Rate on 30-year fixed mortgage rises to 3.98 pct. (AP)

By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – Thu Jan 26, 5:39 pm ET

WASHINGTON – The average rate on the 30-year fixed mortgage rose this week for the first time this month, though it remained below 4 percent for the eighth straight week.

The low rates may be contributing to a slow turnaround in the depressed housing market. Still, many who can afford to buy or refinance a home have already done so.

Freddie Mac said Thursday the average rate on the 30-year fixed mortgage rose to 3.98 percent this week. That's up from 3.88 percent the previous week, which was the lowest level on record.

The average on the 15-year fixed mortgage also rose to 3.24 percent, from 3.17 percent the previous week. The 15-year mortgage hit a record low of 3.16 percent two weeks ago.

Mortgage rates are low because they tend to track the yield on the 10-year Treasury note, which fell below 2 percent this week.

For the past three months, the 30-year fixed mortgage rate has hovered near 4 percent. Historically low mortgage rates are among the signs that point to a pickup in the housing market this year.

Sales of previously occupied homes rose in December for a third straight month. Homebuilders are slightly more hopeful because more people are saying they might consider buying this year. And home construction picked up in the final quarter of last year.

Still, new homes fell in December, the Commerce Department said Thursday. About 302,000 new homes were sold last year, making 2011 the worst year for new home sales on records dating back to 1963.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many don't want to sink money into a home that they fear could lose value over the next few years.

Builders are hopeful that the low rates could boost sales next year. Low mortgage rates were cited as a key reason the National Association of Home Builders survey of builder sentiment rose strongly in December and January.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year loan dipped to 0.7 from 0.8; the average on the 15-year fixed mortgage was unchanged at 0.8.

For the five-year adjustable loan, the average rate rose to 2.85 percent from 2.82 percent. The average on the one-year adjustable loan was unchanged at 2.74 percent.

The average fee on the five-year adjustable loan rose was unchanged at 0.7; the average on the one-year adjustable-rate loan was unchanged at 0.6.

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Bank of America extends drop in mortgage rankings (Reuters)

(Reuters) – Bank of America Corp (BAC.N) was the fourth-biggest U.S. mortgage lender in the fourth quarter of 2011, continuing its descent in the rankings after it stopped buying loans made by smaller banks.

The second-largest U.S. bank in 2008 became the biggest mortgage originator after buying Countrywide Financial, but it has been gradually paring back the business as it copes with losses from the disastrous acquisition.

Citigroup Inc (C.N) moved ahead of Bank of America in the fourth quarter, with about $23 billion in mortgage loans, slightly ahead of Bank of America's $22.4 billion in loans, according to data released Thursday by industry publication Inside Mortgage Finance.

Wells Fargo & Co (WFC.N) remained the largest mortgage originator by far, making $120 billion in loans. That meant it made 30 percent of all loans in the quarter, up from about 27 percent in the third quarter.

JPMorgan Chase & Co (JPM.N) was the second-biggest lender in the quarter, with about $42 billion in loans.

In October, Bank of America said it was exiting correspondent lending by year's end, stripping out about half of its production as it focused on making loans directly to its own customers. The bank now has about 6 percent market share, less than the 7.8 percent it held in 2007 before buying Countrywide.

That acquisition, which brought to the banks loads of bad loans and related lawsuits, has not worked out on two fronts for Bank of America, said Guy Cecala, publisher of Inside Mortgage Finance.

"Not only are they looking to abandon the servicing side of the business, they're looking to abandon the origination platform," he said.

While the bank is missing out on newer loans made under stricter underwriting standards, decreasing its profile in the mortgage business is likely good for its stock price, he said. "It will be welcomed by shareholders and analysts," Cecala said.

After falling 58 percent in 2011, Bank of America's shares are up more than 30 percent this year.

In a CNBC interview Wednesday at the World Economic Forum in Switzerland, Bank of America Chief Executive Officer Brian Moynihan said exiting the correspondent business was a good move because the company was no longer providing its balance sheet to other banks' customers.

"We've shaped our mortgage business much smaller," he said. "We've really got it back (to) our core retail customer... We'll continue to do that."

(Reporting By Rick Rothacker; Editing by Maureen Bavdek, Gary Hill)

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Mortgage rates for the past 52 weeks, at a glance (AP)

The average rate on a 30-year fixed mortgage rose to 3.98 percent, Freddie Mac said Thursday. It was the first increase in four weeks and up from last week's record low of 3.88 percent.Here's a look at rates for fixed- and adjustable-rate mortgages over the past 52 weeks:Current week's average Last week's average 52-week high 52-week low30-year fixed 3.98 3.88 5.05 3.8815-year fixed 3.24 3.17 4.29 3.165-year adjustable 2.85 2.82 3.92 2.821-year adjustable 2.74 2.74 3.40 2.74All values are in percentage points.Source: Freddie Mac Primary Mortgage Market Survey.

