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Average US Rate on 30-Year Mortgage at 4.51 Pct.

8/30/2013

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 Average U.S. rates for fixed mortgages declined this week but stayed close to their highest levels in two years.

Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan fell to 4.51 percent. That's down from 4.58 percent last week, the highest since July 2011.

The average on the 15-year fixed mortgage dipped to 3.54 percent from 3.60 percent, also the highest since July 2011.

Rates have risen more than a full percentage point since May when Chairman Ben Bernanke first signaled that the Federal Reserve might reduce its bond purchases later this year. The purchases have helped keep long-term interest rates low.

Mortgage rates remain low by historical standards. But the sudden spike in rates could slow the housing recovery's momentum.

U.S. sales of newly built homes dropped 13.4 percent in July to a seasonally adjusted annual rate of 394,000, the government said last week. That's the lowest level in nine months.

Also in July, fewer Americans signed contracts to buy homes for the second straight month, according to the National Association of Realtors. Still, the decline has been modest and the level of pending homes sales remains close to a 6 ½ -year high reached in May.

Mortgage rates have been rising because they tend to follow the yield on the 10-year Treasury note. The yield also has surged on speculation that the Fed's stimulus will slow. But the rate on the 10-year note declined this week to 2.78 percent from 2.90 percent last week.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage declined to 0.7 point from 0.8 point. The fee for a 15-year loan was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.64 percent from 2.67 percent. The fee slipped to 0.4 point from 0.5 point.

The average rate on a five-year adjustable mortgage rose to 3.24 percent from 3.21 percent. The fee held at 0.5 point.

source: http://abcnews.go.com/Business/wireStory/average-us-rate-30-year-mortgage-451-pct-20107166
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July home sales continue up

8/28/2013

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 CONCORD — Residential home sales in New Hampshire saw a year-over-year increase for the 20th consecutive month in July, outpacing July 2012 by 23 percent, while the price of those homes was up by 11 percent for the month as well.

There were 1,637 residential sales in July, compared with 1,331 from a year ago, marking the most sales in a single month since August 2005. With a median price of $230,000 (compared with $207,900 in July 2012), it added up to a 37 percent increase in overall July sales volume, meaning the total dollars exchanged in those transactions.

“I read somewhere that it won’t be long before the ‘housing recovery’ is simply referred to as ‘housing,’” said 2013 NHAR President Bill Weidacher. “We no longer have to qualify the recovery as a hypothetical or as something that we’re forecasting or dreaming about. It’s here.”

Year to date numbers in 2013 continue to be on the upswing as well. For the first seven months combined, compared to 2012, closed sales are up 12 percent, median price is ahead by 10 percent, and sales volume saw a 17 percent increase.

The average days on the market for sold homes, meanwhile, dropped by 18 percent in July, from 107 days in 2012 to 88 days this year. The year to date comparison is a 13 percent decline, from an average of 118 days on the market over the first seven months of 2012 to 103 in 2013.

Pending sales, a forward-looking sales indicator, increased by 23 percent in July and has risen 12 percent year to date.

And months’ supply, which measures the number of months it would take to sell of the current inventory of homes at the current pace of sales, dropped from nearly 15 months in July 2012 to 11 in July 2013.

“We’ve been in a buyers’ market for so long, some of those relatively new to the business are seeing things lean back toward the sellers for the first time,” Weidacher said. “There’s certainly more balance in the market than we’ve seen in years.”

Condominium sales in New Hampshire, meanwhile, trended similarly in July.

Locally, nine of the 10 New Hampshire counties saw residential unit sales increases in July, with Sullivan County the only exception, and nine of 10 witnessed July median price increases as well. 
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How To Apply (And Get Approved) For An FHA Mortgage

8/27/2013

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As the U.S. housing market recovers, FHA home loans remain popular among today's first-time and repeat home buyers. This is because of the loan traits that the FHA will allow.

