Archive for the 'Mortgage' Category
Will we see 4 percent mortgage rates?
Just that week there has been considerable buzz that the Fed will release $1.2 trillion in new money and use that money to purchase government bonds as well as mortgage-backed securities. I don’t know too many folks who are thrilled that the government is printing money faster than Congress can figure out ways to spend it. And I know even fewer society who can accurately predict how such an infusion of cash ultimately will play out in our current real estate market.
The possible scenarios play out like that year’s Oscars. Some good, some poor, some mediocre and possibly one or two really good ones; but all of that depends on your perspectives of what’s best for the economy. I can promise you one thing, those of us in the business of financing homes will be busy answering one question, “What do you think home mortgage interest rates are going to do?”
By infusing that cash into bonds and mortgage-backed securities, the Fed intends to drive home mortgage rates lower and stimulate purchase activity in the nationwide glut of available home stock. For hard-hit areas like Phoenix, Las Vegas, California and Florida that could supply just suitable stimulus to not only stop the bleeding but plus reverse the negative equity trend faced by these markets.
For our local area, the potential benefits of that housing stimulus could prepare for a brisk spring and summer home buying/refinancing season. The OKC metro area has not seen the same decline in property values. Most areas of the metro have seen home values remain steady or slightly improved during the past year. At the same instance we have seen our available home stock grow while potential home buyers take longer than usual to think by their options before making buying offers.
Low residential interest rates can be a energetic motivator for qualified home buyers to finally produce the purchase decision they have been putting off. But all is not roses and Russell Stover’s. Lending guidelines have tightened significantly and buyers will have a bit of education awaiting them.
The only 100 percent financing options that remain are for veterans eligible for V.A. benefits and Rural Development Housing loans through the U.S. agency of Agriculture. Both of these financing options have specific borrower guidelines so consult your mortgage provider carefully to build positive you understand all restrictions.
F.H.A. home mortgages now require a minimum down payment of 3.5 percent plus closing costs. However, these costs can be provided as a gift from a qualifying relative. Again your mortgage provider will gladly review all of these conditions with you.
There will be a lot of talk about F.H.A. Streamline Refinances. whether you already have an F.H.A. mortgage on your primary residence, you can more than likely take advantage of that refinancing option to lower your interest rate while saving quite a bit on your closing costs.
If your current home loan is a V.A., you plus have a streamline refinance option. It is called the Interest Rate Reduction Refinance Loan and it is a great way for qualifying veterans to realize considerable savings on their monthly mortgage payments. that refinancing option plus has lower closing costs associated with the process. There are, however, several conditions that must be met in order to qualify. Mostly the conditions are relative to the value of the home and the timeliness of past mortgage payments.
I shouldn’t forget to mention that should interest rates fall, that plus will manufacture Reverse Mortgages more appealing for seniors older than the age of 62. There are a great many myths circulating about Reverse Mortgages. But for many senior home owners a Reverse Mortgage can be a safe and secure way to supplement the income that has been lost in our current economy.
Will we see 4 percent rates? No one knows for certain. whether you take in low rates advertised carefully read the fine print to manufacture certain you’re not paying exorbitant fees that could potentially negate any anticipated benefit. To rob a phrase from classical literature, these could be the best of times in the midst of the worst of times. The wise person gathers knowledge, thinks and prays about it, seeks counsel and soon after makes the best possible decision.
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Will we see 4 percent mortgage rates?
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Mortgage measure passes House committee
Arizona consumers could get their first state-level protections when they get a reverse mortgage.
Without dissent, the House Banking and Insurance Committee has agreed to set up some new regulations on those who offer the mortgages, most often sold to aging homeowners who are seeking to pull some equity out of their properties.
The measure most notably includes some mandatory disclosures and counseling.
That committee approval is significant: A similar measure last year, additionally sponsored by Rep. Bill Konopnicki, R-Safford, stalled when some of his Republican colleagues balked at what they saw was an effort by the government to protect society from themselves.
Several lawmakers expressed similar sentiments that session. But they have agreed to go along, at least in part considering the measure, HB 2513, is not opposed by the Arizona Bankers organization.
