Mortgage Market Must Prepare To Lend To Worthy Borrowers
Existing Home Sales Plunged 27.2% in July, settling to a level not seen in this country since 1999. This number is considered a driving force to the Dow’s drop of 136 points on Tuesday, 8/24. High ranking officials from the National Association of realtors (NAR) are expecting annual home sales to increase greatly over the last 4 months of 2010, predicting home sales will rebound from their existing annual run rate of 4.65 million homes to exceed 5 million. The stimulus package at its height had home sales running at an annual rate of 5.66 million homes.
Ironically, due to business and tax incentives, Toll Brothers Home Builders posted a profit for the quarter for the first time in 3 years.
All this at a time when mortgage rates are just above 4%!
As I stated in this space back in June, homebuyers save more now and increase their purchasing power with rates at their present levels than before the sunset of the housing credit back in May. Actually, it is not even a comparison. Do consumers really need a marketing campaign of “First Time Homebuyer Tax Credit” to realize now is the time to buy? I hope not.
What needs to be pointed out is that there continues to be conflicting forces in the mortgage market:
Little to no private activity in the ABS markets. This cannot be overstated because it drives consumers into the grasp of Fannie, Freddie, HUD and VA programs. Portfolio bank lenders that choose to operate and lend in the residential mortgage market are being forced to mirror these guidelines in many ways due to the banking bailouts of a few years ago. Further, they are limited in the type of risks they can take. Private entities are very cautious to enter the residential mortgage market as well. Pretend for a moment they can overcome their bearish outlook on jobs and housing values…the regulatory environment when dealing with residential home mortgages is so punitive, rewards and ROI do not outweigh the risks enough to enter this market with any fanfare. Non-prime lending roots began by originating the low risk, common sense loans that banks (due to Fannie, Freddie and FHA limitations) were unable, unwilling or incapable of writing.
The Federal Reserve Board has passed new regulations that will limit how mortgage brokers and loan originators can be compensated for the services they perform. On the heels of unprecedented reform of how mortgage originators operate (licensing, FBI background checks, bonding, education requirements, etc…), compensation is now being thrust into the forefront. Mortgage brokers and retail originators have always generated a large percentage of the mortgages written in the United States. They (as all banks and lenders ) are required to comply with state and federal high cost thresholds, rate and fees restrictions, document compliance, etc…, why would compensation be further limited in what has essentially become a commoditized market? These organizations should be incentivized to exist, the most successful and experienced professionals motivated to thrive…not potentially exiled. Competition is the best regulator for consumer cost (I think I learned that with the Boston Tea Party lesson in grade school)…why would that not be held sacred?
Fannie and Freddie continue to mount losses, resulting in setting tougher standards for borrowers to qualify. Regardless of credit score, loan to value, debt to income ration or previous history…every loan is looked at in today’s market case by case on its own merits. Lenders are forced to make decisions so that there is little to no risk involved in a transaction…and that any subjective information is dressed up to be objective. Very difficult to stimulate housing when someone putting 40% down on a property may not qualify for a mortgage because of a minor administrative issue.
FHA has increased the amount it charges for mortgage insurance premiums to cover for future losses that may occur in its portfolio of originations. Interesting that these loans are regulated and insured through a government agency. Did you know that FHA delinquency is higher than non-prime delinquency was managed to?
As a mortgage professional that is dedicated and passionate about this industry properly balancing risk and originations…I would really like to see a little more offense in the game. There is too much defense being played here, and unfortunately, there is no accountability or downside for being slow, deliberate and conservative. Banks have access to what is termed “free money” yet continue to tighten qualifications for borrowers to access it. If mortgage guidelines do not start incentivizing borrowing, we will continue to see what we are seeing daily: lack of job growth, lack of consumer spending, sluggish home sales and poor consumer confidence. I am smart enough to know the entire economic condition of the country does not hinge on the mortgage market alone…there are many other factors in play. However, I do know a recovery will not be sustainable without it.
I keep hearing about a “double dip” recession. What is the term for a third one…”triple threat”?
Wednesday, August 25, 2010
Monday, August 23, 2010
New York State Closing Costs
Do Not Blame Your Mortgage Lender, Mortgage Broker or Services Provider
I was fascinated last week when I saw articles surfacing about how high mortgage closing costs are in the state of New York. The question I have is…what took so long for the media to actually address this issue?