FHA loans can be ideal for buyers with less than 5% to put down; with credit scores below 720; who've recently gone back to work; or, for a combination of these reasons. They're especially good for buyers getting cash gifts for downpayment.

FHA mortgages offer low rates and flexible guidelines. This article explains how to apply.

What Is The FHA Mortgage Program?

The FHA mortgage program is technically an insurance program. This is because the FHA is not a mortgage lender -- it's an agency which provides insurance to lenders for defaults or loan foreclosures.

In order for a loan to be insurable, the lender must be FHA-approved and the specific loan must be underwritten to the standards set forth in the official FHA mortgage guidelines.

FHA mortgage guidelines are among the most forgiving of all mortgage loan types. There is no minimum credit score requirement. Downpayments can be as little as 3.5% on a home. The waiting period after a bankruptcy, short sale or foreclosure can be as little as 12 months.

There are other benefits, too.

All FHA-insured loans get access to the FHA Streamline Refinance program -- one of the simplest ways to lower your annual mortgage rate -- and homeowners with FHA financing can actually sell their homes with the loan attached. This is because FHA loans are assumable.   

How To Get An FHA Mortgage

So, how can you get an FHA loan? Here’s a step-by-step guide to what you’ll need to do.
1. Discuss Your Ideas With A Lender

It's easy to research loans on your own, and that's a terrific way to begin educating yourself about mortgages. However, most information on the internet is general in nature and does not apply to your situation specifically. For example, you may earn non-standard income or show abnormal activity in your bank statements.

You can't know for certain whether you'll qualify for an FHA loan until you talk to a lender.

When you speak with a lender, he will review your financial situation with you and alert you to any ideas which may need to be addressed prior to closing. This can include talking through collection items on your credit report and judgments. During this stage, the more information that you share with your lender, the closer you'll be to getting FHA loan approval later on.

Note that you do not have to select your lender at this stage. It's just important that you speak to somebody who can assist,
2. Get Pre-Approved For An FHA Loan

After you've spoken with a lender, you'l want to begin the pre-approval process. As part of your pre-approval, the lender will tell you the maximum amount you can borrow with an FHA loan given your income, your debts and the expected monthly escrow of homes in the area.

Once pre-approved, your lender will provide you with an official pre-approval letter. Use this letter to prove that you can purchase homes up to a certain purchase price. Keep your pre-approval letter handy for your real estate agent and potential home sellers.

Pre-approvals are often provided at no cost, and asking for one does not obligate you to go ahead with the loan, or the lender.
3. Shop For A Home

There are many ways to shop for a home. You can work through a REALTOR®; you can search via the popular online real estate portals; you can use your local newspaper's real estate section; or, you can use a combination of all three. The good news is that you're pre-approved and  know exactly what you can afford.

When you find a home and make a purchase offer, be sure your contract includes a "financing contingency". Financing contingencies allow you to cancel the contract in the event you are unable to secure a loan. Hopefully, your financing contingency won't need to be invoked but it's important to always have that protection.
4. Select Your FHA-Approved Mortgage Lender

Once you're under contract, it's time to turn your pre-approval into an actual approval.

First, shop for FHA mortgage rates. This is an important step because the FHA does not set mortgage rates -- lenders do. There can be a big difference in rates between lenders, too, so get at least two rate quotes. Get one of your rate quotes here.

After you've selected a lender, provide whatever paperwork that lender requests then let the lender do his job of preparing your loan for closing. During this time, an appraisal of your home will be ordered. This is not the same as a home inspection, though. You should still arrange to have the home inspected on your own. Home inspections can reveal physical defects in a home which you may not have noticed otherwise.

Your real estate agent can refer an inspector, if you need one.
5. Closing Your FHA Loan

Once your loan is approved, you'll be issued a "cleared-to-close" by your lender, and you'll be ready to go to settlement. Often called "closing", your settlement may occur at a title company near your home or office, or in an attorney's office, or in your current home -- each closing can be different.

