Mortgage news this week painted a picture of a variety of ways people are attempting to cope with the mortgage slump:

• While the housing bill continues to meander its way through Congress, it apparently was not an urgent enough issue to get done before Congress adjourned for its Fourth of July recess
• Hope Now, a mortgage industry alliance, reported that it helped 170,000 homeowners avoid foreclosure in the month of May
• Further evidence that falling behind on a mortgage need not be permanent was seen in the fact that more that 40,000 borrowers who had been behind on their mortgages caught up in May
• The week ending June 27 offered a small sign of broader resiliency in the mortgage market, as mortgage application volume recovered slightly from the year-to-date low set during the prior week

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What’s striking about recent mortgage news is how much of it is dominated by stories about investigations and indictments related to mortgage scams. Federal authorities have announced a nationwide crackdown, and local authorities have been active in many communities as well.

There were other, less dramatic stories on the mortgage front:

• Mortgage application activity stalled as mortgage rates rose
• The Hope Now Alliance, a mortgage industry group, announced plans to help streamline work-out plans for troubled borrowers
• A long-awaited mortgage bill became bogged down in the Senate due to controversy stemming from favorable mortgage rates received by two Senators

These other stories are worth reviewing, but ultimatly they are best put in context by the crackdown on mortgage scams.

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A possible Senate compromise on a mortgage relief bill took most of the mortgage headlines this week, but potential borrowers would do well to keep their eyes on the inflation front, where a new surge in oil prices threatened to drive interest rates higher.

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Mortgage rates remained just above 6.0% for the third consecutive week. Some other headlines from the week offer a hint of what’s behind the recent creep upward in those rates:

• Oil and gas prices surged to new record highs, after oil had looked like easing during the previous week
• Retail sales showed unexpected strength in April
• New jobless claims declined in the latest weekly data
• Productivity gains were surprisingly strong in the first quarter

For potential mortgage borrowers, the level of mortgage rates might be the only headline that draws attention, but the broader economic developments can provide some clue as to what to expect in the mortgage market during the weeks and months ahead.

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In a mixed week of news, perhaps the most important outcome is that mortgage rates remained at attractive levels:

• Fed Chairman Ben Bernanke conceded there was a possibility that the economy was in recession
• A provision to give bankruptcy judges more latitude to ease mortgage terms appeared headed for defeat
• Housing sales posted a rare rise, even as prices continued to fall
• 30-year mortgage rates remained little changed for the second week in a row

As much as the above might seem a mix of good news and bad news, overall it translates to a decent environment for home and mortgage shoppers.

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HUD Secretary Alphonso Jackson announced his resignation March 31 in the wake of investigations concerning allegations of favoritism after he paid a friend $362,000 to serve as a construction manager in New Orleans. Jackson is also being sued by the Philadelphia Housing Authority due to his alleged interference in a land deal.

The Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) can potentially provide relief to borrowers facing foreclosure as part of the mortgage mess. We wonder if his successor will focus on helping the nation’s families who’ve been victimized by shoddy lending practices, and unchecked greed.

It’s great that community services agencies, the government, and some lenders are working with homeowners who are having problems making their mortgage payments, or refinancing mortgages they can’t afford. Unfortunately, the scam artists are out to make a from borrowers facing foreclosure.

Foreclosure proceedings are a matter of public record. Scammers can get your name and property address from these records. Yes, folks, there are people who will send offers of quick help, no money required “solutions,” and they may also offer to pay you to stay in your home. These kinds of schemes can result in losing your home, your money, and your credit rating. Don’t get involved in any deal that seems too good to be true; it probably is!

Even as mortgage conditions worsened, comments from top policy makers made it clear that a full-scale bailout isn’t in the cards. The best relief in sight came in the form of a downward turn in interest rates. 

Here’s what the government had to say:

• President Bush and Treasury Secretary Henry Paulson called some Congressional bailout plans an inappropriate use of taxpayer dollars. 
• Federal Reserve Chairman Ben Bernanke asked lenders to forgive some portion of borrowers’ debts.

Here’s what housing statistics had to say:

• The mortgage foreclosure rate reached a record high
• Home equity levels fell to an all-time low

And finally, here’s how interest rates may help:

•  After rising steadily over the previous five weeks, thirty-year mortgage rates took a step back and fell to 6.03% as of March 6th.

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A mixed bag of mortgage and housing news:

• Thirty-year mortgage rates popped back above 6% for the first time since the start of the year
• Home sales recorded their slowest month since 1999
• The dollar sunk to a new low against the Euro

Clearly, the first item is bad news for home buyers, while the second is good news. It is the third item, however, that ought to be a reminder for home buyers to have a sense of urgency about finding a property.

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Mortgage news this week was dominated by the announcement of Project Lifeline, a program to help mortgage borrowers who are on the brink of foreclosure.

To appreciate the context of Project Lifeline, it is important to also consider two other stories from this past week:

• Figures from the first four months of this fiscal year show that the U.S. Government budget deficit is running at about twice the pace of last year’s
• Morgan Stanley became the latest in a series of financial firms to bite the bullet because of the mortgage crisis, with the announcement that they would lay off 1,000 mortgage workers

Considering the circumstances, Project Lifeline might be the most pragmatic type of solution available.

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