Mortgage: April 2012

Monday, April 23, 2012

Mortgages - A Hidden Fee Is Set to Rise

AppId is over the quota
AppId is over the quota
An increase in the fee has been mandated by Congress to occur this spring, and other increases are likely later this year and next. When they happen, interest rates on single-family mortgages resold to Fannie Mae or Freddie Mac are likely to inch up as well.

“It’s going to be silently passed through” by lenders when it does increase, said Richard W. Grohmann, a real estate lawyer in Paramus, N.J.

The G-fee — as it is known — does not show up in borrowers’ mortgage documents or good-faith estimates, and it is little known outside the industry.

“It gets incorporated into the underlying rate that the borrower pays,” said Andrew Wilson, a spokesman for Fannie Mae.

An interest rate is usually made up of three parts: the largest goes to the bank or the investors who buy the loan; a smaller portion is for the mortgage servicer that collects monthly payments; and then there’s the guarantee fee. Fannie and Freddie charge guarantee fees as a form of insurance against default for the loans they acquire and resell to investors.

The G-fee will rise 10 basis points on April 1; the increase was included in the two-month extension of the payroll tax reduction last December. (A basis point is equal to one one-hundredth of 1 percent, or 0.01 percent.)

Keith T. Gumbinger, a vice president of HSH Associates, a financial publisher in Pompton Plains, N.J., says the increase in the guarantee fee will very likely push up mortgage rates on new loans by one-eighth of a percentage point. “While it is most common to build the G-fee into the loan’s rate, it doesn’t have to be done that way,” he said in an e-mail, noting that some lenders might charge a flat fee instead.

Already, though, loans with interest-rate locks from the last 45 or 60 days have the higher guarantee fee written into them, according to Tom Kelly, the president of Investors Home Mortgage, a division of Investors Bank in Short Hills, N.J. Lenders say they need the extra lead time because it may take time to close the loan, package it and send it on to Fannie or Freddie.

One way to avoid the guarantee fee is to use a lender that does not sell off its loans — for instance, a community bank or a credit union.

Besides offsetting risks, the fees provide a primary source of revenue for Fannie Mae and Freddie Mac. Fannie, for instance, made $5.6 billion in single-family guarantee-fee income in the first nine months of 2011, a 4.7 percent increase from the 2010 period, according to its quarterly financial statements.

Fannie and Freddie have collected G-fees since the introduction of mortgage-backed securities in the early 1980s. “It was variable from the start, based on the volume level of loans” made by the lender, Mr. Kelly said.

Both organizations started raising fee rates in 2008 during the housing crisis, as foreclosure costs rose. G-fees gained modestly in 2010, and also last year.

New single-family loans acquired by Fannie Mae were charged a guarantee fee of 31.1 basis points, on average, in the third quarter of 2011, the most recent period for which data are available. That is six points higher than in the third quarter of 2010. Rates on multifamily loans are 15 to 20 basis points higher than on single-families.

“We expect that single-family guarantee fees will increase in the coming years,” Fannie Mae said in its third-quarter report to investors, “although we do not know the timing, form or extent of these increases.”

In a letter to Congress last month, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, suggested “continued gradual increases.”

View the original article here

Mortgages - Reverse Loans at a Younger Age

AppId is over the quota
AppId is over the quota
Consumer advocates warn that these borrowers run the risk of depleting their resources early.

Homeowners aged 62 to 64 are far more likely to take out a reverse mortgage today than they were in 1999, even though their age means they can borrow less from their home’s equity, according to the report released last month by MetLife Mature Market Institute and the National Council on Aging.

The average age of those who have gone through the federally required reverse mortgage counseling was 71.5, the report found, down from 76 in 2000 and nearly 77 in 1990. Twenty percent were 62 to 64, the report said, versus 6 percent in 1999, when the last detailed research was completed.

A reverse mortgage allows homeowners 62 and older to borrow against the equity of their homes and continue to live in them without having to make payments, so long as the home remains their primary residence. The interest is added to the loan balance, and the mortgage insurance premium can be added to the loan as well. The loan must be repaid after the borrower moves out or dies.

Nearly all the reverse mortgages available today come through the Department of Housing and Urban Development and are guaranteed by the Federal Housing Administration through a program called Home Equity Conversion Mortgages, or HECM.

Even though the minimum age for taking out a reverse mortgage has been set at 62, many industry experts feel it is too young.

“It’s a bad idea,” said Judith Grimaldi, a lawyer in Brooklyn who specializes in representing the elderly. “You have too much life ahead to encumber your most important asset.”

Ms. Grimaldi recalled a New Jersey couple who took out a reverse mortgage in their 60s. Now in their 70s, they have no equity left in their home, which means they cannot afford to move out and buy another. Under HECM-insured reverse mortgages, borrowers must keep current with property taxes and insurance.

The loan amount depends on a borrower’s age, the appraised value of a home, the interest rate and whether the rate is fixed or adjustable. “The older the person is, the more they may be entitled to,” said Mario Martirano, a senior vice president of the Residential Home Funding Corporation in White Plains, N.Y.

Homeowners who wait until at least age 72 to take out a reverse mortgage will get considerably more, Mr. Martirano said, though he noted that some borrowers cannot wait. They may use a reverse mortgage to dig themselves out of a financial hole, or even to help prevent foreclosure, so long as they have enough equity in the property. “We do a lot of them for foreclosures,” he said.

The MetLife research found that two-thirds of homeowners seeking reverse mortgages wanted them as a way to lower their debt levels and help “their often precarious financial situation.” (The MetLife report is based on an analysis of 21,240 counseling sessions by HUD-approved counselors.)

Kelly Sabino, the director of the reverse mortgage division of US Mortgage in Melville, N.Y., said, “The majority of people that we see are needs-based clientele” with substantial debts.

Ms. Grimaldi said that borrowers may sometimes be seduced by the industry’s marketing of reverse mortgages and not consider less costly alternatives, like a line of credit secured by a home.

