If you’re like some people, when you hear the mortgage term 5/1 ARM you might say something like, “Ahhhh! Numbers and an acronym—nooooo!!”
Okay, maybe that’s a bit dramatic, but I think it’s fair to say that a 5/1 ARM doesn’t appear to be the friendliest of terms. And that’s really too bad because he’s actually a nice, straightforward guy.
So what is it?
Adjustable-rate mortgages (ARMs) are just that—mortgages with interest rates that adjust depending on market movement. Meaning that if rates go up, your monthly payment will increase, and if they go down, your monthly payment will decrease.
The corresponding numbers tell you how often the rate will change. With a 5/1 ARM, the 5 means that the rate will stay fixed for the first 5 years, and the 1 tells you that it’s subject to change every 1 year after the initial 5.
Don’t wait too long to take advantage of today’s low rate environment. Contact us today to see if we can save you money on your home payments.
The good
One of the best things about 5/1 ARMs is that they usually have significantly lower interest rates than fixed-rate mortgages. For example, our current rate for a 5/1 ARM is 2.375%, while our 30-year fixed rate is at 3.750%. Not only does the lower rate save you money on your monthly payment, but it also gives you the opportunity to take out a larger loan.
* Rates accurate as of 9/23/15. See below for assumptions.
Of course, they do have the potential to adjust to higher levels, whereas fixed-rates stay at the same level for the life of the loan. However, there are ways to take advantage of the low rate without the risk of a rate hike, such as:
You plan to move within 5 years, therefore the potential rate increase wouldn’t apply to you
You think your income will have risen to a level where a rate increase would be insignificant
You want a lower initial monthly payment than is typically offered by fixed-rate mortgages
You plan on refinancing out of the ARM before the rate gets adjusted to a higher level (can be a risky option because you can never be certain what rates will be like when you want to refinance)
You have a crystal ball and it says interest rates will go down in the future
The bad
It’s not always possible to work the system like the above scenarios. And sometimes the rate environment trumps even the cleverest of schemes. So when you’re evaluating your own situation, it’s almost certainly a bad idea to get a 5/1 ARM if:
Rates are rising
You do not expect your income to grow substantially
see more: https://www.totalmortgage.com/blog/adjustable-rate-mortgages/what-is-a-51-arm/29866
Thursday, September 24, 2015
Wednesday, September 16, 2015
'Underwater' residential mortgages in Winston-Salem MSA decline in 2Q
The default rate for first mortgages increased four basis points in August to reach 0.84% of all mortgages in the U.S. - up slightly from July, according to the S&P/Experian Consumer Credit Default index, a comprehensive measure of changes in consumer credit defaults.
Meanwhile, the default rate for auto loans increased four basis points to reach 0.90%, and the default rate for credit cards saw a slight decrease to reach 2.71%, down eight basis points from the previous month, according to the index.
The composite rate in August was 0.96%, up four basis points from July.
The report notes that despite weak wage growth, consumer credit default rates are currently close to pre-financial crisis levels.
"Two economic areas showing strength are auto sales and housing," says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. "Car and light truck sales saw recent gains reaching an annual rate of about 17.5 million units as sales of new homes and housing starts picked up."
Blitzer adds that the growth in credit is "largely due to loosening of credit standards, indicating banks are willing to bear increased risk by approving more subprime consumers." He warns, however, that looser credit could result in higher default rates in the months to come.
Four of the five major cities saw their default rates increase in August, according to the report. New York saw the largest increase, reporting 1.04%, up 12 basis points from July. Dallas saw its default rate increase by seven basis points to 0.71%. Chicago reported its third consecutive increase with a 1.21% rate, up six basis points from the previous month. Miami reported a default rate of 1.46%, up one basis point for the month.
Los Angeles was down 13 basis points to 0.76% - the only city to report a decrease in August.
"With the Federal Reserve policy meeting on Wednesday and Thursday this week, analysts are debating the possible impact of an interest rate increase," Blitzer adds. "Presumably, the Fed will raise interest rates - the question is whether it will be now, late this year, or sometime in the first half of 2016.
"Little initial impact is expected on consumer use of credit or on default rates," Blitzer says. "A quarter-point increase in the Fed funds rate will not affect fixed-rate mortgage loans or auto financing. Some small increases in interest rates on bank cards and similar lending may occur in the months following Fed action. Adjustable-rate mortgages tied to market rates will rise as mortgage loans reach dates when rates reset.
read more: http://www.journalnow.com/business/business_news/local/underwater-residential-mortgages-in-winston-salem-msa-decline-in-q/article_05abf63c-e4a1-569f-b978-94dc8ee7bf08.html
Meanwhile, the default rate for auto loans increased four basis points to reach 0.90%, and the default rate for credit cards saw a slight decrease to reach 2.71%, down eight basis points from the previous month, according to the index.
The composite rate in August was 0.96%, up four basis points from July.
The report notes that despite weak wage growth, consumer credit default rates are currently close to pre-financial crisis levels.
"Two economic areas showing strength are auto sales and housing," says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. "Car and light truck sales saw recent gains reaching an annual rate of about 17.5 million units as sales of new homes and housing starts picked up."
Blitzer adds that the growth in credit is "largely due to loosening of credit standards, indicating banks are willing to bear increased risk by approving more subprime consumers." He warns, however, that looser credit could result in higher default rates in the months to come.
Four of the five major cities saw their default rates increase in August, according to the report. New York saw the largest increase, reporting 1.04%, up 12 basis points from July. Dallas saw its default rate increase by seven basis points to 0.71%. Chicago reported its third consecutive increase with a 1.21% rate, up six basis points from the previous month. Miami reported a default rate of 1.46%, up one basis point for the month.
Los Angeles was down 13 basis points to 0.76% - the only city to report a decrease in August.
"With the Federal Reserve policy meeting on Wednesday and Thursday this week, analysts are debating the possible impact of an interest rate increase," Blitzer adds. "Presumably, the Fed will raise interest rates - the question is whether it will be now, late this year, or sometime in the first half of 2016.
"Little initial impact is expected on consumer use of credit or on default rates," Blitzer says. "A quarter-point increase in the Fed funds rate will not affect fixed-rate mortgage loans or auto financing. Some small increases in interest rates on bank cards and similar lending may occur in the months following Fed action. Adjustable-rate mortgages tied to market rates will rise as mortgage loans reach dates when rates reset.
read more: http://www.journalnow.com/business/business_news/local/underwater-residential-mortgages-in-winston-salem-msa-decline-in-q/article_05abf63c-e4a1-569f-b978-94dc8ee7bf08.html
Thursday, September 3, 2015
Refi Apps Account for Nearly 60 Percent of All Mortgage Activity
Mortgage applications increased 11.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 28, 2015. The refinance share of activity increased to 58.7 percent of total applications from 55.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.5 percent of total applications.
The Market Composite Index, a measure of mortgage loan application volume, increased 11.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 10 percent compared with the previous week. The Refinance Index increased 17 percent from the previous week to its highest level since April 2015. The seasonally adjusted Purchase Index increased four percent from one week earlier to its highest level since July 2015. The unadjusted Purchase Index increased two percent compared with the previous week and was 25 percent higher than the same week one year ago.
“Although mortgage rates were unchanged for the week, Treasury rates were down sharply early in the week due to the global stock market rout and this led to a significant increase in application volume,” said Mike Fratantoni, MBA’s chief economist.
The FHA share of total applications decreased to 12.7 percent from 13.1 percent the week prior. The VA share of total applications decreased to 9.8 percent from 11.4 percent the week prior. The USDA share of total applications decreased to 0.7 percent from 0.8 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.08 percent, with points increasing to 0.37 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.05 percent from 4.00 percent, with points increasing to 0.28 from 0.24 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87 percent from 3.90 percent, with points increasing to 0.32 from 0.21 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.30 percent from 3.33 percent, with points decreasing to 0.26 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
see more at: http://nationalmortgageprofessional.com/news/55586/refi-apps-account-nearly-60-percent-all-mortgage-activity
The Market Composite Index, a measure of mortgage loan application volume, increased 11.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 10 percent compared with the previous week. The Refinance Index increased 17 percent from the previous week to its highest level since April 2015. The seasonally adjusted Purchase Index increased four percent from one week earlier to its highest level since July 2015. The unadjusted Purchase Index increased two percent compared with the previous week and was 25 percent higher than the same week one year ago.
“Although mortgage rates were unchanged for the week, Treasury rates were down sharply early in the week due to the global stock market rout and this led to a significant increase in application volume,” said Mike Fratantoni, MBA’s chief economist.
The FHA share of total applications decreased to 12.7 percent from 13.1 percent the week prior. The VA share of total applications decreased to 9.8 percent from 11.4 percent the week prior. The USDA share of total applications decreased to 0.7 percent from 0.8 percent the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.08 percent, with points increasing to 0.37 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) increased to 4.05 percent from 4.00 percent, with points increasing to 0.28 from 0.24 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.87 percent from 3.90 percent, with points increasing to 0.32 from 0.21 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.30 percent from 3.33 percent, with points decreasing to 0.26 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
see more at: http://nationalmortgageprofessional.com/news/55586/refi-apps-account-nearly-60-percent-all-mortgage-activity
Monday, August 31, 2015
Are HECM Reverse Mortgages Overpriced?
HECM reverse mortgages are reputed to carry high upfront fees, which raises two questions addressed here. First, are seniors getting real value in exchange for the high fees? The answer in most cases is "no". Second, can a senior who knows the ropes avoid paying excessive fees? The answer in every case is "yes."
Price Differences Do Not Necessarily Reflect Over-Pricing
In the early part of the previous century, when Coney Island was a playground for both the rich and famous and those who were neither, there were two restaurants that specialized in hot dogs. One was Nathans which charged 5 cents, the other was Feldmans which charged 10 cents. My father, who is the source of this information on Coney Island history, dealt only with Nathans. But Feldman had better furnishings and the clientele were better dressed, which induced many to pay the higher price for the hot dog.
The Feldman hot dog was not over-priced, at least for many years, because the information consumers needed to make a decision between a 5 cent dog delivered in cheap surroundings and a 10 cent dog delivered in elegant surroundings was available at no cost at the moment it was needed. The market worked. Ultimately, consumers reacted against paying for the elegance of a hot dog vendor, and Feldmans failed, while Nathans survived to this day.
Price Differences on HECM Reverse Mortgages
The price differences that prevail on HECM reverse mortgages are enormous by any standard. For example, consider the borrower of 70 with a home worth $600,000 and an existing mortgage balance of $200,000 who is looking to pay off that balance in order to rid himself of the required monthly payment. If on August 14 he responded to an advertisement on TV or on the internet, in all likelihood he would be offered a fixed-rate mortgage at 5.06% with a $6,000 origination fee. This is the market price on that day estimated by NRMLA, the trade association of reverse mortgage lenders, as quoted on www.nrmlaonline.org. If instead he shopped for the same HECM among a group of competitive lenders, he would have found the same loan available at 3.99% with a zero origination fee.
HECM Price Differences Reflect Over-Pricing
Unlike the hot dog case, there is no way that the price differences cited above could reflect a difference in the value that some borrowers attach to the different HECM delivery systems. While the hot dog buyer had all the information needed to decide between the 5 cent and 10 cent dogs, the HECM borrower does not for a variety of reasons.
One-Time Versus Recurring Transactions: In contrast to the purchase of a hot dog, a HECM transaction is a big one and the borrower has no opportunity to learn from repeated exposures. Very few HECMs are refinanced.
Multiple Price Dimensions: Where a hot dog has a single price, HECMs have two prices, the interest rate and origination fee, which can complicate the decision process.
The Focus of Consumers on Draw Amounts Allows Lenders to Obfuscate the Price: The major focus of most consumers is the amount they can draw on a HECM. Much of the advertising has this focus, especially the on-line advertising which invites the consumer to fill out a form on the basis of which the consumer is told how much they can draw. If the consumer does not ask for the price used in the calculation of the draw amount, she may not see it until receiving the various documents that require her signature.
read more at: http://www.huffingtonpost.com/jack-m-guttentag/are-hecm-reverse-mortgage_b_8061770.html
Price Differences Do Not Necessarily Reflect Over-Pricing
In the early part of the previous century, when Coney Island was a playground for both the rich and famous and those who were neither, there were two restaurants that specialized in hot dogs. One was Nathans which charged 5 cents, the other was Feldmans which charged 10 cents. My father, who is the source of this information on Coney Island history, dealt only with Nathans. But Feldman had better furnishings and the clientele were better dressed, which induced many to pay the higher price for the hot dog.
The Feldman hot dog was not over-priced, at least for many years, because the information consumers needed to make a decision between a 5 cent dog delivered in cheap surroundings and a 10 cent dog delivered in elegant surroundings was available at no cost at the moment it was needed. The market worked. Ultimately, consumers reacted against paying for the elegance of a hot dog vendor, and Feldmans failed, while Nathans survived to this day.
Price Differences on HECM Reverse Mortgages
The price differences that prevail on HECM reverse mortgages are enormous by any standard. For example, consider the borrower of 70 with a home worth $600,000 and an existing mortgage balance of $200,000 who is looking to pay off that balance in order to rid himself of the required monthly payment. If on August 14 he responded to an advertisement on TV or on the internet, in all likelihood he would be offered a fixed-rate mortgage at 5.06% with a $6,000 origination fee. This is the market price on that day estimated by NRMLA, the trade association of reverse mortgage lenders, as quoted on www.nrmlaonline.org. If instead he shopped for the same HECM among a group of competitive lenders, he would have found the same loan available at 3.99% with a zero origination fee.
HECM Price Differences Reflect Over-Pricing
Unlike the hot dog case, there is no way that the price differences cited above could reflect a difference in the value that some borrowers attach to the different HECM delivery systems. While the hot dog buyer had all the information needed to decide between the 5 cent and 10 cent dogs, the HECM borrower does not for a variety of reasons.
One-Time Versus Recurring Transactions: In contrast to the purchase of a hot dog, a HECM transaction is a big one and the borrower has no opportunity to learn from repeated exposures. Very few HECMs are refinanced.
Multiple Price Dimensions: Where a hot dog has a single price, HECMs have two prices, the interest rate and origination fee, which can complicate the decision process.
The Focus of Consumers on Draw Amounts Allows Lenders to Obfuscate the Price: The major focus of most consumers is the amount they can draw on a HECM. Much of the advertising has this focus, especially the on-line advertising which invites the consumer to fill out a form on the basis of which the consumer is told how much they can draw. If the consumer does not ask for the price used in the calculation of the draw amount, she may not see it until receiving the various documents that require her signature.
read more at: http://www.huffingtonpost.com/jack-m-guttentag/are-hecm-reverse-mortgage_b_8061770.html
Monday, August 24, 2015
When your mortgage feels like a life sentence
That is because the traditional 25-year mortgage term is becoming a thing of the past as desperate buyers stretch their terms to 30 or even 35 years in a bid to make their repayments affordable.
Both first-time buyers and home movers are being forced to borrow larger sums to keep up with spiralling house prices.
While a longer mortgage term will save money at first, it can ultimately cost tens of thousands of pounds extra in total interest repayments.
Despite the dangers, the appetite for longer-term mortgages is soaring, according to new figures from the Mortgage Advice Bureau.
Some 21 per cent of homebuyers are now searching for mortgages lasting 30 years or longer, up from just eight per cent a year ago.
Brian Murphy, head of lending at Mortgage Advice Bureau, says: “Homebuyers are tearing up the rule book by searching for longer-term mortgages to secure cheaper monthly repayments.” He warns that extending your mortgage term will save you money at first but will ultimately cost you dear.
“The added interest that comes with repaying your debt over a longer period can add up to tens of thousands of pounds.”
Murphy says that stretching the repayment of the average mortgage of £151,668 over 30 years rather than 25 would cut payments by £83 a month but ultimately cost an extra £23,297 in total interest by the end of the loan.
Increasing the term to 35 years will cut initial repayments by £141 a month but cost an extra £47,707 over the lifetime of the mortgage.
red more: http://www.express.co.uk/finance/personalfinance/600127/When-your-mortgage-feels-like-life-sentence
Both first-time buyers and home movers are being forced to borrow larger sums to keep up with spiralling house prices.
While a longer mortgage term will save money at first, it can ultimately cost tens of thousands of pounds extra in total interest repayments.
Despite the dangers, the appetite for longer-term mortgages is soaring, according to new figures from the Mortgage Advice Bureau.
Some 21 per cent of homebuyers are now searching for mortgages lasting 30 years or longer, up from just eight per cent a year ago.
Brian Murphy, head of lending at Mortgage Advice Bureau, says: “Homebuyers are tearing up the rule book by searching for longer-term mortgages to secure cheaper monthly repayments.” He warns that extending your mortgage term will save you money at first but will ultimately cost you dear.
“The added interest that comes with repaying your debt over a longer period can add up to tens of thousands of pounds.”
Murphy says that stretching the repayment of the average mortgage of £151,668 over 30 years rather than 25 would cut payments by £83 a month but ultimately cost an extra £23,297 in total interest by the end of the loan.
Increasing the term to 35 years will cut initial repayments by £141 a month but cost an extra £47,707 over the lifetime of the mortgage.
red more: http://www.express.co.uk/finance/personalfinance/600127/When-your-mortgage-feels-like-life-sentence
Tuesday, August 18, 2015
N.J. has highest rate of distressed mortgages in nation, study shows
A greater share of residential mortgages in New Jersey were distressed at the end of the second quarter of this year than any other state in the nation, new data shows.
The data from the Mortgage Bankers Association's National Delinquency Survey shows 10.2 percent of mortgages in the state are either in foreclosure or at least three months behind on payments, according to Patrick O'Keefe, director of economic research with CohnReznick. The national rate stood at 3.95 percent.