Generally speaking, a reverse mortgage is very similar to a home equity line of credit. The main difference, however, is that most reverse mortgages do not require repayment until the homeowner moves out.
“that is a bill that is timely and urgent,” Konopnicki said. “As we see public lose equity in 401(k)s and IRAs, humans are going to be looking for a way to retire and expand their opportunities.”
There already are federal regulations governing reverse mortgages, which Robert Zumoff, an assistant state attorney general said form up 90 percent of the market.
But Zumoff said “proprietary” lending is not covered by federal law. And he said that sector of the industry is expected to grow rapidly.
Konopnicki said the legislation is designed less to be regulatory than it is to supply info “so humans know when they compose the decision to do a reverse mortgage they know precisely what it is. What am I getting, how enlarged will it last, what are my obligations, what are the obligations of the funder.”
For example, the legislation says reverse mortgages can be either on a fixed or variable interest rate or even based on sharing any appreciated value of the property.
But there would have to be written disclosure of all the terms. That includes how the money will be given out, ranging from providing an available line of credit to giving the homeowner monthly payments.
And reverse mortgages can be paid off at any instance without prepayment penalty.
What is causing some concern is a requirement that an “independent third party” supply counseling. Rep. Carl Seel, R-Phoenix, questioned whether that would supply an unnecessary hurdle - and whether there are ample folks who would qualify in Arizona to serve.
But Ruben Alonzo, a lobbyist for the Attorney General’s Office said that’s already due under federal law for federally insured mortgages.
And Konopnicki said the requirement underscores the goal of disclosure, making certain that borrowers understand the terms of the loan “so that when you sign, that you would know precisely what it is.”
Wendy Briggs, lobbyist for the Arizona Bankers organization, said there is a possibility that the requirements in the bill, particularly for counseling, could be an additional burden.
Briggs said, though, bankers are willing to live with that requirement whether it is similar to what is in federal law. And she said her organization will work with Konopnicki to fix any problems with the bill.
Seel ultimately agreed to support the bill.
But he said he want assurances there would be no “undue burdens on private industry which by definition would impair their ability to serve the public.”
Rep. Nancy McLain, R-Bullhead City, who chairs the committee, said she will go along, too.
But McLain said she questions whether that legislation is going too far to protect folks from their own decisions.
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Mortgage measure passes House committee
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Former reverse mortgage loan officer faces swindle charges
A former senior loan officer at reverse mortgage lender World Alliance Financial Corp. in Troy faces charges of wire cheat and theft of trade secrets, in a federal indictment unsealed Monday at U.S. District Court in Detroit.
Bruce Jarrad, 37, of Royal Oak, is accused of taking customer leads and related details on prospective borrowers for reverse mortgages, shortly before he left his job in 2008 at the Melville, N.Y.-based lender’s offices along Big Beaver Road.
The U.S. Attorney’s Office in Detroit brought the charges after an FBI observation into allegations he stole the customer info for personal use.
If convicted, Jarrad could face a maximum prison sentence of 20 years on the wire swindle charge and up to 10 years for the theft of trade secrets charge, plus fines of up to $250,000 and court-order restitution.
World Alliance Financial, previously known as Vertical Lend Inc., has more than 120 employees in Troy and met the first of its benchmarks last year for tax incentives approved in early 2007 by the Michigan Economic Growth Authority.
Also in 2008, the company surrendered a previous mortgage broker license and sought new licensing, after the Massachusetts Division of Banks brought allegations of misleading business practices and use of unlicensed loan brokers in that state.
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Former reverse mortgage loan officer faces cheat charges
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Reverse mortgage: Windfall or problem?
Richard Wylie had a reversal of fortune two years ago - but don’t anguish, he’s doing better than before.
Wylie, 75, a retired Cape Coral police officer, got a reverse mortgage on his house under a program regulated by the Federal Housing Administration, which insures the loans.
The program, known as HECM (Home Equity Conversion Mortgage), lets public 62 and older get a reverse mortgage that allows them to get a loan for a positive percentage of the equity they have in their homes. As enlarged as they keep the property up and pay the taxes, the loan doesn’t need to be paid back until the last person on the mortgage dies or leaves the house.
