Mortgage rates rise modestly

By Holden Lewis • Bankrate.com

Excerpts

August 6, 2009

Mortgage rates tried to wriggle free from their restraints this week, but didn't quite succeed, rising modestly.

The benchmark 30-year fixed-rate mortgage rose 9 basis points, to 5.65 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.46 discount and origination points. One year ago, the mortgage index was 6.74 percent; four weeks ago, it was 5.59 percent.

The benchmark 15-year fixed-rate mortgage rose 9 basis points, to 4.97 percent. The benchmark 5/1 adjustable-rate mortgage rose 8 basis points, to 5.03 percent.

Rates have been stuck in a narrow range since the beginning of July. In the last six weeks, the 30-year fixed has been as high as 5.7 percent and as low as 5.55 percent in Bankrate's weekly surveys. It's unusual for rates to remain in a range of roughly an eighth of a percentage point for this long.

The big mortgage news of the week concerned the abrupt failure of Taylor, Bean & Whitaker, a top-15 lender overall, and the third-biggest originator of FHA-insured loans. Taylor, Bean & Whitaker's swift demise Wednesday afternoon stranded possibly thousands of would-be borrowers. The lucky ones were early in the process, and had applied for loans and were waiting for approval. The unlucky customers had been approved for loans and were waiting for them to close. All must start over and submit a new application with another lender.

As soon as Taylor, Bean's shutdown was announced, mortgage brokers across the land solicited marooned borrowers through blog posts, e-mail and Twitter.

Start all over again

Michael Moskowitz, president of Equity Now, a mortgage bank in New York City, says much the same. "The broker is going to tell you, 'Listen, the loan that was closed on the weekend and was supposed to fund today, it's not going to fund. You were counting on cash out. You're not going to get it. We have to start the process somewhere else."

"It's a mess," says Matt Hackett, Equity Now's underwriting manager. "And by the way, you have to get a new appraisal."

Hackett continues: "People are starting all over again. They're probably going to a new bank because now they're nervous, and now they're looking at an extra 300 bucks for a new appraisal. All that stuff over again."

Quick demise

Taylor, Bean & Whitaker's problems surfaced Tuesday afternoon, when the federal Department of Housing and Urban Development announced that it had suspended the lender from underwriting mortgages insured by the Federal Housing Administration.

HUD said that it had suspended Taylor, Bean because the lender "failed to submit a required annual financial report and misrepresented that there were no unresolved issues with its independent auditor even though the auditor ceased its financial examination after discovering certain irregular transactions that raised concerns of fraud."

The next day, Taylor, Bean & Whitaker announced that it was ceasing all lending operations immediately. The Wall Street Journal reported that the company's CEO sent an e-mail to employees, saying that the company was ceasing operations and that all nonessential employees would be laid off that day.