Homeowners at or near retirement should work with a financial planner or a lawyer specializing in estates to make sure they have a clear plan for the next 20 years of living expenses, Mr. Sabino said. He also urges clients to develop a list of relatives who might be affected by a reverse mortgage. “Let’s get them all together so we can discuss it” and answer their questions, he said.

This article has been revised to reflect the following correction:

Correction: April 13, 2012

An earlier version of this article misstated part of the name of the MetLife Mature Market Institute. It is not “Markets.”

View the original article here

Mortgages - Shrinking the Escrow

AppId is over the quota
AppId is over the quota
A goal of the bureau — created in 2010 as part of the Dodd-Frank financial reform legislation — is to help protect consumers from risky loans by watching for violations of mortgage disclosure laws and other issues. (The agency also scrutinizes credit-card practices, payday lenders and credit bureaus.)

There are many other places that allow borrowers to lodge complaints or seek recourse, of course. There are various government agencies, from the Department of Housing to state banking departments. Consumers can also contact a lender’s customer service department. The Mortgage Bankers Association’s Home Loan Learning Center site provides a long list of appropriate agencies.

But to avoid any potential missteps from the outset, industry experts urge borrowers to choose their lenders carefully.

“Decide ahead of time who you want to work with,” by checking online reviews and referrals from friends or family members, said Angie Hicks, the founder and chief marketing officer of Indianapolis-based Angie’s List, which has a million members on its consumer referral and ratings site.

Mrs. Hicks suggests talking with several loan professionals, then getting as many loan details as possible in writing. Choose someone who will explain the process thoroughly, and be responsible.

Russell Tucker, a senior vice president of Investors Home Mortgage in Short Hills, N.J., has another suggestion: ask for a cellphone number. If the loan officer refuses, that could be an indication that he or she may not be readily available through the process, he said.

Financial services companies, which include the mortgage lenders, generated the greatest number of complaints to the Better Business Bureau of Metropolitan New York in 2010, the last year for which data was available. (They were followed by publishing and communications and automotive companies.) The bureau put the total number of complaints against financial companies at 11,224 in 2010, 48 percent higher than in 2009.

Not surprisingly, many complaints involved loan modifications, according to Claire Rosenzweig, the president and chief executive of the Better Business Bureau of Metro New York, and more specifically, the length of time it took to complete one. Some people have endured waits of six months, according to the bureau.

Anna Orkin, the local bureau’s manager of information and investigations, said she was told of loan officers who asked for the same information again and again, or did not respond to repeated phone calls or e-mails. One way to minimize this problem is to send over documents via certified mail with return receipt requested, and to keep copies — just in case.

Michael McHugh, the president of the Empire State Mortgage Banking Association, said lenders were dealing with a “tremendous volume” of troubled loans. He also said other transactions had been delayed, citing some refinancings that have taken up to 120 days to close.

To make matters worse, most mortgage lenders are no longer hiring extra workers to help out, added Mr. Tucker of Investors Home Mortgage; the practice was routine during boom years.

Ms. Rosenzweig says the Better Business Bureau will sometimes intervene on behalf of consumers, whether or not the complaint is against a member lender.

The Consumer Financial Protection Bureau, meanwhile, says that complaints against financial institutions can be made online, via letter or fax, or through its toll-free number, (855) 411-2372. They are forwarded to the lender for review and resolution within 60 days, for “all but the most complicated complaints,” according to a statement on the bureau site.

This article has been revised to reflect the following correction:

Correction: February 5, 2012

The Mortgages column last Sunday, about consumer complaints against mortgage lenders, misstated the circumstances under which the Better Business Bureau of Metro NewYork responds to those complaints. It can intervene whethe rlenders are members or not.

View the original article here

MORTGAGES; On Troubleshooting

AppId is over the quota
AppId is over the quota
CORRECTION APPENDED

THOSE who have issues with their mortgage lenders now have another place to take them: the Consumer Financial Protection Bureau, which began accepting such complaints and inquiries this month.

A goal of the bureau -- created in 2010 as part of the Dodd-Frank financial reform legislation -- is to help protect consumers from risky loans by watching for violations of mortgage disclosure laws and other issues. (The agency also scrutinizes credit-card practices, payday lenders and credit bureaus.)

There are many other places that allow borrowers to lodge complaints or seek recourse, of course. There are various government agencies, from the Department of Housing to state banking departments. Consumers can also contact a lender's customer service department. The Mortgage Bankers Association's Home Loan Learning Center site provides a long list of appropriate agencies.

But to avoid any potential missteps from the outset, industry experts urge borrowers to choose their lenders carefully.

''Decide ahead of time who you want to work with,'' by checking online reviews and referrals from friends or family members, said Angie Hicks, the founder and chief marketing officer of Indianapolis-based Angie's List, which has a million members on its consumer referral and ratings site.

Mrs. Hicks suggests talking with several loan professionals, then getting as many loan details as possible in writing. Choose someone who will explain the process thoroughly, and be responsible.

Anna Orkin, the local bureau's manager of information and investigations, said she was told of loan officers who asked for the same information again and again, or did not respond to repeated phone calls or e-mails. One way to minimize this problem is to send over documents via certified mail with return receipt requested, and to keep copies -- just in case.

Michael McHugh, the president of the Empire State Mortgage Banking Association, said lenders were dealing with a ''tremendous volume'' of troubled loans. He also said other transactions had been delayed, citing some refinancings that have taken up to 120 days to close.

To make matters worse, most mortgage lenders are no longer hiring extra workers to help out, added Mr. Tucker of Investors Home Mortgage; the practice was routine during boom years.

Ms. Rosenzweig says the Better Business Bureau will sometimes intervene on behalf of consumers, whether or not the complaint is against a member lender.

The Consumer Financial Protection Bureau, meanwhile, says that complaints against financial institutions can be made online, via letter or fax, or through its toll-free number, (855) 411-2372. They are forwarded to the lender for review and resolution within 60 days, for ''all but the most complicated complaints,'' according to a statement on the bureau site.