After closing is complete, you will receive copies of your signed loan documents, which will include directions on where to send your payments and how to establish an auto-pay for your mortgage, if that's your preferred method of payment.

You will also receive keys to your new home.
Take Your First FHA Loan Step

FHA loans account for a significant share of the U.S. housing market and it's easy to understand why. The forgiving nature of the FHA mortgage guidelines, combined with the low rates available via the program, can make it a compelling mortgage option. 

Source: http://themortgagereports.com/13412/how-to-apply-and-get-approved-for-an-fha-mortgage-plus-live-mortgage-rates
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Mortgage rates jump to two-year high; refinancing hit

8/26/2013

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Mortgage rates in the U.S. jumped to a two-year high, increasing borrowing costs for homebuyers as sales accelerate.

The average rate for a 30-year fixed mortgage rose to 4.58 percent last week from 4.4 percent, Freddie Mac said in a statement. The average 15-year rate climbed to 3.6 percent from 3.44 percent, the mortgage-finance company said. Both were the highest since July 2011.

Homebuyers are rushing to take advantage of historically low borrowing costs before they increase even more.

Existing-home sales in July jumped 6.5 percent to the second-highest level in six years, the National Association of Realtors reported on Aug. 21. Those transactions largely reflect closings of contracts signed a month or two earlier, when mortgage rates were just beginning to edge up.

“If you were considering buying, rates aren’t going to get much better any time soon,” said Erin Lantz, director of mortgages at Seattle-based Zillow. “So buying sooner rather than later makes sense.”

The 30-year fixed mortgage rate has climbed from 3.35 percent in early May as the Federal Reserve signaled it may begin scaling back its bond-buying program aimed at lowering borrowing costs.

Policy makers were “broadly comfortable” with Chairman Ben Bernanke’s plan to start reducing purchases later this year if the economy improves, according to the minutes of the Federal Open Market Committee’s (FOMC) July meeting, released last week.

The FOMC will probably reduce its $85 billion in monthly purchases at its Sept. 17-18 meeting, according to 65 percent of 48 economists in a Bloomberg survey. The median estimate called for a cut to $75 billion each month.

Rising mortgage rates have had the biggest effect on refinancing. The Mortgage Bankers Association’s index of applications to lower monthly payments fell 7.7 percent in the week ended Aug. 16, the 10th straight decline. A measure of purchases rose 1.2 percent, the trade group said.

The 30-year fixed mortgage rate is well below its average of about 6.3 percent for the past 20 years, according to data compiled by Bloomberg. The 20-year average for a 15-year loan is about 5.83 percent.

Lowe’s, the second-largest U.S. home improvement retailer, isn’t “overly concerned” about the rise in rates as long as the 30-year average stays below 6 percent, chief executive Robert Niblock said on a conference call Aug. 21. The company and larger competitor Home Depot last week reported earnings that beat analysts’ estimates and raised their profit forecasts for 2013, buoyed by the housing recovery.

“The rate increases will likely take some steam out of the recent housing market rebound but shouldn’t derail it as long as job gains persist, homes continue to appreciate and rates rise more gradually going forward,” Niblock said.

source: http://kpbj.com/business_daily/2013-08-26/mortgage_rates_jump_to_two_year_high_refinancing_hit
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James Clooney ranked 45 in Mens 50 PPR Singles