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California calls mortgage settlement "inadequate" (AP)

WASHINGTON – California officials are refusing to sign a proposed settlement between U.S. states and the nation's biggest mortgage lenders over deceptive foreclosure practices, calling it "inadequate."

The objection raised by the nation's biggest state delivered a major setback to the deal, which promised to help roughly 1 million homeowners see the size of their mortgage reduced by an average of $20,000.

Five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial _have agreed to the settlement, which was sent around Monday for state officials to review.

California Attorney General Kamala D. Harris says the deal as written would limit her ability to bring civil charges against mortgage lenders that wrongfully foreclosed on homeowners. Harris, who is a Democrat, objected to an earlier version of the settlement in September.

"We've reviewed the details of the latest settlement proposal from the banks, and we believe it is inadequate for California," said Shum Preston, a spokesman for Harris.

Delaware officials have also said they won't sign on to the settlement.

A signed deal is not expected soon, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who has led the 50-state negotiations. He said late Monday that there are "terms we must still resolve."

The Obama administration has put pressure on states to accept deal, part of its latest push to help the depressed housing market.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement, which could be as high as $25 billion. About 750,000 Americans — about half of the households who might be eligible for assistance under the deal — could receive checks for about $1,800.

But the agreement could reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans.

Nearly 8 million Americans have faced foreclosure since the housing bubble burst. In some cases, companies that process mortgages failed to verify the information on foreclosure documents. The worst practices, known collectively as "robo-signing," included employees signing documents they hadn't read or using fake signatures to sign off on foreclosures.

New York Attorney General Eric Schneiderman, who has opposed previous settlements, has not commented publicly on the latest deal. He was removed from the committee negotiating the settlement in August because of his tough stance.

On Tuesday, Schneiderman was asked by Obama administration to lead a new federal task force investigating the bubble of mortgage-backed securities that contributed to the 2008 financial crisis.

Schneiderman was also one of President Barack Obama's guests at Tuesday's State of the Union speech.

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Mortgage applications retreated last week: MBA (Reuters)

NEW YORK (Reuters) – Applications for home mortgages retreated last week, giving back some of the previous week's surge as interest rates rose, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 5 percent in the week ended Jan 20.

The index had soared more than 20 percent the previous week.

The MBA's seasonally adjusted index of refinancing applications slipped 5.2 percent, while the gauge of loan requests for home purchases was off 5.4 percent. The refinance share of total mortgage activity decreased to 81.3 percent of applications from 82.2 percent.

Fixed 30-year mortgage rates averaged 4.11 percent, up 5 basis points from 4.06 percent.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

(Reporting By Leah Schnurr; Editing by Leslie Adler)

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Protests intensify as mortgage settlement nears (Reuters)

(Reuters) – As state and federal officials near a deal with top banks to settle claims of foreclosure abuses, left-leaning activist groups have stepped up pressure on the officials to reach a deal that demands more from the banks.

Around three dozen protestors from groups that include MoveOn.org, National People's Action and The New Bottom Line gathered outside the State of Illinois building in downtown Chicago on Monday morning in a blustery rain chanting "banks got bailed out, we got sold out."

The activists, some of whom held signs that said "make Wall Street pay" and "President Obama investigate banks now," also marched a few blocks east and chanted in front of President Barack Obama's re-election campaign headquarters.

Democratic state attorneys general and Obama administration officials are meeting on Monday in Chicago to discuss the terms of the settlement, and Republican state officials are expected to be briefed on a conference call later in the day.

Several protest leaders said they planned to confront negotiators meeting at a Hilton hotel near O'Hare International Airport.

A spokesman for Iowa Attorney General Tom Miller, who is leading the negotiations on behalf of the states, declined comment beyond saying no news conference or announcement was planned for this week.

According to past reports of the settlement talks, the banks -- Bank of America (BAC.N), Wells Fargo & Co (WFC.N), JPMorgan Chase & Co (JPM.N), Citigroup (C.N) and Ally Financial Inc (GKM.N) -- would provide $20 billion to $25 billion of relief to homeowners in exchange for being allowed to put behind them potential government lawsuits about improper foreclosures and abuses in originating and servicing mortgage loans.

As talks have dragged into their second year, some states and activist groups said the proposed deal released the banks from too many claims and did not provide enough relief to homeowners.

The total value of the deal depends on which states decide to join, and could drop sharply if certain states, including California, decide not to sign on. The attorney general there pulled out of the talks last year, saying she was not comfortable with the deal under discussion.

The activist groups have increased their pressure in the past week, as negotiators put the final touches on a deal.

Last week U.S. Housing and Urban Development Secretary Shaun Donovan said a deal was "very close" and suggested the settlement could help about 1 million homeowners reduce their mortgage debt.

On Monday, two Democratic lawmakers joined representatives of MoveOn.org, the Campaign for America's Future, and other groups on a conference call with reporters to call for a deeper investigation into mortgage abuses.

"Instead of criminal prosecutions, we are talking about not much more than a slap on the wrist," Senator Sherrod Brown of Ohio said. "In many ways, Wall Street isn't just too big to fail, it's also too big to jail."