CHARTS: INDEX FOR ADJUSTABLE RATE MORTGAGES: 1-year Treasury rate (Source: HSH Associates)

View the original article here

Mortgages — Changes in Federal Housing Administration Fees

AppId is over the quota
AppId is over the quota
In a nutshell, here is what’s happening: Fees for refinancings will fall sharply, as the upfront mortgage insurance decreases to 0.01 percent of the base loan amount, from 1 percent, starting on June 11. For buyers, the upfront mortgage insurance premium will increase to 1.7 percent of the loan amount, from 1 percent, effective April 9, and annual insurance costs, paid monthly, will rise 0.10 percentage points. Those with so-called jumbo loans, those above $625,500, will see a 0.35-percentage-point jump in the annual insurance premium, effective June 1.

The F.H.A. announced these changes over the last several weeks; they reflect an Obama administration initiative to make refinancing easier and more affordable for the three million or so homeowners with F.H.A. mortgages. The reduction in refinancing fees applies to those borrowers who are current on payments.

Charles Coulter, the deputy assistant secretary for single-family housing at the Department of Housing and Urban Development, said the changes were intended in part to shore up the insurance fund, “while having a minimum impact on the borrowers’ payments.” The higher fees could add more than $1 billion to the fund through fiscal year 2013, HUD said in an announcement.

The F.H.A.’s market share has risen sharply in recent years as subprime lenders and others left the business during the housing crisis, or were forced out. F.H.A.-insured mortgages represented almost a third of all mortgages in 2011, and as many as 47 percent in the second quarter of 2010, according to HUD data.

From a recent low of 1.8 percent in 2006, F.H.A.’s loan volume grew to a high of 20.4 percent of all mortgage originations in 2009, and last year it insured 15.2 percent based on dollar volume, according to data from Inside Mortgage Finance, an industry publication. In the last three years, F.H.A.’s volume was about four times its levels of 2005 and 2006.

“That is tremendous growth in just five years,” said Terence Floyd, a vice president of People’s United Bank in Bridgeport, Conn. F.H.A. loans appeal to first-timers who otherwise could not afford to buy, he noted, adding, “They don’t have 20 percent to put down.”

Loans insured by the F.H.A. require only a 3.5 percent down payment for borrowers with a credit score above 580; those with a score of 500 to 580 need at least 10 percent down. Some lenders require higher scores. For instance, Somerset Hills Bank in Madison, N.J., looks for a score of at least 640 for an F.H.A loan, according to Jody Tobia, a senior vice president.

Mr. Tobia says he expects many borrowers to continue with F.H.A. loans despite the higher fees, because of the low down payment and the ability to wrap the upfront insurance fee into the initial loan balance.

While some lenders consider F.H.A. “the only game in town” for first-time buyers of modest means, there are other options. Some credit unions, including New York Municipal Credit Union, are offering mortgages with a 5 percent down payment, said Daryl Newkirk, a mortgage loan originator at the New York credit union. The loans are for single-family homes; buyers must have a credit score of 660 or higher. Mr. Newkirk said that about half the borrowers who come to New York Municipal Credit Union are looking for mortgages with down payments of 5 percent or less.

For first-time buyers, determining a maximum affordable monthly payment is key. F.H.A. mortgage insurance premiums are added into the principal, along with interest and escrowed taxes and insurance amounts. HUD estimated that the annual premium increase will add, on average, $5 a month to consumers’ mortgage costs. Some low-income buyers, however, may be eligible for grants or other assistance to cover some of their closing costs.

View the original article here

Mortgages - Online Features Expanded

AppId is over the quota
AppId is over the quota
Jack M. Guttentag, who holds a Ph.D. in economics, has been involved in the mortgage industry for decades, as a professor and researcher in international banking at the Wharton School of the University of Pennsylvania since 1969, and as consultant to Freddie Mac and the World Bank, to name a few. He has written a weekly column under the “Mortgage Professor” name for 12 years, and even started a group called the Upfront Mortgage Brokers Association, which encourages transparency on fees.

In February, on his Mortgage Professor Web site, Dr. Guttentag and two partners started a service that helps to match buyers and lenders. “You can talk to people all you like and it often has minimal impact,” he said, “but if you show them a better way to do it better, it carries much better clout.”

Dr. Guttentag will be competing with the likes of better-established organizations, like LendingTree, Zillow Mortgage Marketplace and Bankrate.com. These so-called mortgage marketplaces have become increasingly popular as a way for borrowers to research loan rates and options. LendingTree, for example, says it has facilitated over 30 million loan requests and $214 billion in closed loan transactions since its inception 15 years ago. And all of the 1,200 mortgage-related Web sites tracked by Experian Hitwise attracted 126 million visitors in February, up 26 percent from a year ago.

The larger sites offer a mix of consumer mortgage calculators and other tools, along with rate quotes or match-ups with one or more of the hundreds of participating lenders. Many are adding other features and functions to stay more competitive.

Zillow Mortgage Marketplace has been focused on mobile applications, and the early ones have seen “tremendous usage,” said Erin Lantz, the director of the marketplace. Its mobile mortgage app for the iPhone, which lets borrowers check rates and loan quotes, has been downloaded more than two million times since June. In February it began offering a version for Android phones.

LendingTree, meanwhile, plans to redesign its Web site in the next three months, and added several features, including one called “The Best Loan for Life.” It will evaluate homeowners’ current loans against new offerings from lenders signed up with LendingTree to see if it would be worthwhile to refinance. In June, site users will be able to add their own information — that is, rates and terms from other lenders, not just those associated with LendingTree. This will allow them to do a side-by-side analysis “and see which one is better,” said Doug Lebda, the founder.At Bankrate.com, anyone who wants to talk to a mortgage banker can now access “a call center interface” and eventually connect with a person, said Bruce Zanca, a spokesman. Not all the mortgage lenders have signed on, he said.

The Mortgage Professor’s service is tiny by comparison: only six mortgage companies have signed up so far. But Dr. Guttentag said he hoped to teach the bigger shopping sites a few lessons. His mortgage shopping site consists of what he calls “certified network lenders,” each of which must adhere to certain standards and post prices in real time. Borrowers may shop anonymously until they select a lender, which saves them from being bombarded with information.