O'Keefe wrote in a memo that New Jersey's distressed mortgage rate was the "highest among all states for the seventh consecutive quarter."
The association's survey also shows the percentage of mortgages in New Jersey in the foreclosure process remained top in the nation despite a drop in the state's foreclosure inventory.
"As has been the case since the fourth quarter of 2012, New Jersey, New York, and Florida had the highest percentage of loans in foreclosure in the nation," Marina Walsh, the Mortgage Bankers Association's vice president of industry analysis, said in a statement.
New Jersey's foreclosure inventory rate was 7.31 percent, according to the report, while New York had the second highest rate at 5.31 percent. The report also noted that both states have a judicial foreclosure process.
"New Jersey's relatively slow pace in reducing it distressed mortgage inventory is partially attributable to its status as a 'judicial foreclosure' state," O'Keefe wrote. "Court supervised foreclosures entail procedures that are more rigorous – and time consuming – than administrative actions."
read more: http://www.nj.com/business/index.ssf/2015/08/nj_distressed_mortgages.html
The data from the Mortgage Bankers Association's National Delinquency Survey shows 10.2 percent of mortgages in the state are either in foreclosure or at least three months behind on payments, according to Patrick O'Keefe, director of economic research with CohnReznick. The national rate stood at 3.95 percent.
O'Keefe wrote in a memo that New Jersey's distressed mortgage rate was the "highest among all states for the seventh consecutive quarter."
The association's survey also shows the percentage of mortgages in New Jersey in the foreclosure process remained top in the nation despite a drop in the state's foreclosure inventory.
"As has been the case since the fourth quarter of 2012, New Jersey, New York, and Florida had the highest percentage of loans in foreclosure in the nation," Marina Walsh, the Mortgage Bankers Association's vice president of industry analysis, said in a statement.
New Jersey's foreclosure inventory rate was 7.31 percent, according to the report, while New York had the second highest rate at 5.31 percent. The report also noted that both states have a judicial foreclosure process.
"New Jersey's relatively slow pace in reducing it distressed mortgage inventory is partially attributable to its status as a 'judicial foreclosure' state," O'Keefe wrote. "Court supervised foreclosures entail procedures that are more rigorous – and time consuming – than administrative actions."
read more: http://www.nj.com/business/index.ssf/2015/08/nj_distressed_mortgages.html
Thursday, August 13, 2015
Weekly mortgage applications up just 0.1% as rates stall
Mortgage applications eked out the slightest of gains as interest rates barely budged from a week ago, according to the latest survey from the Mortgage Bankers Association. Total applications increased 0.1 percent from a week ago but are nearly 18 percent above year ago levels.
Refinance applications were the driver, increasing 3 percent from the previous week to the highest level since May, 2015.
"As rates declined over the past few weeks, refinance activity picked up in terms of share and volume in the most recent week's data.The refi share, at 53 percent, was the highest refi share since April and the refi index increased 3.1 percent to reach its highest level since May," said Lynn Fisher, the MBA's vice president of research and economics.
Purchase applications decreased 4 percent from the prior week, but are 20 percent higher than a year ago.
Interest rates for the popular 30-year fixed rate mortgages were unchanged at 4.13 percent for loans for $417,000 or less, known as conforming and stayed at 4.08 percent for jumbo loans (greater than $417,000).
Mortgage lenders say clients are watching rates closely as the Federal Reserve has clearly signals it will move rates higher as the economy improves. Tolbert Rowe, VP with Bay Capital Mortgage in Easton,Maryland, says there's a question if the Fed talk has already been priced into mortgage rates, "I've been telling my clients that it's an event, how it impacts rates, if at all, I'll let you know after it happens."
read more: http://www.cnbc.com/2015/08/12/weekly-mortgage-applications-edge-up-as-rates-stall.html
Refinance applications were the driver, increasing 3 percent from the previous week to the highest level since May, 2015.
"As rates declined over the past few weeks, refinance activity picked up in terms of share and volume in the most recent week's data.The refi share, at 53 percent, was the highest refi share since April and the refi index increased 3.1 percent to reach its highest level since May," said Lynn Fisher, the MBA's vice president of research and economics.
Purchase applications decreased 4 percent from the prior week, but are 20 percent higher than a year ago.
Interest rates for the popular 30-year fixed rate mortgages were unchanged at 4.13 percent for loans for $417,000 or less, known as conforming and stayed at 4.08 percent for jumbo loans (greater than $417,000).
Mortgage lenders say clients are watching rates closely as the Federal Reserve has clearly signals it will move rates higher as the economy improves. Tolbert Rowe, VP with Bay Capital Mortgage in Easton,Maryland, says there's a question if the Fed talk has already been priced into mortgage rates, "I've been telling my clients that it's an event, how it impacts rates, if at all, I'll let you know after it happens."
read more: http://www.cnbc.com/2015/08/12/weekly-mortgage-applications-edge-up-as-rates-stall.html
Sunday, August 9, 2015
Save Money With Smaller Jumbos
Home buyers trying to purchase a pricey property will probably need a jumbo loan—a mortgage that exceeds government limits. But there are different types of jumbos, and some are a little easier and cheaper to get than others.
But first, a handy breakdown for those befuddled by the confounding terminology of the mortgage business:
Conforming mortgages are capped at $417,000 and backed by government agencies, such as Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) and the Veterans Administration (VA).
Conforming jumbo mortgages exceed $417,000 and can go up to $625,500—the exact limit depends on housing costs in your area. The loans are sometimes called “super conforming loans” or “agency jumbos” because they’re still guaranteed by government agencies.
Jumbo mortgages exceed government limits and, thus, are typically held by the lender as part of its portfolio or bundled and sold to investors as mortgage-backed securities.
Borrowers typically pay lower interest rates on conforming loans than on nonconforming jumbo mortgages. (Rates and qualification requirements vary by lender.)
Escalating home-sales prices are pushing more buyers into both conforming and nonconforming jumbos, says Tim Owens, who heads Bank of America’s retail sales group.
Jumbo mortgage volume totaled about $93 billion in the second quarter of 2015, up 33% over the first quarter, according to Inside Mortgage Finance, an industry publication.
The volume of government-backed conforming jumbos also saw brisk growth, increasing 32% between the first and second quarters to $34.2 billion—more than double since a year ago, Inside Mortgage Finance data show.
“The agency jumbo market is firing on all cylinders—purchase, refinance and every loan program,” says Guy Cecala, publisher of Inside Mortgage Finance. The biggest jump was in FHA jumbo mortgages, with volume up 136% between the first and second quarters, he adds.
The spike in FHA mortgages, in particular, comes after the agency on Jan. 26 reduced its required mortgage-insurance premiums, Mr. Cecala says. Premiums dropped from 1.35% to 0.85% of the balance on fixed-rate FHA loans with terms above 15 years.
More lenient credit requirements spur borrowers to prefer agency jumbo mortgages over nonconforming loans, says Mathew Carson, a broker with San Francisco-based First Capital Group. He is working with a professional couple borrowing $511,000 for a home in Petaluma, Calif., where the government’s loan limit is $520,950. The couple, both first-time home buyers, could opt for a conforming or a nonconforming jumbo loan but chose a conforming jumbo backed by the FHA. Why? The FHA mortgage required a 3.5% down payment, whereas lenders for a nonconforming loan could require the standard 20% down payment.
see more: http://www.wsj.com/articles/save-money-with-smaller-jumbos-1438786011
But first, a handy breakdown for those befuddled by the confounding terminology of the mortgage business:
Conforming mortgages are capped at $417,000 and backed by government agencies, such as Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA) and the Veterans Administration (VA).
Conforming jumbo mortgages exceed $417,000 and can go up to $625,500—the exact limit depends on housing costs in your area. The loans are sometimes called “super conforming loans” or “agency jumbos” because they’re still guaranteed by government agencies.
Jumbo mortgages exceed government limits and, thus, are typically held by the lender as part of its portfolio or bundled and sold to investors as mortgage-backed securities.
Borrowers typically pay lower interest rates on conforming loans than on nonconforming jumbo mortgages. (Rates and qualification requirements vary by lender.)
Escalating home-sales prices are pushing more buyers into both conforming and nonconforming jumbos, says Tim Owens, who heads Bank of America’s retail sales group.
Jumbo mortgage volume totaled about $93 billion in the second quarter of 2015, up 33% over the first quarter, according to Inside Mortgage Finance, an industry publication.
The volume of government-backed conforming jumbos also saw brisk growth, increasing 32% between the first and second quarters to $34.2 billion—more than double since a year ago, Inside Mortgage Finance data show.
“The agency jumbo market is firing on all cylinders—purchase, refinance and every loan program,” says Guy Cecala, publisher of Inside Mortgage Finance. The biggest jump was in FHA jumbo mortgages, with volume up 136% between the first and second quarters, he adds.
The spike in FHA mortgages, in particular, comes after the agency on Jan. 26 reduced its required mortgage-insurance premiums, Mr. Cecala says. Premiums dropped from 1.35% to 0.85% of the balance on fixed-rate FHA loans with terms above 15 years.
More lenient credit requirements spur borrowers to prefer agency jumbo mortgages over nonconforming loans, says Mathew Carson, a broker with San Francisco-based First Capital Group. He is working with a professional couple borrowing $511,000 for a home in Petaluma, Calif., where the government’s loan limit is $520,950. The couple, both first-time home buyers, could opt for a conforming or a nonconforming jumbo loan but chose a conforming jumbo backed by the FHA. Why? The FHA mortgage required a 3.5% down payment, whereas lenders for a nonconforming loan could require the standard 20% down payment.
see more: http://www.wsj.com/articles/save-money-with-smaller-jumbos-1438786011
Tuesday, August 4, 2015
Tight credit environment? Fed survey says it’s getting better
If anyone thinks that a tight credit environment is holding the mortgage market back, then a new survey from the Federal Reserve shows there may be some light at the end of the tunnel.
According to the July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices, released Monday by the Federal Reserve, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months.
The Fed survey results echo a recent Capital Economics report, which showed that credit conditions are gradually loosening, and that a loosening of credit conditions will help the sluggish recovery.
According to the Fed survey, the easing was coming not from government-insured or subprime mortgages, but rather from jumbo residential mortgages that conform to the Consumer Financial Protection Bureau's qualified mortgage rules.
The Fed survey showed that “modest net fractions” of banks indicated that they had eased underwriting standards on residential mortgages, excluding government-insured and subprime mortgages.
Additionally, “moderate fractions” of domestic banks reported that lending standards for all five categories included in the survey (GSE-eligible mortgages, government-insured mortgages, jumbo mortgages, subprime mortgages, and home equity lines of credit) remained at least somewhat tighter than the midpoints of the ranges that those standards have occupied since 2005.
Meanwhile, the vast majority of banks continued to report that they do not extend home-purchase loans to subprime borrowers.
In fact, of the 66 banks surveyed, only five responded that they wrote loans that they categorized as subprime.
The remaining 61 banks answered “My bank does not originate subprime residential mortgages,” the Fed survey showed.
see more: http://www.housingwire.com/articles/34671-tight-credit-environment-fed-survey-says-its-getting-better
According to the July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices, released Monday by the Federal Reserve, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months.
The Fed survey results echo a recent Capital Economics report, which showed that credit conditions are gradually loosening, and that a loosening of credit conditions will help the sluggish recovery.
According to the Fed survey, the easing was coming not from government-insured or subprime mortgages, but rather from jumbo residential mortgages that conform to the Consumer Financial Protection Bureau's qualified mortgage rules.
The Fed survey showed that “modest net fractions” of banks indicated that they had eased underwriting standards on residential mortgages, excluding government-insured and subprime mortgages.
Additionally, “moderate fractions” of domestic banks reported that lending standards for all five categories included in the survey (GSE-eligible mortgages, government-insured mortgages, jumbo mortgages, subprime mortgages, and home equity lines of credit) remained at least somewhat tighter than the midpoints of the ranges that those standards have occupied since 2005.
Meanwhile, the vast majority of banks continued to report that they do not extend home-purchase loans to subprime borrowers.
In fact, of the 66 banks surveyed, only five responded that they wrote loans that they categorized as subprime.
The remaining 61 banks answered “My bank does not originate subprime residential mortgages,” the Fed survey showed.
see more: http://www.housingwire.com/articles/34671-tight-credit-environment-fed-survey-says-its-getting-better
Friday, July 31, 2015
Reverse mortgages — look before you leap
SOUTHWEST LOUISIANA (KPLC) -
There's been news coverage of a case out of Philadelphia where several widows faced foreclosure on their homes —because their husbands had taken out reverse mortgages.
What should you watch out for if you're thinking about taking out such a loan.
The TV ads say "You'll learn the benefits of a government insured reverse mortgage." What are they?
Reverse mortgages are a way to turn your home's equity into cash. And most of the ads offering such loans say you will never have to leave your home before you die.
But Carmen Million with the Better Business Bureau said it's important to fully understand what you're getting yourself into.
"A reverse mortgage is not for everybody so you need to determine what a reverse mortgage is and if it's something that would benefit you," she said.
Before you sign up for a reverse mortgage, it's important to consider a number of things, such as how it will affect your spouse and your heirs if you hope to leave anything to them.
"Maybe not you, during your lifetime, but your spouses or your heirs may not have any rights to that home once the person who signs the contract is deceased. So you need to make sure you understand what your rights are in relation to your spouse and your heirs," Million said.
Contracts can be hard to understand, so you may want to have your attorney review anything you plan to sign.
"You would need to read your contract and understand exactly how it works, how it's going to benefit you versus, you want to take into consideration the benefits versus any negatives," she said.
Under no circumstances with any loan should you be asked to pay some money up front.
And it's important for borrowers to remember even with a reverse mortgage, they still must pay taxes, insurance and maintenance on their homes.
HUD has a lot of information on reverse mortgages and what to watch out for. Click HERE for information.
see more: http://www.kplctv.com/story/29676410/reverse-mortgages-look-before-you-leap
There's been news coverage of a case out of Philadelphia where several widows faced foreclosure on their homes —because their husbands had taken out reverse mortgages.
What should you watch out for if you're thinking about taking out such a loan.
The TV ads say "You'll learn the benefits of a government insured reverse mortgage." What are they?
Reverse mortgages are a way to turn your home's equity into cash. And most of the ads offering such loans say you will never have to leave your home before you die.
But Carmen Million with the Better Business Bureau said it's important to fully understand what you're getting yourself into.
"A reverse mortgage is not for everybody so you need to determine what a reverse mortgage is and if it's something that would benefit you," she said.
Before you sign up for a reverse mortgage, it's important to consider a number of things, such as how it will affect your spouse and your heirs if you hope to leave anything to them.
"Maybe not you, during your lifetime, but your spouses or your heirs may not have any rights to that home once the person who signs the contract is deceased. So you need to make sure you understand what your rights are in relation to your spouse and your heirs," Million said.
Contracts can be hard to understand, so you may want to have your attorney review anything you plan to sign.
"You would need to read your contract and understand exactly how it works, how it's going to benefit you versus, you want to take into consideration the benefits versus any negatives," she said.
Under no circumstances with any loan should you be asked to pay some money up front.
And it's important for borrowers to remember even with a reverse mortgage, they still must pay taxes, insurance and maintenance on their homes.
HUD has a lot of information on reverse mortgages and what to watch out for. Click HERE for information.
see more: http://www.kplctv.com/story/29676410/reverse-mortgages-look-before-you-leap
Wednesday, July 29, 2015
Why 3% Down Mortgages Alone Won't Revive Housing
In the world of mortgage financing there is stuff that's seen and stuff that's not. Lowering down payment requirements from 5% to 3% will surely help some prospective buyers. However, in a world with roughly 4% interest rates and average sales prices that remain 11% below their 2005 peak, down payments are not the only issue to solve.
The government-sponsored enterprises have begun to accept loans with 3% down, but they're not just any old 3% loan. The GSEs want something more, and that "something" is 18% mortgage insurance coverage.
Combine the 3% down payment and the 18% insurance requirement, and Fannie Mae and Freddie Mac are following long-time industry standards by requiring at least a 20% cushion in case something goes wrong.
And while mortgage insurance is a burden, the bigger obstacle to focus on, according to a RealtyTrac home affordability analysis, is non-household debt.
In 92% of the counties analyzed, payments on a median-priced home required less than 43% of median household income, which is the maximum debt-to-income ratio allowed for a qualified mortgage by the Consumer Financial Protection Bureau.
Add in the typical student loan debt and car payment, and less than half — 48% — of U.S. housing markets are affordable for median-income earners using the 43% DTI.
Additionally, the standards for 3% loans is hardly straight-forward, meaning they are not for everyone.
For instance, Fannie Mae's MyCommunityMortgage program is only available if at least one borrower is a first-time home buyer who has completed pre-purchase education and counseling. The loan must have a fixed rate and be secured with a one-unit principal residence — meaning that duplexes, triplexes and quads are off limits. Manufactured housing is also ineligible. However, gifts can be used to bulk-up reserves, a new wrinkle. The program can also be used to refinance existing Fannie Mae loans and cash-out refinancing is also allowed.
read more: www.nationalmortgagenews.com/news/origination/why-3-down-mortgages-alone-wont-revive-housing-1057171-1.html
The government-sponsored enterprises have begun to accept loans with 3% down, but they're not just any old 3% loan. The GSEs want something more, and that "something" is 18% mortgage insurance coverage.
Combine the 3% down payment and the 18% insurance requirement, and Fannie Mae and Freddie Mac are following long-time industry standards by requiring at least a 20% cushion in case something goes wrong.