In another sign negotiators were close to a deal, three regional banks signaled they had begun talks to also enter the settlement.

Two of the regional banks, PNC (PNC.N) and US Bancorp (USB.N), reported a total of $370 million in mortgage-related expenses, and a third, SunTrust (STI.N), said the discussions were at a preliminary stage and it could not yet estimate any financial impact.

(Reporting By Andrew Stern in Chicago and Aruna Viswanatha in Washington, D.C.; Editing by Steve Orlofsky)

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$25B nationwide mortgage deal goes to states (AP)

WASHINGTON – The nation's five largest mortgage lenders have agreed to overhaul their industry after deceptive foreclosure practices drove homeowners out of their homes, government officials said Monday.

A draft settlement between the banks and U.S. states has been sent to state officials for review.

Those who lost their homes to foreclosure are unlikely to get their homes back or benefit much financially from the settlement, which could be as high as $25 billion. About 750,000 Americans — about half of the households who might be eligible for assistance under the deal — will likely receive checks for about $1,800.

But the agreement could reshape long-standing mortgage lending guidelines and make it easier for those at risk of foreclosure to restructure their loans. And roughly 1 million homeowners could see the size of their mortgage reduced.

Five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial — and U.S. state attorneys general could adopt the agreement within weeks, according to two officials briefed on the discussions. They spoke on condition of anonymity because they are not authorized to discuss the agreement publicly.

The settlement would be the biggest of a single industry since the 1998 multistate tobacco deal. And it would end a painful chapter that grew out of the 2008 financial crisis.

Nearly 8 million Americans have faced foreclosure since the housing bubble burst. In some cases, companies that process mortgages failed to verify the information on foreclosure documents. The worst practices, known collectively as "robo-signing," included employees signing documents they hadn't read or using fake signatures to sign off on foreclosures.

President Barack Obama is expected to tout the settlement in his State of the Union address Tuesday. His administration has put pressure on state officials to wrap up a deal more than a year in the making.

But some say the proposed deal doesn't go far enough. They have argued for a thorough investigation of potentially illegal foreclosure practices before a settlement is hammered out.

New York, Delaware, Nevada and Massachusetts have argued that banks should not be protected from future civil liability. The deal will not fully release banks from future criminal lawsuits by individual states.

In December, Massachusetts sued the five major banks over deceptive foreclosure practices.

Ian McConnell, director of the fraud division for Delaware Attorney General Beau Biden, said Monday that Biden is "opposed to the proposed settlement as drafted."

"This position, given his prior public comments, should come as no surprise," McConnell said, adding that Biden will comment further when the still-confidential deal is made public.

California Attorney General Kamala D. Harris said in a statement that her ability to go after potential wrongdoing by mortgage lenders "remains a key lens through which she will evaluate any proposals." In September, California announced it would not agree to an earlier version of a settlement over foreclosure abuses that state and federal officials have been working on for more than a year.

But her office declined to comment on the proposed deal circulating among the states. And it wouldn't say whether California, the state with the greatest number of people who lost their homes to foreclosure, would agree to the deal.

New York Attorney General Eric Schneiderman, who has taken a public stance against halting investigations of fraudulent business practices as part of a national settlement, had no immediate comment Monday.

A signed deal is not expected this week, said Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, who has led the 50-state negotiations. Greenwood said late Monday that there are "terms we must still resolve."

The settlement would only apply to privately held mortgages issued between 2008 and 2011, not those held by government-controlled Fannie Mae or Freddie Mac. Fannie and Freddie own about half of all U.S. mortgages, roughly about 31 million U.S. home loans.

As part of the deal, about 1 million homeowners could also get the principal amount of their mortgages written down by an average of $20,000. One in four homeowners with a mortgage — or roughly 11 million people — owe more than their home is worth. These so-called "underwater" borrowers have little chance at refinancing.

Democratic attorneys general met Monday in Chicago to discuss the deal with Housing and Urban Development Secretary Shaun Donovan. Republican attorneys general were briefed about the deals via conference call later in the day.

Under the deal:

• $17 billion would go toward reducing the principal that struggling homeowners owe on their mortgages.

• $5 billion would be placed in a reserve account for various state and federal programs; a portion of that money would cover the $1,800 checks sent to those homeowners affected by the deceptive practices.

• $3 billion would to help homeowners refinance at 5.25 percent.

In October 2010, major banks temporarily suspended foreclosures following revelations of widespread deceptive foreclosure practices by banks. Discussions then began over a national settlement.

Both sides have fought over the amounts of money that should be placed in the reserve account for property owners who were improperly foreclosed upon. Many of the larger points of the deal, including a $25 billion cost for the banks, have long been worked out, officials say.

Associated Press Writers Michael Virtanen in Albany, N.Y., Randall Chase in Dover, Del., and Ben Feller in Washington contributed to this report.

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Mortgage settlement between banks, states 'close' (AP)

WASHINGTON – A $25 billion settlement between the nation's major banks and U.S. states over deceptive foreclosure practices during the housing crisis is nearing completion.