New York State regulators and elected officials were front and center in the aftermath of the mortgage crisis in 2008; very quick to cite “predatory lending” as a main reason why so many state residents would now be impacted by their inability (or willingness) to make future payments on their home mortgage loans. These folks failed to mention that New York State had passed not one, but two of the most aggressive “high cost mortgage” regulations to that point limiting the amount of fees, interest rates and in some cases loan programs mortgage lenders and brokers could charge/ offer New York residents for services rendered. While banks and lenders adjusted business models to work for lower margins, state costs and fees continued to grow as volumes grew. Unfortunately for its residents, in what is already the toughest housing market for retaining equity, New York State continues to charge high costs associated with mortgage loan closings while in some cases prohibiting them.
Let it be known that I in no way, shape or form am I using this forum as a criticism for borrowers who had legitimate life events that prohibited them from making their housing payments (that has been a reason for loan delinquency since the first loan was ever made). Nor do I support unethical mortgage originators who coached and/ or provided the means necessary for unqualified borrowers to secure mortgage loans that never should have been originated.
I do believe the State of New York profited mightily from their residents during the mortgage boom through 2006 and have not been held properly accountable for their actions (or lack thereof). When state coffers were receiving windfalls on an annual basis and regulations were passed restricting rates/ fees allowable, the State of New York failed to step up and take accountability to its residents. To this day, as economic experts are citing low mortgage rates as a way to help stimulate the economy, the State of New York continues to charge its residents (or require lenders to because of the cost of doing business there) the highest costs in the country, collects hundreds of millions of dollars in the process and repays its residents by providing what is arguably the most dysfunctional state government in the country.
Did you know that New York State charges a range of 1% to over 3% of the loan amount in state mortgage tax? Depending on which county a property is located, borrowers are responsible for paying a minimum of:
- .75%: Chemung, Chenango, Cortland, Greene, Hamilton, Jefferson, Madison, Montgomery, Ontario, Otsego, St. Lawrence, Tioga, Tompkins
- 1%: Allegany, Broome, Cayuga, Cattaraugus, Clinton, Delaware, Erie, Franklin, Fulton, Herkimer, Lewis, Livingston, Monroe, Niagara, Oneida, Onondaga, Orleans, Oswego, Saratoga, Schoharie, Schuyler, Seneca, Sullivan, Washington, Yates
- 1.05%: Dutchess, Nassau, Orange, Putnam, Suffolk
- 1.25%: Albany, Chautauqua, Columbia, Essex, Genesee, Rensselaer, Schenectady, Steuben, Warren, Wayne, Wyoming
- 1.3%: Rockland and Westchester
- 1.8%: Yonkers
- 2.05%: New York, Bronx, Kings, Queens, Richmond for any mortgage securing less than $500,000; 2.175% for 1, 2 or 3 family houses and individual residential condo units securing $500,000 or more, and 2.80% for all other mortgages securing $500,000 or more
- The Mortgage Lender pays .25% of the loan amount regardless of county.
Think for a minute what every mortgagor (and lender) in the state of New York pays per transaction. A single family mortgage request at the FNMA loan limit of $417,000 in one of the five boroughs in New York City will cost the homeowner $8,548.50 in mortgage tax, the lender $1,042.50 for a total of $9,591**. Multiply that by every loan originated in the state over a day, week, month and year?
In addition to mortgage tax, New York State requires additional title search items not necessary in most other states, along with state specific closing procedures that end up costing borrowers more in fees than any other state I have ever done business in.
With lenders required to pay .25% of the mortgage amount in mortgage tax per transaction, those charges are ultimately passed along to the consumer in the form of higher rates or fees. A borrower in New Jersey for example, can end up paying a lower rate and/ or closing costs schedule than a New York borrower while having the exact same credit, income, property value and loan amount.
The volatility in the mortgage market has greatly increased the costs associated with originating loans. Here are some examples for all states:
- RESPA and HUD have passed new requirements for Good Faith Estimate disclosures and the Final Settlement Statement. While these changes are in the consumers best interests and something I ultimately support, the risk and cost of non-compliance is overwhelming to the mortgage lender. Even errors made in good faith that were unintentional could cost a lender thousands of dollars. Result: additional cost and quality control measures to ensure accuracy and compliance.
- Warehousing/ Closing Fees: Many banks suffered losses during the mortgage market upheaval in 2007 and were tentative at best to enter in to the Warehousing business. Those who chose to remain have put additional protective measures and restrictions in place, often times requiring lenders to lend to preferred credit score borrowers while performing additional due diligence prior to loans closing and funding. Result: additional staffing, delays to loans closing and increased transactional fees.