And while mortgage insurance is a burden, the bigger obstacle to focus on, according to a RealtyTrac home affordability analysis, is non-household debt.
In 92% of the counties analyzed, payments on a median-priced home required less than 43% of median household income, which is the maximum debt-to-income ratio allowed for a qualified mortgage by the Consumer Financial Protection Bureau.
Add in the typical student loan debt and car payment, and less than half — 48% — of U.S. housing markets are affordable for median-income earners using the 43% DTI.
Additionally, the standards for 3% loans is hardly straight-forward, meaning they are not for everyone.
For instance, Fannie Mae's MyCommunityMortgage program is only available if at least one borrower is a first-time home buyer who has completed pre-purchase education and counseling. The loan must have a fixed rate and be secured with a one-unit principal residence — meaning that duplexes, triplexes and quads are off limits. Manufactured housing is also ineligible. However, gifts can be used to bulk-up reserves, a new wrinkle. The program can also be used to refinance existing Fannie Mae loans and cash-out refinancing is also allowed.
read more: www.nationalmortgagenews.com/news/origination/why-3-down-mortgages-alone-wont-revive-housing-1057171-1.html
Friday, July 24, 2015
Christians not missing out on new mortgage financing tool offered to Muslims
The idea of an interest-free mortgage is not as impossible as one might believe. In fact, in an effort to increase home ownership in the state of Seattle some are floating the idea of interest-free mortgages in order to meet the needs of an untapped portion of society: Muslims.
Seattle Mayor Ed Murray raised minimum wage to $15 per hour for his constituents in Seattle in 2014 and now he is trying to get low to mid-income Muslims into their own homes without having to pay interest and violate their religious beliefs.
Photo by David Ryder/Getty Images
On July 23, Fox News reported that Seattle officials have joined the push for Sharia-compliant mortgages, with the Seattle mayor proposing these types of loans in order to provide affordable housing to the Islamic community.
So what does that mean? It means that when a Muslim wants to buy a home the lender must give them a mortgage contract that does not charge them any interest, as paying interest violates their religious belief. Many Americans would say paying interest violates some type of belief system they have as well--at least usury interest rates (the practice of lending money at unusually high rates). But the odds of getting large banks to be motivated to change their policy about charging them interest would be nil, even with a mayor advocating it.
In Seattle, however, the Muslim community is garnering support for interest-free mortgage loans, using their religious dictates as a tool in which to achieve this highly-desired objective. According to Seattle Mayor Ed Murray, this type of mortgage would only be for the low and middle income Muslim families--and only those who strictly adhere to Sharia law, since traditional mortgages would be unattainable for them, as such interest-charging mortgages (or any financial dealings involving the paying or receiving of interest) is forbidden in their faith.
Christians are commanded in their religion to not engage in usury, either, when they lend money, and they are discouraged from owing any man anything, too, but there are not any banks in America giving them loans automatically at low-interest rates just because of their religious beliefs. So should one religious belief trump another when it comes to getting a home mortgage without interest?
The obvious answer is 'no,' of course. But in this instance the Muslim community will not be getting to buy a home more cheaply than their Christian competitors, as Sharia law may dictate that Muslims not pay interest, but it does not dictate that they not pay the full value of a home--along with any profit a bank would make if they did charge interest for the home loan over time. Thus, the banker just has to make sure the contract with his Muslim client does not include the words "interest" for the financial profit that the bank will realize as a result of the home mortgage loan based on Sharia law.
read more: http://www.examiner.com/article/christians-not-missing-out-on-new-mortgage-financing-tool-offered-to-muslims
Seattle Mayor Ed Murray raised minimum wage to $15 per hour for his constituents in Seattle in 2014 and now he is trying to get low to mid-income Muslims into their own homes without having to pay interest and violate their religious beliefs.
Photo by David Ryder/Getty Images
On July 23, Fox News reported that Seattle officials have joined the push for Sharia-compliant mortgages, with the Seattle mayor proposing these types of loans in order to provide affordable housing to the Islamic community.
So what does that mean? It means that when a Muslim wants to buy a home the lender must give them a mortgage contract that does not charge them any interest, as paying interest violates their religious belief. Many Americans would say paying interest violates some type of belief system they have as well--at least usury interest rates (the practice of lending money at unusually high rates). But the odds of getting large banks to be motivated to change their policy about charging them interest would be nil, even with a mayor advocating it.
In Seattle, however, the Muslim community is garnering support for interest-free mortgage loans, using their religious dictates as a tool in which to achieve this highly-desired objective. According to Seattle Mayor Ed Murray, this type of mortgage would only be for the low and middle income Muslim families--and only those who strictly adhere to Sharia law, since traditional mortgages would be unattainable for them, as such interest-charging mortgages (or any financial dealings involving the paying or receiving of interest) is forbidden in their faith.
Christians are commanded in their religion to not engage in usury, either, when they lend money, and they are discouraged from owing any man anything, too, but there are not any banks in America giving them loans automatically at low-interest rates just because of their religious beliefs. So should one religious belief trump another when it comes to getting a home mortgage without interest?
The obvious answer is 'no,' of course. But in this instance the Muslim community will not be getting to buy a home more cheaply than their Christian competitors, as Sharia law may dictate that Muslims not pay interest, but it does not dictate that they not pay the full value of a home--along with any profit a bank would make if they did charge interest for the home loan over time. Thus, the banker just has to make sure the contract with his Muslim client does not include the words "interest" for the financial profit that the bank will realize as a result of the home mortgage loan based on Sharia law.
read more: http://www.examiner.com/article/christians-not-missing-out-on-new-mortgage-financing-tool-offered-to-muslims
Monday, July 20, 2015
Indian Wells Tennis Garden set for another expansion
The BNP Paribas Open plans to build a third stadium by the 2017 tennis tournament that will also include a museum, building permits submitted to the city of Indian Wells show.
Pending ownership approval, construction is expected to begin immediately following the March 2016 tournament with the expectation that it will be ready for use within 12 months.
The stadium would seat roughly 5,000 and will provide the Indian Wells Tennis Garden with the first tennis museum in the world to be incorporated within a stadium. According to build plans, Stadium 3 will replace the existing Court 3, situated between stadiums 1 and 2 near the Circle of Palms courtyard in the heart of the tennis village.
BNP Paribas Open Chief Executive Raymond Moore initially announced a plan for a themed stadium on the last day of this year’s Master Series tournament, on March 22, and said the project was simply awaiting a green light from tournament owner Larry Ellison. The tournament says it is still waiting for that formal approval, though Ellison spoke about the project in an interview with Bloomberg in early June.
When Moore spoke about the possibility of the project in March, he said a tennis memorabilia assemblage he deemed to be “the finest collection in the world” had been purchased by the tournament, and Ellison later told Bloomberg that some of those objects date back to Elizabethan times.
“So we are pretty much ready to go,” Moore said in March, “but Mr. Ellison needs to make that decision. He’s mulling it over. He told me he will let me know soon.”
While awaiting word from Ellison, the Oracle co-founder and billionaire who purchased the BNP Paribas Open in 2009 for $100 million, Moore and tournament director Steve Simon filed with the city of Indian Wells the necessary paperwork that details what the stadium will look like and how it will function. The City Council has since unanimously approved the plans.
read more: http://www.desertsun.com/story/sports/tennis/bnp/2015/07/19/tennis-garden-expansion-stadium-museum/30307649/
Pending ownership approval, construction is expected to begin immediately following the March 2016 tournament with the expectation that it will be ready for use within 12 months.
The stadium would seat roughly 5,000 and will provide the Indian Wells Tennis Garden with the first tennis museum in the world to be incorporated within a stadium. According to build plans, Stadium 3 will replace the existing Court 3, situated between stadiums 1 and 2 near the Circle of Palms courtyard in the heart of the tennis village.
BNP Paribas Open Chief Executive Raymond Moore initially announced a plan for a themed stadium on the last day of this year’s Master Series tournament, on March 22, and said the project was simply awaiting a green light from tournament owner Larry Ellison. The tournament says it is still waiting for that formal approval, though Ellison spoke about the project in an interview with Bloomberg in early June.
When Moore spoke about the possibility of the project in March, he said a tennis memorabilia assemblage he deemed to be “the finest collection in the world” had been purchased by the tournament, and Ellison later told Bloomberg that some of those objects date back to Elizabethan times.
“So we are pretty much ready to go,” Moore said in March, “but Mr. Ellison needs to make that decision. He’s mulling it over. He told me he will let me know soon.”
While awaiting word from Ellison, the Oracle co-founder and billionaire who purchased the BNP Paribas Open in 2009 for $100 million, Moore and tournament director Steve Simon filed with the city of Indian Wells the necessary paperwork that details what the stadium will look like and how it will function. The City Council has since unanimously approved the plans.
read more: http://www.desertsun.com/story/sports/tennis/bnp/2015/07/19/tennis-garden-expansion-stadium-museum/30307649/
Monday, July 13, 2015
Michael Estrin: 4 common mortgage errors and how to avoid them
Many people make expensive, easily avoidable mistakes when shopping for a mortgage.
"Borrowers who don't do their homework often end up paying more than they should, and in some cases that extra cost can really hurt," says Paul Sian, a real estate lawyer and Realtor with HER Realtors in Cincinnati.
A study from the Consumer Financial Protection Bureau concludes that many consumers don't shop for mortgages, and they tend to get their mortgage information from lenders and real estate agents, who aren't impartial.
According to Sian, borrowers tend to fixate on the home's purchase price, and secondarily, the loan's interest rate. But factors like closing costs, the loan's total price tag, whether the loan is fixed or variable, and whether the borrower is required to get private mortgage insurance can dramatically alter what borrowers end up paying.
More coverage
Reverse mortgages are due when borrowers die
Change: Where it occurs, and where not
Following are four common mortgage errors and tips for avoiding them.
Shopping just one lender
Whether it's a new car or the latest gadget, consumers know it pays to shop around for the best deal. But half of mortgage borrowers consider just one lender or broker in their shopping process, according to the CFPB study.
"It is a good idea to shop around for mortgages in order to get better rates," Sian says. "Sometimes large banks and lenders don't offer the best rates that can be had. Additionally, some lenders add in fees. While the final fees do show up at the end, many borrowers don't understand the fees and accept them as the cost of getting the loan, even though they could've avoided those fees by shopping around."
A small difference in the interest rate can make a big impact on cost. On a $200,000 fixed-rate, 30-year mortgage, an interest rate of 4.5 percent costs $59 a month more than a 4 percent rate. That adds up to $3,512 in the first five years.
The lower interest rate means the borrower would pay off an additional $1,421 in principal in the first five years, even while making lower payments.
Read more at http://www.philly.com/philly/business/real_estate/residential/Michael_Estrin_4_common_mortgage_errors_and_how_to_avoid_them.html
"Borrowers who don't do their homework often end up paying more than they should, and in some cases that extra cost can really hurt," says Paul Sian, a real estate lawyer and Realtor with HER Realtors in Cincinnati.
A study from the Consumer Financial Protection Bureau concludes that many consumers don't shop for mortgages, and they tend to get their mortgage information from lenders and real estate agents, who aren't impartial.
According to Sian, borrowers tend to fixate on the home's purchase price, and secondarily, the loan's interest rate. But factors like closing costs, the loan's total price tag, whether the loan is fixed or variable, and whether the borrower is required to get private mortgage insurance can dramatically alter what borrowers end up paying.
More coverage
Reverse mortgages are due when borrowers die
Change: Where it occurs, and where not
Following are four common mortgage errors and tips for avoiding them.
Shopping just one lender
Whether it's a new car or the latest gadget, consumers know it pays to shop around for the best deal. But half of mortgage borrowers consider just one lender or broker in their shopping process, according to the CFPB study.
"It is a good idea to shop around for mortgages in order to get better rates," Sian says. "Sometimes large banks and lenders don't offer the best rates that can be had. Additionally, some lenders add in fees. While the final fees do show up at the end, many borrowers don't understand the fees and accept them as the cost of getting the loan, even though they could've avoided those fees by shopping around."
A small difference in the interest rate can make a big impact on cost. On a $200,000 fixed-rate, 30-year mortgage, an interest rate of 4.5 percent costs $59 a month more than a 4 percent rate. That adds up to $3,512 in the first five years.
The lower interest rate means the borrower would pay off an additional $1,421 in principal in the first five years, even while making lower payments.
Read more at http://www.philly.com/philly/business/real_estate/residential/Michael_Estrin_4_common_mortgage_errors_and_how_to_avoid_them.html
Thursday, July 9, 2015
Mortgage applications rise as rates tick down
Mortgage applications increased 4.6% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 3, 2015. This week’s results included an adjustment for the July 4th holiday.
The Market Composite Index, a measure of mortgage loan application volume, increased 4.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6% compared with the previous week. The Refinance Index increased 3% from the previous week.
The seasonally adjusted Purchase Index increased 7% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week and was 32% higher than the same week one year ago.
The refinance share of mortgage activity decreased to 48.0% of total applications, its lowest level since June 2009, from 48.9% the previous week. The adjustable-rate mortgage share of activity increased to 7.1% of total applications.
The FHA share of total applications decreased to 13.7% from 14.0% the week prior. The VA share of total applications remained unchanged at 10.8% from the week prior. The USDA share of total applications decreased to 0.9% from 1.0% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.23% from 4.26%, with points increasing to 0.37 from 0.33 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
see more: http://www.housingwire.com/articles/34408-mortgage-applications-rise-as-rates-tick-down
The Market Composite Index, a measure of mortgage loan application volume, increased 4.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 6% compared with the previous week. The Refinance Index increased 3% from the previous week.
The seasonally adjusted Purchase Index increased 7% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week and was 32% higher than the same week one year ago.
The refinance share of mortgage activity decreased to 48.0% of total applications, its lowest level since June 2009, from 48.9% the previous week. The adjustable-rate mortgage share of activity increased to 7.1% of total applications.
The FHA share of total applications decreased to 13.7% from 14.0% the week prior. The VA share of total applications remained unchanged at 10.8% from the week prior. The USDA share of total applications decreased to 0.9% from 1.0% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.23% from 4.26%, with points increasing to 0.37 from 0.33 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
see more: http://www.housingwire.com/articles/34408-mortgage-applications-rise-as-rates-tick-down
Monday, July 6, 2015
Mortgage Rates Hit 2015 Highs as Homebuyers Take a Breather
Consumers may have been more interested in planning their holiday vacation than a relocation as mortgage applications fell and interest rates edged upward this week. Mortgage rates are now at new 2015 highs.
30-year fixed-rate mortgages rose to 4.08% with an average 0.6 point for the week ending July 2, 2015, according to Freddie Mac’s weekly market survey. A year ago, the rate averaged 4.12%.
15-year fixed rates moved to 3.24% with an average 0.6 point. The same term priced at 3.22% a year ago.
5-year adjustable-rate mortgages headed up to 2.99% with an average 0.4 point. Last year at this time the same ARM averaged 2.98%
“Overseas events are generating significant day-to-day volatility in interest rates,” said Sean Becketti, chief economist for Freddie Mac, in a release. “The [Mortgage Bankers Association] composite index of mortgage applications fell 4.7% in response to what is now three consecutive weeks of mortgage rates over 4%. Other measures, however, confirmed continued strength in housing — pending home sales rose 0.9%, exceeding expectations, and the Case-Shiller house price index recorded another solid increase.”
The MBA’s weekly survey of lenders also reported refinance applications fell by 5% for the week ending June 26.
Lower loan activity for the most recent week may be more of a quick side trip than a major change in direction as the housing industry continues to be on track for its best year since 2006. Realtor.com’s most recent analysis of residential inventory and demand shows pending home sales are at their highest level in nine years.
“Factors lending themselves to the market’s upswing are the psychological effect of recently increased mortgage rates as well as the specter of the Fed raising interest rates later this year,” said Realtor.com Chief Economist Jonathan Smoke. “Although demand has been strong all year, in June we’re finally beginning to see an uptick in supply as sellers become more confident about home prices.”
A refinance ‘boomlet’ is on
read more: https://www.nerdwallet.com/blog/mortgages/mortgage-rates-hit-2015-highs/
30-year fixed-rate mortgages rose to 4.08% with an average 0.6 point for the week ending July 2, 2015, according to Freddie Mac’s weekly market survey. A year ago, the rate averaged 4.12%.
15-year fixed rates moved to 3.24% with an average 0.6 point. The same term priced at 3.22% a year ago.
5-year adjustable-rate mortgages headed up to 2.99% with an average 0.4 point. Last year at this time the same ARM averaged 2.98%
“Overseas events are generating significant day-to-day volatility in interest rates,” said Sean Becketti, chief economist for Freddie Mac, in a release. “The [Mortgage Bankers Association] composite index of mortgage applications fell 4.7% in response to what is now three consecutive weeks of mortgage rates over 4%. Other measures, however, confirmed continued strength in housing — pending home sales rose 0.9%, exceeding expectations, and the Case-Shiller house price index recorded another solid increase.”
The MBA’s weekly survey of lenders also reported refinance applications fell by 5% for the week ending June 26.
Lower loan activity for the most recent week may be more of a quick side trip than a major change in direction as the housing industry continues to be on track for its best year since 2006. Realtor.com’s most recent analysis of residential inventory and demand shows pending home sales are at their highest level in nine years.
“Factors lending themselves to the market’s upswing are the psychological effect of recently increased mortgage rates as well as the specter of the Fed raising interest rates later this year,” said Realtor.com Chief Economist Jonathan Smoke. “Although demand has been strong all year, in June we’re finally beginning to see an uptick in supply as sellers become more confident about home prices.”
A refinance ‘boomlet’ is on
read more: https://www.nerdwallet.com/blog/mortgages/mortgage-rates-hit-2015-highs/
Wednesday, July 1, 2015
Are reverse mortgages a scam?