Recent changes made by Congress have increased interest in the program by upping the amount society can borrow (the exact maximum increases as someone grows older), said Bronwyn Belling, reverse mortgage specialist with the American organization of Retired Persons Foundation.
But, she said, getting a HECM loan can be tricky and the law requires borrowers to talk to trained counselors to manufacture certain the complicated process is fully understood.
For one thing, she said, with hefty upfront fees, “whether you take out a reverse mortgage and only stay in the house for a couple of years it’s a very expensive proposition.”
Also, Belling said, borrowers who suddenly have a large chunk of money available to them need to be reminded that they still have to take care of the house and can’t necessarily just run through the windfall.
Sometimes, she said, folks take advantage of naive borrowers by getting them into risky or inappropriate investments.
Wylie said the program worked out well in his case.
“The way I had it set up it paid off my existing mortgage so I didn’t have my mortgage to pay,” effectively increasing his income by $650 a month, he said.
He’s used the additional money to travel and generally enjoy life more, Wylie said, and hasn’t touched the remaining $55,000 he had left by after paying the mortgage. It’s now in a certificate of deposit paying 4.5 percent interest.
Belling said HECM, which accounts for 95 percent of all reverse mortgages, is increasingly popular: the program was created in 1989 but 300,000 of the 500,000 issued have been in the past three years.
But David Johnson of Naples-based Reverse Mortgage Group said actually getting one done in today’s down real estate market can be difficult.
“We’re struggling with appraised values” to get the borrower adequate to pay off his mortgage, which often is the goal, he said.
Borrowers often would have been able to get a better deal before prices fell in the housing break down that has reduced the value of homes, Johnson said. “They should have done a reverse mortgage three or four years ago.”
On the other hand, said Stephanie Kirch of Reverse Mortgage in Naples, borrowers can have poor credit or a recent foreclosure in their past without being disqualified considering the loan is paid off when the house is sold. “I look at that as a lifeline, a Get Out of Jail Free card for seniors.”
Belling cautioned that like traditional mortgages, reverse ones carry risks that didn’t exist a few years ago. “Appreciation is an assumption we all had for years and it’s not a good assumption these days. There’s no guarantee you’ll be able to refinance your house years from now and get more money out of the house.”
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Reverse mortgage: Windfall or problem?
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‘Reverse mortgages cannot be forced on retirees’ [Australia]
Representative body, The National data Centre on Retirement Investments (NICRI), has slammed suggestions that retirees, whose principal residence is valued at by $1m, should not receive the aged pension, but rather fund their own retirement using a reverse mortgage.
The suggestion was put forward by Christian charity group, Brotherhood of St Laurence, who said the government should: “include owner-occupied housing as part of the means pop quiz for the age pension for homes of high value, say above $1m. that could include arrangements for reverse mortgages so citizens can remain in their family home while drawing down on its equity to create an income.”
But Wendy Schilg, director of NICRI, said it was concerned about the principle of “Australians being forced to fund their own retirement using equity in their primary residence”.
“We should not expect Mr. and Mrs. Smith to lose their pension and be forced to sell part of their house to put food on the table. They have contributed to the taxation system all their lives and their house is so valuable not considering they are rich, but considering they have owned it for 30 years and property prices have increased.
“While I understand the intention behind the suggestion, I believe that the recommendation is misguided and will aftereffect in detriment to Australia’s cash-poor, asset rich retires.”
Following the launch of its reverse mortgage info service for consumers last month, NICRI, which represents retiree and consumer groups, said calls to moment have shown that reverse mortgages can be a poor choice for some retirees.
“We have found that you have to be a undoubtful type of person to take on a reverse mortgage,” Schilg said.
“Some humans dislike the compounding interest that eats into the equity of their home by moment; others have wanted to sell their home and have encountered break fees in the tens of thousands of dollars.
Retirees are a vulnerable part of our community, and to assume that a reverse mortgage would be suited to everyone is just wrong.”