At various points in the mortgage-shopping process, borrowers are guided through “decision support,” which includes access to brief informational articles and question-and-answer features.

Dr. Guttentag is already considering upgrades. “We’ll have a special section on niche products,” he said.

View the original article here

Mortgages - A Fixed-Rate Alternative

AppId is over the quota
AppId is over the quota
These hybrid adjustable-rate mortgages, or ARMs, originated in the jumbo-loan marketplace at the end of the 1980s. But they fell out of favor — along with the riskier ARMs with ultralow teaser rates and interest-only components — after the subprime mortgage crisis.

“There were certain types of ARMs that didn’t work out that well,” said Keith T. Gumbinger, a vice president of HSH Associates, a financial publisher in Pompton Plains, N.J., “but hybrids predated those products by at least a decade or more. If you’re buying a home, and you’re good about saving money for the future, there are ways to take these hybrid products and save some cash or pay down the loans.”

Some adjustable-rate mortgages have an interest rate that changes every year, but a hybrid — also known as a delayed first-adjustment ARM — has a fixed interest rate for a period of time. In fact, most loan officers refer to a hybrid by the period during which the rate is fixed. A 5/1 loan, for example, has a fixed rate for five years, then adjusts annually for the remainder of the term; a 7/1 adjusts after seven years.

ARMs make up only a small segment of the overall mortgage market these days, financing just over 10 percent of home purchases, but market share is expected to increase to 14 percent this year, according to an annual survey released last month by Freddie Mac, a government buyer of home loans. The 5/1 hybrid was the most popular adjustable-rate loan product in the market, the survey found, followed by the 3/1 and 7/1. (The least popular: a 3/3 ARM, which adjusts once every three years.)

A common reason for choosing a hybrid ARM is projected length of homeownership: it’s a nice option for buyers who don’t expect to stay in their home for longer than, say, three to five years, perhaps because they anticipate transferring to a new city or starting a family.

And, “you might be an empty nester, a retiree,” said Lou-Ann Smith, a loan officer at Hamilton Home Loans in Ridgefield, Conn., “or somebody who knows they’re getting a big inheritance and won’t have a mortgage.”

Rates on hybrid ARMs are also attractive. As of Thursday, for example, the average rate on a 5/1 loan was 2.81 percent in the Northeast, compared with 3.88 percent for a 30-year fixed-rate loan, according to Freddie Mac.

The interest rate is often tied to rates on Treasuries or to an index, like the London Interbank Offered Rate, or Libor.

“We continuously have interest in hybrid ARMs, especially in the jumbo marketplace, where there’s a huge rate differential,” said Melissa Cohn, the president of the Manhattan Mortgage Company. The rate on a 5/1 ARM could be as low as 2.5 percent, according to Ms. Cohn, while a 30-year fixed-rate loan costs 3.75 percent. So if you took out a $300,000 loan, you could save almost $4,000 a year with the hybrid ARM, she said.

She noted that the difference was even larger with nonconforming jumbo loans.

“Those are real numbers that make it worth the risk,” Ms. Cohn said. “We’re in an unusual financial period where interest rates are very low, and the indices by which the rates are set are also very low.”

A word of caution to borrowers, however: With rates starting at rock-bottom levels, there’s generally only one direction for them to go. And even though there are caps on the rate change amount, the jump could be as much as six percentage points.

View the original article here

Mortgages - Paying on Time

AppId is over the quota
AppId is over the quota
Being in such a predicament almost always proves costly for borrowers — both in terms of fees they will owe and the lower credit rating that will result.

Mortgage delinquencies are “about halfway back to long-term prerecession levels,” said Jay Brinkmann, the chief economist for the Mortgage Bankers Association, in its fourth-quarter delinquency report, which was released last month. Some 7.58 percent of all residential loans were delinquent at the end of 2011, down from a 10 percent high in 2010 but well above the 5 percent prerecession average. All together, 12.63 percent — one in eight homeowners — were in trouble or in foreclosure at the end of the year, the association reported.

Meanwhile a separate report last month, from the credit-reporting agency TransUnion, found that delinquency rates fell to 6.01 percent in the fourth quarter of 2011 from 6.4 percent the same period the year before, though they rose slightly from the third quarter. Delinquencies of 60 days or more are expected to rise again in the first quarter of 2012, then decline the rest of the year, said David Blumberg, a TransUnion spokesman.

With so many homeowners still pinched financially, it is crucial to understand and adhere to payment deadlines. In general, payments are due on the first of the month; many lenders, though, allow a 15-day grace period. That means “not written by, not posted by, but received by the servicer” on that day, said Michael McHugh, the president of Continental Home Loans in Melville, N.Y., and the president of the Empire State Mortgage Bankers Association. In scheduling automatic electronic payments, he advised, allow at least “five days’ leeway.”

If the payment arrives even a day past the grace period, your lender will very likely charge a late fee of 2 to 5 percent of the monthly payment, Mr. McHugh said. The late fee and timing are spelled out in mortgage documents. Some late fees may be waived, especially if you have a history of on-time payment.

What is less often waived is the nick to the credit score. At 30 days tardy, a lender sends the credit bureaus a report, which is immediately transferred to your credit report, said Rod Griffin, the director of consumer and public education at Experian, another credit-reporting bureau. The black mark stays on the books seven years, he said, unless successfully challenged.

“That late payment on a mortgage is going to have a significant negative effect on your credit score,” Mr. Griffin said.

Research last year by FICO, the provider of one of the most popular credit scores used by lenders, showed a 60- to 110-point drop in scores for being 30 days late, with the biggest reduction to those with the highest starting score of 780. It could take nine months to three years for the FICO score to recover fully, the research indicated.

VantageScore, a rival to FICO, estimates that the initial hit would be 60 to 100 points at 30 days delinquent and another 10 to 20 points at 60 days.

