Buyers may get higher mortgage rates

The weak housing market has been great news for home buyers, but some purchasers will soon see an unexpected downside: higher mortgage rates.

Soft home prices have prompted industry giants Fannie Mae and Freddie Mac to leave loan limits on so-called “conforming” mortgages unchanged for the first time since 1995.

Fannie and Freddie announced plans yesterday to keep conforming loans’ cutoff at $417,000 for 2007, unchanged from 2006. That means home buyers who borrow more than $417,000 next year will need costlier “jumbo” loans.

Generally, jumbo-mortgage interest runs about 0.25 percentage points higher than conforming-loan rates.

Borrow $417,001 at today’s jumbo rates and you’d pay $22,500 more interest over 30 years than you would if you could get the money at conforming rates.

“In years past, as the conforming-loan limit increased, borrowers had a cheaper mortgage alternative,” said Greg McBride, senior financial analyst with mortgage tracker Bank-Rate.com. “But next year, that alternative will be harder to grab a hold of.”

By law, Fannie and Freddie adjust the conforming-loan limit each November based on how much average U.S. home prices changed in the preceding 12 months.

This year, prices rose just 0.16 percent, so Fannie and Freddie left the limit unchanged for 2007.

By Jerry Kronenberg at http://business.bostonherald.com/

FSA fines mortgage firm for cold calling

The Financial Services Authority (FSA) has fined a Scottish mortgage firm £17,500 for rule breaches including cold calling potential customers. This is the first time it has taken action against a firm for cold calling.

An FSA investigation found that 85% of the business of Glasgow-based Capital Mortgage Connections Ltd was generated by cold calling potential customers.

The fine also includes Capital's failure to treat its customers fairly by being unable to demonstrate that it gave appropriate pricing information on the accident, sickness and unemployment (ASU) insurance polices it sold.

Over 97% of ASU insurance polices sold by the firm were on a single premium basis. Capital was unable to demonstrate that it advised its customers of the potentially cheaper monthly option and gave suitable pricing information to them.

"Cold calling potential customers for mortgage business is against our rules and firms operating in the industry should be aware of this," said Jonathan Phelan, head of retail enforcement at the FSA. "Management is responsible for ensuring that firms comply with our rules and we will act where we find breaches."

The regulator has instructed CMC to carry out a past business review to all existing single premium ASU insurance policy customers to ensure they are fully aware of the benefits, cost alternatives, terms and conditions of the product they have and the reasons why they were recommended the single premium plan.

By agreeing to settle at an early stage of the FSA investigation the firm qualified for a 30% discount under the FSA’s Executive Settlement Scheme.

Mortgage Fraud

In Lauderdale County three separate people are facing legal battles thanks to allegations of mortgage fraud.

Rhonda Hare of Hare Mortgage plead guilty in August to three counts of wire fraud. The former Meridian business owner was sentenced this week to three years in prison with two years suspended and one year under house arrest.

Meanwhile an former employee in a Meridian law firm was also convicted of wire fraud. Linda Stephens of Collinsville plead guilty this week to one count of wire fraud. She was given a three-year, suspended sentence and three years of probation.

The Attorney General's Office says each woman had previously been charged with one count of conspiracy in a mortgage scheme.
A Meridian business owner has also plead guilty to wire fraud. David Hand, president of Mid-South Mortgage and Investments, plead guilty to two counts of wire fraud this week. His company operated in Meridian under the name Freedom Lending. In June, the company's license was suspended and he was fined 10-thousand dollars.