Heritage Mortgage Review

12/23/2014

Are Low Mortgage Rates Keeping People in Their Homes?
Sales of previously owned homes tumbled in November to their lowest level in six months, the National Association of Realtors said Monday. And NAR chief economist Lawrence Yun is puzzled as to why.
He admits weak inventory growth could be holding some potential buyers back. So too could October’s stock-market volatility and the “lock-in effect” of low interest rates. Many current homeowners fear that if they buy a new house, they risk facing higher rates–though current mortgage rates are near 18-month lows.

Still, the potential of a home purchase resulting in higher mortgage rates “will be a potentially long-term trend,” says Yun, who called November’s sales-pace decline a “1-month aberration.” He sees the annualized pace returning to 5 million next year.

12/22/2014

Why paying extra on mortgage pays off
Conventional wisdom says that making extra payments toward your mortgage saves interest. True, but that's not all. Increasing your mortgage payment also means larger equity value and more money in your pocket when you're older.

Paying extra on your mortgage saves you money over the life of the loan. Let's look at an example using this online calculator to see how it works. For example, say you take out a 30-year $200,000 mortgage with an annual interest rate of 4%. Under those conditions, you pay $955 a month for the next 360 months, which adds up to $343,739 in total. Now, if you pay an extra $100 a month, the calculator says you pay a total of $316,884, saving $26,855 in interest.

This is where most articles on the topic simply stop. They fail to explore the extra equity value in your home, during the repayment period, which is similarly striking.

As the mortgage meltdown in the early 2000s showed, equity matters. In the early years of ownership, equity is a cushion should home values decline. If you decide to sell, the extra equity value in your home means extra funds that may generate the income you need. It also means more reverse mortgage payments if you decide to tap your home's value for income later on when you are retired. If the home value grows on top of the mortgage payment acceleration, even more gains accrue to you.

Another advantage is the money available after the mortgage is paid off. Shortening the length of the mortgage and thus having that extra money – from not having to pay a mortgage – available to your budget sooner is a major benefit that most people often overlook. From the example above, if you add $100 to your monthly payment, you shorten the mortgage term by almost five years (from 360 months to 301).

Some argue paying off your mortgage early is unnecessary because you could take that money and grow it by investing it somewhere else. Indeed, the $30,100 extra payment is not available to you during the mortgage period. But it is likely that you need that $100 per month now less than you need that $955 later in life. A retiree, for instance, may need money more because of lower income and poorer health. Besides, there is risk in investing the money elsewhere. You may not be able to get a return that breaks even in the end. Extra payments don't have that risk.

Paying off a mortgage faster is about increasing equity value and having more money later on in retirement. More equity today is more income later, when you really need it.

12/20/2014

Mortgage rates drop to new low for the year, Freddie Mac says
The average for a 30-year fixed loan fell to 3.80% this week, down from 3.93% a week earlier, mortgage company Freddie Mac said Thursday. Lenders, meanwhile, offered a 15-year fixed mortgage at 3.09%, compared to 3.20% last week.

Plunging oil prices and concerns over the global economy drove yields on the 10-year Treasury note this week to their lowest level since May 2013.

That sent mortgage rates down as well, because they tend to track the long-term Treasury yield.

The mortgage giant's survey asks lenders each Monday morning through midday Wednesday about the terms they are offering to low-risk borrowers on loans up to $417,000.

12/17/2014

"The Government Refinance Plan Banks Hope You Ignore" Click for todays rates.

You need to act fast in order to refinance your house at these current low refinance rates as the HARP incentive expires. Could you use the extra savings?
The average monthly savings for most eligible Americans is $191.

12/17/2014

Regulator Finds Deficiencies With Mortgage Servicer Ocwen Financial
Ocwen Financial, a firm that collects the payments on millions of mortgages, has fallen afoul of another regulator.

The monitor of the National Mortgage Settlement announced on Tuesday that his office could not rely on information provided by Ocwen. That settlement, struck in 2012, requires banks and firms like Ocwen to meet standards that aim to ensure that struggling borrowers are treated properly.

