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Home loan applications fell 1.5 percent on a seasonally adjusted basis for the week ending May 14, the Mortgage Bankers Association said today.

The refinance index actually jumped 14.5 percent from one week earlier thanks to the low interest rates on offer, but home purchase applications plummeted 27.1 percent to their lowest point since May 1997.

It’s pretty clear the expiration of the homebuyer tax credit in late April led to this extreme drop-off, and it makes you wonder if home prices will be able to sustain, even with the near record-low mortgage rates on offer.

The decline in purchase apps pushed the refinance share of mortgage activity from 57.7 percent to 68.1 percent of total applications.

Meanwhile, the popular 30-year fixed-rate mortgage slipped further to 4.83 percent from 4.96 percent, and the 15-year fixed averaged 4.19 percent, down from 4.32 percent.

The one-year adjustable-rate mortgage dipped to 6.81 percent from 6.86 percent.

Mortgage points increased on all loan types, somewhat eliminating any benefit tied to the interest rate improvement.

The interest rates above are good for mortgages at 80 percent loan-to-value.

The MBA’s weekly survey covers more than half of all retail, residential loan applications, but does not factor out duplicate or rejected apps, which have surely risen since the mortgage crisis began.

Of the estimated 211,154 residential units foreclosed on in California during 2009, roughly 77,145 were rental units, according to a new report focused on tenant rights.

The foreclosures resulted in the displacement of an estimated 208,795 tenants who were living in single-family homes, condos, and multi-family apartments, despite likely making on-time payments every month.

From 2008 to 2009, there was a 70 percent increase in the foreclosure rate of apartment buildings of five units or more – single-family foreclosures fell 3.1 percent year-to-year.

An overwhelming 85 percent of the foreclosed properties went back to banks in 2009, while private investors took the rest.

During the year, banks forfeited more than $776 million in rental income, focusing on booting tenants by hiring lawyers to litigate eviction cases and having real estate agents carry out cash-for-keys deals.

“Once the properties are vacated, they become prime targets for vandalism, further contributing to plunging property values, and creating legal liability for banks as the owners of blighted vacant property,” the Tenants Together report said.

“Furthermore, banks continue to tarnish their standing in local communities by maintaining their policies to evict rent- paying tenants.”

Fannie Mae and Freddie Mac have implemented post-foreclosure programs to assist renters, but many banks apparently continue to see tenants as obstacles to future profits.

Tenants Together is calling for better tenant protections, including making the “Protecting Tenants at Foreclosure Act” (PTFA) permanent, passing local “just cause for eviction” laws, providing tenant notification when a landlord receives a foreclosure filing, and boosting legal funding for tenants in foreclosure situations.

Currently, PTFA provides tenants with the right to a 90-day notice to vacate after foreclosure and requires new owners to allow tenants with leases to continue occupying properties until the end of the lease term, unless sold to a buyer who intends to occupy the property as their primary residence.

In sunny California, mortgage delinquencies vary widely by county, as evidenced by a Fitch Ratings study.

Fitch took a look at all securitized, non-agency mortgage loans in the state and discovered that “delinquencies are highly correlated with the level of negative equity.”

And while mortgage performance in California is not substantially different than that of the remainder of the country, certain parts of the state are underperforming or outperforming the rest of the nation.

In the hard-hit Riverside-San Bernardino-Ontario MSA, 23 percent of prime loans are 60+ days delinquent, making it the worst performing region in the nation.

Meanwhile, the San Francisco-San Mateo-Redwood City MSA is the best performing region in the country, with just four percent of prime loans 60+ days delinquent.

Additionally, high-risk option arms and subprime loans in San Francisco outperform less risky Alt-A mortgages in Riverside.

“From 2000-2006, nominal home prices in San Francisco increased by 81% and have since declined 22% from their peak. Over the same period, prices in Riverside have declined 55% from their peak after jumping 193%,” Fitch said in a release.

As a result, 90 percent of Riverside mortgages are now underwater, with nearly 60 percent of mortgage holders owing more than 150 percent of the value of their home.

“Fitch estimates the weighed average current loan-to-value ratio (LTV) in Riverside to be 164%. By comparison, less than 1% of San Francisco mortgages are more than 50% underwater, with a weighted average current LTV of 81%.”