8/23/2013

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Rank Name City State Section District Points
1 Rodgers, Scott D. Scotch Plains NJ Eastern                                             New Jersey Region 756
2 Friedman, Neil New York NY Eastern                                             Metropolitan Region                                             576
3 Clark, James Larchmont NY Eastern                                             Southern Region 516
4 Kalina, Jonathan Fair Lawn NJ Eastern                                             New Jersey Region 384
5 Harrington, Bill New York NY Eastern                                             Metropolitan Region                                             354
6 Satterlee, Richard Thomas                                             Bronx NY Eastern                                             Metropolitan Region                                             259
7 Miyake, Junji Cliffside Park NJ Eastern                                             New Jersey Region 258
8 Okuda, Tatsumi Tenafly NJ Eastern                                             New Jersey Region 198
9 Serebro, Boris White Plains NY Eastern                                             Southern Region 192
10 Olds, Mason Garden City NY Eastern                                             Long Island Region 192
11 Lurie, Jonathan New York NY Eastern                                             Metropolitan Region                                             165
12 White, Ken Elma NY Eastern                                             Western Region 164
13 Hakanson, John East Northport NY Eastern                                             Long Island Region 159
14 Hoffman, Andrew Holmdel NJ Eastern                                             New Jersey Region 132
15 Irom, Bruce Roslyn NY Eastern                                             Long Island Region 126
16 Difabio, Joseph J. Troy NY Eastern                                             Northern Region 126
17 Asher, Jordy Endicott NY Eastern                                             Western Region 104
18 Smith, Theodore Croton Falls NY Eastern                                             Southern Region 96
19 Miller, Grant L. Guilderland NY Eastern                                             Northern Region 96
20 Spano, Joseph Oak Ridge NJ Eastern                                             New Jersey Region 96
21 marshall, william New York NY Eastern                                             Metropolitan Region                                             95
22 Coglietta, Fred F. Saint James NY Eastern                                             Long Island Region 88
23 Boutillette, Michael J. Somerset NJ Eastern                                             New Jersey Region 84
24 Goetz, Philip Brooklyn NY Eastern                                             Metropolitan Region                                             84
25 Yonkers, Paul J Sea Cliff NY Eastern                                             Long Island Region 68
26 Bellcourt, Scott L. Niskayuna NY Eastern                                             Northern Region 64
27 Smith, David Cresskill NJ Eastern                                             New Jersey Region 64
28 Sherlock, John G. Laurence Harbor                                             NJ Eastern                                             New Jersey Region 44
29 L'allier, Jean Flushing NY Eastern                                             Metropolitan Region                                             13
30 Varela, Alejandro Jamaica NY Eastern                                             Metropolitan Region                                             6
31 Greenblatt, Joel Sands Point NY Eastern                                             Long Island Region 4
32 Rakoczy, Roman Clifton Park NY Eastern                                             Northern Region 4
33 Barest, Warren S. White Plains NY Eastern                                             Southern Region 4
34 Gash, Gary M. White Plains NY Eastern                                             Southern Region 4
35 Heath, Timothy New York NY Eastern                                             Metropolitan Region                                             4
36 Appel, Jeffrey New York NY Eastern                                             Metropolitan Region                                             2
37 Gribbin, Bill Manhasset NY Eastern                                             Long Island Region 2
38 Delman, Robert Old Westbury NY Eastern                                             Long Island Region 2
39 Reiley, Jorge A. Manorville NY Eastern                                             Long Island Region 2
40 Soltan, Yasser Ahmed Brooklyn NY Eastern                                             Metropolitan Region                                             2
41 Hesky, Haim Great Neck NY Eastern                                             Long Island Region 2
42 Ackley, Frank Wainscott NY Eastern                                             Long Island Region 1
43 Anton, David Old Bethpage NY Eastern                                             Long Island Region 1
44 Swenson, Christopher B Montclair NJ Eastern                                             New Jersey Region 1
45 Clooney, Jim oyster bay cove NY Eastern                                             Long Island Region 1
46 Weiss, Andrew G. Port Chester NY Eastern                                             Southern Region 1
47 Sedlacek, Paul L. Rockaway NJ Eastern                                             New Jersey Region 1
48 Volpe, John L. Nutley NJ Eastern                                             New Jersey Region 1
49 Mejia, Robert J. Mahwah NJ Eastern                                             New Jersey Region 1
50 Hinshaw, John Levittown NY Eastern                                             Long Island Region 1
51 Gigante, Joseph West Islip NY Eastern                                             Long Island Region 1

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Ways to Sidestep Volatile Mortgage Rates

8/22/2013

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To say mortgage rates are volatile right now is an understatement. Every few days for the past two months, there have been heavy swings in mortgage pricing, translating to strong gyration in mortgage rates. Nothing can be more frustrating for a pre-approved potential homebuyer than knowing their ability to qualify and their subsequent proposed payment could change in an instant. But there are other options that can help take the volatility out of your house hunting.