Five major banks — Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial (formerly GMAC) — and U.S. states are "very close," Housing and Urban Development Secretary Shaun Donovan said Wednesday.

Separately, two officials briefed on internal discussions say a proposed deal could be announced within weeks. Negotiators are finalizing a draft of the agreement, which must be reviewed by state attorneys general. Under the deal, banks would pay states and the federal government, which would fund programs to compensate homeowners.

The two officials asked to remain anonymous because they were not authorized to speak publicly about the deal.

Talks have been dragging on for more than a year between major U.S. banks and state attorneys general over fraudulent foreclosure practices that drove millions of Americans from their homes during the housing crisis.

In October 2010, major banks temporarily suspended foreclosures following revelations of widespread deceptive foreclosure practices by banks. That has backlogged millions of foreclosures that must be cleared before the housing market can fully recover.

The settlement would only apply to privately held mortgages, not those held by government-controlled Fannie Mae or Freddie Mac. Fannie and Freddie own about half of all U.S. mortgages, roughly about 31 million U.S. home loans.

Individual states can opt out of the proposed deal. Some have disagreed over what terms to offer the banks.

In September, California announced it would not agree to a settlement over foreclosure abuses that state and federal officials have been working on for more than a year.

New York, Delaware, Nevada and Massachusetts, which sued five major banks earlier in December over deceptive foreclosure practices, have also argued that banks should not be protected from future civil liability.

And both sides have also fought over the amounts of money that should be placed in the reserve account for property owners who were improperly foreclosed upon. Many of the details of the deal, including a $25 billion cost for the banks, have been agreed upon, officials say.

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Insight: Top Justice officials connected to mortgage banks (Reuters)

By Scot J. Paltrow Scot J. Paltrow – Fri Jan 20, 9:31 am ET

(Reuters) – U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department's criminal division, were partners for years at a Washington law firm that represented a Who's Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington's biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.

Reuters reported in December that under Holder and Breuer, the Justice Department hasn't brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

The evidence, including records from federal and state courts and local clerks' offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners' lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven't responded publicly to any of the requests.

While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S. banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co - as well as at least one other bank that is among the 10 largest mortgage servicers.

DEFENDER OF FREDDIE

Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of mortgage owners, usually groups of investors who bought mortgage-backed securities.

Covington represented Freddie Mac, one of the nation's biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators.

A particular concern by those pressing for an investigation is Covington's involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.

Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. -- roughly 60 million loans.

But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS "vice presidents" or "assistant secretaries."

Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS.

It isn't known to what extent if any Covington has continued to represent the banks and other mortgage firms since Holder and Breuer left. Covington declined to respond to questions from Reuters. A Covington spokeswoman said the firm had no comment.

Several lawyers for homeowners have said that even if Holder and Breuer haven't violated any ethics rules, their ties to Covington create an impression of bias toward the firms' clients, especially in the absence of any prosecutions by the Justice Department.

O. Max Gardner III, a lawyer who trains other attorneys to represent homeowners in bankruptcy court foreclosure actions, said he attributes the Justice Department's reluctance to prosecute the banks or their executives to the Obama White House's view that it might harm the economy.

But he said that the background of Holder and Breuer at Covington -- and their failure to act on foreclosure fraud or publicly recuse themselves -- "doesn't pass the smell test."

Federal ethics regulations generally require new government officials to recuse themselves for one year from involvement in matters involving clients they personally had represented at their former law firms.

President Obama imposed additional restrictions on appointees that essentially extended the ban to two years. For Holder, that ban would have expired in February 2011, and in April for Breuer. Rules also require officials to avoid creating the appearance of a conflict.

Schmaler, the Justice Department spokeswoman, said in an e-mail that "The Attorney General and Assistant Attorney General Breuer have conformed with all financial, legal and ethical obligations under law as well as additional ethical standards set by the Obama Administration."

She said they "routinely consult" the department's ethics officials for guidance. Without offering specifics, Schmaler said they "have recused themselves from matters as required by the law."

Senior government officials often move to big Washington law firms, and lawyers from those firms often move into government posts. But records show that in recent years the traffic between the Justice Department and Covington & Burling has been particularly heavy. In 2010, Holder's deputy chief of staff, John Garland, returned to Covington, as did Steven Fagell, who was Breuer's deputy chief of staff in the criminal division.

The firm has on its web site a page listing its attorneys who are former federal government officials. Covington lists 22 from the Justice Department, and 12 from U.S. Attorneys offices, the Justice Department's local federal prosecutors' offices around the country.

As Reuters reported in 2011, public records show large numbers of mortgage promissory notes with apparently forged endorsements that were submitted as evidence to courts.

There also is evidence of almost routine manufacturing of false mortgage assignments, documents that transfer ownership of mortgages between banks or to groups of investors. In foreclosure actions in courts mortgage assignments are required to show that a bank has the legal right to foreclose.