- Appraisal fees: New York State began what eventually became an industry accepted practice of eliminating mortgage originators (loan officers, brokers or anyone who directly generates income from a loan closing) from ordering or having contact with real estate appraisers (except to provide additional information if necessary). While I agree that pressure, duress and undue influence have no place in the mortgage industry, borrower costs went up and service levels went down. Result: Third party management companies controlling the appraisal ordering process, increasing fees that a borrower pays, paying the appraiser a little more than half of what they used to collect while sending appraisers to areas into expanded areas of coverage.
- Licensing: Many states have required additional net worth and insurance requirements to retain mortgage lending/ broker licenses. In addition, all loan originators are required to attend minimum education requirements and obtain national and state licenses. Result: Increased hiring, maintenance and administrative costs.
- “Zero Defect” mentality of Fannie Mae, Freddie Mac and FHA investors. Any error, omission or subjective decision made on a loan file that was ultimately sold into a Fannie or Freddie pool, or insured by FHA, could be sent back to the originating lender for repurchase. Putting reckless decisioning, misrepresentations and purposeful omissions aside (originators do need to take accountability for those 100% of the time), lenders are required to build up significant amounts of cash reserves should they be forced to repurchase loans. Result: increased rates and fees paid by consumers so that lenders can build up a cash reserve account.
I am not trying to create a simplistic solution for the above. There are too many factors to be considered. I would relish the opportunity to be part of a group to undertake such a project and recommend solutions. My passion and commitment to the industry, lending community and the borrowers I work with allow me the opportunity to use my knowledge, experience and relationships for everybody’s advantage. Loans get originated and the borrower pays less in rates and fees working with me than they likely would pay elsewhere. I am honored to have the opportunity to do so for so many years.
**In fairness, mortgage borrowers do have the opportunity to circumvent mortgage tax by having their new and existing mortgage lenders agree to execute a Consolidated and Extension Modification Agreement (CEMA). This document enables the existing mortgage company to “assign” their mortgage to the new mortgage company, who in turn “modifies and extends” the original mortgage terms. Mortgage Tax is than calculated on the “new money” amount (ex. 417,000 loan request, $410,000 existing balance, mortgage tax is charged on $7,000 $417,000-$410,000)). CEMA’s can be very time consuming and costly as well, and often times can cost just as much as the mortgage tax since the existing lender will charge fees to approve the process, along with attorney fees for the gathering and managing of the proper documentation. Not only can these fees run several thousand dollars, depending on the accessibility of original mortgage documents by the original lender (what if the existing mortgage was originated by a company no longer in business and servicing rights were transferred?).
Do Not Blame Your Mortgage Lender, Mortgage Broker or Services Provider
I was fascinated last week when I saw articles surfacing about how high mortgage closing costs are in the state of New York. The question I have is…what took so long for the media to actually address this issue?
New York State regulators and elected officials were front and center in the aftermath of the mortgage crisis in 2008; very quick to cite “predatory lending” as a main reason why so many state residents would now be impacted by their inability (or willingness) to make future payments on their home mortgage loans. These folks failed to mention that New York State had passed not one, but two of the most aggressive “high cost mortgage” regulations to that point limiting the amount of fees, interest rates and in some cases loan programs mortgage lenders and brokers could charge/ offer New York residents for services rendered. While banks and lenders adjusted business models to work for lower margins, state costs and fees continued to grow as volumes grew. Unfortunately for its residents, in what is already the toughest housing market for retaining equity, New York State continues to charge high costs associated with mortgage loan closings while in some cases prohibiting them.
Let it be known that I in no way, shape or form am I using this forum as a criticism for borrowers who had legitimate life events that prohibited them from making their housing payments (that has been a reason for loan delinquency since the first loan was ever made). Nor do I support unethical mortgage originators who coached and/ or provided the means necessary for unqualified borrowers to secure mortgage loans that never should have been originated.
I do believe the State of New York profited mightily from their residents during the mortgage boom through 2006 and have not been held properly accountable for their actions (or lack thereof). When state coffers were receiving windfalls on an annual basis and regulations were passed restricting rates/ fees allowable, the State of New York failed to step up and take accountability to its residents. To this day, as economic experts are citing low mortgage rates as a way to help stimulate the economy, the State of New York continues to charge its residents (or require lenders to because of the cost of doing business there) the highest costs in the country, collects hundreds of millions of dollars in the process and repays its residents by providing what is arguably the most dysfunctional state government in the country.
