WASHINGTON, Aug 1 (Reuters) – Lately mortgage interest rates have been hitting one record low after another. At the same time, we’re seeing increases in mortgage defaults, foreclosures and short sales in which lenders get less than 100 cents to the dollar for the loans they’ve let. So why would anyone want to be a mortgage lender right now?

That would be a good question to ask investors who have thrown $6.9 billion into Government National Mortgage Association (GNMA)-backed mutual funds in the year ending June 30, according to figures from Lipper, a Thomson Reuters company.

They have their reasons. GNMA-backed mortgages are backed by the government, so they are relatively risk-free. Even at record lows, they yield more than Treasuries do. And Federal Reserve policymakers have hinted that they might be willing to buy big bunches of these mortgage-backed bonds if they have to do another round of quantitative easing to stimulate the economy.

Theoretically, then, an investor could buy some shares of a mortgage-backed bond fund, reap the higher (than Treasury) yields and then sell at a profit to the Fed. Past performance – while not indicative of future results, as the saying goes – indicates that people who stuck with these funds have done OK. Through June 30, GNMA funds have averaged 6.56 percent total returns for the last five years and 5.97 percent for last three years, according to Lipper. That’s middling – on a total return basis, they’ve outperformed riskier high-yield bond funds but underperformed general Treasury funds.

The Fidelity GNMA Fund, a Morningstar favorite, is yielding 2.81 percent now and has returned an average of 7.41 percent a year for the last five years through July 30.

So, as with any other investment, there are pros and cons. Here are a few points to keep in mind before you start buying mortgages.

– It’s different. When you hold mortgages, you’re really on the opposite end of homeowners. So when rates fall, instead of getting rich on the higher-rate bonds you hold, you lose them quickly when homeowners refinance to lower rates. Going up, the reverse is true: Mortgages only get paid when people sell their homes, so you have less money free to reinvest at higher rates. “This would make the bond go down in value more than the damage caused by rising interest rates,” says Don Martin, a Los Alamos, California, wealth manager.

WASHINGTON (Reuters) – Coming soon to a neighborhood near you: A late-summer wave of short sales, as homeowners, mortgage bankers and potential buyers all race to settlement on bargain-priced homes that are worth less than the mortgages written on them.

“We’re seeing a rush already,” said Daren Blomquist of Realtytrac, a firm that monitors real estate foreclosures and distressed sales. “There was a big increase in the first quarter and we’re expecting that to continue.”

A short sale occurs when the lender agrees to let the property be sold for less than the amount owed on the mortgage.

2012 may be the year the short sale market peaks, because of a number of factors. Bankers, pressed by the Obama administration and their own bottom lines, realize they are better off accepting partial payment on a mortgage than taking a home in foreclosure, said Blomquist. Some have created expedited short sales procedures in which they will pre-approve a home for a distress sale and even pay the seller as much as $45,000 to get the deal done.

Sellers with one eye on the clock realize that they could lose a valuable tax break if they fail to complete their short sale by year end. And some sellers — who have been hanging on “by tooth and nail” to homes worth less than their mortgages for years, according to Elizabeth Weintraub, a Sacramento, California, real estate agent who specializes in short sales — have decided now is the time.

“It seems to be doubling every year, but 2012 is particularly busy,” she said.

In the first quarter of 2012, some 109,521 properties were sold in pre-foreclosure — a proxy for short sales, according to Realtytrac. That was a 25 percent increase from the same quarter the previous year and a three-year high, Blomquist said.

WASHINGTON, July 25 (Reuters) – Coming soon to a neighborhood near you: A late-summer wave of short sales, as homeowners, mortgage bankers and potential buyers all race to settlement on bargain-priced homes that are worth less than the mortgages written on them.

“We’re seeing a rush already,” said Daren Blomquist of Realtytrac, a firm that monitors real estate foreclosures and distressed sales. “There was a big increase in the first quarter and we’re expecting that to continue.”

A short sale occurs when the lender agrees to let the property be sold for less than the amount owed on the mortgage.

2012 may be the year the short sale market peaks, because of a number of factors. Bankers, pressed by the Obama administration and their own bottom lines, realize they are better off accepting partial payment on a mortgage than taking a home in foreclosure, said Blomquist. Some have created expedited short sales procedures in which they will pre-approve a home for a distress sale and even pay the seller as much as $45,000 to get the deal done.

Sellers with one eye on the clock realize that they could lose a valuable tax break if they fail to complete their short sale by year end. And some sellers — who have been hanging on “by tooth and nail” to homes worth less than their mortgages for years, according to Elizabeth Weintraub, a Sacramento, California, real estate agent who specializes in short sales – have decided now is the time.

“It seems to be doubling every year, but 2012 is particularly busy,” she said.

In the first quarter of 2012, some 109,521 properties were sold in pre-foreclosure — a proxy for short sales, according to Realtytrac. That was a 25 percent increase from the same quarter the previous year and a three-year high, Blomquist said.