The monitor, Joseph A. Smith Jr., regularly reviews whether the firms are in compliance with the standards. To do so, he relies to a large extent on reports from an “internal review group” inside each of the institutions that are part of the settlement.

“After my team and I reviewed numerous documents and interviewed several Ocwen personnel, I concluded that I could not rely on the work of Ocwen’s I.R.G. for the first half of 2014,” Mr. Smith said in a statement, referring to the review group. He added that an employee of Ocwen in May contacted the monitor, contending that there were serious deficiencies within the review group.

The company said it would work to address the monitor’s concerns.

“We will continue to support the monitor’s efforts to ensure that we are fully compliant with all aspects of the National Mortgage Settlement,” Ronald M. Faris, Ocwen’s chief executive, said in a statement. “We are committed to delivering best-in-class servicing as we work to help struggling borrowers keep their homes.”

The questions raised by Mr. Smith add to regulatory actions that have weighed on Ocwen’s business and helped cut its stock price by more than half this year.

Benjamin M. Lawsky, the superintendent of New York State’s Department of Financial Services, has assailed Ocwen on several fronts, most recently contending that Ocwen backdated letters to borrowers. Mr. Smith said on Tuesday that he had asked Ocwen to correct any issues relating to backdated letters.

Ocwen ballooned in size after the financial crisis of 2008, by purchasing so-called loan servicing business from banks who no longer found the activity financially attractive. Servicing involves collecting mortgage payments, arranging loan modifications for borrowers in default and carrying out foreclosures. And for a long time, Ocwen had little trouble convincing investors that it did servicing more efficiently.

But the company’s growth prospects came under threat after Mr. Lawsky’s office intervened. The regulator asserted that Ocwen had issues that might hinder it from carrying out its duties as a mortgage servicer. Mr. Lawsky required that a large purchase of servicing rights from Wells Fargo be delayed. That deal fell through completely last month.

The National Mortgage Settlement took aim at big banks, including JPMorgan Chase and Bank of America, that mishandled the tidal wave of foreclosures that followed the financial crisis of 2008. Ocwen became part of the settlement after it bought mortgage servicing business from Ally, a lender that was among the original participants in the settlement.

After finding fault with Ocwen’s review group, Mr. Smith has asked an outside accounting firm, McGladrey, to determine whether Ocwen had met the settlement’s standards.

In an interview, Mr. Smith said that he expected to report on McGladrey’s findings in February or March next year. The monitor first allows a firm to try to fix its problems with its servicing. But he can also resort to fines. “That’s a pretty heavy hammer that we have got, if we need it,” Mr. Smith said.

Ocwen has installed new management in the internal review group that reports to the mortgage settlement monitor. In addition, the review group now reports directly to a compliance committee on Ocwen’s board.

One of Mr. Lawsky’s concerns has been that potential conflicts between Ocwen and related firms may harm borrowers. Those ties may come under greater scrutiny after Mr. Smith’s announcement.

William C. Erbey, a founder of Ocwen and its chairman, is also the chairman and largest shareholder of Altisource Portfolio Solutions, a firm that provides Ocwen with a computer system for servicing loans. One question regulators may have is whether Ocwen used that system, called RealServicing, for the servicing business bought from Ally – and whether that system was up to the task of complying with the National Mortgage Settlement’s standards.

“We do not believe anything particular about RealServicing, as a system, caused the issues identified in the report,” Margaret Popper, a spokeswoman for Ocwen, said. “Unlike other servicers, Ocwen’s I.R.G. was tasked with testing on two platforms simultaneously – and that complexity may have been challenging for Ocwen’s I.R.G. during the applicable time period.”

12/16/2014

"The Government Refinance Plan Banks Hope You Ignore"

Mortgage rates have decreased, but rates may not stay low if the government changes its economic policy. Act now while rates are still low and avoid a potential rate hike.

12/16/2014

Here is a great mortgage calculator from bankrate

Trusted, easy-to-use mortgage calculator helps you calculate monthly payments, see the effect of adding extra payments, and more.

