Things Are Never What They Seem To Be In The Mortgage Market

Whatever else might be wrong with the country right now, it appears as if the propensity to game the system is still strong. Here are a couple of examples.

HousingWire reports that a company in Georgia, Metro Buyers Group, LLC, is buying the new homebuyer tax credit from potential buyers. They then use the money for the downpayment on their home purchase. One hundred percent financing lives! No shortage of enthusiasm for the idea either.

The program is already available through several mortgage lenders throughout the Southeast, the company said. “This program will have an immediate positive impact for builders,” said Doug Cotter, past president of the Greater Atlanta Association of Home Builders.

“This is a legitimate monetizing program that actually works,” said David Abrahamson, vice president of S.E. operations for American Home Key Mortgage Company, one firm participating in the tax credit purchase program.

As far as I can see, you would have to engage in some sort of fraud to actually employ this device but I could be wrong. Anyone who sees a way to reputably pull this off, let me know.

And from a couple amusing (NOT!) bits of information about the new Home Affordable Refinance Program. This program requires that you have either a Fannie or Freddie mortgage to participate. Fannie lets you refinance with any lender while Freddie will only let you only refinance with the lender affiliated with your current servicer.

Fannie’s program permits borrowers to shop around for the best deal but then Fannie takes back some of the savings. They’re charging up to 2% for loan-level price adjustments. That can eat up a lot of savings but, hey, when you’re having financial problems like Fannie you have to make a buck anywhere you can.

Freddie’s program only charges what they call an “adverse market” fee of 0.25% but you can’t shop around for the lowest rate. Do you think that the banks refinancing the Freddie loans are going to give you the best rate on the block? But this one is even a little bit more interesting.

Remember the great first quarter results that Wells Fargo announced yesterday? You might have noticed how much they were crowing about their mortgage originations. If you were wondering why Freddie won’t let their borrowers shop around, does the fact that Wells is their biggest customer mean anything?

Try not to think about the fact that your tax dollars are paying for all of this.

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