Should You Lock In a Mortgage Rate?: Most lenders will not lock in your interest rate until you have a ratified purchase contract or a bona fide legitimate purchase agreement. Mortgage lenders offer interest rate locks for 30 days, 45 days, 60 days and some even as long as 90 days, with the majority of buyers doing 30-day rate locks to match the traditional 30 days for close of escrow. Locking in an interest rate means you've committed to an interest rate that will be used for the term of the loan, e.g. 360 months for a 30-year fixed-rate mortgage.

Pros:
• Payment clarity upfront.
• More time to budget and plan your finances during the escrow process.
• More time for the lender to get your loan package through the underwriting process.
• More allowance to focus on other aspects of your purchase offer, i.e. contractual obligations.

Cons:
• Missed opportunity for a reduction in the interest rate, which means a lower monthly payment.

Should You Float?: Floating your rate is defined as simply not locking in your interest rate. Floating essentially allows your interest rate and payment to move on a daily basis until you fully commit to your lender on an interest rate.

Pros:
• The opportunity for a lower interest rates and costs.
• Depending on your individual lender's policies/procedures, the opportunity to switch loan programs during the loan process, such as going from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage.

Cons:
• This can be a risky position to be in during a volatile interest rate environment.
• You risk rates rising while you float, which could reduce your ability to qualify for a mortgage and could impact your earnest money deposit on your purchase transaction.

Which Is Right for You?: It depends on your personal threshold for how much risk you're willing to take on by floating for interest rate opportunity. If you can qualify for the mortgage loan even if rates were to rise during your loan process, you would have the luxury of being able to take advantage of a favorable market reaction the next time the bond market rallies. On the flipside, you'd be entering into a purchase contract with thousands of dollars on the line in exchange for what may or may not come to fruition with rates. This is why it solely depends on your appetite for risk and how much you're willing to gamble in the market. If you have a 30-day close of escrow, that's not much time for floating in an attempt to seize something better.

Other Timing Considerations: Don't forget interest rates aren't the only consideration to take during the home-buying process. Some other factors include:
• Ordering an appraisal, or making sure value comes in at purchase price.
• Inspections.
• Releasing any inspection contingencies.
• Providing updated financial documentation in a timely manner to the lender. (This is a big one!)
• Releasing any loan contingencies.

While these steps in the purchase process seem relatively small, they can very quickly become task-heavy, which otherwise can change your focus from interest rates to making sure everything else is in order. Granted, your loan officer and real estate agent will be handling a lot of these steps in conjunction with you, but these are things to be mindful of in addition to trying to time the market.

Strategy for Locking In a Mortgage Rate: In a perfect situation, locking ahead of major economic news is generally the most conservative approach. It is expected that before large economic market mover information comes out, an idea of how the market will react is typically released beforehand. For example, whenever the Federal Reserve makes a statement about the financial markets, usually there is information and analysis leading up to the speech before the news actually hits the markets. This gives you and your lender an opportunity to examine the market and discuss whether not it makes sense to float or lock the interest rate prior to the official announcement. Keep in mind that the speculation beforehand is just that -- speculation -- and you will need to make your own call based on the information.

source: http://realestate.aol.com/blog/2013/08/21/lock-in-or-float-mortgage-rate/
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Reverse mortgages likely to get stingier, more complex

8/21/2013

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WASHINGTON — Three years ago, with his former partner suffering from cancer, Jim Dorsey decided to borrow against the equity on his Vashon Island, Wash., home with a reverse mortgage. The couple didn't have children and didn't plan to move, so a loan that didn't have to be repaid until he died seemed like a good deal.