WASHINGTON (Reuters) – Here’s an appealing idea: What if you could design your home loan so the house is paid off exactly when your kids go off to college, or when you retire? Or if you could refinance for 10, 12 or 17 years, instead of the standard 15- or 30-year terms on most fixed-rate mortgages?

Of course, most borrowers are free to prepay their mortgages, but now, some lenders are letting people borrow money for as many – or as few – years as they like.

Quicken Loans has created a product based on that premise. Called YOURgage, it lets borrowers choose the term of their loan – anything from 8 years to 30 years. Other lenders, who haven’t marketed their efforts so explicitly, also are allowing borrowers to chose alternative maturities on their loans.

In June, 14.6 percent of refinancers took fixed-rate loans that had maturities other than 15 or 30 years, according to the Mortgage Bankers Association. This was a “remarkably large” 108-percent increase in takeup of alternative-maturity loans compared with June 2011, said Michael Fratantoni, vice president of research for the trade group.

“We’ve been highlighting for a couple of years that a large percentage of refinance borrowers are opting for shorter terms,” he said in an interview. “The third favorite refinance product is for the 20-year term.”

Fratantoni said the secondary market, made up of investors who buy mortgage-backed bonds, is also becoming more receptive to alternative maturity loans.

“As more of these loans get made, the liquidity of these loans improves, and that brings down rates relative to their terms and that makes them more attractive and they can get more borrowers.”

WASHINGTON (Reuters) – Wells Fargo & Co agreed to pay $175 million to resolve allegations by the U.S. Justice Department that it discriminated against qualified African-American and Hispanic borrowers in its mortgage lending.

At the same time, the bank said it would stop making loans through mortgage brokers, who the government said submitted loans to Wells Fargo that had varied interest rates, fees and costs based only on race and not correlated to the borrowers’ creditworthiness.

There are a lot of pieces to that, and borrowers – especially those who are in the midst of getting new Wells Fargo mortgages – may wonder what it means for them. Not all of the answers are evident yet, but here are a few.

– I’m in the middle of refinancing with Wells. Now what?

If you’ve already filed your application with a mortgage broker, your loan should go through as planned. Wells said it would stop taking new broker applications on Friday, July 13. Mortgages already in the pipeline are expected to go through.

– Will this make it harder to get a mortgage in the future?

Many experts, especially those who value the brokerage process, say it will. Bank of America, Citi and JPMorgan Chase have all stopped doing mortgage loans through brokers, and the theory is that the fewer outlets brokers have, the more business they will squeeze into fewer companies.

WASHINGTON, July 12 (Reuters) – Wells Fargo & Co agreed to pay $175 million to resolve allegations by the U.S. Justice Department that it discriminated against qualified African-American and Hispanic borrowers in its mortgage lending.

At the same time, the bank said it would stop making loans through mortgage brokers, who the government said submitted loans to Wells Fargo that had varied interest rates, fees and costs based only on race and not correlated to the borrowers’ creditworthiness.

There are a lot of pieces to that, and borrowers - especially those who are in the midst of getting new Wells Fargo mortgages – may wonder what it means for them. Not all of the answers are evident yet, but here are a few.

– I’m in the middle of refinancing with Wells. Now what?

If you’ve already filed your application with a mortgage broker, your loan should go through as planned. Wells said it would stop taking new broker applications on Friday, July 13. Mortgages already in the pipeline are expected to go through.

– Will this make it harder to get a mortgage in the future?

Many experts, especially those who value the brokerage process, say it will. Bank of America, Citi and JPMorgan Chase have all stopped doing mortgage loans through brokers, and the theory is that the fewer outlets brokers have, the more business they will squeeze into fewer companies.

WASHINGTON, July 11 (Reuters) – Not everybody gets happy every time Federal Reserve policymakers promise to hold interest rates low for years to come.

Savers suffer, and retirees worry about where they will get any income in an era when 10-year U.S. Treasury yields, at 1.5 percent, are near record lows and one-year certificates of deposit are averaging 0.32 percent interest, according to Bankrate.com.

Yield-hunters can at least be glad they don’t live in France, where the government issued negative-interest bonds this week. Yes, negative-interest bonds – meaning that some savers are so anxious to keep their money safe with the French government that they will pay a premium to keep it there. If investors hold those bonds to maturity, they’ll get back less money than they paid for them.

U.S. savers can still do a little bit better than that. Here’s how:

– Separate the concept of yield from income. Savers who want to stash away some rainy day money in secure spots want to squeeze out more yield. Retirees need to draw regular income from their investments, but they don’t need it to be interest income, says Christopher Van Slyke, an Austin, Texas, financial adviser.

“My clients don’t care if it is capital gains income, dividend income or interest income, as long as they get their income,” he says.

– Comparison shop for the highest yielding Federal Deposit Insurance Corp-backed savings accounts. You can do that at DepositAccounts.com (), a website that lists CDs offering rates like 1.5 percent on one-year CDs.