According to 2008 The Deloitte SEQUAL Reverse Mortgage Study, mortgage brokers and other intermediaries are responsible for distributing nearly half of all new reverse mortgages, in a market worth $2.3bn.
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‘Reverse mortgages cannot be forced on retirees’ [Australia]
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The Reverse Gear
GETTING credit is no simple task these days, even under the best of circumstances - just ask anyone who has applied for a mortgage. But it can be even more problematic for those who are retired, with many facing the triple whammy of declining income, falling home values and dwindling savings from Wall Street’s meltdown.
Looking for a way around the continuing credit crunch, more older citizens are exploring reverse mortgages, which allow homeowners 62 or older to borrow against their equity.
With reverse mortgages, lenders and brokers generally don’t consider credit history. Instead, they look at the applicant’s age, any existing mortgage and the home’s value.
“Many seniors have been able to use reverse mortgages to avoid delinquency or foreclosure, and to help fund their retirement,” said Regina M. Lowrie, a former chairwoman of the Mortgage Bankers organization and the chief executive of Vision Mortgage Capital in Montgomeryville, Pa.
Reverse mortgages have been around for a while, but considering of recent changes now look more appealing. Last month, the economic stimulus package raised the maximum loan amount to $625,500 from $417,000, at least for that year.
New federal guidelines, meanwhile, expand the reach of the loans and compose them slightly more affordable. They cap the fees, which had drawn many complaints for their size and even allow borrowers to use a reverse mortgage to buy a primary residence. Eventually, the program will be offered to co-op owners, although it will be up to co-op boards to decide whether shareholders can take part.
Although still small, the number of reverse mortgages rose 6.4 percent in 2008 from the previous year, to 115,176 loans - all from the home equity conversion mortgage (HECM) program run by the Federal Housing Administration, an arm of HUD, and offered through brokers and lenders. (The credit crunch put an end to private reverse-mortgage loans.) One of the top 10 markets is the New York area, where higher home prices often mean more equity to tap into.
Part of the reason that reverse mortgages have gained in allure, brokers say, is that it has become more difficult to sell a home and move to a less expensive one. plus, some elderly homeowners have been unable to refinance their mortgage or qualify for a traditional home-equity loan considering they cannot meet tighter credit standards.
Elizabeth Gahart, 65, who owns a three-bedroom house and a horse farm on 19 acres in Bridgeton, N.J., with her husband, Ronald, 68, used a reverse mortgage to deal with a financial crisis. “that was the best solution for our situation,” Mrs. Gahart said.
Debt problems had forced the couple to file for bankruptcy protection, and they were in danger of losing their home - and quite possibly, their business raising Arabian horses - to foreclosure.
Because the property they bought nearly seven years ago had appreciated in value, they qualified for a reverse mortgage of around $225,000. They used the proceeds to settle the bankruptcy, retire the primary mortgage, and take out a $4,800 line of credit, which will go toward property taxes and insurance.
But reverse mortgages have their drawbacks. For one thing, they can be expensive, even with the recent caps on fees, which is why they build sense only for those planning to stay put for a while.
Total costs run from around $7,000 to $20,000, brokers say, though they are usually added to the loan balance, along with the interest. In addition to the regular mortgage closing costs, there is an origination fee (capped at $6,000). There is additionally an upfront insurance premium equal to 2 percent of the home’s appraised value or lending limit (up to $625,500), which protects borrowers whether anything happens to the lender and guarantees that the total debt owed will never exceed the home’s value.
“Even whether you live to be 130 years old, you’ll never owe more than the value of the house,” explained Eric Bachman, the chief executive of Golden Gateway Financial in Oakland, Calif., one of the nation’s largest reverse mortgage brokers.
Martin M. Shenkman, a lawyer in Paramus, N.J., specializing in estate and tax planning, considers reverse mortgages “a great tool, when the right circumstances exist.” But considering of the high expenses and the myriad complexities of the loans, he urges homeowners to consider other alternatives first.
For some, he said, it might produce better sense to downsize, or to try to refinance a current mortgage. With property values still declining, he added, homeowners may not be able to borrow as much through a reverse mortgage as they could have a couple of years ago.
