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The average rate for a 30-year, fixed-rate mortgage remained virtually steady last week, with Texas’ rates rising slightly.

For the week ended April 26, the average rate for a 30-year, fixed-rate mortgage in Texas was 5.03 percent, up 0.3 percent from the week before.

Nationwide, the average 30-year rate was 5.07 percent, up .2 percent from 5.06 percent the prior week, according to Zillow.

The national average for a 15-year, fixed-rate mortgage was 4.72 percent, up from 4.68 percent the week before.

Georgia (4.99 percent) and Florida (5.01 percent) had the lowest 30-year mortgage rates in the country, while Ohio (5.17 percent) had the highest.

Seattle-based Zillow compiles rates quoted by 4,000 participating mortgage lenders to potential borrowers on its site.

By BRIAN WITTE – 23 hours ago

BALTIMORE (AP) — More than 1,000 people were defrauded out of about $70 million by a group advertising the dream of homeownership in what turned out to be a nightmare Ponzi scheme, federal and Maryland officials said Monday.

Five officers for Laurel, Md.-based Metro Dream Homes company are accused of tricking homeowners into pouring money into the business with the promise that the revenue would be used to pay off their mortgages. The scheme ran from 2005 until October 2007, authorities said.

Newly confirmed Assistant U.S. Attorney General Lanny Breuer said the charges should send a message to those engaging in mortgage fraud.

“Our resolve as a group is great,” he said at a news conference in Washington. “We will find you. We will prosecute you, and we’re going to put you in prison.”

The indictment names company founder Andrew Hamilton Williams Jr., 58, of Hollywood, Fla.; financial officer Michael Anthony Hickson, 46, of Commack, N.Y.; president Isaac Jerome Smith, 46, of Spotsylvania, Va.; and vice president Alvita Karen Gunn, 31, of Hanover, Md. They had 48 hours to turn themselves in.

Gunn had an initial appearance Monday afternoon in U.S. District Court in Greenbelt, Md. Her attorney, Elita C. Amato, did not immediately return a call seeking comment. Other attorneys in the case also could not be reached for comment.

A fifth person, Carole Nelson, 50, of Washington, D.C., was named in a document normally filed as part of a plea deal.

“Some people hope to get rich quickly just by dreaming, without the hard work,” said Rod Rosenstein, the U.S. attorney for Maryland. “Usually, people can achieve that only by breaking the rules.”

Prosecutors say the company marketed the mortgage program in seminars at luxury hotels in Maryland, Washington and Beverly Hills, Calif. An investor had to put up a minimum of $50,000 for each home. The company was then supposed to pay off their mortgages within five to seven years.

More than half the victims were from the Washington suburbs of Prince George’s County in Maryland, said John McLane, a Maryland assistant attorney general. Other victims were in California, Delaware, the District of Columbia, Georgia, New York, North Carolina and Virginia.

Investors were told they were investing in ATM machines, television advertising and calling card kiosks that would raise money for the mortgage payments. But prosecutors say those businesses never made any money.

Instead, prosecutors say the investments were used to pay company salaries of up to $200,000 and maintain a fleet of luxury cars and a staff of 10 chauffeurs. And company officials allegedly traveled to the Super Bowl and the NBA all-star game with investor money.

“The name Dream Homes was truly a nightmare for so many people in the state of Maryland,” said Douglas F. Gansler, the state’s attorney general.

Authorities say the conspirators operated under several corporate names, including Metro Dream Homes, Metropolitan Grapevine LLC and POS Dream Homes.

Investigators said the scheme was elaborate — early investors whose monthly mortgage payments had been paid by money provided by later investors assured potential recruits that the program worked. Investors were told the company made as much as $10 million a month.

Dream Home representatives also encouraged investors to enroll more than one home in the program, with an additional $50,000 investment fee required for each home. Investors who put $100,000 or more into the program were told they would receive a seat on a “Junior Board of Directors.”

WASHINGTON (Dow Jones)–The Obama administration unveiled a fresh set of incentives Tuesday for mortgage servicers to help strapped U.S. homeowners.

Under a new program, the government will pay mortgage servicers $500 up front and $250 a year for three years for successfully modifying a second mortgage, such as a home equity loan.