The key, the experts say, is to pay up before you are 30 days behind — or, failing that, to keep the payments no more than 120 days delinquent to avoid foreclosure proceedings and many extra costs, they say. “If they can stay between 90 and 120 days’ delinquency,” said Carol Yopp, the manager of the foreclosure program at the Long Island Housing Partnership, “they typically don’t get referred for foreclosure.”

Ms. Yopp, who also has 16 years’ experience as a mortgage underwriter, notes that many lenders will not take partial payments on mortgages; they will hold them in a “suspend account” until the borrower has the full amount. Still, she suggested homeowners make a partial payment anyway, so they’re not tempted to use the earmarked funds elsewhere.

View the original article here

Mortgages — Avoiding Mortgage Relief Scams

AppId is over the quota
AppId is over the quota
But these so-called mass joinder lawsuits being advertised in mailings are fraudulent — sent out by companies purporting to be law firms, according to a consumer alert posted on the Federal Trade Commission’s Web site.

The F.T.C. last month filed a lawsuit against one operation based in Santa Ana, Calif., asserting that it had persuaded more than 1,000 homeowners nationwide to pay $6,000 to $10,000 each to join “mass joinder” suits, which are akin to class-action suits. Homeowners ended up with little or nothing in return, the F.T.C. said.

“It is an emerging trend,” said Reilly Dolan, the agency’s assistant director of financial practices, describing these fraudulent operations as part of a wide range of scams linked to loan modifications.

Consumers can lose valuable time to these dishonest players — not to mention money. The nonprofit Lawyers Committee for Civil Rights Under Law, which has brought seven lawsuits nationwide involving fraudulent loan modifications, estimates that homeowners nationwide who reported scams to its database have lost over $60 million in the last two years alone, and that $4 million of those losses were suffered by New Yorkers.

Of course, there are many credible law firms around to help homeowners. But Mr. Dolan noted that some businesses might be promoting themselves as providers of legal services, though they might have, say, only one lawyer on retainer, as a way around F.T.C. rules that allow only lawyers to collect upfront fees on mortgage aid. And these businesses may not meet all the requirements of the rule, which also mandates that the lawyer be licensed to practice law in the state where the homeowner lives.

“We definitely get people who think they have attorneys, who have retained attorneys who are not adequately assisting them,” said Erica Jo Gilles, the deputy director for advocacy and outreach at the South Brooklyn Legal Services.

Such firms, and people posing as lawyers, are fueling a 60 percent jump in complaints about mortgage scams this year, according to a report this month by the Homeownership Preservation Foundation, which helps distressed homeowners. The nonprofit group says the increase coincides with the announcement of new federal relief programs for homeowners.

So how can consumers protect themselves from unscrupulous operations? Here are some suggestions from industry experts.

CHECK CREDENTIALS State bar associations have lists of licensed lawyers. (And the National Organization of Bar Counsel Web site has links to state bar associations.) When speaking with a lawyer, consumers might ask about the lawyer’s track record, including documentation of successes via media reports or signed court documents awarding borrowers money or relief. Local bar associations can provide the names of lawyers who specialize in foreclosure and loan modification, as can housing counselors from nonprofit groups in some instances.

BEWARE OF PROMISES “Legitimate lawyers don’t make guarantees, just like doctors don’t,” said Colleen Hernandez, the chief executive of the Homeownership Preservation Foundation. In particular, Mr. Dolan of the F.T.C. suggested avoiding firms that promise to restore credit.

DON’T PAY IN ADVANCE “If they’re asking for any kind of money, you want to say, ‘N-O,’ ” said Martha Cedeno-Ross, a counselor at Neighborhood Housing Services in Waterbury, Conn. She notes that there are plenty of free services available at nonprofit groups certified by the Department of Housing and Urban Development.

View the original article here

Mortgages - Locking In Peace of Mind

AppId is over the quota
AppId is over the quota
This guarantee may be especially important for those who are refinancing, where even a quarter of a percentage point could skew a borrower’s calculations and make a refinancing less financially desirable, said Keith T. Gumbinger, a vice president of HSH.com a financial publisher in Pompton Plains, N.J.

Rates for the 30-year fixed-rate mortgage averaged 3.95 percent nationwide in March, up from 3.89 percent in February, according to Freddie Mac, though that is still significantly lower than the 4.84 average rate in March 2011. The average rate was 3.98 percent on Thursday, versus 3.99 percent the week before.

“We expect fixed-rate mortgages to gradually move higher over the next six months to about 4.25 to 4.5 percent as the country’s economic condition improves,” said Frank Nothaft, Freddie Mac’s vice president and chief economist. “This would be a move from the all-time record low rates we’ve experienced over the last few months but still at historically low levels.”

Rate lock-ins can provide buyers with some peace of mind, not to mention one less thing to think about in an otherwise onerous application process.

Lenders typically will give loan rate guarantee agreements when a borrower has a purchase agreement, but a few will provide them to those who are preapproved for a mortgage, said Rick Allen, the chief operating officer of Mortgage Marvel, an online site.

While shopping for a mortgage lender, Mr. Allen suggests inquiring about loan locks, too. “Get a copy of the rate lock agreement,” he said, noting that this would help borrowers better understand how the process works.

The cost of reserving an interest rate depends both on the duration of the lock and the amount of the loan. “The longer the lock, the more costly it is,” said Mark Lazar, an owner of Allied Financial Mortgage in River Edge, N.J. Most locks are for 30, 45 or 60 days, but some lenders will go as long as six months.

Most lenders offer some version of a free lock, Mr. Gumbinger said, though it may be only for 30 days. Others charge points — or fractions thereof — based on the loan size, which could amount to several hundred dollars. (A point is equal to 1 percent of the loan amount.) Sometimes these charges are refundable at closing, Mr. Gumbinger said.

Borrowers may want to skip a rate lock-in, or delay taking one, if they are unsure when their home purchase will close.

“You need to have a pretty good idea of your closing date,” Mr. Lazar said.

Knowing how long to lock in a rate requires a clear picture of the mortgage process, and a good estimate from your lender on how long it will take to approve the loan and complete all the paperwork and other requirements. For some lenders handling refinancing, this can be 15 or 20 days; others take longer.