Home A_VALLESEquity Conversion Mortgages (HECM), more commonly known as reverse mortgages, were authorized by President Ronald Reagan in 1987 and are federally insured by the Department of Housing and Urban Development (HUD). Hundreds of thousands of people aged 62 or older have benefited from this program, which has provided them the opportunity to remain financially independent.
Yet, despite a 27-year history of helping senior homeowners, there still remains confusion over whether reverse mortgages actually work. A client recently shared that her daughter had heard reverse mortgages are a “scam.” She wasn’t sure why this was so, but had “heard it somewhere.” Fortunately, once the daughter learned about the merits of a reverse mortgage, she was in agreement with her mother that it was the best option.
This is a recurring pattern of seniors, adult children, attorneys, estate planners, and real estate agents, to name just a few, who have a poor opinion about reverse mortgages, but don’t really know why.
To help dispel this unwarranted negative perception, here’s a short summary of the top seven myths about reverse mortgages:
The lender will own your home – FALSE!
You continue to retain ownership of your home. Reverse mortgage borrowers may remain in the home for as long as they wish subject to paying the property charges, which include real estate taxes and insurance. When the home is sold any profit is yours.
Your heirs must pay the loan back – FALSE!
A reverse mortgage is a non-recourse loan and you do not sign personally. The lender is repaid from the sale of the property. Your heirs are not responsible for paying back the loan.
You need income and good credit to qualify – IT DEPENDS!
As of April 27, 2015, all borrowers must provide their income information and have their credit profile reviewed. For those who do not meet the guidelines the lender will “set aside” future amounts to pay the property charges, subject to the available reverse mortgage loan amount.
You must make monthly payments – FALSE!
There are never any mandatory monthly principal or interest payments. However, you may make a payment at any time with no prepayment penalty.
Your home must be debt free to qualify – FALSE!
Yet, despite a 27-year history of helping senior homeowners, there still remains confusion over whether reverse mortgages actually work. A client recently shared that her daughter had heard reverse mortgages are a “scam.” She wasn’t sure why this was so, but had “heard it somewhere.” Fortunately, once the daughter learned about the merits of a reverse mortgage, she was in agreement with her mother that it was the best option.
This is a recurring pattern of seniors, adult children, attorneys, estate planners, and real estate agents, to name just a few, who have a poor opinion about reverse mortgages, but don’t really know why.
To help dispel this unwarranted negative perception, here’s a short summary of the top seven myths about reverse mortgages:
The lender will own your home – FALSE!
You continue to retain ownership of your home. Reverse mortgage borrowers may remain in the home for as long as they wish subject to paying the property charges, which include real estate taxes and insurance. When the home is sold any profit is yours.
Your heirs must pay the loan back – FALSE!
A reverse mortgage is a non-recourse loan and you do not sign personally. The lender is repaid from the sale of the property. Your heirs are not responsible for paying back the loan.
You need income and good credit to qualify – IT DEPENDS!
As of April 27, 2015, all borrowers must provide their income information and have their credit profile reviewed. For those who do not meet the guidelines the lender will “set aside” future amounts to pay the property charges, subject to the available reverse mortgage loan amount.
You must make monthly payments – FALSE!
There are never any mandatory monthly principal or interest payments. However, you may make a payment at any time with no prepayment penalty.
Your home must be debt free to qualify – FALSE!
see more: http://www.fiftyplusadvocate.com/archives/9991
Friday, June 26, 2015
30-year mortgage edges up to 4.02%
Mortgage rates are looking stable amid an improving housing market, with Freddie Mac’s latest survey showing that lenders were offering 30-year fixed-rate home loans this week at an average interest rate of 4.02 percent, up from 4 percent a week ago.
The results of Freddie Mac’s weekly survey, released Thursday, said the average for a 15-year fixed mortgage slipped from 3.23 percent to 3.21 percent. The start rates for adjustable mortgages also fell slightly.
While higher than recent levels — Freddie’s survey showed the 30-year average at less than 3.6 percent at one point in January — the rates are still exceedingly low by historical standards and lower than a year ago, when the 30-year loan averaged 4.14 percent
Sean Becketti, Freddie Mac’s chief economist, noted that home sales have strengthened recently as buyers anticipate that the Federal Reserve will begin raising interest rates later this year.
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Posted: Friday, June 26, 2015 6:00 am
Mortgage rates are looking stable amid an improving housing market, with Freddie Mac’s latest survey showing that lenders were offering 30-year fixed-rate home loans this week at an average interest rate of 4.02 percent, up from 4 percent a week ago.
The results of Freddie Mac’s weekly survey, released Thursday, said the average for a 15-year fixed mortgage slipped from 3.23 percent to 3.21 percent. The start rates for adjustable mortgages also fell slightly.
While higher than recent levels — Freddie’s survey showed the 30-year average at less than 3.6 percent at one point in January — the rates are still exceedingly low by historical standards and lower than a year ago, when the 30-year loan averaged 4.14 percent
Sean Becketti, Freddie Mac’s chief economist, noted that home sales have strengthened recently as buyers anticipate that the Federal Reserve will begin raising interest rates later this year.
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“Buyers appear anxious to purchase homes,” Becketti said. “Given the tight inventory of homes for sale, a 5.1-month supply at the current sales pace, home prices are being bid up.”
Freddie Mac asks lenders each Monday through Wednesday about the terms they are offering to solid borrowers seeking mortgages of up to $417,000.
The loans must conform to guidelines set by Freddie Mac and Fannie Mae, the nation’s other major buyer and guarantor of home loans.
The borrowers would have paid an average of 0.7 percent of the loan balance in upfront lender fees and discount points.
read more: http://www.southbendtribune.com/news/business/year-mortgage-edges-up-to/article_0d018d56-cf58-5e66-beab-3464ad29d02e.html
Thursday, June 25, 2015
Here's what happens to their reverse mortgage after your parents die
As more seniors turn to reverse mortgages, their adult children might well be puzzled or concerned about what will happen to that debt when one or both of their parents eventually dies. At that time, questions about how to pay off the loan will need to be resolved -- and relatively quickly.
Loans are due when borrower dies
Nearly all reverse mortgages today are home equity conversion mortgages, or HECMs, which are insured by the Federal Housing Administration. HECMs are subject to certain rules that might not apply to non-HECMs.
The first thing adult children should know about HECMs is that these reverse mortgages technically become due and payable when the borrower dies.
The word "technically" is important because it's understood that a borrower's heirs can't possibly refinance or sell the home on the day of death to satisfy the debt, explains Beth Paterson, a certified reverse mortgage professional at Reverse Mortgages SIDAC, a division of Greenleaf Financial in St. Paul, Minnesota.
A harsh letter
Instead, what usually happens in practice is that the loan servicer sends out a letter that Paterson says might seem insensitive but is intended to inform the heirs of the rules and ascertain their intentions for the loan and property.
"The servicing companies have had issues with people not notifying them and trying to stay in the home, so that's why it needs to be harsh," Paterson says. "My conversation to the consumer is that communication is vital."
Notice of demise
Servicers use a number of resources to find out that a borrower has died. These include the Social Security death index, proprietary databases and annual occupancy letters that typically are sent to reverse mortgage borrowers.
"If they don't get the letter of occupancy back or property taxes or insurance aren't paid, they start doing the next steps: contacting an alternate contact, searching other records or sending someone out to inspect the property and see if someone is living in the house," Paterson says.
Refi, sell or deed
The borrower's heirs aren't required to sell the home to pay off the reverse mortgage, says Cara Pierce, a housing and reverse mortgage counselor at ClearPoint Credit Counseling Solutions in Fresno, California.
But if heirs want to keep the home, they'll have to pay off the loan.
"If they want to get a loan in their own name and pay off the reverse mortgage, they can," Pierce says. "But if they can't and there are no other assets, like life insurance, other property or a 401(k), that they could use to pay off the loan, they will have to sell the property."
When heirs sell, they typically can choose their own real estate broker. The heirs manage the sale and keep any capital gain after the loan and closing costs have been paid.
The borrower's personal belongings and furnishings can be removed. Fixtures, as defined by state law, can't.
A tenant living in the property might have certain rights and protections under state law.
Read more: http://www.bankrate.com/finance/mortgages/pay-reverse-mortgage-after-parent-dies.aspx
Loans are due when borrower dies
Nearly all reverse mortgages today are home equity conversion mortgages, or HECMs, which are insured by the Federal Housing Administration. HECMs are subject to certain rules that might not apply to non-HECMs.
The first thing adult children should know about HECMs is that these reverse mortgages technically become due and payable when the borrower dies.
The word "technically" is important because it's understood that a borrower's heirs can't possibly refinance or sell the home on the day of death to satisfy the debt, explains Beth Paterson, a certified reverse mortgage professional at Reverse Mortgages SIDAC, a division of Greenleaf Financial in St. Paul, Minnesota.
A harsh letter
Instead, what usually happens in practice is that the loan servicer sends out a letter that Paterson says might seem insensitive but is intended to inform the heirs of the rules and ascertain their intentions for the loan and property.
"The servicing companies have had issues with people not notifying them and trying to stay in the home, so that's why it needs to be harsh," Paterson says. "My conversation to the consumer is that communication is vital."
Notice of demise
Servicers use a number of resources to find out that a borrower has died. These include the Social Security death index, proprietary databases and annual occupancy letters that typically are sent to reverse mortgage borrowers.
"If they don't get the letter of occupancy back or property taxes or insurance aren't paid, they start doing the next steps: contacting an alternate contact, searching other records or sending someone out to inspect the property and see if someone is living in the house," Paterson says.
Refi, sell or deed
The borrower's heirs aren't required to sell the home to pay off the reverse mortgage, says Cara Pierce, a housing and reverse mortgage counselor at ClearPoint Credit Counseling Solutions in Fresno, California.
But if heirs want to keep the home, they'll have to pay off the loan.
"If they want to get a loan in their own name and pay off the reverse mortgage, they can," Pierce says. "But if they can't and there are no other assets, like life insurance, other property or a 401(k), that they could use to pay off the loan, they will have to sell the property."
When heirs sell, they typically can choose their own real estate broker. The heirs manage the sale and keep any capital gain after the loan and closing costs have been paid.
The borrower's personal belongings and furnishings can be removed. Fixtures, as defined by state law, can't.
A tenant living in the property might have certain rights and protections under state law.
Read more: http://www.bankrate.com/finance/mortgages/pay-reverse-mortgage-after-parent-dies.aspx
Monday, June 22, 2015
How Mortgage Rates Move When The Federal Reserve Meets
Mortgage Rates Expected To Change
The Federal Reserve's Federal Open Market Committee (FOMC) adjourns from a scheduled two-day meeting Wednesday afternoon. The meeting's outcome is expected influence U.S. mortgage bonds which, in turn, will cause mortgage interest rates to change.
If you're currently unlocked on your loan; or about to start a refinance, consider yourself on alerted. Beginning Wednesday afternoon, mortgage rates may look decidedly different.
Since crossing 4 percent for the first time in nine months last week, mortgage rates have since dropped back to the threes. Rates for VA loans, FHA loans, and USDA loans are even lower.
It's an excellent time to consider locking a rate. Rates could change dramatically later this week and it would unfortunately to miss the last chance at sub-4 percent rates.
Click to see today's rates.
The Fed Does Not Control Mortgage Rates
Mortgage rates are made on Wall Street. Rates are not set by the Fed.
The Federal Open Market Committee is a rotating, 12-person sub-committee within the Federal Reserve. The group is currently headed by Federal Reserve Chairperson Janet Yellen, and meets eight times annually on a pre-determined schedule.
The Fed also meets on an emergency basis, as needed.
For example, during the three-year period 2008-2011, as the U.S. economy staved off depression, the Federal Open Market Committee met 13 times separate from its regularly scheduled meetings in order to review the group's ongoing stimulus plans.
In the time since, the Fed has met just twice in "emergency" -- once to discuss what would happen if the U.S. government failed to raise its debt limit (2013) and once to discuss how the group would communicate forward-guidance to the markets (2014).
The FOMC's most well-known role is as keeper of the Fed Funds Rate. The Fed Funds Rate is the prescribed rate at which banks lend money to each other on an overnight basis.
When the Fed Funds Rate is low, the Fed is attempting to promote economic growth. This is because the Fed Funds Rate is correlated to Prime Rate, and Prime Rate is the basis of most bank lending including most business loans and consumer credit cards.
Since December 2008, the Federal Reserve has held the Fed Funds Rate in a target range near 0.00% which has made borrowing money "cheap" for both businesses and consumers.
The Federal Reserve has advised Wall Street that the Fed Funds Rate will remain near zero percent until the labor market is markedly improved, assuming stable inflation. Once the economy improves, a rise in the Fed Funds Rate becomes possible.
An increase to the Fed Funds Rate may not move mortgage interest rates higher, though.
see more at: http://themortgagereports.com/17724/how-mortgage-rates-move-when-the-federal-reserve-meets
The Federal Reserve's Federal Open Market Committee (FOMC) adjourns from a scheduled two-day meeting Wednesday afternoon. The meeting's outcome is expected influence U.S. mortgage bonds which, in turn, will cause mortgage interest rates to change.
If you're currently unlocked on your loan; or about to start a refinance, consider yourself on alerted. Beginning Wednesday afternoon, mortgage rates may look decidedly different.
Since crossing 4 percent for the first time in nine months last week, mortgage rates have since dropped back to the threes. Rates for VA loans, FHA loans, and USDA loans are even lower.
It's an excellent time to consider locking a rate. Rates could change dramatically later this week and it would unfortunately to miss the last chance at sub-4 percent rates.
Click to see today's rates.
The Fed Does Not Control Mortgage Rates
Mortgage rates are made on Wall Street. Rates are not set by the Fed.
The Federal Open Market Committee is a rotating, 12-person sub-committee within the Federal Reserve. The group is currently headed by Federal Reserve Chairperson Janet Yellen, and meets eight times annually on a pre-determined schedule.
The Fed also meets on an emergency basis, as needed.
For example, during the three-year period 2008-2011, as the U.S. economy staved off depression, the Federal Open Market Committee met 13 times separate from its regularly scheduled meetings in order to review the group's ongoing stimulus plans.
In the time since, the Fed has met just twice in "emergency" -- once to discuss what would happen if the U.S. government failed to raise its debt limit (2013) and once to discuss how the group would communicate forward-guidance to the markets (2014).
The FOMC's most well-known role is as keeper of the Fed Funds Rate. The Fed Funds Rate is the prescribed rate at which banks lend money to each other on an overnight basis.
When the Fed Funds Rate is low, the Fed is attempting to promote economic growth. This is because the Fed Funds Rate is correlated to Prime Rate, and Prime Rate is the basis of most bank lending including most business loans and consumer credit cards.
Since December 2008, the Federal Reserve has held the Fed Funds Rate in a target range near 0.00% which has made borrowing money "cheap" for both businesses and consumers.
The Federal Reserve has advised Wall Street that the Fed Funds Rate will remain near zero percent until the labor market is markedly improved, assuming stable inflation. Once the economy improves, a rise in the Fed Funds Rate becomes possible.
An increase to the Fed Funds Rate may not move mortgage interest rates higher, though.
see more at: http://themortgagereports.com/17724/how-mortgage-rates-move-when-the-federal-reserve-meets
Wednesday, June 17, 2015
Improving home prices chip away at underwater mortgages
Less than 20 percent of homeowners with a mortgage in the Chicago area owed more on their mortgage than their homes were worth in the year's first quarter, as slowly rising home prices continue to benefit homeowners.
During 2015's first three months, 19.1 percent of area residential properties with a mortgage, or almost 262,000 properties, were underwater, real estate data firm CoreLogic reported Tuesday. That compares with 21.9 percent of properties a year ago.
Despite the improvement, the percentage of mortgaged, underwater residential properties in Chicago's housing market was second only to Tampa-St. Petersburg-Clearwater, Fla., where 23.1 percent of properties were underwater. Also on the list of the top five markets in the worst shape were Phoenix-Mesa-Scottsdale, Ariz., at 16.9 percent; Riverside-San Bernardino-Ontario, Calif., at 13.9 percent; and Warren-Troy-Farmington Hills, Mich., at 13.4 percent.
Nationally, 10.2 percent of properties were underwater at the end of March, and rising home prices meant borrower equity rose by $694 billion year-over-year during the quarter. During the first quarter, home prices rose 2.5 percent, according to the firm.
read more: http://www.chicagotribune.com/business/breaking/ct-underwater-homeowners-0617-biz-20150616-story.html
During 2015's first three months, 19.1 percent of area residential properties with a mortgage, or almost 262,000 properties, were underwater, real estate data firm CoreLogic reported Tuesday. That compares with 21.9 percent of properties a year ago.
Despite the improvement, the percentage of mortgaged, underwater residential properties in Chicago's housing market was second only to Tampa-St. Petersburg-Clearwater, Fla., where 23.1 percent of properties were underwater. Also on the list of the top five markets in the worst shape were Phoenix-Mesa-Scottsdale, Ariz., at 16.9 percent; Riverside-San Bernardino-Ontario, Calif., at 13.9 percent; and Warren-Troy-Farmington Hills, Mich., at 13.4 percent.
Nationally, 10.2 percent of properties were underwater at the end of March, and rising home prices meant borrower equity rose by $694 billion year-over-year during the quarter. During the first quarter, home prices rose 2.5 percent, according to the firm.
read more: http://www.chicagotribune.com/business/breaking/ct-underwater-homeowners-0617-biz-20150616-story.html
Monday, June 15, 2015
Reverse Mortgages Could Mean Elderly Lose Homes
A recent government study has found adverts for reverse mortgages which largely target seniors can be misleading. Elderly people tempted by these offers could find they end up losing their home rather than gaining financial freedom.