Over the past year, San Francisco home prices have increased by 12 percent, while residences in Riverside have appreciated by just one percent.

An amendment introduced by Oregon Senator Jeff Merkley and Minnesota Senator Amy Klobuchar aimed at protecting homeowners from deceptive lending practices passed the Senate by a vote of 63-36 today.

As a result, mortgage lenders and loan originators will be banned from accepting payments based on the interest rate and other terms of the loan, which effectively wipes out loan steering.

The legislation also seemingly kills off yield spread premium, which was one of the main ways mortgage brokers were compensated (how mortgage brokers make money).

“Deceptive mortgage practices like hidden steering payments directly led to the Wall Street meltdown and resulted in millions of families losing their homes,” said Senator Merkley in a release.

“We took a huge stride forward today in the fight to restore fairness for homeowners and strengthen the financial foundations of our families. I look forward to seeing this amendment become law so that never again will hidden steering payments put millions of homeowners on the fast track to foreclosure.”

Current rules allow loan originators and mortgage lenders to place borrowers into higher-cost and riskier loans, even when they qualify for more affordable loans.

Merkley cited a WSJ study, which found that 61 percent of subprime loans originated in 2006 went to borrowers who qualified for prime loans.

The bill will also require lenders to document income and “other underwriting standards” to ensure borrowers can actually repay their loans, putting an end to no doc loans and so-called “liar loans,” otherwise known as stated income loans.

These are huge changes and the implications may be great for the mortgage industry.

The amendment was also co-sponsored by Senators Chuck Schumer (D-NY), Olympia Snowe (R-ME), Scott Brown (R-MA), Mark Begich (D-AK), Barbara Boxer (D-CA), Chris Dodd (D-CT), Carl Levin (D-MI), Al Franken (D-MN) and John Kerry (D-MA).

Refinance demand surged last week as mortgage rates benefited from economic uncertainty, but purchase activity cooled following the expiration of the homebuyer tax credit, according to data from the Mortgage Bankers Association.

“The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefitted US mortgage borrowers last week,” said Michael Fratantoni, MBA Vice President of Research and Economics.

“Rates on 30-year mortgages dropped to their lowest level since mid-March. As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks.”

The refinance index increased 14.8 percent during the week ending May 7, pushing its share of mortgage activity to 57.7 percent of total applications from 51.9 percent the previous week.

“In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later.”

The seasonally adjusted purchase index fell 9.5 percent week-to-week; the unadjusted purchase index was off 8.9 percent from the previous week and 0.6 percent lower than the same week a year ago.

Meanwhile, the average contract rate for a 30-year fixed-rate mortgage fell to 4.96 percent from 5.02 percent, and the 15-year fixed slipped to 4.32 percent from 4.34 percent.

The one-year adjustable-rate mortgage averaged 6.86 percent, down from 7.03 percent – the ARM share of activity remained unchanged at 6.3 percent of total applications.

The rates above are good for mortgages at 80 percent loan-to-value.

The MBA’s weekly survey covers more than half of all retail, residential loan applications, but does not factor out duplicate or rejected apps, which have surely risen since the mortgage crisis began.

(photo: qmnonic)

Black Eyed Peas frontman will.i.am has taken on the foreclosure crisis, creating the i.am home fund to help those in jeopardy of losing their homes as a result of the economic downturn.

Yesterday, he unveiled the program on Oprah, surprising two struggling families facing foreclosure by paying off their mortgages.

Sure beats the other freebies Oprah has been known to throw out to guests on the show…

One family with eight children owed $250,000 on their mortgage and had already exhausted their 401k and savings account after the breadwinner lost his job.

The other lucky victim was a single mom who had been laid off after her company downsized, leaving her eight months behind on the mortgage and owing about $100,000.

Both families are now free-and-clear, let’s just hope they don’t try to pull cash-out anytime soon.

“Growing up I dreamt that one day I’d be able to buy my mom a house and take care of my family,” said will.i.am on his website. “I realized that dream and experienced the positive effect giving back had on my family.”

“Now I am compelled to help others who are in jeopardy of losing their homes and inspire others to join the movement.”

The i.am home fund is collecting donations to help other families in similar situations, though it’s unclear how the money will be allocated.

A number of struggling homeowners have already written in on the website in hopes of receiving assistance.

(photo: nicogenin)