Dorsey, 69, isn't so sure now.

The retired high-school teacher figures the loan — which netted him a $75,000 lump sum after paying off his existing mortgage — will reduce his home equity by $100,000, compared with what it otherwise might have been, if he lives another decade.

Then again, Dorsey can stay in the house for as long as he pays his property taxes and homeowner's insurance. Plus, he won't be liable for the shortfall if his final loan balance exceeds his home's value, either because of falling real-estate prices or because he lives longer than expected.

That's because almost all reverse mortgages since 1989 have been insured by the Federal Housing Administration.

The agency collects mortgage-insurance premiums from borrowers, much of which are used to make lenders whole if borrowers default or if home prices drop.

"The feds are assuming the risk," he said. "The bank is in the catbird seat."

That risk has put the FHA's reverse-mortgage portfolio $5.25 billion in the hole as worrisome numbers of borrowers fail to keep up with taxes and insurance or convey their homes to the FHA rather than go through the expense of marketing and selling their properties.

In response, Congress recently passed legislation sponsored by U.S. Rep. Denny Heck, D-Wash., allowing the FHA to fast-track changes to stem the deficit. President Obama signed the bill.

The agency plans to use the new authority to tighten lending terms that could reduce loan amounts or even disqualify some borrowers.

Among the proposed changes are requiring a review of applicants' finances before granting a loan and mandating an escrow account to set aside money for taxes and insurance.

The new rules are scheduled to take effect Oct. 1.

The legislation's passage comes on the heels of an FHA administrative action in April to steer borrowers to lower-fee, lower-payout loans to reduce stress on the agency's insurance fund.

Some consumer advocates fear the pending changes could lock seniors out of reverse mortgages or drastically lower their borrowing limits. That's a worry because retirement experts expect more pension- and savings-poor Americans to tap their home equity after paychecks end.

Heck said his legislation was a "twofer" win for seniors and taxpayers. Giving the FHA quick authority to shore up its reverse-mortgage program of Home Equity Conversion Mortgages, Heck said, protects against defaults and minimizes the tab for the Treasury.

Heck acknowledged that critics regard reverse mortgages as inherently predatory. Unlike home-equity loans, for instance, reverse mortgages carry origination fees, mortgage-insurance premiums, closing costs and other expenses.

Then there are those who believe "the FHA shouldn't even exist at all," he said.

Erin Reardon, a reverse-mortgage counselor with Solid Ground, a nonprofit anti-poverty group in Seattle, warned that the FHA's new guidelines could sow more confusion with a product that's already complicated.

Dorsey, who separated from his partner, said reverse mortgages come with trade-offs: cash now or equity later.

He said fees ate up a substantial portion of his original draw. In exchange, he can stay put in his home as long as he keeps it in good repair.

"Do you need the cash? If so, then reverse mortgages may be a sound choice," he said. "Do you value future equity? If so, then reverse mortgages may not be a good choice."
Reverse mortgage basics

Reverse mortgages can help cash-poor seniors tap the equity in their homes without moving out. But borrowers often lack a full grasp of how the loans work. They are the opposite of traditional, or "forward," mortgages: Your loan balance grows — and home equity shrinks — over time.

Who qualifies

Homeowners who are at least 62. You must be mortgage-free or have a small balance that will be paid off with proceeds from the reverse mortgage.

Borrowing limits

You can borrow against homes of any value, but loan proceeds are capped at homes appraised at $625,500. The size of the loan depends on the age of the borrower, the interest rate and required fees. But roughly, on a $200,000 home, a 65-year-old homeowner could take out about $120,000 after closing costs and other fees, depending on the terms of the loan. At 85, the same borrower could get about $155,000.

Interest and fees

Reverse mortgages have similar costs as regular mortgages. For instance, they carry origination fees of up to $6,000 on homes appraised at $400,000 or higher. On top of that, some borrowers must pay an up-front 2 percent mortgage-insurance premium, plus another 1.25 percent annually. Borrowers also incur closing costs, such as title searches, home appraisal, recording fees and mortgage taxes.