Second mortgages have complicated government efforts to help borrowers avoid foreclosure. According to the U.S. Treasury Department, up to 50% of at-risk mortgages have second liens and many properties in foreclosure have more than one lien.

Senior administration officials Tuesday told reporters they expect a significant amount of big banks to sign up for the updated federal program to bring relief to troubled homeowners. Once those firms sign necessary contracts, they’ll generally be obligated to modify second liens when they’ve initiated a modification on the first, the officials said. They also noted that the second lien program will be funded by the $50 billion in Troubled Asset Relief Program, or TARP, funds the administration had already projected to use for home affordability efforts.

Additionally, the administration unveiled a schedule of incentives for holders of second mortgages to extinguish those liens voluntarily.

The administration also announced a set of incentives for servicers and lenders participating in the Hope for Homeowners program, which aims to restore homeowners’ lost equity by encouraging lenders to write down loan principal. The administration said it will take steps to incorporate Hope for Homeowners into its loan modification program. Servicers will be required to determine eligibility for a Hope for Homeowners refinancing and where it proves viable, the servicer would need to offer this option to the borrower.

While participation in the Hope for Homeowners program has been dismal, administration officials said they’re expecting strong investor interest as the program is wrapped into the broader federal loan modification program. The administration also said it supports legislation to strengthen the Hope for Homeowners program so that it can function effectively as a key part of the administration’s new housing efforts.

“With these latest program details, we’re offering even more opportunities for borrowers to make their homes more affordable under the administration’s housing plan,” Treasury Secretary Timothy Geithner said in a statement Tuesday. “Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall.”

During a conference call, senior administration officials said they are continuing to work on key elements of the president’s plan to stem foreclosures and agencies will be developing more details and guidelines going forward.

Tuesday’s announcements are expected updates. The issue of second mortgages has been dogging policymakers ever since the onset of the foreclosure crisis. A large share of troubled borrowers also have a second mortgage on their home, which is typically owned by a different investor than the first mortgage. Such borrowers may not be able to afford their monthly payments if only the first mortgage is modified.

The administration’s effort on second mortgages is also aimed at soothing the concerns of investors, who have been crying foul over the Obama housing plan’s incentives for servicers. They argue the first mortgage shouldn’t be modified if the second one is left untouched. They also contend the banks that dominate mortgage servicing are conflicted because they own more than $400 billion of second mortgages. Such banks stand to gain from modifying the first mortgage because the second mortgage is more likely to be repaid once the homeowner is saved from foreclosure.

Some of the largest U.S. banks, including Bank of America (BAC), Wells Fargo (WFC) and JPMorgan Chase (JPM), have already agreed to sign on to the program, the official said. The rest of the industry will be encouraged to participate.

Under the program, servicers must agree to modify all second mortgages where the first mortgage has already been modified. To qualify for payment, servicers must extend the term of the second mortgage and reduce the interest rate to match the first mortgage. Then, the government will share the cost with the servicer of reducing the rate down to 1% for amortizing loans and 2% for interest-only loans.

Borrowers will receive payments of up to $250 per year for as many as five years if they stay current on the loan. The payments will be applied to pay down principal on the first mortgage.

Changes to the Hope for Homeowners program are designed to place it in line with the taxpayer-assisted loan modifications. Launched last fall to help troubled borrowers refinance into more affordable government-backed loans, it has failed to gain traction due to onerous borrower requirements and the nagging problem of second liens.

The administration announced Tuesday a $2,500 up-front payment to servicers that refinance borrowers into the program. Meanwhile, lenders that originate the new loans will receive $1,000 a year for three years, if the loans stays current.

By Ken Bensinger

12:24 PM PDT, April 27, 2009

In a desperate bid to avoid bankruptcy, General Motors Corp. today launched a restructuring plan that would eliminate 2,600 dealers, 21,000 workers, $44 billion in debt and four brands, including Pontiac — while leaving the U.S. government owning at least half of the troubled automaker.

In addition, GM will accelerate the wind-down of its Hummer, Saturn and Saab brands, ceasing production by year’s end. Pontiac will be terminated after 2010.