In an interview in late 2011, Raymond Brescia, a visiting professor at Yale Law School who has written about foreclosure practices said, "I think it's difficult to find a fraud of this size on the U.S. court system in U.S. history."

Holder has resisted calls for a criminal investigation since October 2010, when evidence of widespread "robo-signing" first surfaced. That involved mortgage servicer employees falsely signing and swearing to massive numbers of affidavits and other foreclosure documents that they had never read or checked for accuracy.

Recent calls for a wide-ranging criminal investigation of the mortgage servicing industry have come from members of Congress, including Senator Maria Cantwell, D-Wash., state officials, and county clerks. In recent months clerks from around the country have examined mortgage and foreclosure records filed with them and reported finding high percentages of apparently fraudulent documents.

On Wednesday, John O'Brien Jr., register of deeds in Salem, Mass., announced that he had sent 31,897 allegedly fraudulent foreclosure-related documents to Holder. O'Brien said he asked for a criminal investigation of servicers and their law firms that had filed the documents because they "show a pattern of fraud," forgery and false notarizations.

(Reporting By Scot J. Paltrow, editing by Blake Morrison)

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Mortgage rates for the past 52 weeks, at a glance (AP)

The average rate on the 30-year fixed mortgage fell to a record low of 3.88 percent, Freddie Mac said Thursday. That's just below the previous record of 3.89 percent reached one week ago. Here's a look at rates for fixed- and adjustable-rate mortgages over the past 52 weeks.Current week's average Last week's average 52-week high 52-week low30-year fixed 3.88 3.89 5.05 3.8815-year fixed 3.17 3.16 4.29 3.165-year adjustable 2.82 2.82 3.92 2.821-year adjustable 2.74 2.76 3.40 2.74All values are in percentage points.Source: Freddie Mac Primary Mortgage Market Survey.

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Rate on 30-year mortgage down to record 3.88 pct. (AP)

By DEREK KRAVITZ, AP Real Estate Writer Derek Kravitz, Ap Real Estate Writer – Thu Jan 19, 2:53 pm ET

WASHINGTON – The average rate on the 30-year fixed mortgage fell again this week to a record low. The eighth record low in a year is attracting few takers because most who can afford to buy or refinance have already done so.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year fixed mortgage dipped to 3.88 percent this week, down from the old record of 3.89 percent one week ago.

The average on the 15-year fixed mortgage ticked up to 3.17 percent from 3.16 percent, which was also a record low. Records for mortgage rates date back to the 1950s.

Mortgage rates tend to track the yield on the 10-year Treasury note, which fell below 1.9 percent this week.

For the past three months, the 30-year fixed mortgage rate has hovered near 4 percent. Yet cheap rates on the most popular mortgage option have done little to boost home sales.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many don't want to sink money into a home that they fear could lose value over the next few years.

Previously occupied homes are selling just slightly ahead of 2010's dismal pace. New-home sales in 2011 will almost certainly be the worst on records going back half a century.

Builders are hopeful that the low rates could boost sales next year. Low mortgage rates were cited as a key reason the National Association of Home Builders survey of builder sentiment rose strongly in December and January.

So far, the low rates have had minimal impact. Mortgage applications have risen about 6 percent on a seasonally adjusted basis over the past four weeks, according to the Mortgage Bankers Association. But they are coming off extremely low levels.

To calculate the average rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year loan rose to 0.8 from 0.7; the average on the 15-year fixed mortgage was unchanged at 0.8.

For the five-year adjustable loan, the average rate was unchanged at 2.82 percent. The average on the one-year adjustable loan fell to 2.74 percent from 2.76 percent.

The average fee on the five-year adjustable loan rose was unchanged at 0.7; the average on the one-year adjustable-rate loan was unchanged at 0.6.

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Mortgage rates for the past 52 weeks, at a glance (AP)

The average rate on the 30-year fixed mortgage fell to a record low of 3.89 percent, Freddie Mac said Thursday. That's below the previous record of 3.91 percent reached three weeks ago. Here's a look at rates for fixed- and adjustable-rate mortgages over the past 52 weeks.Current week's average Last week's average 52-week high 52-week low30-year fixed 3.89 3.91 5.05 3.8915-year fixed 3.16 3.23 4.29 3.165-year adjustable 2.82 2.86 3.92 2.821-year adjustable 2.76 2.80 3.40 2.76All values are in percentage points.Source: Freddie Mac Primary Mortgage Market Survey.

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Exclusive: Angelides to lead distressed mortgage firm (Reuters)

By Matthew Goldstein and Jennifer Ablan Matthew Goldstein And Jennifer Ablan – Fri Jan 13, 3:32 pm ET

New York (Reuters) – Phil Angelides, formerly the chairman of a federal commission who led investigations into why the financial markets collapsed, is heading an investment group that hopes to "do a good thing" for America while turning a profit from the wreckage of the housing market.

The startup company, of which Angelides is executive chairman, seeks to raise money from investors to purchase troubled mortgages from banks and other financial institutions in order to help keep homeowners from being foreclosed upon, according to a January 4 letter reviewed by Reuters.

