MBANews is reporting on an article in the American Banker which notes that early results from the Federal Reserve's study of Home Mortgage Disclosure Act data appear "to support the claim by community groups that certain minority borrowers receive more than their fair share of subprime home loans."

"As some press accounts have implied, the data indicate that blacks and Hispanics are more likely to take out higher-priced loans than non-Hispanic whites," conceded Fed Governor Edward Gramlich.  Gramlich did note that the HMDA data by itself does not necessarily suggest discrimination on the part of lenders.

Uh, as opposed to what? 

Starting Wednesday, Texans and other southern state consumers can get a free copy of their credit report as part of changes under federal Fair and Accurate Credit Transactions Act to combat identity theft.

Consumers can get a free copy of their credit report every 12 months. Requests can be made online or by calling (877) 322-8228.

Inman is reporting that the Dorean Group, a California based outfit claiming to be able to help consumers eliminate their mortgage debt, has run into trouble and at least one of its owners is in jail. 

KRON 4 of San Francisco reports that one of the company's principals, Dale Scott Heineman is behind bars and that Utah authorities are looking for his partner, Kurt F. Johnson.

"Both men are being charged with numerous felonies including racketeering, communications fraud, theft and conspiracy," according to the news report.

Here's an attorney's opinion of the mortgage elimination scam.

The FBI, The Federal Reserve System and Office of Comptroller of Currency have all alerted the banking, lending and mortgage industries to the unscrupulous and deceptive practices of the programs.  The alerts are available at:

http://www.fbi.gov/page2/dec03/fraud120803.htm

http://www.hud.gov/utilities/intercept.cfm?http://www.occ.tr…

http://www.federalreserve.gov/boarddocs/SRLETTERS/2004/sr040…

The new Georgia Residential Mortgage Fraud Act increases the penalties for mortgage fraud; violators can be sentenced to ten years in prison and fined up to $5,000 (more severe penalties exist for multiple instances).  The law also provides for forfeiture of any property obtained from the fraudulent activities.

The law defines residential mortgage fraud as "knowingly misstating, misrepresenting, or omitting information during the mortgage lending process; receiving proceeds from a mortgage closing that one knew to be fraudulent, conspiring for either of the previous or filing with the official registrar of deeds of any county any fraudulent document."

The Mortgage Bankers Association has launched an online anti-fraud resource center located at http://www.mortgagebankers.org/MBAFightsFraud/

The website features fraud alerts and mortgage industry news and helps lenders "prevent investigate and combat mortgage fraud," according to the site.  There are also links to report fraud activity.

In a survey conducted by the Mortgage Bankers Association it was revealed that adjustable rate and interest only loans accounted for 63% of all loans originated in the second half of 2004. 

Also, San Francisco's LoanPerformance has announced that 25% of buyers nationwide are taking interest only loans. 

Here's how one lender recently advertised interest-only loans: "You won't build equity in your home during the interest-only period, but it could help you afford to buy the home you want instead of settling for the home you can afford."

But for how long?

Washington Mutual, which has spent the last several years digesting previous acquisitions has announced that it is to acquire Providian Financial for $6.45 billion and cash and stock.  Washington Mutual said it expects the transaction will add to its consumer banking business and strengthen its middle market customer segment.  Providian will be WaMu's fourth major unit. 

Kerry Killinger, chairman and chief executive of Washington Mutual, said in a statement. "Providian is a highly profitable business with solid credit quality. Its focus on middle market consumers makes Providian a natural fit for our business and a winning combination for both companies' customers," he said. 

"This combination also helps to further diversify our balance sheet and earnings by adding attractive, high-yielding credit card assets, while improving our net interest margin and adding stable fee income," Mr. Killinger added.

In other words - mortgages just don't do it anymore.

A recent New York Times article (reg. reqd.) addresses the financial rewards real estate agents are reaping from the real estate boom.  It tells the story of a NY broker who cleared $98,000 in commissions (after splits) in a two week period during which five homes were bought, sold and closed.

The Times article observes:

"Until recently, the neighbors, who drove the best cars, wore the best clothes and gave the best dinner parties were doctors, lawyers, bankers and stockbrokers.  But now, with house prices skyrocketing and homes in the hottest markets selling in a matter of days, some real estate brokers are enjoying incomes and lifestyles that approach those of their wealthiest clients."

The agent noted above owns four Mercedes, two Jaguars and two Range Rovers and 28 pairs of Alain Mikli eyeglasses (whatever those are).

Real estate agents earned $61.1 billion in commissions in 2004 - that's up 43% from 2000. 

Unfortunately for our friends, this rise in standing hasn't resulted in a rise in status.  The Times article quoted a Harris Poll from 2004 which found that real estate brokers ranked the lowest of all professions, likely due to the perception that they will say or do anything to sell a house.

The Times also warns of a real estate agent bubble.  "When you see headlines about median prices continuing to grow it attracts attention," said Richard Haggerty, deputy executive officer of the Westchester County Board of Realtors.  "A lot of people become intrigued by that and go ahead and get their licenses."

I've got to tell you, when I read the headline in the Times I assumed it was referring to mortgage brokers.  And frankly, after reading the article I still think you could replace "real estate agent" with "mortgage broker" and print it almost word for word.  Not that there's anything wrong with that.