The automaker announced the sweeping moves as part of a revised business plan it is submitting to the Treasury Department, from which it is requesting $11.6 billion in loans on top of the $15.4 billion it has already received.

The new plan is centered on a debt-for-equity offering GM is extending to holders of $27 billion in bonds. At least 90% of holders of outstanding bonds must accept, the company said, or it will file for bankruptcy by June.

“The objective here is not to survive, the objective is to develop an operating plan that helps us win,” said Fritz Henderson, GM’s president and chief executive in a morning conference call. “It’s a difficult period, it’s a challenging period, it’s a very painful period.”

Shares in GM rose 36 cents, or 21%, to $2.05, in early trading.

This is the third restructuring plan filed by GM since December. This time, it plans to incorporate cuts sufficient to allow the company to break even in a market with industry sales as low as 10 million vehicles in the U.S. on an annual basis.

Last year, 13.2 million cars and light trucks were sold in the U.S., but through the first quarter of this year, sales were on a 9.8-million-unit pace.

Last month, the Treasury Department’s autos task force rejected GM’s previous restructuring plan, submitted on Feb. 17, saying it was insufficient in scope and reach.

Instead, GM was given until June 1 to show the Obama administration it has a sustainable business model or it would face being pushed into bankruptcy.

To do that, the automaker was asked to reduce billions of dollars in obligations to the bondholders and unions for retiree healthcare and to reduce labor costs, as well as show it can turn a profit in a market that’s seeing its lowest sales level in three decades and repay its taxpayer funded loans.

The latest plan is based on far deeper cuts for all significant stakeholders than considered before, and as such calls for far greater sacrifices in order to keep the century-old automaker afloat in its most difficult hour.

“The depth of the pain inflicted on our workers, families and communities by these decisions should not be minimized,” Sen. Carl Levin (D-Mich.) said. “It appears GM was left no choice, and I now believe bondholders have no choice either but to accept significant losses as a better alternative to bankruptcy.”

Chrysler, which has borrowed $4 billion from the government, has been given until the end of this month to reduce its debt and to cut union costs. In addition, it has been asked to forge a merger with Italian automaker Fiat.

On Sunday, Chrysler reached a deal with the United Auto Workers union and the Canadian Auto Workers union, the latter of which has been ratified and is expected to save the company about $200 million a year in labor costs.

The Chrysler union deals are likely to set a framework for any agreement that GM reaches in coming weeks.

Although GM has already reached a tentative agreement with the UAW on labor costs — which has not yet been ratified — it is still negotiating reductions in payments due to a retiree healthcare trust. At the same time, its new plan contemplates further layoffs.

GM said it would eliminate 21,000 salaried and hourly jobs by the end of next year, 7,000 more than previously announced, and would shutter 13 plants in the process. By 2010, it will sell only 34 car models, down from 48 in 2007.

With Pontiac, Hummer, Saab and Saturn slated to be eliminated, GM will focus on four brands: Chevrolet, Cadillac, GMC and Buick. The company’s plan predicts that its share of the U.S. vehicle market will drop to between 18.4% and 18.9%, from 19.5% at present, as a result of the brand reductions.

On Friday, GM said it would shut down 13 plants for up to 11 weeks this spring and summer, reducing inventories by 130,000 units, in order to meet currently depressed levels of demand. GM’s sales through the first quarter of the year are down 43% compared with a year earlier.

GM lost $30.9 billion in 2008.

A major sticking point for the company has been reducing by as much as half $20 billion in cash obligations to a retiree healthcare trust established with the UAW in 2007. The automaker said it would accomplish that goal with a debt-for-equity swap, and would also offer equity to the Treasury in exchange for up to $10 billion in debt and to private holders of $27 billion in GM bonds.

A tender offer extended by the company today to bondholders would trade 225 shares in the company for every $1,000 in debt. To avoid a bankruptcy filing, Henderson said, at least 90%, or $24 billion, of that debt would have to be voluntarily swapped.

“If the tender doesn’t work, we will file into bankruptcy,” Henderson said in a call to Wall Street analysts today.