Still, Mr. Shenkman acknowledges that the reverse mortgage industry has come a towering way in attracting business and burnishing its reputation, which was sullied by stories from years past of nefarious lenders preying on the elderly. Strict federal guidelines protect borrowers today, and applicants are called for to attend a counseling session before they receive any money.
Many industry and consumer groups, including the AARP (aarp.org), offer education programs for consumers.
“There were misconceptions about reverse mortgages - a lot of folks thought they were giving up their houses, which is simply not true,” said Jonathan Pinard, the president of the Empire State Mortgage Bankers organization, which represents more than 100 mortgage-banking businesses in New York, and whose members speak to various senior groups all through the year.
More recently, efforts have been made to set up additional industry standards for brokers. The Mortgage Bankers organization formed a task force last year for that purpose, while the National Reverse Mortgage Lenders organization plans to have in place by mid-June a certification program for loan officers.
“The reverse mortgage field is one of the few growth areas,” said Peter H. Bell, the president of the reverse mortgage trade group. “There are a lot of new folks entering the field, and that helps the more experienced participants distinguish themselves from the newcomers.”
Mr. Bell and others see even more growth ahead, particularly as the reverse mortgage program continues to expand.
Few borrowers so far have taken advantage of a rule change that lets them use a reverse mortgage - instead of a traditional “forward” mortgage - to buy a home. The main advantage in doing so is that borrowers don’t have to use all the proceeds from a previous home sale, nor do they have to manufacture monthly payments.
Co-op owners contemplating reverse mortgages, meanwhile, will have to wait until HUD completes some technical language, Mr. Bell said.
Mark Draper, a senior loan officer for the reverse mortgage station at Regional Home Mortgage in Clark, N.J., says the prospect of reverse mortgages on co-ops is generating plenty of interest. “My list is getting longer,” he said. “I’m adding at least one client a week.”
Among his clients is Patricia DiLieto, 69, who owns a Westchester co-op. Mrs. DiLieto says a reverse mortgage would help to supplement her fixed income, which has been eaten away by health care costs for her husband, who is in a nursing home after a series of strokes. She said she had been given the go-ahead to take out a reverse mortgage by board members in her building.
Not surprisingly, though, some co-ops are apprehensive. “whether someone is in that position, they are obviously in need of cash,” said Daniel DiBenedetto, the co-op board president at 15 West 11th Street in the East Village. He expressed doubts about a reverse mortgage as a permanent solution to financial problems.
But Elliot Meisel, a real estate lawyer from Manhattan, says that co-ops can easily monitor such borrowing. “I would inspire boards to permit them with appropriate safeguards and tight controls and oversight,” he said.
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Possible “Catches” to Reverse Mortgages [Opinion]
Reverse mortgages: One of the most worrying of all to me, reverse mortgages, which allow older homeowners by 62 years of age to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.
In a “reverse” mortgage, you receive tax-free money from the lender and generally don’t have to pay it back for as towering as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence.
Reverse mortgages can be a great way for older homeowners who are house-rich but cash-poor to stay in their homes, but boost their financial liquidity.
The catches …
A) Reverse mortgages have very high up-front fees, as much as 8 percent of the home’s value, plus monthly service fees.
So whether you’re an older homeowner and you own your home outright, you might be better off taking out a home equity loan.
Even though you’ll have to compose monthly payments to repay a home equity loan, in many cases, it can turn out to be less expensive than a reverse mortgage.
B) With a reverse mortgage (and additionally a home equity loan), you’re tapping the equity in your home and taking on debt.
So whether you have any plans of leaving your home in your estate to your children or grandchildren, just keep in mind you might be jeopardizing that, or, leaving your heirs an encumbered property.
Many senior citizens are jumping at the opportunity to cash out some equity in their homes. For many, it’s a big help. But for many others, it’s nothing more than going deeply into debt and hocking your home.
So, think that decision through carefully before you entertain a reverse mortgage, comparing its costs to that of just getting a plain old home equity line instead.
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Possible “Catches” to Reverse Mortgages [Opinion]
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