Did you know that New York State charges a range of 1% to over 3% of the loan amount in state mortgage tax? Depending on which county a property is located, borrowers are responsible for paying a minimum of:
- .75%: Chemung, Chenango, Cortland, Greene, Hamilton, Jefferson, Madison, Montgomery, Ontario, Otsego, St. Lawrence, Tioga, Tompkins
- 1%: Allegany, Broome, Cayuga, Cattaraugus, Clinton, Delaware, Erie, Franklin, Fulton, Herkimer, Lewis, Livingston, Monroe, Niagara, Oneida, Onondaga, Orleans, Oswego, Saratoga, Schoharie, Schuyler, Seneca, Sullivan, Washington, Yates
- 1.05%: Dutchess, Nassau, Orange, Putnam, Suffolk
- 1.25%: Albany, Chautauqua, Columbia, Essex, Genesee, Rensselaer, Schenectady, Steuben, Warren, Wayne, Wyoming
- 1.3%: Rockland and Westchester
- 1.8%: Yonkers
- 2.05%: New York, Bronx, Kings, Queens, Richmond for any mortgage securing less than $500,000; 2.175% for 1, 2 or 3 family houses and individual residential condo units securing $500,000 or more, and 2.80% for all other mortgages securing $500,000 or more
- The Mortgage Lender pays .25% of the loan amount regardless of county.
Think for a minute what every mortgagor (and lender) in the state of New York pays per transaction. A single family mortgage request at the FNMA loan limit of $417,000 in one of the five boroughs in New York City will cost the homeowner $8,548.50 in mortgage tax, the lender $1,042.50 for a total of $9,591**. Multiply that by every loan originated in the state over a day, week, month and year?
In addition to mortgage tax, New York State requires additional title search items not necessary in most other states, along with state specific closing procedures that end up costing borrowers more in fees than any other state I have ever done business in.
With lenders required to pay .25% of the mortgage amount in mortgage tax per transaction, those charges are ultimately passed along to the consumer in the form of higher rates or fees. A borrower in New Jersey for example, can end up paying a lower rate and/ or closing costs schedule than a New York borrower while having the exact same credit, income, property value and loan amount.
The volatility in the mortgage market has greatly increased the costs associated with originating loans. Here are some examples for all states:
- RESPA and HUD have passed new requirements for Good Faith Estimate disclosures and the Final Settlement Statement. While these changes are in the consumers best interests and something I ultimately support, the risk and cost of non-compliance is overwhelming to the mortgage lender. Even errors made in good faith that were unintentional could cost a lender thousands of dollars. Result: additional cost and quality control measures to ensure accuracy and compliance.
- Warehousing/ Closing Fees: Many banks suffered losses during the mortgage market upheaval in 2007 and were tentative at best to enter in to the Warehousing business. Those who chose to remain have put additional protective measures and restrictions in place, often times requiring lenders to lend to preferred credit score borrowers while performing additional due diligence prior to loans closing and funding. Result: additional staffing, delays to loans closing and increased transactional fees.
- Appraisal fees: New York State began what eventually became an industry accepted practice of eliminating mortgage originators (loan officers, brokers or anyone who directly generates income from a loan closing) from ordering or having contact with real estate appraisers (except to provide additional information if necessary). While I agree that pressure, duress and undue influence have no place in the mortgage industry, borrower costs went up and service levels went down. Result: Third party management companies controlling the appraisal ordering process, increasing fees that a borrower pays, paying the appraiser a little more than half of what they used to collect while sending appraisers to areas into expanded areas of coverage.
- Licensing: Many states have required additional net worth and insurance requirements to retain mortgage lending/ broker licenses. In addition, all loan originators are required to attend minimum education requirements and obtain national and state licenses. Result: Increased hiring, maintenance and administrative costs.
- “Zero Defect” mentality of Fannie Mae, Freddie Mac and FHA investors. Any error, omission or subjective decision made on a loan file that was ultimately sold into a Fannie or Freddie pool, or insured by FHA, could be sent back to the originating lender for repurchase. Putting reckless decisioning, misrepresentations and purposeful omissions aside (originators do need to take accountability for those 100% of the time), lenders are required to build up significant amounts of cash reserves should they be forced to repurchase loans. Result: increased rates and fees paid by consumers so that lenders can build up a cash reserve account.
