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- State AG forces mortgage servicer to cancel $10M in zombie second mortgages, pay $300K penalty
State AG forces mortgage servicer to cancel $10M in zombie second mortgages, pay $300K penalty
Plus: Mortgage rates tick up
Good morning! This is Mortgage Nuggets, the newsletter that brings you the best of the mortgage industry so you're always the smartest one at the table.
Today’s newsletter is 702 words, a 2.5-minute read.
Disclaimer: Average mortgage rates as of Oct 03, 2024. © MND Daily Rate Index.
1. State AG forces mortgage servicer to cancel $10M in zombie second mortgages, pay $300K penalty
The Massachusetts attorney general's office reached a settlement with Franklin Credit Management Corp. over its practice of resurrecting "zombie" second mortgages—old, defaulted loans—without proper borrower communication.
The settlement requires Franklin Credit to stop collecting on its Massachusetts loans, erasing over $10 million in mortgage debt, and pay a $300,000 penalty. Franklin Credit violated state regulations by delaying notices to borrowers, leading to unaffordable balances.
The case highlights growing concerns over zombie loans, which have resurfaced amid rising home equity values. Federal regulators, including the CFPB, have also warned servicers against this practice.
2. Mortgage rates tick up
According to Freddie Mac’s Primary Mortgage Market Survey®, the weekly average rate on a 30-year mortgage rose to 6.12%, the first increase in seven weeks. The rate ticked up from 6.08% last week. A year ago, the rate averaged 7.49%.
The average rate on a 15-year fixed-rate mortgage rose to 5.25% from 5.16% last week. A year ago, it averaged 6.78%, Freddie Mac said.
"The decline in mortgage rates has stalled due to a mix of escalating geopolitical tensions and a rebound in short-term rates that indicate the market’s enthusiasm on rate cuts was premature. Zooming out to the bigger picture, mortgage rates have declined one and a half percentage points over the last 12 months, home price growth is slowing, inventory is increasing, and incomes continue to rise. As a result, the backdrop for homebuyers this fall is improving and should continue through the rest of the year."
🚨 Coach’s Corner
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3. More Nuggets
🏚️ JD Vance, Tim Walz debate on the housing crisis. (CBS News)
🏦 Banks are omitting data about race from home loans, preventing researchers from identifying racist lending and its solutions. (Fortune)
📈 Mortgage lock volume is up 3%, refinance activity buoys market. (MCT)
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4. MLSs, brokerages get approval for opt-in settlements
Judge Stephen R. Bough, who is overseeing the Sitzer/Burnett suit, granted preliminary approval to 13 brokerages and 15 MLSs that chose to settle the commission lawsuits via the opt-in mechanism negotiated by NAR in its settlement.
The final approval of these settlements is slated to take place on Nov. 26, 2024, alongside the final approval hearing for the NAR settlement. Below are the brokerages that chose to join the NAR settlement and the amounts they’ll pay.
The brokerages that chose to join the NAR settlement and the amounts they'll pay are: Fathom Holdings ($2.95 million), Key Realty, Ltd. ($375K), Rose & Womble Realty Company ($100K), Shorewest Realtors, Inc. ($6.92 million), The Agency ($3.75 million), Watson Realty Corp. ($1.35 million), Downing-Frye Realty, Inc. ($925K), Michael Saunders & Company ($1.2 million), Pinnacle Estate Properties, Inc. ($725K), Brown Harris Stevens ($2.9 million), Silvercreek Realty Group ($350K), Vanguard ($2 million), and McGraw Davisson Stewart LLC ($800K).
5. Charted: 7 states are back above pre-pandemic inventory levels—these 4 states are likely next
In August 2024, only four states had returned to or surpassed pre-pandemic 2019 active inventory levels. In September 2024, that number grew to seven: Tennessee, Texas, Idaho, Florida, Colorado, Utah, and Arizona.
States likely to join that list soon include Oklahoma, Washington, Alabama, and Oregon.
If a market has less active housing inventory for sale in September 2024 compared to September 2019, it's below pre-pandemic 2019 inventory levels. Click here to view an interactive version of the map
☀️ You’re all caught up. See you on Monday!
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