12/16/2014

Fannie Mae, Freddie Mac offer lower mortgage down payments
First-time home buyers have caught a break, thanks to a 3 percent down payment program re-introduced by mortgage giants Fannie Mae and Freddie Mac.

They have accepted 5 percent down payments but larger ones have been the general rule since funky mortgages issued during the last decade helped trigger the Great Recession. The hope now is the lower down payment will inject some life into the moribund housing market.

Fannie calls its program My Community Mortgage and Freddie’s is Home Possible Advantage, different names for programs discontinued several years ago as the housing market collapse deepened.

“Home Possible Advantage gives qualified borrowers with limited down payment savings a responsible path to home ownership and lenders a new tool for reaching eligible working families ready to own a home of their own,” Dave Lowman, executive vice president of Single-Family Business at Freddie Mac, said in a email.

Fannie Mae’s program takes affect on Saturday and Freddie Mac’s on March 23.

Realtors applaud lowering the limit.

“It’s very exciting. We’re thrilled to see this,” said Chris Kutzkey, president of the California Association of Realtors. “We, as an organization, have been at the table with Fannie and Freddie and HUD (the federal Housing and Urban Development Department) saying that we are through the horrific times so let’s loosen that credit box up a bit for our first-time buyers.”

This week the website www.mortgagenewsdaily.com reported that close to 70 percent of mortgage and housing industry professional responding to the Collingwood Group’s Mortgage Outlook Report was hopeful that relaxed lending rules will help stimulate the industry.

But Collingwood, which provides advisory services to the industry, also noted that home loan credit will remain tight.

So will knocking the down payment requirement by 2 percentage points really do the trick and boost home sales next year?

Probably not, said Clem Ziroli, Jr., president and chief operating officer of First Mortgage Corp. in Ontario and a member of the California Mortgage Bankers Association’s board of directors.

“I think it will pull a few people off the shelf, “ he said. “But the good thing about this is it’s an admission from the government that they need to loosen things up a bit. But with respect to moving the needle on sale? Probably not so much.”

Mortgage News Daily provides up to the minute mortgage and real estate news including mortgage rates, mortgage rss feeds and blog.

12/15/2014

Low mortgage down payment for minorities good for America

“Every American lives in safe, decent, affordable and energy efficient housing on fair terms.”
— National Urban League 2025 housing
empowerment goal
Federal Housing Finance Agency (FHFA) Director Mel Watt is taking action to turn the American dream of homeownership into reality for many more people. Watt recently announced that Fannie Mae and Freddie Mac, which he regulates and which are linchpins of the nation’s residential mortgage market, will reduce down payment requirements from 5 percent to 3 percent. This will enable many more low-income, but credit-worthy, consumers to become homeowners while helping the nation’s faltering housing market regain its traction.
We enthusiastically applaud this move and believe that as a result, more African-American, Latino and working class borrowers of all races, who face an especially tough time securing mortgages, will have greater access to conventional loans, which are more affordable than other financing options. We are also encouraged that the plan will allow housing counseling in lieu of costly mortgage insurance to be a compensating factor to help make up for low down payments or low credit scores.
Saving the necessary down payment to purchase a home is one of the biggest obstacles to attaining the American Dream, especially for communities of color. African Americans and Latinos typically have lower incomes and are less likely to receive an inheritance or first-time buying help from their parents than white Americans. According to the Center for Responsible Lending, while it takes the typical white family 14 years to save for a 5 percent down payment, plus closing costs, it takes the typical Latino family 17 years and the typical African-American family 21 years to save those amounts.
The National Urban League has long supported a reasonable and affordable “skin in the game” down payment requirement, but the ability to save a lump sum of money does not translate to the ability to pay a monthly mortgage. As Watt said at a Senate Banking Committee hearing recently, “The problem is that the down payment itself is not necessarily a reliable indicator of whether somebody will pay a loan. If they have good credit, if they have housing counseling … and know how to be responsible homeowners — those can mitigate the perceived increased risk.”
Forty years of National Urban League housing counseling experience and independent research indicate that borrowers who receive housing counseling services are one-third less likely to be seriously delinquent on their mortgage than non-counseled borrowers. We have seen first-hand how housing counseling benefits borrowers, lenders, Fannie and Freddie, and communities. Nearly 50 of the National Urban League’s 95 affiliates provide home buyer education to ensure communities of color are well-informed of their housing rights and options. Since 2008, we have provided pre-and-post purchase counseling to nearly 180,000 clients.
Watt has been rolling out this policy for several months. On Oct. 20, he told the Mortgage Bankers Association annual meeting, “To increase access for creditworthy but lower-wealth borrowers, FHFA is also working with the enterprises [Fannie and Freddie] to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower-down payment mortgages by taking into account compensating factors. It is yet another much needed piece to the broader-access-to-credit puzzle.”
Watt recognizes that low down payments did not cause the housing crisis, but that irresponsible products and predatory lending did. Lowering Fannie and Freddie down payment requirements will allow tens of thousands of African Americans, Latinos and working class Americans to purchase lower cost mortgages and become homeowners. That is good for our communities and good for America.