I am not trying to create a simplistic solution for the above. There are too many factors to be considered. I would relish the opportunity to be part of a group to undertake such a project and recommend solutions. My passion and commitment to the industry, lending community and the borrowers I work with allow me the opportunity to use my knowledge, experience and relationships for everybody’s advantage. Loans get originated and the borrower pays less in rates and fees working with me than they likely would pay elsewhere. I am honored to have the opportunity to do so for so many years.
**In fairness, mortgage borrowers do have the opportunity to circumvent mortgage tax by having their new and existing mortgage lenders agree to execute a Consolidated and Extension Modification Agreement (CEMA). This document enables the existing mortgage company to “assign” their mortgage to the new mortgage company, who in turn “modifies and extends” the original mortgage terms. Mortgage Tax is than calculated on the “new money” amount (ex. 417,000 loan request, $410,000 existing balance, mortgage tax is charged on $7,000 $417,000-$410,000)). CEMA’s can be very time consuming and costly as well, and often times can cost just as much as the mortgage tax since the existing lender will charge fees to approve the process, along with attorney fees for the gathering and managing of the proper documentation. Not only can these fees run several thousand dollars, depending on the accessibility of original mortgage documents by the original lender (what if the existing mortgage was originated by a company no longer in business and servicing rights were transferred?).
Tuesday, July 6, 2010
How to Monitor Mortgage Rates
Many Are Shocked When They Learn What Really Drives Rates
Many people base their knowledge of what mortgage rates are based on what they see in the newspaper, TV commercial, an Internet banner, a sign at the local bank, etc.... It seems like mortgage rates are everywhere. Unfortunately, by the time a newspaper gets printed, a sign comes back from the sign shop or a television commercial is recorded and aired...mortgage rates likely have changed several times. Rates change daily and often times can change several times during the course of a day.
If you or anyone you know might be interested in entering the mortgage market...and you want to "time it just right" to get the lowest rate possible, be ready to do a little homework. One of the ways I monitor how mortgage rates are trending is by watching the 10 year Treasury Yield. When the "10 Year" yield drops for a day or two, mortgage rates will typically follow. When the "10 Year" yield increases, rates usually move immediately. There is no crystal ball. Nobody knows for sure if and when rates will adjust...and in today's environment, they can adjust based on a number of economic factors. Click Here if you wish to view a chart that lists various treasury yields for different maturities, including the "10 Year".
If you are feeling really ambitious, you can click here to see where average mortgage rates have been over different periods of time.
Whatever you do, when you enter the mortgage market, make sure you work with an experienced professional.
Many Are Shocked When They Learn What Really Drives Rates
Many people base their knowledge of what mortgage rates are based on what they see in the newspaper, TV commercial, an Internet banner, a sign at the local bank, etc.... It seems like mortgage rates are everywhere. Unfortunately, by the time a newspaper gets printed, a sign comes back from the sign shop or a television commercial is recorded and aired...mortgage rates likely have changed several times. Rates change daily and often times can change several times during the course of a day.
If you or anyone you know might be interested in entering the mortgage market...and you want to "time it just right" to get the lowest rate possible, be ready to do a little homework. One of the ways I monitor how mortgage rates are trending is by watching the 10 year Treasury Yield. When the "10 Year" yield drops for a day or two, mortgage rates will typically follow. When the "10 Year" yield increases, rates usually move immediately. There is no crystal ball. Nobody knows for sure if and when rates will adjust...and in today's environment, they can adjust based on a number of economic factors. Click Here if you wish to view a chart that lists various treasury yields for different maturities, including the "10 Year".
If you are feeling really ambitious, you can click here to see where average mortgage rates have been over different periods of time.
Whatever you do, when you enter the mortgage market, make sure you work with an experienced professional.
Tuesday, June 29, 2010
Housing Market - Post Stimulus
When I first heard of the home buyer tax credit extension in November, 2009, I thought it continued to define the term “stimulus”. I believed at the time, and still do today, that the stimulus was necessary to continue to offer incentives to a housing market in need of any support possible. The tax credit did exactly what it was designed to do, and has even been voted to be extended to allow borrowers to maximize its effect due to mortgage company delays in processing loan files by 6/30/10.