The Consumer Financial Protection Bureau carried out a study showing elderly homeowners are being misled by the advertising for reverse mortgages and this could result in large financial problems. According to the article in CNNMoney.com, many homeowners don’t realize that reverse mortgages are essentially loans which means they eventually have to be paid back. In addition homeowners are confused by the inaccurate and often incomplete information they receive from lenders. This is partly due to the fact that they didn’t read the fine print on the ads which are frequently shown on the Internet and on TV.
A reverse mortgage is a loan that enables homeowners aged 62 or older to release equity in their homes through taking out a loan. Payment and interest on the loan is deferred until they move home, sell up or die.
The study looked at 97 ads from a number of different lenders that were shown in five large urban markets during a one-year period from March 2013. They also conducted interviews with 59 homeowners aged 62 or older to get their overall impression of the ads. The results were interesting as apparently some homeowners thought a reverse mortgage meant they could never lose their home while others thought the money they received through a reverse mortgage was due to home equity built up over the years and therefore there was no reason why they would ever have to pay it back. This shows the information being given out is misleading, because as the study points out homeowners are still liable for insurance and maintenance on the property as well as property taxes. If they fail to pay these then they can end up in foreclosure. This information is typically shown in the fine print which not everyone bothers to, or is able to read.
- See more at: http://realtybiznews.com/reverse-mortgages-could-mean-elderly-lose-homes/98728503/
The Consumer Financial Protection Bureau carried out a study showing elderly homeowners are being misled by the advertising for reverse mortgages and this could result in large financial problems. According to the article in CNNMoney.com, many homeowners don’t realize that reverse mortgages are essentially loans which means they eventually have to be paid back. In addition homeowners are confused by the inaccurate and often incomplete information they receive from lenders. This is partly due to the fact that they didn’t read the fine print on the ads which are frequently shown on the Internet and on TV.
A reverse mortgage is a loan that enables homeowners aged 62 or older to release equity in their homes through taking out a loan. Payment and interest on the loan is deferred until they move home, sell up or die.
The study looked at 97 ads from a number of different lenders that were shown in five large urban markets during a one-year period from March 2013. They also conducted interviews with 59 homeowners aged 62 or older to get their overall impression of the ads. The results were interesting as apparently some homeowners thought a reverse mortgage meant they could never lose their home while others thought the money they received through a reverse mortgage was due to home equity built up over the years and therefore there was no reason why they would ever have to pay it back. This shows the information being given out is misleading, because as the study points out homeowners are still liable for insurance and maintenance on the property as well as property taxes. If they fail to pay these then they can end up in foreclosure. This information is typically shown in the fine print which not everyone bothers to, or is able to read.
- See more at: http://realtybiznews.com/reverse-mortgages-could-mean-elderly-lose-homes/98728503/
Thursday, June 11, 2015
80 percent of banks say credit has tightened, mortgages more difficult to get
CLEVELAND, Ohio -- Nearly 18 months after it became more difficult to qualify for a mortgage, nearly 80 percent of banks say that lending has tightened, and about 19 percent say the impact is "severe."
The American Bankers Association, which conducted a survey about mortgages approved last year, also said the new mortgage rules have hurt the housing market recovery. "Combine that with new mortgage disclosures, which are just around the corner, and we'll continue to see a slow down in what should be the ideal time to buy a home," said Robert Davis, ABA executive vice president.
Cleveland-area banks say the biggest impact on consumers is that borrowers must submit more documentation. Lenders overall said mortgages under the new law cost more, and require bigger down payments and better credit scores.
The Consumer Financial Protection Bureau adopted the rules for "qualified mortgages" in January 2014. The new rules don't absolutely prohibit home loans that aren't "qualified," but say the lender could face penalties and liability if it makes a non-qualified loan and the borrower defaults. Further, the same penalties will affect any company that buys or touches the loan. So a lender is unlikely to originate a non-qualified loan unless it plans to hold on to the loan and not sell it.
About 90 percent of the typical bank's mortgage loans made last year were "qualified mortgages," the ABA said.
The most common reasons for being rejected for a mortgage, according to the ABA, are borrowers with high debts compared to income and the lack of having required documentation.
The ABA also said that, despite ridiculously low 10- and 15-year interest rates, more people took out 30-year loans in 2014 compared with 2013. Half of all loans last year were 30-year loans.
One-third of banks said the impact on business has been "extremely negative." About 54 percent said the effect on business has been moderate.
read more: http://www.cleveland.com/business/index.ssf/2015/06/80_percent_of_banks_say_credit.html
The American Bankers Association, which conducted a survey about mortgages approved last year, also said the new mortgage rules have hurt the housing market recovery. "Combine that with new mortgage disclosures, which are just around the corner, and we'll continue to see a slow down in what should be the ideal time to buy a home," said Robert Davis, ABA executive vice president.
Cleveland-area banks say the biggest impact on consumers is that borrowers must submit more documentation. Lenders overall said mortgages under the new law cost more, and require bigger down payments and better credit scores.
The Consumer Financial Protection Bureau adopted the rules for "qualified mortgages" in January 2014. The new rules don't absolutely prohibit home loans that aren't "qualified," but say the lender could face penalties and liability if it makes a non-qualified loan and the borrower defaults. Further, the same penalties will affect any company that buys or touches the loan. So a lender is unlikely to originate a non-qualified loan unless it plans to hold on to the loan and not sell it.
About 90 percent of the typical bank's mortgage loans made last year were "qualified mortgages," the ABA said.
The most common reasons for being rejected for a mortgage, according to the ABA, are borrowers with high debts compared to income and the lack of having required documentation.
The ABA also said that, despite ridiculously low 10- and 15-year interest rates, more people took out 30-year loans in 2014 compared with 2013. Half of all loans last year were 30-year loans.
One-third of banks said the impact on business has been "extremely negative." About 54 percent said the effect on business has been moderate.
read more: http://www.cleveland.com/business/index.ssf/2015/06/80_percent_of_banks_say_credit.html
Thursday, June 4, 2015
Reverse mortgages making comeback to help seniors
SCOTTSDALE, AZ (KPHO/KTVK) -
Saving money for retirement isn't easy, but some Valley seniors have found a way to make money off the equity of their own home.
Tim Ryan is a reverse mortgage specialist with iReverse Home Loans.
Ryan said that reverse mortgages are making a comeback, with a growing number of seniors looking to create more cash flow.
"We have a lot of people doing it to plan their retirement, take charge of their finances, and live the life style they want to live," Ryan said. "About half of my clients are seniors that do reverse mortgages to just have a better life."
Paul and Caroline Walrad, of Scottsdale, said that their reverse mortgage has provided them more financial flexibility as they get closer to retirement.
"It's a huge sense of relief," Caroline Walrad said. "To feel that you are in one place and can be in one place for the rest of your life is extremely comforting."
"Basically, what it's done is replenish the money we lost in the (housing) crash," said Paul Walrad. "It paid also for medical expenses I had."
The reverse mortgage is still a loan, but instead of making a monthly payment, homeowners can receive a lump sum.. monthly payment or line of credit, based on the amount of equity they have in their house.
To be eligible you must be at least 62 years old, and you must pay off your remaining mortgage before receiving any money.
However, certified public accountant Seth Fink said that reverse mortgages are not for everyone.
According to Fink, there are some drawbacks which include:
Closing costs that can be more expensive than a traditional loan.
Little money left for surviving children.
Heirs will inherit the home with a lien on it.
f you run out of money, you may need to sell the property.
Read more: http://www.kpho.com/story/29234295/reverse-mortgages-making-comeback-to-help-seniors
Saving money for retirement isn't easy, but some Valley seniors have found a way to make money off the equity of their own home.
Tim Ryan is a reverse mortgage specialist with iReverse Home Loans.
Ryan said that reverse mortgages are making a comeback, with a growing number of seniors looking to create more cash flow.
"We have a lot of people doing it to plan their retirement, take charge of their finances, and live the life style they want to live," Ryan said. "About half of my clients are seniors that do reverse mortgages to just have a better life."
Paul and Caroline Walrad, of Scottsdale, said that their reverse mortgage has provided them more financial flexibility as they get closer to retirement.
"It's a huge sense of relief," Caroline Walrad said. "To feel that you are in one place and can be in one place for the rest of your life is extremely comforting."
"Basically, what it's done is replenish the money we lost in the (housing) crash," said Paul Walrad. "It paid also for medical expenses I had."
The reverse mortgage is still a loan, but instead of making a monthly payment, homeowners can receive a lump sum.. monthly payment or line of credit, based on the amount of equity they have in their house.
To be eligible you must be at least 62 years old, and you must pay off your remaining mortgage before receiving any money.
However, certified public accountant Seth Fink said that reverse mortgages are not for everyone.
According to Fink, there are some drawbacks which include:
Closing costs that can be more expensive than a traditional loan.
Little money left for surviving children.
Heirs will inherit the home with a lien on it.
f you run out of money, you may need to sell the property.
Read more: http://www.kpho.com/story/29234295/reverse-mortgages-making-comeback-to-help-seniors
Tuesday, June 2, 2015
Consumers Can’t Void Second Mortgage In Bankruptcy, SCOTUS Rules
Consumers taking out a second mortgage will now have to consider the fact that if they encounter financial difficulties and file for bankruptcy, they won’t be able to strip off the additional loan obligation.
The Wall Street Journal reports that the Supreme Court ruled in favor of banks when it came to determining that struggling homeowners can’t get rid of a second mortgage using bankruptcy protection, even if the home’s value is less than the amount owed on the first mortgage.
Monday’s unanimous ruling involved two cases in which Florida homeowners sought to cancel their second mortgages – issued by Bank of America – under the argument that when both primary and subsequent loans are underwater, the second is worthless.
The homeowners in the cases were previously allowed by lower courts to nullify the second mortgages. Back in 2013, those rulings were affirmed by the Atlanta-based 11th U.S. Circuit Court, the Associated Press reports.
However, Bank of America maintained that the rulings conflicted with Supreme Court precedent, arguing that even if the primary mortgage is underwater, it shouldn’t affect the lien securing the second loan.
According to the bank, there remains a possibility that the second loan would be repaid if the property’s value rose in the future.
The company also claimed that after the Circuit Court ruling, hundreds – if not thousands – of struggling homeowners had moved to nullify their second loans, the AP reports.
Justice Clarence Thomas said on Monday that the SCOTUS decision took into consideration the shifting nature of property, the WSJ reports.
see more of this: http://consumerist.com/2015/06/01/consumers-cant-void-second-mortgage-in-bankruptcy-scotus-rules/
The Wall Street Journal reports that the Supreme Court ruled in favor of banks when it came to determining that struggling homeowners can’t get rid of a second mortgage using bankruptcy protection, even if the home’s value is less than the amount owed on the first mortgage.
Monday’s unanimous ruling involved two cases in which Florida homeowners sought to cancel their second mortgages – issued by Bank of America – under the argument that when both primary and subsequent loans are underwater, the second is worthless.
The homeowners in the cases were previously allowed by lower courts to nullify the second mortgages. Back in 2013, those rulings were affirmed by the Atlanta-based 11th U.S. Circuit Court, the Associated Press reports.
However, Bank of America maintained that the rulings conflicted with Supreme Court precedent, arguing that even if the primary mortgage is underwater, it shouldn’t affect the lien securing the second loan.
According to the bank, there remains a possibility that the second loan would be repaid if the property’s value rose in the future.
The company also claimed that after the Circuit Court ruling, hundreds – if not thousands – of struggling homeowners had moved to nullify their second loans, the AP reports.
Justice Clarence Thomas said on Monday that the SCOTUS decision took into consideration the shifting nature of property, the WSJ reports.
see more of this: http://consumerist.com/2015/06/01/consumers-cant-void-second-mortgage-in-bankruptcy-scotus-rules/
Friday, May 29, 2015
Senior Bank Services Discusses New HECM Reverse Mortgage Figures
Although many reverse mortgage lenders are busy helping seniors with these types of home loans, the latest HECM reverse mortgage endorsements show a small decline. Senior Bank Services is a nationally known website that provides valuable information about products that senior citizens would be interested in. The main source of traffic to this website is from those looking for reverse mortgage information, and localized pages for reverse mortgage lenders to be contacted from interested consumers about reverse mortgages. The latest information that shows the decline in HECM endorsements is less than a couple percent, but states like California continue to grow in reverse mortgages for seniors. To find out more about reverse mortgages, or to speak with a licensed mortgage professional who specializes in these types of loan products visit,
A HECM reverse mortgage is the only reverse mortgage insured by the U.S. Federal Government. It also constitutes most of all the reverse mortgages done in this country. Individuals 62 or older and have equity in their homes can apply for this type of loan. The different between a traditional mortgage and reverse mortgage is, seniors that receive a reverse mortgage do not have to make mortgage payments. They are still responsible for taxes and insurance as well as maintaining the home. A popular trend in reverse mortgages is using one to buy a home, called a HECM purchase, or reverse purchase. The senior places a large down-payment on the home when buying and then lives there without the worry of making a mortgage payment. To learn how to buy a home using a HECM purchase, or to speak with a reverse mortgage specialist call the number provided.
About the Company: SeniorBankServices. com is a nationwide reverse mortgage information website that offers reverse mortgage information and connects prospective clients to qualified licensed reverse mortgage brokers and lenders to homeowners in Riverside, San Diego, Los Angeles, and San Bernardino, and throughout the state of California. The company and its partners follow all rules and regulations regarding reverse mortgages. To learn more about reverse mortgage lenders in San Diego, or any other loan product, visit the company website.
fore more information http://www.prweb.com/releases/hecm-reverse-mortgages/reverse-mortgage-lenders/prweb12751848.htm
A HECM reverse mortgage is the only reverse mortgage insured by the U.S. Federal Government. It also constitutes most of all the reverse mortgages done in this country. Individuals 62 or older and have equity in their homes can apply for this type of loan. The different between a traditional mortgage and reverse mortgage is, seniors that receive a reverse mortgage do not have to make mortgage payments. They are still responsible for taxes and insurance as well as maintaining the home. A popular trend in reverse mortgages is using one to buy a home, called a HECM purchase, or reverse purchase. The senior places a large down-payment on the home when buying and then lives there without the worry of making a mortgage payment. To learn how to buy a home using a HECM purchase, or to speak with a reverse mortgage specialist call the number provided.
About the Company: SeniorBankServices. com is a nationwide reverse mortgage information website that offers reverse mortgage information and connects prospective clients to qualified licensed reverse mortgage brokers and lenders to homeowners in Riverside, San Diego, Los Angeles, and San Bernardino, and throughout the state of California. The company and its partners follow all rules and regulations regarding reverse mortgages. To learn more about reverse mortgage lenders in San Diego, or any other loan product, visit the company website.
fore more information http://www.prweb.com/releases/hecm-reverse-mortgages/reverse-mortgage-lenders/prweb12751848.htm
Tuesday, May 26, 2015
Now it’s tougher to get a reverse mortgage
New federal rules that kicked in last month may make it harder for some people to qualify for reverse mortgages. But they’ll also make it more likely that those who do receive reverse mortgages will have fewer worries about them.
Reverse mortgages are FHA-insured loans available to homeowners age 62 or older that let the borrowers convert their home equity to cash without making monthly payments; they’re repaid when the borrower sells the home, moves or dies. A 65-year-old with a $250,000 home might be allowed to borrow $127,000 with a reverse mortgage, according to the Boston College Center for Retirement Research.
The new financial assessments
Under the new rules (which sprang from a 2013 law), to get a reverse mortgage, you’ll now be subject to what’s known as a “financial assessment” — much like what lenders do when sizing up applicants for regular mortgages. Lenders will now review the income, cash flow and credit reports of prospects.
Basically, you’ll need to prove that you have the “willingness” and “capacity” to continue paying your home’s property taxes and insurance premiums. If the assessment convinces the reverse mortgage lender that you won’t have the cash to make those home-related payments, you may be rejected. That’s because a reverse mortgage borrower who fails to pay property taxes or homeowner’s insurance could be tossed out of the home and the house could then go into foreclosure.
“I think these changes are positive overall,” says Phil Stevenson, a Certified Reverse Mortgage Professional and principal of PS Financial Services in Coral Gables, Fla. “They’ll affect 5% to 10% of potential borrowers and, in reality, those are the ones who probably shouldn’t have done reverse mortgages in the past.”
The new rules will undoubtedly make the reverse-mortgage application process more complex, though, and will lengthen the time it’ll take for loan approval, at least initially.
read more: http://www.marketwatch.com/story/now-its-tougher-to-get-a-reverse-mortgage-2015-05-23
Reverse mortgages are FHA-insured loans available to homeowners age 62 or older that let the borrowers convert their home equity to cash without making monthly payments; they’re repaid when the borrower sells the home, moves or dies. A 65-year-old with a $250,000 home might be allowed to borrow $127,000 with a reverse mortgage, according to the Boston College Center for Retirement Research.
The new financial assessments
Under the new rules (which sprang from a 2013 law), to get a reverse mortgage, you’ll now be subject to what’s known as a “financial assessment” — much like what lenders do when sizing up applicants for regular mortgages. Lenders will now review the income, cash flow and credit reports of prospects.
Basically, you’ll need to prove that you have the “willingness” and “capacity” to continue paying your home’s property taxes and insurance premiums. If the assessment convinces the reverse mortgage lender that you won’t have the cash to make those home-related payments, you may be rejected. That’s because a reverse mortgage borrower who fails to pay property taxes or homeowner’s insurance could be tossed out of the home and the house could then go into foreclosure.