The company, Mortgage Resolution Partners, claims its strategy of using "legal and political leverage" to acquire the loans could generate a 20 percent annual return for investors. The company intends to purchase mortgages at a steep discount and re-work them to enable the homeowners to continue making payments, with the firm collecting the proceeds.

"We just might do a good thing for America, and along the way get a great return on investment," says the letter to prospective investors. "If our hopes do not pan out, the amount wagered should be a deductible loss."

In the letter, the mortgage company refers to its political connections as its "secret formula."

Angelides, a former California state treasurer, Democratic politician and land developer, was head of the Financial Crisis Inquiry Commission until last February.

Planning for the Mortgage Resolution Partners began last summer, less than five months after the Commission wrapped up its work in Washington, D.C. In January 2011, the Commission issued a 662-page report that highlighted Wall Street's role in the collapse of the U.S. housing market. ( http://fcic-static.law.stanford.edu/cdn_media/fcic-reports/fcic_final_report_full.pdf )

Angelides did not respond to an email seeking comment.

Emily Lenzner, a spokeswoman for Mortgage Resolution Partners, said the mortgage crisis was affecting millions of families in California and beyond, having a devastating impact on communities and the economy. She said political initiatives had come up short and "Mortgage Resolution Partners is exploring business and public policy solutions to this critical matter."

In a September interview with Bloomberg television on the housing crisis, Angelides said: "The banks unfortunately aren't doing enough to fix the housing crisis." He added: "I think we need to be much more forceful now about modifications. There are millions of people who can stay in their homes if they have principal reductions."

His move into housing comes at a time when hedge funds, private equity firms and other deep-pocketed investors are looking to scoop up foreclosed homes and earn money by renting them out. The Federal Housing Finance Agency, which regulated Fannie Mae and Freddie Mac, recently received proposals from hundreds of investment groups interested in acquiring and renting out single-family homes federal agencies have foreclosed on.

"The big question is, 'How can he possibly jump to the front of the line when everybody's been jockeying for this and to get to this feeding trough. Perhaps because he knows where the front of the line is?" Laus Abdo, executive director at TriArchic Advisors, a Las Vegas real estate advisory firm which has been focusing on rentals of single-family homes acquired through foreclosure.

Mortgage Resolution Partners is starting off small, aiming to raise about $6 million to study the feasibility of its plan, which mainly focus on acquiring home loans in distressed communities in California.

Most of the group's founding members have deep ties to California and have either political or finance backgrounds. The letter lists former San Francisco Mayor Willie Brown Jr. and Putnam Lovell Securities founder Donald Putnam as early backers of the company.

Putnam, who now heads private equity and investment advisory shop Grail Partners LLC, declined to comment, beyond saying the group "is trying to think of ways to cut through the Gordian Knot of the mortgage crisis." Before Grail, Putnam was involved in numerous transactions including Allianz Group's acquisition of PIMCO Advisors LP and Deutsche Bank AG's acquisition of Zurich Scudder Investment.

Gordian Knot, a reference to a legend involving Alexander the Great, is often a metaphor for an intractable problem and appears to be the inspiration for the investment vehicle that controls Mortgage Resolution Partners - Gordian Sword LLC.

In November, according to the January 4 letter to "potential investor members," the founders of Gordian Sword and at least two dozen other people met at Cavallo Point in Sausalito, California, a posh estate in Golden Gate National Park, "to hammer out a business plan and chart a course through 2012."

But the letter, which asks potential investors to sign a non-disclosure agreement before receiving any further information, is sparse on details. It says the company will use "computer models and other techniques" to determine the best price for a so-called underwater mortgage - a loan on which a borrower owes more than a house is worth. The goal is to acquire loans at a discount and write down the debt to a point where a borrower can continue to make payments.

A good deal of the success of the program rests on Mortgage Resolution Partners' "secret formula," which the letter describes as its leverage in "California politics" and an executive chairman in Angelides, "who will be front-line center stage nationally."

The idea of investment groups buying distressed mortgages and writing down the principal and attempting to make money by keeping homeowners current on their new mortgages isn't totally new. A handful of other investment funds are trying that, including Selene Residential Mortgage Opportunity Fund, founded by mortgage-backed securities pioneer Lewis Ranieri.

But the more common approach is for investors to raise money to buy foreclosed homes and rent them out.

Lenzner, the spokeswoman for Mortgage Resolution Partners, said since the group has just been launched "it's premature to determine" the firm's final approach to the mortgage problem because it is "still in the research and development stage."

(Reporting by Matthew Goldstein and Jennifer Ablan; editing by Claudia Parsons and Edward Tobin)

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Mortgage applications picked up last week: MBA (Reuters)

NEW YORK (Reuters) – Applications for U.S. home mortgages rose in the first week of the year as demand for both purchases and refinancing perked up, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 4.5 percent in the week ended Jan 6.