As I shared in my 6/25 post, many economic forecasts were predicting rising interest rates around the time of the tax credit sunset. That surprised and concerned me more than anything. How could an economy grow or expand in any positive way with high/ rising unemployment numbers, rising consumer debt, housing inventory surplus, etc… if rates are increased? Quite simply, rising interest rates would have undermined any momentum the markets had gained and would have pushed it backwards. Housing is 20% of the GDP and is vital to lead any sustainable recovery. Studies have shown $63,000 is put into the local economy with every home sale. How could that be compromised? Why would it be compromised?
To further illustrate my beliefs why interest rates would not increase at the tax credit expiration, the S&P/Case Shiller home price indexes show today that U.S. single-family home prices climbed in April from March, driven by a final sales push before tax credits expired, but signs of a sustained recovery have yet to emerge. "Inventory data and foreclosure activity have not shown any signs of improvement," says David Blitzer, chairman of S&P index committee, which publishes the price indexes. "Consistent and sustained boosts to economic growth from housing may have to wait to next year." With the expiration of tax incentives, existing home sales fell 2.2% in May and mortgage applications to buy homes hover at 13-year lows.
What needs to be remembered here is that affordability is tremendous. Lower listing prices combined with mortgage rates lower than they were when the market was being “stimulated” by tax incentives should start creating some more positive trends. Take advantage of the opportunities that are available today. We have learned that traditional benchmarks and indices are not as reliable as they once were. Please guard against complacency…4-5% interest rates should not be considered the norm.
As I shared in my 6/25 post, many economic forecasts were predicting rising interest rates around the time of the tax credit sunset. That surprised and concerned me more than anything. How could an economy grow or expand in any positive way with high/ rising unemployment numbers, rising consumer debt, housing inventory surplus, etc… if rates are increased? Quite simply, rising interest rates would have undermined any momentum the markets had gained and would have pushed it backwards. Housing is 20% of the GDP and is vital to lead any sustainable recovery. Studies have shown $63,000 is put into the local economy with every home sale. How could that be compromised? Why would it be compromised?
To further illustrate my beliefs why interest rates would not increase at the tax credit expiration, the S&P/Case Shiller home price indexes show today that U.S. single-family home prices climbed in April from March, driven by a final sales push before tax credits expired, but signs of a sustained recovery have yet to emerge. "Inventory data and foreclosure activity have not shown any signs of improvement," says David Blitzer, chairman of S&P index committee, which publishes the price indexes. "Consistent and sustained boosts to economic growth from housing may have to wait to next year." With the expiration of tax incentives, existing home sales fell 2.2% in May and mortgage applications to buy homes hover at 13-year lows.
What needs to be remembered here is that affordability is tremendous. Lower listing prices combined with mortgage rates lower than they were when the market was being “stimulated” by tax incentives should start creating some more positive trends. Take advantage of the opportunities that are available today. We have learned that traditional benchmarks and indices are not as reliable as they once were. Please guard against complacency…4-5% interest rates should not be considered the norm.
Friday, June 25, 2010
Mortgage Rates and How To Beat The Homebuyer Tax Credit
Mortgage Rates Continue To Drop
"Today's mortgage rates are officially the lowest rates I have ever seen in my 25 years in the mortgage business."
- Bob Germano, 6/24/10
I had a discussion with a colleague at the end of 2009 to discuss the forecast of the mortgage market. We had a friendly debate about how the economists at the bank he worked for were forecasting drastic reductions in mortgage origination volume for 2010, that the housing market would continue to decrease and mortgage rates would be dramatically higher by the middle of 2010. I disagreed, citing that housing needs to lead the charge back to economic recovery, that there were too many negative economic factors that had not really been dealt with yet and that if the past two years have proven anything, traditional forecasting tools may not predict as well as they used to.
I went back and researched where interest rates were at the beginning of 2010 and am happy to report that at the midway point of the year, not only have rates not gone higher, but they are actually about 1 1/2 percent lower than they were in January.
As a result, I am recommending to everyone I know:
- If you have a fixed interest rate higher than 5.25% , you should explore refinancing.
- If you are in an Adjustable Rate Mortgage, you should explore refinance options regardless of your current rate
- If you are thinking of purchasing a new home, buying a second home or investment property…now might be the best time to take advantage of both market pricing and payment affordability
With the sunset of the home buyer tax credit on 4/30/10, it is my opinion that this should not keep potential buyers out of the market. Believe it or not, there may be greater savings opportunities now than when the tax credit was available.