By combining its tender offer with its equity offers to the Treasury Department and the UAW, GM hopes to cut $44 billion in debt from its balance sheet.

Analysts reacted with skepticism, suggesting that the plan provided a far weaker offer to bondholders than to the UAW.

“The offer is unlikely to be accepted,” said Brian Johnson of Barclays Capital. He calculated that the tender would be worth 0 to 5 cents per dollar of outstanding debt to bondholders, compared with 50 to 60 cents a dollar to the union. Johnson called GM’s latest plan “final brinksmanship.”

If the offer is successful, however, it would give the U.S. government at least a 50% stake in the automaker, with the union holding up to 39% and bondholders with an additional 10% share. Current shareholders would effectively be wiped out.

As such, it would effectively nationalize the automaker.

GM’s Henderson did not give details on how it would be managed in that scenario, but said that the “administration is not interested in running GM.”

He did say, however, that the autos task force insisted on the specific ownership percentages to different stakeholders, and that it also asked GM to replace the majority of members of its board of directors. Both are strong indicators of how deeply involved the administration has been in the automaker’s planning to date.

Meanwhile, GM said it would soon begin contacting the approximately 2,600 dealers it has selected for elimination and make them undisclosed offers to surrender their GM franchises. That could cost billions of dollars, although Henderson declined to give specifics of the offer.

The cuts would leave GM with about 3,600 U.S. dealers by 2011, a 42% reduction. The closings would leave 500 fewer GM dealers than had been contemplated in the company’s previous restructuring plan.

A big part of that reduction would be eliminating Pontiac, which GM today added to the list of targeted brands. Hummer, Saab and Saturn were already slated for closure. Henderson said that production of all four brands would cease by 2010, although a few Pontiac models could be extended for another year.

Henderson said that several parties continued to show interest in Hummer and that “our gut judgment is we do have a reasonable chance there will be a sale of the brand.” He was less certain about Saab and Saturn.

Though an Oklahoma City-based private investment firm approached GM about purchasing Saturn two weeks ago, Henderson said that an offer sweet enough to keep Saturn vehicles in production beyond this year was not “on the table, at least one we would consider successful.”

The company plans “discussions” with Toyota Motor Corp. over the fate of the Fremont, Calif., plant they operate together to produce the Pontiac Vibe and Toyota Matrix. Henderson said the Vibe would continue production through 2010.

GM is also in discussions with potential investors in its European Opel division, including the possibility of giving up a majority stake in the unit.

“It’s been my theory that big is only good if you use it to your advantage,” said Henderson. “As a company, our overall performance has not been adequate.”

By Kristina Cooke

NEW YORK (Reuters) – Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Barack Obama’s plan to stem foreclosures by modifying loans.

Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.

Loan modifications are not necessarily a better deal for investors either, wrote Boston Fed economists Christopher Foote and Paul Willen, Atlanta Fed economist Kristopher Gerardi and Lorenz Goette, a professor at the University of Geneva.

Their research found that policies that directly help homeowners overcome setbacks such as losing their jobs may be more effective in combating foreclosures.

“Foreclosure-prevention policy should focus on the most important source of defaults,” the economists wrote in a study released on the Boston Fed’s website late last week.

The findings challenge the thinking behind a White House plan announced in February that would give up to 9 million families the chance to refinance their mortgages. President Obama’s administration has made loan modifications a central plank of its efforts to tackle the housing crisis.

“One of the most influential strands of thought contends that the crisis can be attenuated by changing the terms of ‘unaffordable’ mortgages,” the economists wrote. But policies that focus on loan modification “face important hurdles in addressing the current foreclosure crisis,” they wrote.

The economists suggest that the government could instead replace part of an individual homeowner’s lost income from a job loss through loans and grants and help those whose predicament is more permanent become renters.

In addition, investors do not necessarily stand to gain if foreclosure is avoided, they said, and that could help explain the relatively small number of loan modifications to date. Estimates that total gains for investors from modifying rather than foreclosing can run to $180 billion may not take into account a number of key factors.

Investors can lose money when they modify mortgages for borrowers who would have repaid anyway. Borrowers with modified loans may default again later, especially if the reason they were driven to default remains, the economists said.

Kansas City Business Journal