12/13/2014

Mortgage Lenders Tough on Self-Employed
Self-employed people have always had a tough time getting a mortgage but new data from Zillow, the real estate Website, shows just how bad it is.

Despite the fact that 6.6% of the U.S.-based working population is self-employed and many enjoy high incomes, self-employed borrowers receive 40% fewer purchase loan quotes. According to Zillow, they get six loan quotes for every ten received by non-self-employed borrowers. In June 2011 they fared a little better, getting seven loan quotes for every ten.

“The primary reason is their credit scores are lower,” says Erin Lantz, vice president of mortgages at Zillow. “Many times their personal and business finances are intermingled which can cause problems with their credit.”

According to Zillow’s finding, people who work for themselves are nearly twice as likely as those that work for an employer to report a FICO score below 680. Of survey respondents, 47% have scores below 720 while 28% have scores lower than 680. While myFICO says the median U.S. credit score as of April 2014 was 692, lenders want to see a credit score of at least 740 to get the best rates on a mortgage loan. Lenders use several factors to determine if they will give someone a mortgage, but the credit score situation seems to be hurting self-employed people the most, according to Zillow.

Another factor that may be limiting their chances of getting a mortgage is the size of loan. According to Zillow self-employed borrowers typically request loan quotes for homes that are 12% more expensive than employees of companies. The median property value for the self-employed, at least on Zillow is $352,000 compared to $315,000 for the non self-employed.

The lower credit score and higher loan price may be the reason self-employed people are getting shut out of the mortgage lending market but one thing is for sure, many of them make more money than those that work for an employer. Zillow found the incomes disparity was an eye-opening 81% with the self-employed reporting household income of $145,000 compared to $80,000 for the average non-self-employed household. “Income for self-employed borrowers is up by 28% since the summer of 2012, whereas the reported household income for non-self-employed borrowers is down 17% during the same time period,” said Zillow in its report. What’s more, self-employed people typically have a larger down payment.

Although the self-employed have always struggled to get a mortgage, Lantz says these days it’s slightly worse. Three years ago that type of borrower got 30% fewer quotes and now it stands at 40%. That doesn’t mean they can’t get a loan, but it does mean they are going to have to shop around to get a mortgage. After all, one lender may not be willing to give them a mortgage but the one around the block may be willing to. “It’s going to be harder to find a lender that will work with them,” says Lantz. Another thing working against them is the fact that underwriting and producing a loan for a self-employed person is going to require more work on the bank’s part than for a standard W-2 worker. “It takes more time and a lot of the time the borrower’s income is more volatile. They have to explain the ups and down,” she says. Not to mention that underwriters are working off of tax returns instead of W2s.

So what do the self-employed need to have at the ready when looking for a mortgage? According to Quicken Loans, some of the documentation they’ll have to produce include tax forms that document their profit and loss from a business; a profit and loss statement summarizing the revenues, costs and expenses for a specific time; business license, letters from customers proving they performed a service; and bond insurance for some professions, among other documentation.