Consider these hypothetical scenarios*:
Here are the rates, payments and interest amounts based on interest rates as of 4/23/10:
Loan principal amount $417,000.00
Annual loan payments $27,632.28
Annual interest rate 5.250%, APR: 5.34%
Monthly payments $2,302.69
Loan period in years: 30
Interest in first calendar year $12,726.36
Base year of loan 2010
Interest over term of loan $411,968.40
First Payment Due: June
Sum of all payments $828,968.40
Here are the terms borrowers could have locked in on 6/24/10:
Loan principal amount: $417,000.00
Annual loan payments: $25,354.56
Annual interest rate: 4.500%, APR: 4.58%
Monthly payments: $2,112.88
Loan period in years: 30
Interest in first calendar year: $7,798.08
Base year of loan: 2010
Interest over term of loan: $343,636.80
First Payment Due: August
Sum of all payments: $760,636.80
*740+ credit score, full income documentation, purchase or no cash out refinance, 80% LTV . Rates change daily.
Based on the above, a loan on 6/24/10 would recoup $8,000 in 3 ½ years but more importantly, have a payment that is $190 lower and interest savings greater than $68,000 ($5,000 (e) in interest alone in the first year). If a consumer missed the tax credit expiration, they could possibly save more money by doing so.
I hope that people are running home to get their mortgage situations reviewed or calling their realtors to show them their next home. It's about time consumers can say the economy can work to their benefit.
"Today's mortgage rates are officially the lowest rates I have ever seen in my 25 years in the mortgage business."
- Bob Germano, 6/24/10
I had a discussion with a colleague at the end of 2009 to discuss the forecast of the mortgage market. We had a friendly debate about how the economists at the bank he worked for were forecasting drastic reductions in mortgage origination volume for 2010, that the housing market would continue to decrease and mortgage rates would be dramatically higher by the middle of 2010. I disagreed, citing that housing needs to lead the charge back to economic recovery, that there were too many negative economic factors that had not really been dealt with yet and that if the past two years have proven anything, traditional forecasting tools may not predict as well as they used to.
I went back and researched where interest rates were at the beginning of 2010 and am happy to report that at the midway point of the year, not only have rates not gone higher, but they are actually about 1 1/2 percent lower than they were in January.
As a result, I am recommending to everyone I know:
- If you have a fixed interest rate higher than 5.25% , you should explore refinancing.
- If you are in an Adjustable Rate Mortgage, you should explore refinance options regardless of your current rate
- If you are thinking of purchasing a new home, buying a second home or investment property…now might be the best time to take advantage of both market pricing and payment affordability
With the sunset of the home buyer tax credit on 4/30/10, it is my opinion that this should not keep potential buyers out of the market. Believe it or not, there may be greater savings opportunities now than when the tax credit was available.
Consider these hypothetical scenarios*:
Here are the rates, payments and interest amounts based on interest rates as of 4/23/10:
Loan principal amount $417,000.00
Annual loan payments $27,632.28
Annual interest rate 5.250%, APR: 5.34%
Monthly payments $2,302.69
Loan period in years: 30
Interest in first calendar year $12,726.36
Base year of loan 2010
Interest over term of loan $411,968.40
First Payment Due: June
Sum of all payments $828,968.40
Here are the terms borrowers could have locked in on 6/24/10:
Loan principal amount: $417,000.00
Annual loan payments: $25,354.56
Annual interest rate: 4.500%, APR: 4.58%
Monthly payments: $2,112.88
Loan period in years: 30
Interest in first calendar year: $7,798.08
Base year of loan: 2010
Interest over term of loan: $343,636.80
First Payment Due: August
Sum of all payments: $760,636.80
*740+ credit score, full income documentation, purchase or no cash out refinance, 80% LTV . Rates change daily.
Based on the above, a loan on 6/24/10 would recoup $8,000 in 3 ½ years but more importantly, have a payment that is $190 lower and interest savings greater than $68,000 ($5,000 (e) in interest alone in the first year). If a consumer missed the tax credit expiration, they could possibly save more money by doing so.
I hope that people are running home to get their mortgage situations reviewed or calling their realtors to show them their next home. It's about time consumers can say the economy can work to their benefit.
Monday, November 9, 2009
ID Theft in the Canyon of Heroes?