In what has to be one of the most self-serving pieces of authorship I've ever seen, the law firm of Traiger & Hinckley LLP has released a report (pdf) in which it concludes that there is

"no meaningful differences in the pricing of first lien loans with reported rate spreads to homebuyers of different race and sex.  On average, African American and white borrowers paid essentially the same rate spread, and Hispanic borrowers paid less than whites.  The rate spread for men and women were almost identical."

Sounds great, doesn't it.  Makes it look like lenders are pillars of society.  And it's an accurate statement - unfortunately the truth is buried under the rubble.  In order to understand what the report statistics really show we need to understand the concept of "rate spread."  The report notes that

"Effective for mortgage loans originated in 2004, HMDA requires mortgage lenders to report the spread between a loan's APR and the comparable Treasury yield, where the spread is at least three percentage points for first-lien loans…"

In other words, the study, which included HMDA data from "ten leading national mortgage lenders" included information on ONLY those loans in which the loan APR was so egregious that it required additional reporting under HMDA.  Again, only those loans where the APR was at least three percentage points above the comparable Treasury yield were included in the study.  Thus, the study data was based on only those loans where the clients were most likely being ripped-off.

So, while the reports authors concluded,

"If lenders are treating the most vulnerable borrowers equitably, it seems unlikely that they are otherwise engaged in illegal discrimination based on race, ethnicity, or sex." 

my conclusion would be a bit different,

Of those consumers who are being ripped-off, many of whom are likely being pressured into a loan with a higher rate than an honest lender would offer, we are happy to report that they are being ripped-off equitably. 

Isn't that the real story; rather than making some logically flawed argument that because I don't beat my wife I probably don't sexually abuse my children (sorry but I want to make the point).

By the way, the law firm of Traiger & Hinckley LLP represents "financial services entities throughout the United States on all facets of fair lending…"  And aids "in the defense of an institution under regulatory scrutiny."  But I didn't have to tell you that, did I?

Research company Research and Markets has released its "2004 Analysis Online Real Estate Advertising Comes of Age" report.

While newspaper real estate advertising is declining (on a per sold home basis) internet media advertising is increasing.  The report reveals that the internet is now the number two medium for reaching homebuyers (just behind yard signs).  MLS listing databases were previously little threat to media advertising as they were closed systems. 

However NAR's two year old Internet Data Exchange (IDX) now lets consumers access MLS databases online that are more comprehensive than newspaper and magazine listings.  The report notes the IDX policy is changing how agents and brokers are reaching consumers.  According to the report nine of the twenty most visited real estate websites are operated by traditional brokerage firms which include extensive MLS data.

We previously reported on the increase in online local mortgage advertising.

The House Financial Services Committee has approved a bill that would establish a new independent regulator to oversee Fannie, Freddie and the Federal Home Loan Banks. 

Features include an increase in conforming limits in high cost markets, required contributions to an affordable housing fund, a lack of authority by the regulator to reduce the size of Fannie and Freddie's portfolios and no restrictions on their AU systems.

And we thought the GSEs had lost some capital hill mojo with the absences of Raines and Brendsel.

Ameriquest Mortgage which previously sponsored Paul McCartney's performance during the super bowl is sponsoring the tour of the Rolling Stones "One Stage World Tour." 

They've actually created a pretty cool marketing site for the tour with a sweepstakes, merchandise, ticket sales and links to an online mortgage application.  Considering we've seen Philadelphia Eagle fans finance their homes for Super Bowl tickets, we wonder whether Ameriquest is creating a new loan category - let's call it the Performance Loan.

It would appear subprime continues to drive the market.  National Mortgage News will be reporting in Monday's edition that the first quarter saw a second best ever $169 billion in subprime closings.  While second best in dollars, it was a new record in terms of market share.  Look for subprime lender rankings in Monday's edition.

In a "guidance" regarding home equity loans issued by the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration, lenders were specifically warned about loans originated by mortgage brokers or other third parties.

Brokers, who are not bank employees and who are paid by commission based on the volume of loans they complete, and correspondents, which make loans on their own for resale to other lenders were identified as risk factors regarding potential future increased delinquency rates.

The guidance noted that active portfolio management was especially important for "financial institutions that project or have already experienced significant growth or concentrations in higher risk products, such as high LTV, limited documentation and no documentation interest-only, and third-party generated loans."

The guidance also suggested that banks stop buying gasoline from oil companies, food from the supermarket, electricity from the electric company and to be sure to roll the boulder in front of the cave opening before turning in for the night.

In a speech at the Center for American Progress, Spitzer told the audience that the Office of the Comptroller of the Currency has advised him that his ongoing investigation of mortgage lending practices was infringing on its jurisdiction.  "Our investigation of of whether or not banks are properly lending to minorities and women, they're trying to intercede on behalf of the banks, keeping us from getting the data we need," said Spitzer. 

I can just hear the calls from the banks to the OCC, "Uh, Julie, aren't you the ones that are supposed to catch us breaking the law?  We'd much rather be investigated by you than that other guy; he's such a pain in the ass."