The MBA's seasonally adjusted index of refinancing applications gained 3.3 percent, while the gauge of loan requests for home purchases climbed 8.1 percent.

The refinance share of total mortgage activity eased to 80.8 percent of applications from 81.9 percent the previous week.

The improvement in demand came even as interest rates rose. Fixed 30-year mortgage rates averaged 4.11 percent in the week, up 4 basis points from 4.07 percent.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

(Reporting By Leah Schnurr; Editing by Leslie Adler)

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DoJ contacting additional banks on mortgage deal (Reuters)

(Reuters) – As the government nears a deal with top banks to resolve mortgage abuses, the Justice Department has begun reaching out to other banks to gauge their interest in joining the wide-ranging settlement, according to a person familiar with the matter.

The DOJ has contacted several nationally chartered banks to determine whether they might agree to terms similar to those in the proposed deal, the person said.

State and federal officials are nearing a settlement with the five largest mortgage servicers - Bank of America Corp, JPMorgan Chase & Co, Wells Fargo & Co, Citigroup Inc and Ally Financial Inc- to resolve allegations of misconduct in processing foreclosures and other issues.

In exchange for between $20 billion to $25 billion in relief to distressed homeowners, the banks will put behind them potential government lawsuits about improper foreclosures and abuses in originating and servicing the loans.

In recent weeks Justice officials have approached several other banks about joining the settlement, a move that could potentially push up the total price tag.

The additional banks are expected to include those that entered into consent orders last year with U.S. bank regulators over similar allegations. That group includes HSBC Holdings Plc PNC Financial Services Group Inc, MetLife Inc, SunTrust Bank, U.S. Bancorp , OneWest Bank, Sovereign Bank and Aurora Bank.

A settlement that goes beyond the five largest servicers might add around $5 billion or less to a total settlement, according to estimates from Inside Mortgage Finance's publisher Guy Cecala, but it could reach a wider pool of borrowers.

"Clearly it was not just five lenders committing robo-signing," he said. "It was a widespread practice."

Negotiators have long said they planned to go beyond the top five servicers, but the recent contact signals they are at an advanced stage in the talks.

While the contours of the deal are set, some of the fine print, including which claims are released and who will monitor the enforcement of the settlement, is still being hashed out.

LONG TIME IN THE MAKING

The talks, which began more than a year ago after reports emerged that banks had robo-signed documents and rushed through paperwork to deal with a flood of foreclosures, included both regulatory and enforcement agencies aimed at striking a global settlement.

But regulators at the Office of the Comptroller of the Currency and the Federal Reserve moved forward on their own last April, when 14 servicers signed consent orders, agreeing to review past foreclosures and reform their servicing practices.

While the enforcement agencies involved in the ongoing talks expected to eventually resolve cases against all 14, they focused on the largest five initially.

A person familiar with the matter said it was unlikely the smaller banks would sign on in time for an announcement, which could come in the next several weeks, but could join soon after.

Representatives of the banks either declined to comment or did not respond to a request for comment. A spokeswoman for the Justice Department declined comment.

In a November securities filing, HSBC said it expected that the next nine largest servicers, including HSBC Bank USA and HSBC Finance, would be approached about a settlement after the five largest servicers concluded their talks and announced an agreement.

The bank has ongoing discussions with regulators and government agencies on mortgage servicing matters but those discussions are confidential, HSBC spokesman Neil Brazil said.

In its most recent quarterly securities filing, PNC said regulatory inquiries related to foreclosure practices were ongoing and might result in additional "actions, penalties or other remedies."

The volume of the total settlement has fluctuated based on who and what is in the final deal.

The attorney general in California pulled out of the talks in September and said the deal under consideration failed to provide enough relief to the state's homeowners and released the banks from too many claims.

Negotiators have moved forward on a scaled-back deal without the state.

(Reporting By Aruna Viswanatha in Washington and Rick Rothacker in Charlotte; editing by Andre Grenon)

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MetLife says exits forward mortgage business (Reuters)

BOSTON (Reuters) – MetLife will shut down its mortgage operations, the largest U.S. life insurer said on Tuesday, giving up on the unit three months after it said it would seek a buyer.

MetLife has been trying to shed assets like its bank and mortgage operations in order to reduce regulatory scrutiny and focus its operations on insurance and annuities. Last year the Federal Reserve blocked the company from raising its dividend, and most analysts expect it will soon face additional regulatory oversight as a "systemically important" financial firm.

In a statement, MetLife said it would no longer accept new applications for forward mortgages, but would honor all commitments for loans in process. MetLife said it would continue with its reverse mortgage business.

The company forecast up to $110 million in after-tax costs over the next year for the closure but said there would be no impact on operating earnings.

The shutdown of the mortgage business follows the late-December deal to sell its retail banking operations to a unit of General Electric (GE.N). The retail banking business represented less than 2 percent of the company's operating earnings.