“I think these changes are positive overall,” says Phil Stevenson, a Certified Reverse Mortgage Professional and principal of PS Financial Services in Coral Gables, Fla. “They’ll affect 5% to 10% of potential borrowers and, in reality, those are the ones who probably shouldn’t have done reverse mortgages in the past.”
The new rules will undoubtedly make the reverse-mortgage application process more complex, though, and will lengthen the time it’ll take for loan approval, at least initially.
read more: http://www.marketwatch.com/story/now-its-tougher-to-get-a-reverse-mortgage-2015-05-23
Thursday, May 21, 2015
Mortgage rates climb for 4th week in a row
Mortgage rates inched up this week after days of volatile trading that sent the 10-year Treasury yield on a wild ride. Meanwhile, homebuyers remained reluctant to borrow for a second straight week, even as builders geared up to break more ground.
2015%30-year fixedMarAprMay3.703.803.904.004.10
30 year fixed rate mortgage -- 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 4.03 percent from 4.01 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.29 percent. Four weeks ago, it was 3.79 percent, and the rate has increased four weeks in a row. The mortgages in this week's survey had an average total of 0.23 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.07 percent. This week's rate is 0.04 percentage points lower than that 52-week average.
The benchmark 15-year fixed-rate mortgage rose to 3.23 percent from 3.22 percent.
The benchmark 5/1 adjustable-rate mortgage rose to 3.19 percent from 3.17 percent.
The benchmark 30-year fixed-rate jumbo rose to 4.13 percent from 4.09 percent.
Read more: http://www.bankrate.com/finance/mortgages/mortgage-analysis-052115.aspx
2015%30-year fixedMarAprMay3.703.803.904.004.10
30 year fixed rate mortgage -- 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 4.03 percent from 4.01 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.29 percent. Four weeks ago, it was 3.79 percent, and the rate has increased four weeks in a row. The mortgages in this week's survey had an average total of 0.23 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.07 percent. This week's rate is 0.04 percentage points lower than that 52-week average.
The benchmark 15-year fixed-rate mortgage rose to 3.23 percent from 3.22 percent.
The benchmark 5/1 adjustable-rate mortgage rose to 3.19 percent from 3.17 percent.
The benchmark 30-year fixed-rate jumbo rose to 4.13 percent from 4.09 percent.
Read more: http://www.bankrate.com/finance/mortgages/mortgage-analysis-052115.aspx
Tuesday, May 19, 2015
Amazingly, Securitization Of Mortgages Actually Worked
Matt Levine makes a lovely point over at Bloomberg . One which is entirely contrary to current received wisdom. That point being that securitization of mortgages actually worked, actually did what it said it would. And this is true despite even the lying about what was going into those packages.
Start from the basic macroeconomic point of what was going on. The desire is to spread the risk around, to slice and dice the risk even, of lending money to people to buy houses. This is one of the functions of financial markets and it’s the entire economic point of having speculation. There’s people out there who really don’t want to be carrying risk at all. Either from temperament or for sound business reasons. There’s also people out there with a much greater appetite for risk than most other people. So, what we’d like to do is transfer that risk from those who don’t want it to those who do. The most obvious example of this is in a futures market. The farmer is growing grain, the baker making bread. Neither of them is particularly keen on carrying the risk that the price of wheat (one’s output, for the other an input) is going to vary as a result of, say, summer rains or not in the Ukraine. But there’s plenty of people out there who are happy to bet on there being rain in the Ukraine this summer or not. So, the farmer sells a futures contract, the baker buys one: and in the middle we’ve that froth of speculation. The speculators are carrying the risk as the price for both the farmer and the baker is now set. Reducing risk on those who don’t want it and adding it to those who do is a synonym for us all becoming richer.
ADVERTISING
There’s also mathematics that we can use to transfer risk: risk pooling we can call it. This is what insurance is based upon. That my house might burn down has a very low probability (that probability perhaps changing dependent on how often I try to make french fries on return from the bar). But it would be devastating if it did. Across the whole population we know that some houses will burn down each year. Pool the risks of any one house burning down, everyone pays a small premium and there’s the funds to compensate those poor saps it does happen to.
see more: http://www.forbes.com/sites/timworstall/2015/05/14/amazingly-securitisation-of-mortgages-actually-worked/
Start from the basic macroeconomic point of what was going on. The desire is to spread the risk around, to slice and dice the risk even, of lending money to people to buy houses. This is one of the functions of financial markets and it’s the entire economic point of having speculation. There’s people out there who really don’t want to be carrying risk at all. Either from temperament or for sound business reasons. There’s also people out there with a much greater appetite for risk than most other people. So, what we’d like to do is transfer that risk from those who don’t want it to those who do. The most obvious example of this is in a futures market. The farmer is growing grain, the baker making bread. Neither of them is particularly keen on carrying the risk that the price of wheat (one’s output, for the other an input) is going to vary as a result of, say, summer rains or not in the Ukraine. But there’s plenty of people out there who are happy to bet on there being rain in the Ukraine this summer or not. So, the farmer sells a futures contract, the baker buys one: and in the middle we’ve that froth of speculation. The speculators are carrying the risk as the price for both the farmer and the baker is now set. Reducing risk on those who don’t want it and adding it to those who do is a synonym for us all becoming richer.
ADVERTISING
There’s also mathematics that we can use to transfer risk: risk pooling we can call it. This is what insurance is based upon. That my house might burn down has a very low probability (that probability perhaps changing dependent on how often I try to make french fries on return from the bar). But it would be devastating if it did. Across the whole population we know that some houses will burn down each year. Pool the risks of any one house burning down, everyone pays a small premium and there’s the funds to compensate those poor saps it does happen to.
see more: http://www.forbes.com/sites/timworstall/2015/05/14/amazingly-securitisation-of-mortgages-actually-worked/
Thursday, May 14, 2015
Cautionary tales: Reverse mortgages could lead to problems
FAIRWAY, KS (KCTV) -
Reverse home mortgages are complicated and not for everybody.
They are designed for seniors - 62 or older - to borrow against their home's equity. But where there is money, there are scammers.
With a regular mortgage, homeowners make monthly payments to a lender. In a reverse mortgage, a lender pays the homeowner.
The loan is repaid when the homeowner passes away, sells their home or when the home is no longer their primary residence.
That means if someone decides to sell the family home, they are not going to get as much.
"If you have a reverse mortgage on your house, and you've had it for several years. the more money you get, the more money you're going to owe on your house the less money you're going to get when you sell it," said Aaron Reese with the Better Business Bureau.
Reverse home mortgages aren't for everybody, but they do have their benefits.
"It is a really great vehicle for seniors who choose to age in place. And they don't want to out-live their money, so they'll have a little extra money available," said Victoria Duke, a professor of Law and reverse mortgage expert.
The federal government highly recommends talking to a counselor who can walk someone through the process and help them decide if it's best for them.
If the lender doesn't offer that, that is a red flag. Another red flag is who to make the check out to.
"He said, 'you are going to have to pay us $800 for three months. can you afford that?' I said, 'I guess so,'" one mortgage scam victim said.
Just last year, a metro man was charged with ripping off a 70-year-old Excelsior Springs woman in a reverse mortgage scam.
The Housing of Urban Development says Robert Todd convinced her to write the checks to him instead of the bank.
"Oh, I was mad, really upset," the victim said.
Luckily, she got her money back once Todd was charged.
"If you're looking to get a reverse mortgage, you're going to want to get some outside advice. Talk to a financial adviser or someone you know and trust that is good with finances and might know what is your best option," Reese said.
Scammers love using reverse home mortgages because they think senior citizens are easy targets.
Read more: http://www.kctv5.com/story/29056290/cautionary-tales-reverse-mortgages-could-lead-to-problems
Reverse home mortgages are complicated and not for everybody.
They are designed for seniors - 62 or older - to borrow against their home's equity. But where there is money, there are scammers.
With a regular mortgage, homeowners make monthly payments to a lender. In a reverse mortgage, a lender pays the homeowner.
The loan is repaid when the homeowner passes away, sells their home or when the home is no longer their primary residence.
That means if someone decides to sell the family home, they are not going to get as much.
"If you have a reverse mortgage on your house, and you've had it for several years. the more money you get, the more money you're going to owe on your house the less money you're going to get when you sell it," said Aaron Reese with the Better Business Bureau.
Reverse home mortgages aren't for everybody, but they do have their benefits.
"It is a really great vehicle for seniors who choose to age in place. And they don't want to out-live their money, so they'll have a little extra money available," said Victoria Duke, a professor of Law and reverse mortgage expert.
The federal government highly recommends talking to a counselor who can walk someone through the process and help them decide if it's best for them.
If the lender doesn't offer that, that is a red flag. Another red flag is who to make the check out to.
"He said, 'you are going to have to pay us $800 for three months. can you afford that?' I said, 'I guess so,'" one mortgage scam victim said.
Just last year, a metro man was charged with ripping off a 70-year-old Excelsior Springs woman in a reverse mortgage scam.
The Housing of Urban Development says Robert Todd convinced her to write the checks to him instead of the bank.
"Oh, I was mad, really upset," the victim said.
Luckily, she got her money back once Todd was charged.
"If you're looking to get a reverse mortgage, you're going to want to get some outside advice. Talk to a financial adviser or someone you know and trust that is good with finances and might know what is your best option," Reese said.
Scammers love using reverse home mortgages because they think senior citizens are easy targets.
Read more: http://www.kctv5.com/story/29056290/cautionary-tales-reverse-mortgages-could-lead-to-problems
Tuesday, May 12, 2015
Nomura, RBS Defective-Bond Suit Loss Seen Spurring Deals
Nomura Holdings Inc. and Royal Bank of Scotland Group Plc may face $500 million in damages for what a judge called an “enormous” deception in the sale of defective mortgage-backed securities, a ruling that may spur other banks to settle similar claims tied to the 2008 financial crisis.
Nomura and RBS were excoriated in a 361-page opinion by U.S. District Judge Denise Cote in Manhattan, whose ruling followed the first trial of claims that banks sold flawed securities to government-owned mortgage companies. After a three-week trial, Cote said they misled Fannie Mae and Freddie Mac and set a damages formula that may result in the government winning about half its original claim of $1 billion.
“The offering documents did not correctly describe the mortgage loans,” Cote, who heard the case without a jury, wrote Monday. “The magnitude of falsity, conservatively measured, is enormous.”
Before the trial, FHFA had reached $17.9 billion in settlements with other banks, including Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. The ruling against Nomura and RBS may encourage other banks to settle mortgage-related suits brought by regulators and private investors rather than face the bad publicity and cost of an adverse judgment, said Robert C. Hockett, a professor at Cornell Law School.
“They look pretty bad,” Hockett said in an interview. “They look like the strategy has blown up in their faces.”
Cote ordered the Federal Housing Finance Agency, which filed the case, to propose how much the banks should pay as a result of her ruling.
‘Consistently Candid’
“Nomura is confident that it was consistently candid, transparent and professional in all of its dealings with Fannie Mae and Freddie Mac,” Jonathan Hodgkinson, a U.S.-based spokesman for the bank, said in an e-mailed statement. Nomura will appeal, he said.
Linda Harper, a U.K.-based spokeswoman for RBS, declined to comment on the decision.
FHFA is pleased with the ruling and “looks forward to submitting proposed damages,” the agency’s general counsel, Alfred M. Pollard, said in an e-mailed statement.
see more: http://www.bloomberg.com/news/articles/2015-05-11/nomura-loses-trial-over-toxic-mortgage-after-16-banks-settle
Nomura and RBS were excoriated in a 361-page opinion by U.S. District Judge Denise Cote in Manhattan, whose ruling followed the first trial of claims that banks sold flawed securities to government-owned mortgage companies. After a three-week trial, Cote said they misled Fannie Mae and Freddie Mac and set a damages formula that may result in the government winning about half its original claim of $1 billion.
“The offering documents did not correctly describe the mortgage loans,” Cote, who heard the case without a jury, wrote Monday. “The magnitude of falsity, conservatively measured, is enormous.”
Before the trial, FHFA had reached $17.9 billion in settlements with other banks, including Bank of America Corp., JPMorgan Chase & Co. and Goldman Sachs Group Inc. The ruling against Nomura and RBS may encourage other banks to settle mortgage-related suits brought by regulators and private investors rather than face the bad publicity and cost of an adverse judgment, said Robert C. Hockett, a professor at Cornell Law School.
“They look pretty bad,” Hockett said in an interview. “They look like the strategy has blown up in their faces.”
Cote ordered the Federal Housing Finance Agency, which filed the case, to propose how much the banks should pay as a result of her ruling.
‘Consistently Candid’
“Nomura is confident that it was consistently candid, transparent and professional in all of its dealings with Fannie Mae and Freddie Mac,” Jonathan Hodgkinson, a U.S.-based spokesman for the bank, said in an e-mailed statement. Nomura will appeal, he said.
Linda Harper, a U.K.-based spokeswoman for RBS, declined to comment on the decision.
FHFA is pleased with the ruling and “looks forward to submitting proposed damages,” the agency’s general counsel, Alfred M. Pollard, said in an e-mailed statement.
see more: http://www.bloomberg.com/news/articles/2015-05-11/nomura-loses-trial-over-toxic-mortgage-after-16-banks-settle
Friday, May 8, 2015
Mortgage rates move higher for second week in a row
Mortgage rates moved higher for the second week in a row, according to the latest data released Thursday by Freddie Mac.
The 30-year fixed-rate average spiked to 3.8 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.68 percent a week ago and 4.21 percent a year ago. The jump of 12 basis points was the biggest gain by the 30-year fixed-rate average since November 2013 when it soared 19 basis points.
The 15-year fixed-rate average climbed to 3.02 percent with an average 0.6 point. It was 2.94 percent a week ago and 3.32 percent a year ago. The 15-year fixed rate surpassed 3 percent for the first time since March 19.
Hybrid adjustable rate mortgages were mixed. The five-year ARM average rose to 2.9 percent with an average 0.4 point. It was 2.85 percent a week ago and 3.05 percent a year ago. The five-year ARM has stayed below 3 percent since March 12.
The one-year ARM average fell to 2.46 percent with an average 0.4 point. It was 2.49 percent a week ago and 2.43 percent a year ago.
Len Kiefer, Freddie Mac deputy chief economist, cited German government bond yields for the upturn.
“Mortgage rates rose this week to the highest level since the week of March 12 as a selloff in German bunds helped drive U.S. Treasury yields above 2.2 percent,” Kiefer said in a statement.
“The U.S. trade deficit reached $51.4 billion in March to the highest level since 2008. Also, the Institute for Supply Management’s manufacturing index was unchanged in April, but manufacturing employment contracted as the index fell below 50 for the first time since May 2013.”
see more at: http://www.washingtonpost.com/blogs/where-we-live/wp/2015/05/07/mortgage-rates-move-higher-for-second-week-in-a-row-2/
The 30-year fixed-rate average spiked to 3.8 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.68 percent a week ago and 4.21 percent a year ago. The jump of 12 basis points was the biggest gain by the 30-year fixed-rate average since November 2013 when it soared 19 basis points.
The 15-year fixed-rate average climbed to 3.02 percent with an average 0.6 point. It was 2.94 percent a week ago and 3.32 percent a year ago. The 15-year fixed rate surpassed 3 percent for the first time since March 19.
Hybrid adjustable rate mortgages were mixed. The five-year ARM average rose to 2.9 percent with an average 0.4 point. It was 2.85 percent a week ago and 3.05 percent a year ago. The five-year ARM has stayed below 3 percent since March 12.
The one-year ARM average fell to 2.46 percent with an average 0.4 point. It was 2.49 percent a week ago and 2.43 percent a year ago.
Len Kiefer, Freddie Mac deputy chief economist, cited German government bond yields for the upturn.
“Mortgage rates rose this week to the highest level since the week of March 12 as a selloff in German bunds helped drive U.S. Treasury yields above 2.2 percent,” Kiefer said in a statement.
“The U.S. trade deficit reached $51.4 billion in March to the highest level since 2008. Also, the Institute for Supply Management’s manufacturing index was unchanged in April, but manufacturing employment contracted as the index fell below 50 for the first time since May 2013.”
see more at: http://www.washingtonpost.com/blogs/where-we-live/wp/2015/05/07/mortgage-rates-move-higher-for-second-week-in-a-row-2/
Thursday, May 7, 2015
Mortgage rates rise to highest level of the year so far
Mortgage rates jumped this week after the yield on the 10-year Treasury note hit its highest level in two months. The increase in rates spurred a drop-off in refinances, but purchases are still up.
The 10-year Treasury yield, which mortgage rates tend to follow, reached its highest level since March 6 after a weeklong sell-off in European bonds.
"Obviously, rates are up. The real question is what is driving it right now," says Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. "It's not necessarily U.S. growth inflation. It's what's happening in the European markets."
Dissipating worries over deflation in the eurozone prompted a global sell-off in government bonds.
2015%30-year fixedFebMarApr3.703.803.904.00
30 year fixed rate mortgage -- 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 3.99 percent from 3.86 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.37 percent. Four weeks ago, it was 3.82 percent. The mortgages in this week's survey had an average total of 0.23 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.08 percent. This week's rate is 0.09 percentage points lower than that 52-week average.
The benchmark 15-year fixed-rate mortgage rose to 3.17 percent from 3.07 percent.
The benchmark 5/1 adjustable-rate mortgage rose to 3.19 percent from 3.11 percent.
The benchmark 30-year fixed-rate jumbo rose to 4.07 percent from 3.97 percent
Read more: http://www.bankrate.com/finance/mortgages/mortgage-analysis-050715.aspx
The 10-year Treasury yield, which mortgage rates tend to follow, reached its highest level since March 6 after a weeklong sell-off in European bonds.