WASHINGTON, June 27 (Reuters) – A senior Internal Revenue Service official says she’s already concerned about what next year’s tax filing season will look like, because of the mass of expiring provisions and possible tax changes that could occur near the end of this year and into next year.

Piling on an additional tax reform bill next year could lead to “meltdown” that could delay taxpayer refunds, Nina Olson, the IRS’s national taxpayer advocate, told Reuters reporters and editors during a wide ranging interview this week. She also sent a semi-annual report to Congress cataloging the same concerns.

At issue is the uncertain nature of many tax provisions. A so-called “patch” exempting more than 25-million mostly middle-income families from the alternative minimum tax expired at the beginning of this year. So did the deduction for state and local sales taxes and a variety of other provisions. Unless they are extended by August at the latest, the IRS would have trouble getting forms out on time for next filing season, she said.

Of course, it’s not all about the forms – it’s about the money. And there’s a lot of money at stake for most taxpayers over the next year. All of those George W. Bush-era tax rate cuts expire at the end of 2012, as does President Barack Obama’s temporary payroll tax cut and the provision which limits taxes on most dividends to the capital gains rate.

Republican legislators say they want to extend all the Bush-era breaks, and most Democrats say they don’t want to extend breaks for taxpayers earning more than $250,000 (or $500,000 or $1-million, depending on whom you ask) a year. Some politicos are talking about a scenario in which the AMT gets patched this year, but all of the Bush tax cuts are allowed to expire at year’s end. That would allow a new Congress (and a new president?)to come in next year, hand most people a big tax cut, and give Olson a big headache.

But what about your headache? Mid-year is usually a good time to lay tax plans for the rest of the year, but this year is more confusing than most. Here are a few strategies to employ:

- Save more money. Sure, every personal finance article tends to say that. But there are a few reasons why you may need more cash going forward. If, as many people expect, that payroll tax cut expires, your pay up to $110,000 a year will be cut by an additional 2 percentage points as Social Security taxes go back to their normal levels. That’s roughly $1,000 a year that the average wage earner won’t see in 2012.

WASHINGTON, June 20 (Reuters) – Within a week, the U.S. Supreme Court is likely to rule on the landmark 2010 health care law that President Obama – for better or worse – made the centerpiece of his initial time in office.

Conventional wisdom holds that the court will ‘vote’ mostly along party lines w ith a 50-50 chance of invalidating at least th e p art of the program that requires Americans to buy health insurance. But that means the high court is equally likely to uphold the law, much of which has not gone into effect yet.

What’s that to you?

The political consequences may be immediate and severe, but the personal ramifications will be less extreme. Nobody should expect to lose part or all of their coverage overnight, and health costs won’t immediately ratchet up or down in response.

“We’ve gotten assurances that insurers and employers won’t change anything mid-stream, and will hang on for a while,” said Jeff Munn, a benefits consultant with Fidelity Investments, who works with employers.

He suggests that the earliest consumers would see any impact from a decision would be at open-enrollment time, which usually comes in the fall.

But healthcare consumers – covered or not – should be ready for the decision, and for some of the l onger-range i mplications. Here are a few steps you may have to take after the Su premes we igh in.

WASHINGTON, June 13 (Reuters) – The variable annuity market has been sending some very mixed signals lately. Sales are down, several key players have exited the market, yet assets in the insurance products reached an all-time high of $1.61 trillion in the first quarter of the year.

What does that mean? One simple answer is that investors are holding a lot of money in older variable annuities that grew along with the stock market in the beginning of the year. Perhaps the policies are so old the holders may be free of the surrender charges faced by investors who dump annuities within the first few years of holding them.

That means that a lot of people may be wondering whether to stick with the plans they bought or shake things up a bit and trade for something newer. Or they may be getting pressure from an annuity salesperson to do that.

To refresh, variable annuities are a mash-up of life insurance, mutual funds, and tax-deferred retirement plans. A typical deferred variable annuity conveys a death benefit, allows the purchaser to invest in a variety of mutual fund-like sub accounts, get tax deferral on account income until the proceeds are cashed out, and then, via a policy rider, take a guaranteed monthly payment after retirement.

All of those benefits are wrapped up in a package that was typically so fee- and commission-laden that variable annuities became the subject of complaints from consumers and warnings from the securities industry self-regulator, the Financial Industry Regulatory Authority (FINRA). Some experts, like Mattawan, Michigan, fee-only insurance adviser Peter Katt, still claim they are mostly without value to investors.

“In a good world, variable annuities wouldn’t be allowed,” he says. “People don’t understand them.” Katt says that variable annuities are too expensive, carry risks of the underwriting insurer not being stable, and – in a low-tax environment - create a tax burden by subjecting withdrawals to income taxes instead of allowing investors to take capital losses and low-tax capital gains during their investing years.

“The only time they make sense is if you are a very active trader and you want to do market timing in an account that won’t produce short-term taxable gains,” he says.