Mr. Gumbinger said some lenders may extend an interest rate guarantee for a day or two, but if you need an additional 10 to 15 business days to close, it might cost you a few hundred dollars or a one-quarter point fee. On a $300,000 loan balance that would work out to $750.

Mr. Lazar noted that some lenders will extend a rate lock-in agreement for free, especially if interest rates are unchanged.

What happens if your loan doesn’t get approved by the underwriters? Borrowers will need to inquire about whether the lock fee is refundable, and under what circumstances they could receive their money back.

“Most lenders will refund it if the loan is denied,” Mr. Allen said. If the deal falls apart for circumstances beyond your control, such as a failed home inspection, many lenders will refund the fee, he added. If you decide to back out, expect the lender to keep your cash locked up.

View the original article here

More Homeowners Seek Reverse Mortgages at Earlier Age

AppId is over the quota
AppId is over the quota

Reverse mortgages have always been viewed as a last resort — something that older retirees could turn to when they desperately needed to supplement their dwindling incomes. But in the wake of the housing market’s collapse and high unemployment, a new study has found that people are using reverse mortgages to alleviate more urgent financial pressures, like paying off debt. And homeowners are applying for these loans at much younger ages than they have in the past.

Reverse mortgages allow people age 62 and older to tap what may be their biggest asset, the equity in their home, without having to make any payments. Instead, the bank pays the borrowers, though they continue to be responsible for paying property taxes and homeowner’s insurance. When borrowers are ready to sell (or when they die), the bank takes its share of the proceeds from the sale, and borrowers (or their heirs) receive whatever is left.

The study, conducted by the MetLife Mature Market Institute and the National Council on Aging, analyzed data collected from reverse mortgage applicants who went through mandatory counseling sessions with government-approved counselors. The study covers 21,240 sessions from September through November 2010.

“Consumer attitudes about reverse mortgages are changing because the recession has eroded confidence about retirement security, and Americans will rely more and more on these measures,” said Sandra Timmermann, director of the MetLife Mature Market Institute. “As reverse mortgages do not have income requirements and since other forms of credit have become less accessible, these loans will become more attractive.”

The research found that about 21 percent of homeowners who went through counseling were 62 to 64 years old — even though you can pull less money out the younger you are. That’s a sharp rise from the 6 percent of borrowers in that age group who applied for reverse mortgages in 1999. Those findings are also consistent with a recent industry analysis that found a dramatic shift toward younger borrowers in the past few years.

MetLife Mature Market Institute

And while the average age of the borrower is 73 years old, as the chart above shows, the average age of homeowners who went through the counseling was 71.5 years old. That is consistent, the study said, with the housing department’s findings. “As we look more closely at the age distribution of recent counseling clients, it appears that this broad trend may conceal the start of a major generational shift in the use of reverse mortgage loans,” the study said.

Of homeowners who are considering a reverse mortgage, nearly 46 percent are under the age of 70, according to the study.

The vast majority of counseling clients in 2010, or 67 percent, were seeking the reverse mortgage to lower their household debt. Only 27 percent were considering it to improve their quality of life. Most recent counseling clients (67 percent) said they had a conventional mortgage that needed to be repaid if they decided to take out the mortgage, whereas 27 percent reported having both housing and nonhousing debt. Naturally, using their equity to repay the debt means they will have less left should they need to access it in the future.

For nearly one-third of counseling clients, the existing mortgage may exceed half the value of their home, the study said. That means they may not have enough equity to qualify for the mortgage, or they have to wait several years until they can qualify for a loan that’s large enough to satisfy their financial needs.

Most reverse mortgages originate through the Department of Housing’s Home Equity Conversion Mortgages program — known as HECM (pronounced HECK-um) — which has become more popular over the past 10 years. There have also been many changes to the program, including a new loan option known as the “HECM Saver,” which requires lower upfront fees. That version came out in October of 2010, so the study noted that its results may reflect the fact that more homeowners considered those loans, though it’s unlikely that it had a major effect.

The study’s authors also point out that more homeowners are likely to incorporate home equity into their retirement plans, instead of tapping it for emergencies only. “It is likely the reverse mortgage option will be considered alongside some of the more traditional methods of saving and investment,” said Barbara Stucki, vice president for home equity initiatives at the National Council on Aging.

The study also included a consumer guide to reverse mortgages.

At what point would you consider a reverse mortgage?

View the original article here

Mortgages - Of Jobs, Loans and Timing

AppId is over the quota
AppId is over the quota
Mortgage experts generally recommend that homeowners complete their refinancing before making any major career changes, especially if they are planning to start their own business or become an independent contractor, in which case income may fluctuate.

“There’s no real reason to wait unless you don’t qualify” with current income, said Matt Hackett, the underwriting manager for Equity Now, a direct mortgage lender in New York City.

The job market has been steadily improving. The unemployment rate fell to 8.3 percent in February from 9.0 percent in February 2011. And data released this month from the Bureau of Labor Statistics shows that more people quitting their jobs this year are doing so voluntarily.

But depending on work history and mortgage lender, just being in the market for a new job might hinder a person’s ability to refinance or buy a home.

“If you’re actively looking to leave your job, it will impact how the bank views giving you a mortgage,” said Jason Auerbach, a divisional manager of First Choice Loan Services in Manhattan. The search raises “a question mark about their future employment” and income, he added.

In addition to checking employment at the start of the application process, many lenders will verify such information as late as the last 72 hours before mortgage closing. If they learn a borrower is starting a new job in the very near future, the mortgage can be delayed or even derailed. And borrowers who withhold such information could be committing income fraud, Mr. Auerbach said.

Other lenders, however, say they make loans based on a moment-in-time snapshot of a borrower’s finances.

“As long as the time when you’re closing that loan that you’re gainfully employed in the job that you said you were, you’re telling the truth,” said Heidi Yanavich, who trains mortgage loan originators at the McCue Mortgage Company, a direct lender in New Britain, Conn.

