgage and Lending, Real Estate
July 1st, 2011

Low mortgage rates combined with plummeting home prices have not stimulated the troubled housing market in 2011 and the problem is dragging down the broader economy.

Low Mortgage Rates For many prospective home buyers, the good news is that mortgage rates are still hovering around all-time lows but the bad news is that it’s more difficult for the average home buyer to qualify for a mortgage at these rates.

In the week ending June 30, 2011, 30-year fixed-rate mortgage (FRM) averaged 4.51 percent with an average 0.7 point. The numbers were up from last week when 30-year fixed-rate mortgage (FRM) averaged 4.50 percent. The same time last year, the average for a 30-year FRM was 4.58 percent.

As for the 15-year FRM, this week it averaged 3.69 percent with an average 0.7 point which was the same from last week’s average. The same time last year, the average for a 15-year FRM was 4.04 percent.

Even with these great rates which might otherwise entice people to stop renting and buy a home, the sale of homes is still repressed. Investors buying homes with cash, without taking out a mortgage represent a significantly large percentage of home buyers.

“If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector,” stated Lawrence Yun, chief economist for the National Association of Realtors (NAR).

Last Week, Federal Reserve Chairman Ben Bernanke stated the housing market is dragging down the broader economy. For the market to recover, he said foreclosures must be cleared from the pipeline of homes for sale.

Most economists say home prices will continue falling through the rest of 2011. Many forecasts don’t anticipate a rebound in Real Estate prices until at least 2013.





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Martin_Harris

What is a 50 Year Mortgage?

 
By Martin Harris in Mortgage and Lending
April 10th, 2011

While 50 year and even 100 year mortgages may be the norm in Japan, many Americans are already living under the belief they can eventually “own their home” lock stock and barrel with a 30 year mortgage. A 50 year mortgage is no better than renting because most consumers will never see the term carried out and the posession of the deed to their home in their own hands.

The 50 year mortgage is being offered by certain lenders as an alternative to an interest only or balloon mortgage. However, when you really look at the details it becomes apparent that both types of mortgages are targeting people who prefer to live above their means. In most cases, a 50 year mortgage doesn’t seem to make very much sense in financial terms, at least not for those of us striving towards financial freedom and living debt free.

Jason Flurry, an experienced financial planner and president of Legacy Partners Financial Group in Woodstock, Ga. states, “If you run the amortization out, it basically is an interest-only loan, in all practical terms. If a person is considering something like that, they’re probably trying to squeeze into too much house to begin with.”

While a 50 year mortgage will have lower monthly payments, the total end cost to homeowner is astronomically higher than that of a standard 30 year mortgage because they would be stretching out the payments for two decades longer. It’s impossible to guess how much higher the overall costs would be because the rate moves up and down annually for the last 45 years of the loan.

50 year mortgages are a relatively new mortgage loan and they can make homeownership more affordable but typically require a minimum credit score of 681 to qualify for a loan. Prime candidates for a 50 year mortgage could possibly be professionals who don’t have the current income to qualify for their dream homes but are anticipating significant increases in their earnings in the immediate future.

For the average consumer who isn’t expecting a windfall, a 50 year mortgage can be financial suicide and in my opinion, if you are considering this type of loan, you might want to consider purchasing a more affordable home, one within your current and predicted future earnings.





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