"Obviously, rates are up. The real question is what is driving it right now," says Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. "It's not necessarily U.S. growth inflation. It's what's happening in the European markets."
Dissipating worries over deflation in the eurozone prompted a global sell-off in government bonds.
2015%30-year fixedFebMarApr3.703.803.904.00
30 year fixed rate mortgage -- 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 3.99 percent from 3.86 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.37 percent. Four weeks ago, it was 3.82 percent. The mortgages in this week's survey had an average total of 0.23 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.08 percent. This week's rate is 0.09 percentage points lower than that 52-week average.
The benchmark 15-year fixed-rate mortgage rose to 3.17 percent from 3.07 percent.
The benchmark 5/1 adjustable-rate mortgage rose to 3.19 percent from 3.11 percent.
The benchmark 30-year fixed-rate jumbo rose to 4.07 percent from 3.97 percent
Read more: http://www.bankrate.com/finance/mortgages/mortgage-analysis-050715.aspx
Tuesday, May 5, 2015
Family-funded reverse mortgage can help elderly parents keep home
WASHINGTON — Could there be a way to help senior homeowners with their cash flow needs without saddling them — and ultimately their families — with high costs?
That's a key question at a time when millions of seniors are flooding into their post-retirement years, many of them with equity in their homes but insufficient income to handle expenses over the long term. If they want to stay in their homes, they can opt for a government-insured reverse mortgage, which may provide them cash in exchange for repayment plus interest after they die, move out or sell. Or they can apply for a home equity line of credit from a bank.
But there are problems with both choices. The dominant government-insured reverse mortgage program comes with high upfront lender fees, mortgage insurance premiums and newly toughened financial qualification requirements. A home equity credit line may be difficult for seniors to obtain because they cannot qualify on credit or debt-to-income grounds in today's stricter underwriting environment.
As of Friday nationwide, however, some seniors had a new option — one that ties into increasingly popular "peer-to-peer" lending. It's a family-funded reverse mortgage known as the "Caregiver" loan. It allows any number of children and grandchildren to pool resources to provide a flexible line of credit at interest rates far below what commercial reverse mortgage lenders charge and with far fewer hassles. In intra-family lending, there's no bank or mortgage company. Family members are the bank.
Here's a simplified example: Say you and two siblings want to help Mom and Dad, who are in their late 70s. You and your siblings are all doing well enough that you have at least some cash to spare. Ultimately, you want to retain your parents' house for the estate once your parents pass away, keep costs to a minimum and only sell the property when you, not a faraway bank, choose to.
So you sit down with Mom and Dad and determine that, at least for the foreseeable future, they will need about $1,500 in additional income a month. You and your siblings agree to apportion the payments among yourselves in some way, maybe a commitment of $500 a month each for a period of years. You also pick an interest rate that achieves a good result for you and your parents — say 3% annually. That's much lower than a commercial lender could charge but higher than what you've been earning on your bank deposits or money market funds. There are no required fees upfront — hey, it's Mom and Dad.
What you need at this stage is help with putting all the details of your agreement into a legally binding reverse mortgage, recordable at the local courthouse. Enter National Family Mortgage, a Massachusetts company that has helped facilitate and service nearly $290 million in intra-family home loans in recent years — typically parents helping kids buy first homes. Now National Family is expanding its menu to include reverse mortgages.
see more at: http://www.latimes.com/business/realestate/la-fi-harney-20150503-story.html
That's a key question at a time when millions of seniors are flooding into their post-retirement years, many of them with equity in their homes but insufficient income to handle expenses over the long term. If they want to stay in their homes, they can opt for a government-insured reverse mortgage, which may provide them cash in exchange for repayment plus interest after they die, move out or sell. Or they can apply for a home equity line of credit from a bank.
But there are problems with both choices. The dominant government-insured reverse mortgage program comes with high upfront lender fees, mortgage insurance premiums and newly toughened financial qualification requirements. A home equity credit line may be difficult for seniors to obtain because they cannot qualify on credit or debt-to-income grounds in today's stricter underwriting environment.
As of Friday nationwide, however, some seniors had a new option — one that ties into increasingly popular "peer-to-peer" lending. It's a family-funded reverse mortgage known as the "Caregiver" loan. It allows any number of children and grandchildren to pool resources to provide a flexible line of credit at interest rates far below what commercial reverse mortgage lenders charge and with far fewer hassles. In intra-family lending, there's no bank or mortgage company. Family members are the bank.
Here's a simplified example: Say you and two siblings want to help Mom and Dad, who are in their late 70s. You and your siblings are all doing well enough that you have at least some cash to spare. Ultimately, you want to retain your parents' house for the estate once your parents pass away, keep costs to a minimum and only sell the property when you, not a faraway bank, choose to.
So you sit down with Mom and Dad and determine that, at least for the foreseeable future, they will need about $1,500 in additional income a month. You and your siblings agree to apportion the payments among yourselves in some way, maybe a commitment of $500 a month each for a period of years. You also pick an interest rate that achieves a good result for you and your parents — say 3% annually. That's much lower than a commercial lender could charge but higher than what you've been earning on your bank deposits or money market funds. There are no required fees upfront — hey, it's Mom and Dad.
What you need at this stage is help with putting all the details of your agreement into a legally binding reverse mortgage, recordable at the local courthouse. Enter National Family Mortgage, a Massachusetts company that has helped facilitate and service nearly $290 million in intra-family home loans in recent years — typically parents helping kids buy first homes. Now National Family is expanding its menu to include reverse mortgages.
see more at: http://www.latimes.com/business/realestate/la-fi-harney-20150503-story.html
Friday, May 1, 2015
Mortgage rates rise, even in a weak economy
Mortgage rates increased this week as yields on government bonds spiked. Still, rates will likely stay low down the road as an economy recovering from a severe winter keeps the Federal Reserve from raising interest rates too soon.
Housing picture mixed
After last week's good housing data, the state of the home market looked more conflicted this week. New home sales disappointed in March, falling 11.4 percent, while the volume of mortgage applications fell 2.3 percent last week from the previous one, according to the National Mortgage Bankers Association. That included a 4 percent decline in refinances and a flat reading on purchase applications.
Those downbeat reports were balanced out by Standard & Poor's/Case-Shiller Home Price Index on April 28, which showed values in 20 cities increased in February 0.9 percent month over month (seasonally adjusted) and 5 percent year over year (non-seasonally adjusted). Pending home sales for April edged up 1.1 percent, the third straight month of increases, according to an April 29 report from the National Association of Realtors.
2015%30-year fixedFebMarApr3.703.803.904.0030-year fixed02/11/2015 : 3.90%
30 year fixed rate mortgage -- 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 3.86 percent from 3.79 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.44 percent. Four weeks ago, it was 3.82 percent. The mortgages in this week's survey had an average total of 0.22 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.09 percent. This week's rate is 0.23 percentage points lower than that 52-week average.
Read more: http://www.bankrate.com/finance/mortgages/mortgage-analysis-043015.aspx
Housing picture mixed
After last week's good housing data, the state of the home market looked more conflicted this week. New home sales disappointed in March, falling 11.4 percent, while the volume of mortgage applications fell 2.3 percent last week from the previous one, according to the National Mortgage Bankers Association. That included a 4 percent decline in refinances and a flat reading on purchase applications.
Those downbeat reports were balanced out by Standard & Poor's/Case-Shiller Home Price Index on April 28, which showed values in 20 cities increased in February 0.9 percent month over month (seasonally adjusted) and 5 percent year over year (non-seasonally adjusted). Pending home sales for April edged up 1.1 percent, the third straight month of increases, according to an April 29 report from the National Association of Realtors.
2015%30-year fixedFebMarApr3.703.803.904.0030-year fixed02/11/2015 : 3.90%
30 year fixed rate mortgage -- 3 month trend
The benchmark 30-year fixed-rate mortgage rose to 3.86 percent from 3.79 percent last week, according to the Bankrate.com national survey of large lenders. One year ago, that rate was 4.44 percent. Four weeks ago, it was 3.82 percent. The mortgages in this week's survey had an average total of 0.22 discount and origination points. Over the past 52 weeks, the 30-year fixed has averaged 4.09 percent. This week's rate is 0.23 percentage points lower than that 52-week average.
Read more: http://www.bankrate.com/finance/mortgages/mortgage-analysis-043015.aspx
Sunday, April 26, 2015
Low-down-payment mortgages are back
One of the culprits in the building and bursting of the nation's housing bubble -- the low-down-payment mortgage -- is back in favor and readily available at a lender near you.
Numerous firms are taking part in a new and somewhat controversial program offered by Fannie Mae for fixed-rate conventional home loans with 3 percent down payments. Freddie Mac started backing similar loans in January.
The two bailed-out housing finance corporations reintroduced their 3 percent down products in December as a way to assist prospective first-time home buyers who have the income to pay off a mortgage but lack the savings for a large upfront payment. Before the announcement, Fannie and Freddie's lowest down-payment option was 5 percent.
Lenders say that millennial home buyers -- those born after 1980 -- can especially benefit from this 3 percent down program.
Proponents contend that these 3 percent-down-mortgages are vastly different from the risky subprime mortgage products that fueled the housing bubble and led to the financial crisis. As a result of the crisis, the federal government infused Fannie and Freddie with $187 billion once borrowers started defaulting. (They've since repaid the bailout with a $38 billion profit.)
Adjustable rates or interest-only teaser periods are forbidden. Borrowers must accurately document their finances and ability to repay. They also need a minimum 620 credit score, a low debt-to-income ratio, and must take a home ownership education course.
"There's many factors that go into the risk of a certain loan and down payment is just one of them," said Fannie Mae spokesman Andrew Wilson. "You get into the danger zone when you're layering a lot of risk factors."
Still, some lawmakers have questioned whether the 3 percent-down products are a return to the loose lending practices that brought on the 2007-08 real estate market collapse.
That danger -- real or exaggerated -- was a hot topic among Republican members of the House Financial Services Committee during Jan. 27 testimony by Melvin Watt, director of the Federal Housing Finance Agency that regulates Fannie and Freddie.
"You're once again putting people into homes that they can't afford," said Rep. Jeb Hensarling, R-Texas.
Down payments of about 20 percent were the norm for most home mortgages prior to the 1980s. A large down payment helps assure lenders that a borrower has enough of a stake in the property to keep up with the monthly payments. Sizable down payments also make it less likely that borrowers will walk away if home values fall and they owe more on their mortgage than the property is worth.
Fannie Mae and Freddie Mac relaxed their down payment requirements during the 1990s, moving from 10 percent to 5 percent to 3 percent, and later even zero percent down in the early 2000s.
The government's Financial Crisis Inquiry Report concluded that Fannie and Freddie "added helium to the housing balloon" by buying subprime mortgage-backed securities and loosening their standards for guaranteeing loans. But they weren't central causes of the crisis: "They followed rather than led Wall Street and other lenders in the rush for fool's gold."
After the crash, Fannie and Freddie were crucial to propping up the housing market when lenders were skittish to make loans without government guarantees. Together, both entities own or guarantee just under 60 percent of all new U.S. mortgages.
Research by the Urban Institute, a left-leaning think tank, shows that default rates on recent Fannie Mae-backed mortgages are similar among borrowers who make 20 percent down payments and 3 percent to 5 percent payments. Defaults on older, pre-crash loans were much higher with low down payments.
Numerous firms are taking part in a new and somewhat controversial program offered by Fannie Mae for fixed-rate conventional home loans with 3 percent down payments. Freddie Mac started backing similar loans in January.
The two bailed-out housing finance corporations reintroduced their 3 percent down products in December as a way to assist prospective first-time home buyers who have the income to pay off a mortgage but lack the savings for a large upfront payment. Before the announcement, Fannie and Freddie's lowest down-payment option was 5 percent.
Lenders say that millennial home buyers -- those born after 1980 -- can especially benefit from this 3 percent down program.
Proponents contend that these 3 percent-down-mortgages are vastly different from the risky subprime mortgage products that fueled the housing bubble and led to the financial crisis. As a result of the crisis, the federal government infused Fannie and Freddie with $187 billion once borrowers started defaulting. (They've since repaid the bailout with a $38 billion profit.)
Adjustable rates or interest-only teaser periods are forbidden. Borrowers must accurately document their finances and ability to repay. They also need a minimum 620 credit score, a low debt-to-income ratio, and must take a home ownership education course.
"There's many factors that go into the risk of a certain loan and down payment is just one of them," said Fannie Mae spokesman Andrew Wilson. "You get into the danger zone when you're layering a lot of risk factors."
Still, some lawmakers have questioned whether the 3 percent-down products are a return to the loose lending practices that brought on the 2007-08 real estate market collapse.
That danger -- real or exaggerated -- was a hot topic among Republican members of the House Financial Services Committee during Jan. 27 testimony by Melvin Watt, director of the Federal Housing Finance Agency that regulates Fannie and Freddie.
"You're once again putting people into homes that they can't afford," said Rep. Jeb Hensarling, R-Texas.
Down payments of about 20 percent were the norm for most home mortgages prior to the 1980s. A large down payment helps assure lenders that a borrower has enough of a stake in the property to keep up with the monthly payments. Sizable down payments also make it less likely that borrowers will walk away if home values fall and they owe more on their mortgage than the property is worth.
Fannie Mae and Freddie Mac relaxed their down payment requirements during the 1990s, moving from 10 percent to 5 percent to 3 percent, and later even zero percent down in the early 2000s.
The government's Financial Crisis Inquiry Report concluded that Fannie and Freddie "added helium to the housing balloon" by buying subprime mortgage-backed securities and loosening their standards for guaranteeing loans. But they weren't central causes of the crisis: "They followed rather than led Wall Street and other lenders in the rush for fool's gold."
After the crash, Fannie and Freddie were crucial to propping up the housing market when lenders were skittish to make loans without government guarantees. Together, both entities own or guarantee just under 60 percent of all new U.S. mortgages.
Research by the Urban Institute, a left-leaning think tank, shows that default rates on recent Fannie Mae-backed mortgages are similar among borrowers who make 20 percent down payments and 3 percent to 5 percent payments. Defaults on older, pre-crash loans were much higher with low down payments.
see more: http://www.rep-am.com/Business/876977.txt
Thursday, April 23, 2015
The crazy world of negative rates: Banks pay your mortgage for you?
Up is down, black is white.
Or at least that's what it feels like in Europe, where at least one bank is paying some customers who borrow from it because interest rates have turned negative.
The European Central Bank has slashed official rates to record lows, and is pumping billions of euros into the economy to boost growth and inflation.
That has forced rates on some mortgage products far enough below zero to create a big headache for the banks: Do they now owe their borrowers?
"We are in uncharted waters," said Luca Bertalot, secretary general of the European Mortgage Federation. "Monetary policy is changing the funding landscape in Europe completely."
Here's how it works. Mortgage interest in Europe is often pegged to interbank lending rates known as Libor or Euribor. Short-term rates on a Swiss franc version of Libor are now approaching minus 1.0%.
Spain's Bankinter, which sold mortgages pegged to Swiss Libor, told CNN it couldn't pay interest on a loan (go figure!) so instead reduced the principal for some of its customers.
Bankinter's policy was first reported by The Wall Street Journal earlier this month.
With no shift in ECB policy likely for some time, the banking industry is worried about how things will pan out. Bertalot said mortgage lenders were talking to the ECB and national central banks about how to deal with the challenge.
"There are no clear guidelines on how to move forward," he said.
Related: Fed rate hike: Here's what matters
The Bank of Spain told CNN it has not issued any official guidance to banks on how to adjust lending practices to the negative interest rate environment. The Bank of Portugal said in March that lenders should take "precautionary measures."
Negative interest rates have created anomalies elsewhere in Europe.
Germany issued its first 5-year bond with a negative yield in February, meaning investors are prepared to make a small loss buying super secure government debt. In the same month, a small Danish bank said it would charge customers 0.5% interest on their deposits from March. So for every $100 they deposit, the bank takes 50 cents.
see more: http://money.cnn.com/2015/04/22/investing/negative-mortgage-rates-europe/
Or at least that's what it feels like in Europe, where at least one bank is paying some customers who borrow from it because interest rates have turned negative.
The European Central Bank has slashed official rates to record lows, and is pumping billions of euros into the economy to boost growth and inflation.
That has forced rates on some mortgage products far enough below zero to create a big headache for the banks: Do they now owe their borrowers?
"We are in uncharted waters," said Luca Bertalot, secretary general of the European Mortgage Federation. "Monetary policy is changing the funding landscape in Europe completely."
Here's how it works. Mortgage interest in Europe is often pegged to interbank lending rates known as Libor or Euribor. Short-term rates on a Swiss franc version of Libor are now approaching minus 1.0%.
Spain's Bankinter, which sold mortgages pegged to Swiss Libor, told CNN it couldn't pay interest on a loan (go figure!) so instead reduced the principal for some of its customers.
Bankinter's policy was first reported by The Wall Street Journal earlier this month.
With no shift in ECB policy likely for some time, the banking industry is worried about how things will pan out. Bertalot said mortgage lenders were talking to the ECB and national central banks about how to deal with the challenge.
"There are no clear guidelines on how to move forward," he said.
Related: Fed rate hike: Here's what matters
The Bank of Spain told CNN it has not issued any official guidance to banks on how to adjust lending practices to the negative interest rate environment. The Bank of Portugal said in March that lenders should take "precautionary measures."
Negative interest rates have created anomalies elsewhere in Europe.