Still, Mrs. Yanavich said, the best path is to refinance first and change jobs afterward — especially if a borrower is changing careers. “Your success in a new field is not established,” she said.

An advantage to refinancing first is that “you are freeing up additional cash flow” by reducing your monthly payment, said Jodi Glickman, the founder of Great on the Job, a career-training company based in Chicago. Some job changers may earn less at first. “They are going to be assuming more risk,” she said, pointing out that they therefore need to reduce their financial risks.

All that said, however, there are advantages to refinancing later, especially for those who might have to relocate when they change jobs, Ms. Glickman said.

A person may well get a new job with more income and responsibility, or in an especially robust industry. That may help him or her qualify for a larger mortgage, or even better terms. According to Mr. Auerbach, you could be able to borrow up to four times your annual income.

Taking a new job right in the middle of a mortgage refinancing, though, could mean extra time and paperwork. Mr. Auerbach, for one, says he will very likely want to see an employment contract or a job offer letter.

Other lenders may want you to wait. Mrs. Yanavich says borrowers may need to provide 30 days of pay stubs and have their employer verify their employment and the time frame of any probationary period.

The Federal Housing Administration, along with Fannie Mae and Freddie Mac, requires 30 days’ pay stubs if the loans are going to be insured by or resold to those entities.

If you’re counting on a future bonus, expect to be asked for a letter from your employer verifying that, too.

“Today’s lending is pretty conservative,” Mrs. Yanavich said. “Incomes need to be documented.”

View the original article here

Program in Massachusetts Helps Those Facing Foreclosure

AppId is over the quota
AppId is over the quota
THREE years ago, after the government moved in to save big banks from failure, many homeowners facing foreclosure started asking, “Where’s our bailout?”

Annmarie Zaparesky got hers.

Through an unorthodox program in Massachusetts, Ms. Zaparesky was able to save her home, a white raised ranch in a neighborhood of wide streets, large yards and modest houses in this blue-collar city near Boston. At a time when roughly 20 percent of homeowners owe more than their homes are worth, an innovative program lowered Ms. Zaparesky’s payments and reduced her total debt to something closer to the house’s actual value.

The program, run by a nonprofit investment corporation called Boston Community Capital, is helping to bring homeowner debt in line with reality, something many lenders have been reluctant to do even as foreclosures continue to drive down housing prices. Boston Community buys houses out of foreclosure, sells them back to the families that lost them and gives them a new, more affordable mortgage.

Ms. Zaparesky and her husband, Bradford, bought the house — their first — in 1995 for $90,000 and moved in with their three children. But a few years later, Mr. Zaparesky learned that he had cancer. The doctors gave him three to five years to live.

Mr. Zaparesky was a claims manager for an insurance company, and Ms. Zaparesky had quit her job as a paralegal and begun working as a manager at a Save-A-Lot grocery store (she now manages two stores). Mr. Zaparesky had always handled the couple’s finances. “He was the one with the big paycheck,” she said.

In 2002, when property values were rising, he refinanced the house. Ms. Zaparesky said she was unhappy when she learned that he had gotten an adjustable rate loan that lacked even a short fixed-interest rate at the beginning. But she did not protest. “He was dying,” she said.

Mr. Zaparesky outlived the doctors’ predictions. But in 2008, when their daughter Danielle got married, he was too sick to attend the wedding. He died a week later.

Almost immediately, Ms. Zaparesky, now 53, fell behind on her payments. Although her children were grown, she shared the house with her elderly father. Unused to dealing with bills, Ms. Zaparesky has only a foggy grasp of what happened next.

In an interview last month, she said she believed that she had been offered a loan modification under what she called “Obamacare,” but the offer from her mortgage servicer, American Home Mortgage Servicing, came before President Obama took office. It allowed her to make interest-only payments for five years.

The payments were to be around $1,100 a month. But even that was too much to handle for Ms. Zaparesky, who was juggling financial responsibilities on her own for the first time.

“My world came crashing down,” she said.

Ms. Zaparesky and her mortgage servicer disagree about subsequent events. She tried several times to apply for a permanent loan modification, she said, a process she described as “a farce.” She repeatedly faxed and mailed in papers, she said, that she was then told had been lost — a common story among struggling homeowners.

American Home Mortgage Servicing, though, prides itself on its ability to work with delinquent borrowers. The company, which will soon change its name to Homeward Residential, said it tried to give her another modification but did not receive the required paperwork. According to the company’s records, Ms. Zaparesky did not qualify for the federal Home Affordable Modification Program because the house was not her primary residence. She said she never moved out of the house.

At any rate, the foreclosure process began in August of last year. At that point, she owed about $200,000.

“They just kept saying nope, nope, nope,” Ms. Zaparesky said. “All they cared about was, Let’s foreclose on the house. You’d think they would work with me instead of having another house foreclose.”

Despair was close at hand.

“I did wake up one morning and said, ‘That’s it: I’m not going to fight anymore,’ ” Ms. Zaparesky said. “I was on a roller coaster.”

At about that point, she heard about Boston Community Capital from a local mortgage counselor. The group has tried to prevent evictions and vacancies through an initiative it calls SUN, or Stabilizing Urban Neighborhoods.

The concept is predicated on the fact that homes in foreclosure usually sell at distressed prices, which are even lower than the home’s already depressed fair market value. When homeowners default, Boston Community offers to buy their homes, either from the bank or from the owners in a short sale approved by the bank. If the bank consents, Boston Community buys the homes at the distressed value and sells them back to the homeowners at something closer to market value, which is usually substantially less than they had owed.

To qualify for the program, the homeowner must have experienced hardship, like job loss or illness, and must demonstrate the ability to make the new payment. In Ms. Zaparesky’s case, her boyfriend, who is now living in the house, signed on to help. The homeowner also makes a $5,000 down payment. If the house is later sold at a profit, Boston Community is entitled to half the proceeds.

The program is two years old and has just begun to near its goal of roughly 10 mortgages a month.