I had taken a few days from thinking of what to “blog” as I was enjoying the Yankee run through the World Series. As I set back my recliner late Friday night to watch the 11pm news re-cap of the ticker tape parade, I hear how some office workers got carried away during the Yankees victory parade and began tossing files and documents out the window when they could not get their hands on confetti. It has been reported that investigators found all kinds of personal financial documents in the mountains of shredded paper tossed from skyscrapers as the players rode up Broadway through the Canyon of Heroes. Documentation found on the ground included pay stubs, banking data, law firm memos and court files.
I routinely hear people say that they do not need identity theft protection…that it has never been an issue and do not wish to spend the money it takes to subscribe to an ID Theft Service. I have written in this space how ID Theft expands way beyond someone stealing your wallet or credit card. ID Theft is a preventive strike against a worst case scenario…a scenario you never want to endure. Is this worth a few bucks per month? If your name is on one of those documents on the ground in NYC…you bet it is!
I would love the opportunity to help you secure ID Theft Protection for you and the entire family. If you wish to go someplace else, that is fine…just do it today.
I routinely hear people say that they do not need identity theft protection…that it has never been an issue and do not wish to spend the money it takes to subscribe to an ID Theft Service. I have written in this space how ID Theft expands way beyond someone stealing your wallet or credit card. ID Theft is a preventive strike against a worst case scenario…a scenario you never want to endure. Is this worth a few bucks per month? If your name is on one of those documents on the ground in NYC…you bet it is!
I would love the opportunity to help you secure ID Theft Protection for you and the entire family. If you wish to go someplace else, that is fine…just do it today.
Tuesday, October 6, 2009
7 of 10 vs 3 of 10? I will take the 3!!!!
Do You Have a Will?
My wife will not even discuss these types of issues. In fact, when we drew up our estate planning documents, she had to get up and left the room all flustered. Who really looks forward to and wants to confront their own mortality and the issues that surround it? Neither one of us did, but knew it was something that we needed to do. If you have not done so…believe it or not you are in the majority.
Did you know that 7 out of 10 people have not created a Will? Think about that…7 out of 10! Those 7 people can and likely will cost their heirs (family members…the ones closest to them) a lot of money in avoidable estate taxes, lawyer/ probate costs and add tremendous stress to what is already a stressful situation. Who really wants a third party, judge or government official deciding who inherits their property, savings and personal belongings? For 7 out of every 10 people, unfortunately, this is precisely what will happen and what they should expect to happen.
Doing nothing and not thinking about it will not solve the problem.
Pre-Paid Legal Plans offer Wills (and Living Wills) as part of their basic membership package. If you do have a Will, you control who inherits your property, portfolio etc…. Further, if you are raising children under 18, you designate who will raise them. If you do not have a Will, you are designating an impersonal, beaurocratic court system to make critical decisions for the long term interests of those closest to you. No one wants to confront their own mortality and deal with these issues. If you choose not to, can you really say that you are doing the responsible thing for your spouse and children?
Suburban Solutions provides employer and membership groups with Pre-Paid Legal Plan programs, along with a menu of over 40 other lifestyle benefits. You can contact us should yo wish to inquire about how to access these types of services.
My wife will not even discuss these types of issues. In fact, when we drew up our estate planning documents, she had to get up and left the room all flustered. Who really looks forward to and wants to confront their own mortality and the issues that surround it? Neither one of us did, but knew it was something that we needed to do. If you have not done so…believe it or not you are in the majority.
Did you know that 7 out of 10 people have not created a Will? Think about that…7 out of 10! Those 7 people can and likely will cost their heirs (family members…the ones closest to them) a lot of money in avoidable estate taxes, lawyer/ probate costs and add tremendous stress to what is already a stressful situation. Who really wants a third party, judge or government official deciding who inherits their property, savings and personal belongings? For 7 out of every 10 people, unfortunately, this is precisely what will happen and what they should expect to happen.
Doing nothing and not thinking about it will not solve the problem.
Pre-Paid Legal Plans offer Wills (and Living Wills) as part of their basic membership package. If you do have a Will, you control who inherits your property, portfolio etc…. Further, if you are raising children under 18, you designate who will raise them. If you do not have a Will, you are designating an impersonal, beaurocratic court system to make critical decisions for the long term interests of those closest to you. No one wants to confront their own mortality and deal with these issues. If you choose not to, can you really say that you are doing the responsible thing for your spouse and children?
Suburban Solutions provides employer and membership groups with Pre-Paid Legal Plan programs, along with a menu of over 40 other lifestyle benefits. You can contact us should yo wish to inquire about how to access these types of services.
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