Germany issued its first 5-year bond with a negative yield in February, meaning investors are prepared to make a small loss buying super secure government debt. In the same month, a small Danish bank said it would charge customers 0.5% interest on their deposits from March. So for every $100 they deposit, the bank takes 50 cents.
see more: http://money.cnn.com/2015/04/22/investing/negative-mortgage-rates-europe/
Tuesday, April 21, 2015
Commercial mortgages triple in South Florida
Overall commercial mortgage volume more than tripled in South Florida between 2009 and 2014, according to a study released by Miami-based BridgeInvest, a private mortgage lender.
Over $11.4 billion in commercial mortgages were financed in 2014, up from about $9.8 billion in 2013 and $3.5 billion in 2009
Miami-Dade County captured the biggest slice of mortgage volume in the region in 2014 with 57 percent, followed by Palm Beach County at 23 percent and Broward County at 20 percent.
BridgeInvest used data from CRS Power Tool Mortgage, a Cushman & Wakefield research publication, for the study.
While Miami-Dade captured almost two-thirds of the commercial mortgage volume in 2014, the county also saw the most growth with a 42 percent year-over-year increase, compared to the 13 percent growth in Palm Beach and a 26 percent decline in Broward over the same period.
“Miami-Dade consistently has had more, but it’s considerably more this year when compared to Broward and Palm Beach,” said Alex Horn, managing partner of BridgeInvest. “Miami grew so much more. It’s very interesting and alludes to the fact that we’re seeing so much changing in the county,” he said.
The study broke out into seven classes of mortgages: land and construction, retail, multifamily, industrial, office, hotel and other. Land and construction dominated, with about $10.1 billion in mortgages, or 23 percent, followed by retail with $9.4 million, or 18 percent, and multifamily with $7.1 billion, or 17 percent.
see more at: http://www.bizjournals.com/southflorida/blog/morning-edition/2015/04/commercial-mortgages-triple-in-south-florida.html
Over $11.4 billion in commercial mortgages were financed in 2014, up from about $9.8 billion in 2013 and $3.5 billion in 2009
Miami-Dade County captured the biggest slice of mortgage volume in the region in 2014 with 57 percent, followed by Palm Beach County at 23 percent and Broward County at 20 percent.
BridgeInvest used data from CRS Power Tool Mortgage, a Cushman & Wakefield research publication, for the study.
While Miami-Dade captured almost two-thirds of the commercial mortgage volume in 2014, the county also saw the most growth with a 42 percent year-over-year increase, compared to the 13 percent growth in Palm Beach and a 26 percent decline in Broward over the same period.
“Miami-Dade consistently has had more, but it’s considerably more this year when compared to Broward and Palm Beach,” said Alex Horn, managing partner of BridgeInvest. “Miami grew so much more. It’s very interesting and alludes to the fact that we’re seeing so much changing in the county,” he said.
The study broke out into seven classes of mortgages: land and construction, retail, multifamily, industrial, office, hotel and other. Land and construction dominated, with about $10.1 billion in mortgages, or 23 percent, followed by retail with $9.4 million, or 18 percent, and multifamily with $7.1 billion, or 17 percent.
see more at: http://www.bizjournals.com/southflorida/blog/morning-edition/2015/04/commercial-mortgages-triple-in-south-florida.html
Wednesday, April 15, 2015
New Research: Reverse Mortgages, SPIAs And Retirement Income
Retirees need longevity protection and additional funds. Annuities and reverse mortgages can meet those needs. While annuities have been researched extensively, reverse mortgages haven’t received as much attention. We need research on how to fit these two products together in overall retirement plans. I’ll launch that effort here.
Let’s say a new client walks into an advisor’s office and says, “I want to build a secure income for retirement and I’ve heard about both annuities and reverse mortgages. What should I do?” The advisor’s answer is likely to be: “Let’s focus on whether you should buy an annuity and leave the reverse mortgage for later in retirement. You can tap home equity in the future if you need to.”
But that may not be the best answer. It might be better to set up a reverse mortgage line of credit at the time of retirement for use later on, or opt for the tenure option that will make level monthly payments for as long as the borrower occupies their home. Or an even better option might be to purchase a single premium immediate annuity (SPIA) and combine it with either a reverse mortgage line of credit or the tenure option.
Which alternative is best? To reduce the inevitable confusion, I’ll look at these alternatives conceptually, and then use an example to model the financial outcomes.
First things first
We need to ask questions before making recommendations: How much savings does the client have? Will systematic withdrawals or purchasing annuities provide adequate retirement funds, or does the client need even more income? How long does the client plan to stay in their current home? Is the home mortgaged? Does the client hope to leave the home as a bequest or is it more important to generate retirement income? Does the client have long-term care insurance, or is the plan to rely on home equity? If a reverse mortgage line of credit is set up, what is the likelihood the client will use it?
Reverse mortgages are offered under the home equity conversion mortgage (HECM) program administered by HUD and insured by the FHA. A new version of the program was introduced in 2013 offering three alternatives – line of credit (LOC), payments for set periods, or a tenure option. Under the HECM program, borrowers need to be age 62 or older, and the amount of home value that can be mortgaged is capped at $625,000. There are non-HECM proprietary reverse mortgages for larger amounts, but they are not government guaranteed and do not have the HECM standard loan provisions.
Reverse mortgages have significant up-front fees, so effective borrowing costs are high if only small amounts are borrowed, or borrowed for a short time. An example from the National Reverse Mortgage Lenders Association (NRLMA) calculator estimates fees of $8,301 for a $250,000 home. Lending limits (referred to as “principal limits”) depend on the age of the borrower and interest rates. For a 65-year-old in this $250,000 home, the current principal limit would be $135,500, so the up-front costs would be 3.3% of the home value or 6.1% of the principal limit. The fees cover loan origination, mortgage insurance and other closing costs, and can be financed as part of the loan, but they come out of the funds available for lending.
see more: http://www.valuewalk.com/2015/04/nreverse-mortgages-spias/
Let’s say a new client walks into an advisor’s office and says, “I want to build a secure income for retirement and I’ve heard about both annuities and reverse mortgages. What should I do?” The advisor’s answer is likely to be: “Let’s focus on whether you should buy an annuity and leave the reverse mortgage for later in retirement. You can tap home equity in the future if you need to.”
But that may not be the best answer. It might be better to set up a reverse mortgage line of credit at the time of retirement for use later on, or opt for the tenure option that will make level monthly payments for as long as the borrower occupies their home. Or an even better option might be to purchase a single premium immediate annuity (SPIA) and combine it with either a reverse mortgage line of credit or the tenure option.
Which alternative is best? To reduce the inevitable confusion, I’ll look at these alternatives conceptually, and then use an example to model the financial outcomes.
First things first
We need to ask questions before making recommendations: How much savings does the client have? Will systematic withdrawals or purchasing annuities provide adequate retirement funds, or does the client need even more income? How long does the client plan to stay in their current home? Is the home mortgaged? Does the client hope to leave the home as a bequest or is it more important to generate retirement income? Does the client have long-term care insurance, or is the plan to rely on home equity? If a reverse mortgage line of credit is set up, what is the likelihood the client will use it?
Reverse mortgages are offered under the home equity conversion mortgage (HECM) program administered by HUD and insured by the FHA. A new version of the program was introduced in 2013 offering three alternatives – line of credit (LOC), payments for set periods, or a tenure option. Under the HECM program, borrowers need to be age 62 or older, and the amount of home value that can be mortgaged is capped at $625,000. There are non-HECM proprietary reverse mortgages for larger amounts, but they are not government guaranteed and do not have the HECM standard loan provisions.
Reverse mortgages have significant up-front fees, so effective borrowing costs are high if only small amounts are borrowed, or borrowed for a short time. An example from the National Reverse Mortgage Lenders Association (NRLMA) calculator estimates fees of $8,301 for a $250,000 home. Lending limits (referred to as “principal limits”) depend on the age of the borrower and interest rates. For a 65-year-old in this $250,000 home, the current principal limit would be $135,500, so the up-front costs would be 3.3% of the home value or 6.1% of the principal limit. The fees cover loan origination, mortgage insurance and other closing costs, and can be financed as part of the loan, but they come out of the funds available for lending.
see more: http://www.valuewalk.com/2015/04/nreverse-mortgages-spias/
Friday, April 10, 2015
Mortgage rates fall; 30-year averaging 3.66%, Freddie Mac says
Fixed mortgage rates moved lower this week on news of weakness in the labor markets, with Freddie Mac saying lenders were offering conventional 30-year loans at an average of 3.66%, down from last week’s 3.7%
The average offering rate for 15-year loans, which are popular with refinancers, dropped to 2.93%, from 2.98%, the home finance giant reported.
In the latest sign that economic growth may be slowing, the Labor Department said Thursday that claims for first-time unemployment benefits rose last week from a 15-year low set the previous week.
Jobs are a key indicator for analysts considering when the Federal Reserve may increase a benchmark short-term lending rate from near zero, where it has been held since the 2008 financial crisis to stimulate the economy.
If the Fed begins to raise the rate later this year, it could also affect long-term interest rates such as those for mortgages, although the Fed has no direct control over the long rates.
Keith Gumbinger, vice president of HSH.com, which tracks mortgage rates day to day, said other economic reports in recent weeks also have suggested that the economy has lost some momentum, allowing interest rates to ease.
"The employment report for March was rather weak, breaking a year-long string of solid gains in hiring," Gumbinger wrote.
see more: http://www.latimes.com/business/la-fi-freddie-mac-mortgage-rates-20150409-story.html
The average offering rate for 15-year loans, which are popular with refinancers, dropped to 2.93%, from 2.98%, the home finance giant reported.
In the latest sign that economic growth may be slowing, the Labor Department said Thursday that claims for first-time unemployment benefits rose last week from a 15-year low set the previous week.
Jobs are a key indicator for analysts considering when the Federal Reserve may increase a benchmark short-term lending rate from near zero, where it has been held since the 2008 financial crisis to stimulate the economy.
If the Fed begins to raise the rate later this year, it could also affect long-term interest rates such as those for mortgages, although the Fed has no direct control over the long rates.
Keith Gumbinger, vice president of HSH.com, which tracks mortgage rates day to day, said other economic reports in recent weeks also have suggested that the economy has lost some momentum, allowing interest rates to ease.
"The employment report for March was rather weak, breaking a year-long string of solid gains in hiring," Gumbinger wrote.
see more: http://www.latimes.com/business/la-fi-freddie-mac-mortgage-rates-20150409-story.html
Tuesday, April 7, 2015
Urban Institute: 4 million missing mortgages
A new Urban Institute study says that tight credit standards curbed mortgage lending activity from 2009 to 2013.
Based on the authors’ estimates, if the cautious standards of 2001 had been in place rather than the more severe standards that were in place over these five years, lenders would have made more than 4 million additional loans.
“The number of potential loans that were not made-which we call ‘missing loans’-grew from 0.50 million in 2009 to 1.25 million in 2013. African American and Hispanic families have been particularly affected by this tight credit environment,” the authors say.
The full study can be read here.
Based on the authors’ estimates, if the cautious standards of 2001 had been in place rather than the more severe standards that were in place over these five years, lenders would have made more than 4 million additional loans.
“The number of potential loans that were not made-which we call ‘missing loans’-grew from 0.50 million in 2009 to 1.25 million in 2013. African American and Hispanic families have been particularly affected by this tight credit environment,” the authors say.
The full study can be read here.
Friday, April 3, 2015
Fixed Mortgage Rates Rise in Latest Week
Average fixed mortgage rates in the U.S. edged up in the latest week, according to mortgage-finance company Freddie Mac.
"Mortgage rates were little changed this week, entering April about where we started the year," Freddie Mac Deputy Chief Economist Len Kiefer stated Thursday.
Mr. Kiefer noted that the final fourth-quarter gross domestic product growth estimate was unchanged from a previous estimate for a 2.2% increase. Also, pending home sales rose 3.1% in February, beating expectations.
For the week ended Thursday, the 30-year fixed-rate mortgage averaged 3.7%, compared with 3.69% a week earlier and 4.41% a year earlier. Rates on 15-year fixed-rate mortgages averaged 2.98%, compared with 2.97% the previous week and 3.47% a year earlier.
Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, on average, were at 2.92%, unchanged from the previous week and down from 3.12% a year earlier. One-year Treasury-indexed ARM rates on average were 2.46%, flat from the previous week and up slightly from 2.45% a year earlier.
Read more: http://www.nasdaq.com/article/fixed-mortgage-rates-rise-in-latest-week-20150402-00581
"Mortgage rates were little changed this week, entering April about where we started the year," Freddie Mac Deputy Chief Economist Len Kiefer stated Thursday.
Mr. Kiefer noted that the final fourth-quarter gross domestic product growth estimate was unchanged from a previous estimate for a 2.2% increase. Also, pending home sales rose 3.1% in February, beating expectations.
For the week ended Thursday, the 30-year fixed-rate mortgage averaged 3.7%, compared with 3.69% a week earlier and 4.41% a year earlier. Rates on 15-year fixed-rate mortgages averaged 2.98%, compared with 2.97% the previous week and 3.47% a year earlier.
Five-year Treasury-indexed hybrid adjustable-rate mortgages, or ARMs, on average, were at 2.92%, unchanged from the previous week and down from 3.12% a year earlier. One-year Treasury-indexed ARM rates on average were 2.46%, flat from the previous week and up slightly from 2.45% a year earlier.
Read more: http://www.nasdaq.com/article/fixed-mortgage-rates-rise-in-latest-week-20150402-00581
Thursday, April 2, 2015
Guess who's issuing slews of mortgages? Not your bank
More home buyers enter the market this spring, but big banks are continuing their retreat from mortgage lending.
That is opening the door ever wider for independent, nonbank lenders. Both volume and profit at these lenders are up from a year ago, according to the Mortgage Bankers Association, but their share of all lending is where the numbers are really soaring.
Nonbank lending rose to 37.5 percent of the market during 2014, up from 14 percent in 2011, according to publication Inside Mortgage Finance.
"That was attributable to a combination of nonbanks being more aggressive, both in terms of rates and underwriting, and large banks pulling back slightly in the conforming markets," Editor Guy Cecala said.
The leaders in nonbank growth were names like Quicken and Penny Mac as well as other smaller nonbanks, like Charlotte, North Carolina-based Movement Mortgage.
"Our building actually sits in the shadow of a Bank of America headquarters building, and we've been able to gain number one purchase market share in that city inside of five years by offering great service to homeowners," said Casey Crawford, CEO of Movement Mortgage, which he founded in 2007.
Movement's angle is a promise to borrowers that it can close a loan in eight business days, the fastest the federal government allows. It fulfills that promise by approving borrowers before they even apply for a loan.
read more: http://www.cnbc.com/id/102553213
Tuesday, March 31, 2015
What effect are second mortgages and home equity lines of credit having on housing recovery?
Joe Schwarz is sick and tired of being a landlord.
“The property has pretty much been a nightmare since day one,” he said of a home he bought while a student at Arizona State University in 2007 near the height of the housing market in the Phoenix area. “I’ve wanted to be done with it for years but I couldn’t because of the second (mortgage) to be honest … A lot of people shy away from me because of the second.”
Schwarz said he purchased the property for $165,000, thinking he was getting instant equity given that other similar properties nearby were selling for as much as $199,000 at the time. The plan was to rent the property to cover the mortgage while watching the equity increase over time.
He purchased using some money he inherited along with a stated-income loan and a second mortgage to avoid paying private mortgage insurance (PMI).
“I had to go stated because I couldn’t qualify otherwise because I had a part-time job working at a bar while I was in college,” said Schwarz, who has since married and purchased another property where he and his wife live. “I was told if I do a second you don’t have to pay PMI.”
But about a year after Schwarz purchased the investment property, the housing market tanked and he saw the value of the property drop precipitously, falling as low as $65,000. Meanwhile the original plan for renting to a friend fell through, and although he ended up renting the property eventually, the rental income was barely enough to cover his mortgage payments, not to mention maintenance, vacancies and other costs that come with being a landlord.
“I’ve never really made any money on the property. In fact, it’s been a huge money pit for me,” he said, estimating he’s invested about $30,000 in the property that he never expects to see again.
see more at: http://www.inman.com/2015/03/30/second-mortgages-and-home-equity-lines-of-credit-threaten-housing-recovery/?hvid=1JGG2t
“The property has pretty much been a nightmare since day one,” he said of a home he bought while a student at Arizona State University in 2007 near the height of the housing market in the Phoenix area. “I’ve wanted to be done with it for years but I couldn’t because of the second (mortgage) to be honest … A lot of people shy away from me because of the second.”
Schwarz said he purchased the property for $165,000, thinking he was getting instant equity given that other similar properties nearby were selling for as much as $199,000 at the time. The plan was to rent the property to cover the mortgage while watching the equity increase over time.
He purchased using some money he inherited along with a stated-income loan and a second mortgage to avoid paying private mortgage insurance (PMI).
“I had to go stated because I couldn’t qualify otherwise because I had a part-time job working at a bar while I was in college,” said Schwarz, who has since married and purchased another property where he and his wife live. “I was told if I do a second you don’t have to pay PMI.”
But about a year after Schwarz purchased the investment property, the housing market tanked and he saw the value of the property drop precipitously, falling as low as $65,000. Meanwhile the original plan for renting to a friend fell through, and although he ended up renting the property eventually, the rental income was barely enough to cover his mortgage payments, not to mention maintenance, vacancies and other costs that come with being a landlord.
“I’ve never really made any money on the property. In fact, it’s been a huge money pit for me,” he said, estimating he’s invested about $30,000 in the property that he never expects to see again.
see more at: http://www.inman.com/2015/03/30/second-mortgages-and-home-equity-lines-of-credit-threaten-housing-recovery/?hvid=1JGG2t
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