View the original article here

Mortgages - Loan Terms Made to Order

AppId is over the quota
AppId is over the quota
Customized mortgages aren’t new. But industry experts say they are seeing more and more borrowers opt for fixed-rate loans with terms other than the standard 30 or 15 years, especially when it comes to refinancings.

Last year, nearly 17 percent of all refinanced mortgages were with “other length” fixed-rate loans, according to the Mortgage Bankers Association, which noted that in August, September and October, the share was 20 percent. Most of those “other length” loans were in 20-year mortgages, though loans are also available for 10, 25 and 40 years, and even for “oddball” terms like 23 or 12 years.

Michael Fratantoni, the association’s vice president for research and education, called the 20-year mortgage “a new phenomenon” and said it had “become the third-favorite product.”

Despite this increased popularity, some borrowers aren’t aware that they could take out a 20-year mortgage, said Jason Auerbach, a divisional manager of First Choice Loan Services in Manhattan. Lenders usually offer home loans in five-year increments, he said. JPMorgan Chase, for example, lists on its Web site fixed-rate mortgages in 10-, 15-, 20-, 25-, 30 and 40-year terms.

The shorter terms are especially valuable to people refinancing after paying down their 30-year mortgage for five or seven years, Mr. Auerbach said. If they take a 20-year mortgage, they can reduce their interest rate — and the term — and possibly even get a monthly payment the same or slightly lower than before.

The 20-year mortgage is becoming so prevalent, Mr. Fratantoni said, that banks are starting to sell them off to investors or in the secondary mortgage market.

Meanwhile, if you want to match your loan term to a life event and it’s an unusual number of years, like 17 or 23, expect to do some digging. Those loans have limited availability and their price — the rate or fees — could be higher, Mr. Fratantoni said.

“You can get some oddball amortization — you just have to ask for it” at a smaller bank, credit union or specialty lender, said David Boone, a first vice president for residential lending of Provident Bank in Jersey City. His mortgage team recently made a home loan with an eight-year amortization, which was aimed at a borrower close to retirement. Many customers seeking to refinance ask for odd loan terms to avoid increasing the length of their repayment schedule, he noted.

Of course, you could also create your own 23-year mortgage: for example, by obtaining a 25-year mortgage and then determining how much extra you need to pay each month if paying it off two years earlier. This approach could work with biweekly loan payments too; typically, these will reduce your payoff by five to seven years, Mr. Auerbach said.

Before you decide, get your mortgage professional to run different amortization tables so you can compare the payment and other details. Ask which terms come with reduced interest rates. These vary; some lenders step up the rate. For instance, someone getting a 12-year term will very likely receive the 15-year mortgage rate, Mr. Boone said.

Explore the loan options in the context of your other goals and timelines, said Debra L. Morrison, a financial planner with Trovena in Roseland, N.J. Ask yourself and your partner: When do I expect to retire? When could I become debt-free?

It’s important that you continue to fund your retirement accounts, too, and not focus solely on a short-term mortgage. If you rustle up an extra $400 a month in income, split the extra payments between your mortgage and a 401(k) or other retirement account, she said.

“A free-and-clear home is a wonderful thing for a lot of people,” she said.

View the original article here

Mortgages - Points Lose Favor

AppId is over the quota
AppId is over the quota
The trend away from points, which buy down the interest rate in exchange for an upfront fee, partly reflects borrower sentiment that rates are already low enough, the industry experts say.

In New York and other areas with a mobile population, many people avoid mortgages with points, because they know they won’t be staying put long enough to break even on the costs, which typically takes five to seven years, according to Norman Calvo, the president of Universal Mortgage, a mortgage broker in Brooklyn.

“If you’re young and buying your first apartment,” Mr. Calvo said, “chances are you’re going to be moving on.”

Only about 5 percent of Universal’s customers pay points, he said. Nationwide, 32 percent of loans for purchases had paid points in December, down from 47 percent in December 2008, according to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.

A point equals 1 percent of the loan amount, so paying one point on a $250,000 refinancing costs an extra $2,500 at closing, atop other mortgage fees, taxes and escrow amounts. Paying a point usually reduces the interest rate by 0.25 points over its term, so for instance instead of 4 percent, the rate is 3.75 percent.

The average number of points paid in 2011, according to a Freddie Mac survey, was 0.7 percentage points, less than half the levels people paid in the 1990s. The average has been 0.7 percent for three years, after it hit a low of 0.4 percent in 2007; in 1995 it averaged 1.8 percent, according to Freddie Mac data.

The chief advantage to paying points is you lower your rate and your monthly payment based on a one-time charge, said Neil Diamond, a mortgage banker with Legacy Real Estate in Commack, N.Y. Your mortgage professional should take time to find out what works for your circumstances, then structure the loan and fees and commission accordingly, he said.

So how do you know if paying points is worthwhile? There are two key considerations: how long you plan to live in a home, and how much you can afford in closing costs.

Many mortgage professionals suggest a rule of thumb on living in a home for at least five years to reap the savings. Others suggest doing an analysis of your financial goals, along with a direct comparison of no-point and point mortgages. Once you’ve filled out a mortgage application, ask for good-faith estimates on both options, said Chanda Gaither, a housing counselor with La Casa de Don Pedro, which works on affordable housing and neighborhood development in Newark.

People should also consider how much cash they have in reserve for emergencies and unexpected housing costs, Ms. Gaither said; that may be more important than a slightly lower rate.

Sometimes a seller will offer to pay a point or two on the mortgage as a concession. But, “with rates as low as they are, people are not coming out of their pockets to pay for points,” especially for refinancings, said Russell Tucker, a senior vice president of Investors Home Mortgage in Short Hills, N.J.

Some borrowers, meanwhile, go for negative points, which is also called a lender rebate or points in reverse. In exchange for accepting a higher rate, the lender agrees to give the borrower a credit, which is usually used for closing costs.

Mr. Calvo says these rebates can be “a really, really great option” to defray costs, especially for larger mortgages. He said he recently closed a $2 million loan on which the borrower agreed to accept a rate of 4.75 percent, instead of 4.5 percent, in exchange for a $20,000 credit in closing costs.

View the original article here