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The average interest rate on the most popular U.S. home loan rose above 6% for the first time since 2008 and is now more than double the level it was one year ago, Mortgage Bankers Association (MBA) data showed yesterday, Reuters reported. Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs in order to tame high inflation. The central bank has raised its benchmark overnight lending rate by 225 basis points since March. Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year. The yield on the 10-year note acts as a benchmark for mortgage rates. The average contract rate on a 30-year fixed-rate mortgage rose by 7 basis points to 6.01% for the week ended Sept. 9, a level not seen since towards the end of the financial crisis and Great Recession. The MBA also said its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is now down 64.0% from one year ago. Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to one year ago.

Bond insurer Ambac Financial Group Inc cannot prove its $2.7 billion case against Bank of America over troubled mortgage-backed securities on evidence that BofA was a "bad actor" before the 2008 financial crisis, an attorney for the bank said yesterday in New York state court, Reuters reported. Ambac seeks to recoup more than $2 billion in insurance claims it paid to cover investor losses on securities backed by 375,000 home loans from Bank of America's Countrywide unit. As the trial in the 12-year-old case opened on Wednesday, an attorney for the bond insurer argued that Countrywide's own files show it systematically approved shoddy mortgages and pushed the risk onto investors and insurers. But that type of evidence is not sufficient to show the bank violated insurance agreements it made with Ambac, said the bank's attorney Enu Mainigi in her opening statement. Courts have ruled in other cases that insurers must prove such agreements were breached on a loan-by-loan basis, she said. Mainigi also said it was Ambac that accepted more risk in order to cash in on pre-2008 optimism in the housing market, until the financial crisis undermined borrowers' ability to repay their loans. "Now Ambac is here asking this court to conclude that somehow all of this is Countrywide's fault," she said. Between 2004 and 2006, Ambac insured securities backed by Countrywide loans worth $25 billion. The insurer claims 80% of the loans were the product of poor underwriting standards or had other deficiencies that violated insurance agreements, and that Bank of America failed to repurchase the loans as required.

Florida homeowners will see another surcharge included on their insurance premiums in 2023 in order to help the Florida Insurance Guaranty Association (FIGA) cover the claims from insurance companies that have gone into receivership, ABCActionNews.com reported. This new charge is the second to hit homeowners this year and the third in the last two years. When an insurance company goes insolvent and is liquidated, the FIGA steps in and takes on all of its existing claims and pays back premiums. From 2013 to 2020, the nonprofit never had to issue these assessments, but as multiple companies went into receivership last year, they took on thousands of claims and hundreds of millions in financial responsibility. FIGA’s executive director Corey Neal, just before May’s special session, said they had about 8,000 claims and expected maybe 2,000 more in coming months, many of those from St. Johns and Avatar Insurance. However, that was a serious underestimate because just three months later, after Southern Fidelity and then Weston went under. Now, FIGA has about 14,000 claims it needs to pay out.

Preston Parsons, a former fourth-string quarterback for the Denver Broncos has filed for bankruptcy on an 18,000-square-foot home in Cherry Hills Village, Colo., the Denver Post reported. But the bank he owes $5.4 million to wants the chapter 11 case dismissed. It claims that he only filed for bankruptcy Aug. 16 to stop a foreclosure sale of the mansion Aug. 17. Parsons’ bankruptcy filing claims the house is worth $9.5 million. Redfin and Zillow estimate its value at $8.4 million and $8.1 million, respectively. Parsons filed for bankruptcy on the house through a new LLC, Press on Holdings. He lists only one creditor: InBank, which loaned him $4.3 million in 2019 and hasn’t been repaid. Parsons used the house, which he bought for $5.1 million in 2017, as collateral for the loan. In April, InBank sued Parsons and his wife as a result. It claims they also haven’t paid insurance premiums or property taxes for several years and asked an Arapahoe County judge to permit a sale of the mansion. On June 8, Judge Peter Michaelson did so. A foreclosure sale was scheduled for Aug. 17. Two days before, Parsons created Press on Holdings and moved the mansion’s deed from a trust to the LLC, InBank claims. On Aug. 16, Press on Holdings filed for bankruptcy and the foreclosure sale was canceled.

The number of zombie properties — homes abandoned by their owners while in pre-foreclosure status — is inching higher, with the total likely to increase, even as overall vacancies should drop, NationalMortgageNews.com reported. A total of 7,707 residential properties facing foreclosure are sitting vacant in the third quarter, increasing by 1.8% from 7,569 three months earlier and 2.2% from 7,538 year over year, according to a report from real estate data provider Attom. It is the second consecutive quarterly increase in zombie numbers. The trend runs counter to vacancy rates relative to all U.S. properties, which fell to just under 1.3 million, equaling 1.28%, or one in 78 homes. The total is down from 1.31% during the second quarter and 1.35% a year ago.

The U.S. mortgage industry is seeing its first lenders go out of business after a sudden spike in lending rates, and the wave of failures that’s coming could be the worst since the housing bubble burst about 15 years ago, Bloomberg News reported. There’s no systemic meltdown coming this time around, because there hasn’t been the same level of lending excesses and because many of the biggest banks pulled back from mortgages after the financial crisis. But market watchers nonetheless expect a string of bankruptcies broad enough to trigger a spike in layoffs in an industry that employs hundreds of thousands of workers, and potentially an increase in some lending rates. More of the business is now controlled by independent lenders, and with mortgage volumes plunging this year, many are struggling to stay afloat. “The nonbanks are poorly capitalized,” said Nancy Wallace, chair of the real estate group at Berkeley Haas, the business school at University of California, Berkeley. “When the mortgage market tanks they are in trouble.” In 2004, only about a third of the top 20 lenders for refinancings were independent firms. Last year, two-thirds of the top 20 were non-bank lenders, according to LendingPatterns.com, which analyzes the industry for mortgage lenders. Since 2016, banks have seen their share of the market shrink to about a third from about half, according to news and data provider Inside Mortgage Finance. Many of the so-called shadow lenders will emerge from this slowdown relatively unscathed. But some lenders have already stopped operating or scaled down dramatically, including and Sprout Mortgage and First Guaranty Mortgage Corp. Both specialized in riskier lending that isn’t eligible for government backing.