(Reporting By Ben Berkowitz. Editing by Gunna Dickson)

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Rate on 30-year mortgage drops to record 3.89 pct. (AP)

WASHINGTON – Fixed mortgage rates fell once again to a record low, offering a great opportunity for those who can afford to buy or refinance homes. But few are able to take advantage of the rates.

Freddie Mac says the average rate on the 30-year fixed mortgage fell to 3.89 percent. That's below the previous record of 3.91 percent reached three weeks ago.

The average on the 15-year fixed mortgage ticked down to 3.16 percent. That's down from a record 3.21 percent three weeks ago.

Mortgage rates are lower because they track the yield on the 10-year Treasury note, which fell below 2 percent.

Average fixed mortgage rates hovered around 4 percent at the end of 2011. Yet many Americans either can't take advantage of the rates or have already done so.

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Mortgage rates for the past 52 weeks, at a glance (AP)

The average rate on the 30-year fixed mortgage matches its record low of 3.91 percent this week, Freddie Mac said Thursday. That's the lowest on records dating back to the 1950s. Here's a look at rates for fixed- and adjustable-rate mortgages over the past 52 weeks.Current week's average Last week's average 52-week high 52-week low30-year fixed 3.91 3.95 5.05 3.9115-year fixed 3.23 3.24 4.29 3.215-year adjustable 2.86 2.88 3.92 2.851-year adjustable 2.80 2.78 3.40 2.77All values are in percentage points.Source: Freddie Mac Primary Mortgage Market Survey.

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Raskin says Fed will fine mortgage servicers (Reuters)

WASHINGTON (Reuters) – Federal Reserve Governor Sarah Bloom Raskin on Saturday said the Fed must impose monetary penalties on banks who entered into an April agreement with regulators over how to fix problems in their mortgage servicing businesses.

"The Federal Reserve and other federal regulators must impose penalties for deficiencies that resulted in unsafe and unsound practices or violations of federal law," Raskin said in remarks to the Association of American Law Schools. "The Federal Reserve believes monetary sanctions in these cases are appropriate and plans to announce monetary penalties."

Raskin did not say when the penalties will be announced.

She said that "appropriately sized" penalties would "incentivize mortgage servicers to incorporate strong programs to comply with laws when they build their business models."

Mortgage servicers, many of which are large banks, collect home loan payments and manage issues like foreclosures.

The servicing issue burst into public view last year when government agencies began investigating bank mortgage practices, including the use of "robo-signers" to sign hundreds of unread foreclosure documents a day.

In April, 14 mortgage servicers, including Bank of America (BAC.N) and JPMorgan Chase (JPM.N), entered into a settlement with the Fed, the Office of the Comptroller of the Currency and the now defunct Office of Thrift Supervision on steps that have to be taken to correct and improve their servicing practices, such as providing borrowers with a single point of contact for questions.

As part of the agreement, these mortgage servicers have hired consultants to review foreclosures that took place in 2009 and 2010 to see if any were improper.

REVIEWS ONGOING

Regulators have said these reviews, which are ongoing, will help determine the size of any penalties the servicers will have to pay.

When asked by an audience member whether regulators may as part of the enforcement action seek to have banks reduce mortgage balances for some borrowers in an effort to keep them in their homes, Raskin said it is an option that should "stay on the table."

"The notion of how we can bring principal reduction into an enforcement action I think is a good question and one that as we think through what remedies and tools that we have is one that should stay on the table," she said.

Reducing borrowers' principal has been controversial with critics charging it could create a "moral hazard" - the concept that rescue efforts breed further behavior that exacerbates the existing problem - prompting other borrowers to stop making timely loan payments.

Some consumer groups and congressional Democrats have criticized the use of consultants to do the "look-back" review of mortgage servicers, questioning how independent they will be since their core business is working with banks.

Regulators have defended the decision, saying the consultants, while hired by the banks, report to the agencies.

In her speech Raskin acknowledged the issue is "the subject of much debate" and said regulators would be able to "monitor and judge the completeness of the look-back."

Democrats have also called for the agencies to publicly release the specifics of what the consultants find and servicers do in response.

On Saturday Raskin endorsed the idea of releasing information publicly but did not get into the specific details of what should be made available.

"The corrective actions that the mortgage servicers are undertaking pursuant to the enforcement actions in an appropriate format also need to be shared with the public," she said.

(Editing by Andrea Ricci)

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Md. AG announces mortgage rate settlement (AP)

BALTIMORE – Maryland Attorney General Doug Gansler has announced an agreement with Wells Fargo relating to allegedly deceptive marketing of adjustable rate mortgages written by companies it acquired in 2008.

Gansler said Thursday that the settlement involves mortgages written by Wachovia and Golden West Financial.

Gansler says the settlement will create loan modifications for some customers. He also says Wells Fargo has agreed to pay about $940,000 for restitution to "Pick-a-Payment" borrowers who lost their homes in foreclosure.

The attorney general's Consumer Protection Division says Wachovia and Golden West did not fully explain to borrowers who chose a loan with payments that were less than the interest actually due that their minimum payments would not cover the full interest and that their principal debt would actually increase over time.

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