Mortgage rates rise modestly

Mortgage rates tried to wriggle free from their restraints this week, but didn't quite succeed, rising modestly.

The benchmark 30-year fixed-rate mortgage rose 9 basis points, to 5.65 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.46 discount and origination points. One year ago, the mortgage index was 6.74 percent; four weeks ago, it was 5.59 percent.

The benchmark 15-year fixed-rate mortgage rose 9 basis points, to 4.97 percent. The benchmark 5/1 adjustable-rate mortgage rose 8 basis points, to 5.03 percent.

Rates have been stuck in a narrow range since the beginning of July. In the last six weeks, the 30-year fixed has been as high as 5.7 percent and as low as 5.55 percent in Bankrate's weekly surveys. It's unusual for rates to remain in a range of roughly an eighth of a percentage point for this long.

The big mortgage news of the week concerned the abrupt failure of Taylor, Bean & Whitaker, a top-15 lender overall, and the third-biggest originator of FHA-insured loans. Taylor, Bean & Whitaker's swift demise Wednesday afternoon stranded possibly thousands of would-be borrowers. The lucky ones were early in the process, and had applied for loans and were waiting for approval. The unlucky customers had been approved for loans and were waiting for them to close. All must start over and submit a new application with another lender.

As soon as Taylor, Bean's shutdown was announced, mortgage brokers across the land solicited marooned borrowers through blog posts, e-mail and Twitter.

"Taylor Bean troubles? Reach out to me for help. My bank underwrites and funds FHA in-house," tweeted Dan Green, loan officer for Waterstone Mortgage in Cincinnati.

Outside of Twitter's 140-character limit, Green's message for Taylor, Bean customers is more detailed and more brutal. "Your loan, as it exists with Taylor, Bean, is gone," he says. "Your rate lock is over. You'll have to re-lock your interest rate. You'll have to have your home loan re-underwritten. In some cases you may need a new appraisal."

If you think that's bad, wait until what Green says next.

"You may have already closed on your home loan but not funded yet, so your loan won't fund. If you were with Taylor, Bean and you closed on your home loan Friday or Monday, your home loan's not going to fund."

Start all over again

"It's a mess," says Matt Hackett, Equity Now's underwriting manager. "And by the way, you have to get a new appraisal."

Hackett continues: "People are starting all over again. They're probably going to a new bank because now they're nervous, and now they're looking at an extra 300 bucks for a new appraisal. All that stuff over again."

Green points out that for some borrowers, there's no point in starting over. "What's rough is you think back 45 days, and mortgage rates were very, very low," Green says. "FHA rates were especially low 45 days ago. So if you're having to start over now, you might not find the advantage. There might not be a reason to refinance anymore because the chance of savings is gone. That's why the timing of it is awful, because 45 days ago, FHA rates were as low as they've been."

Quick demise

HUD said that it had suspended Taylor, Bean because the lender "failed to submit a required annual financial report and misrepresented that there were no unresolved issues with its independent auditor even though the auditor ceased its financial examination after discovering certain irregular transactions that raised concerns of fraud."

The next day, Taylor, Bean & Whitaker announced that it was ceasing all lending operations immediately. The Wall Street Journal reported that the company's CEO sent an e-mail to employees, saying that the company was ceasing operations and that all nonessential employees would be laid off that day.