Terms

Borrowers can opt for lump-sum draws, regular payments or a line of credit. They are responsible for paying property taxes and homeowner's insurance to avoid foreclosure. The loans come due when owners move out, sell or die. The final loan balance can sometimes exceed the home's sale price. The borrowers or their heirs are not liable for the shortfall.

Source: http://www.denverpost.com/styleheadlines/ci_23880320/reverse-mortgages-likely-get-stingier-more-complex

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Rethinking reverse mortgages

8/19/2013

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 WASHINGTON — Three years ago, with his former partner suffering from cancer, Jim Dorsey decided to borrow against the equity on his Vashon Island, Wash., home with a reverse mortgage. The couple didn't have children and didn't plan to move, so a loan that didn't have to be repaid until he died seemed like a good deal.

Dorsey, 69, isn't so sure now.

The retired high school teacher figures the loan — which netted him a $75,000 lump sum after paying off his mortgage — will reduce his home equity by $100,000, compared with what it otherwise might have been, if he lives another decade.

Then again, Dorsey can stay in the house for as long as he pays his property taxes and homeowner's insurance. Plus, he won't be liable for the shortfall if his final loan balance exceeds his home's value, either because of falling real-estate prices or because he lives longer than expected.

That's because almost all reverse mortgages since 1989 have been insured by the Federal Housing Administration. The agency collects mortgage-insurance premiums from borrowers, much of which are used to make lenders whole if borrowers default or home prices drop.

“The feds are assuming the risk,” he said. “The bank is in the catbird seat.”

That risk has put the FHA's reverse-mortgage portfolio $5.25 billion in the hole as worrisome numbers of borrowers fail to keep up with taxes and insurance or convey their homes to the FHA rather than go through the expense of marketing and selling their properties.

In response, Congress recently passed legislation sponsored by U.S. Rep. Denny Heck, D-Wash., allowing the FHA to fast-track changes to stem the deficit. President Obama signed the bill. The agency plans to use the new authority to tighten lending terms that could reduce loan amounts or even disqualify some borrowers.

Among the proposed changes are requiring a review of applicants' finances before granting a loan, and mandating an escrow account to set aside money for taxes and insurance.

The new rules are scheduled to take effect Oct. 1.

The legislation's passage follows an FHA administrative action in April to steer borrowers to lower-fee, lower-payout loans to reduce stress on the agency's insurance fund.

Some consumer advocates fear the pending changes could lock seniors out of reverse mortgages or drastically lower their borrowing limits. That's a worry because retirement experts expect more pension- and savings-poor Americans to tap their home equity after their paychecks end.

The FHA intends to limit the amount borrowers can draw at the beginning of the loan, possibly tied to the size of the existing mortgage they need to pay off and other types of debt.

“We will get frantic calls from borrowers,” said Erin Reardon, a reverse-mortgage counselor with Solid Ground, a nonprofit anti-poverty group in Seattle. Any time rules change, borrowers are “rushed into getting the loan when they usually might have taken more time to think about it.”

The number of Americans taking out reverse mortgages fell for a third straight year to 54,591 in fiscal 2012. But that number is expected to spike in coming years as more baby boomers finance retirement.

Anthony Webb, research economist at the Center for Retirement Research at Boston College, said the need is being driven by the rising age for Social Security eligibility and inadequate savings.

But Webb put most blame on disappearing pensions. Between 1989 and 2010, the percentage of American workers with defined-benefit pensions that pay specific, promised sums fell by two-thirds to just 8 percent.

“I think more Americans, out of necessity, will turn to reverse mortgages,” he said.

Dorsey, who separated from his partner, said reverse mortgages come with trade-offs: cash now or equity later. He said fees ate up a substantial portion of his original draw.

“Do you need the cash? If so, then reverse mortgages may be a sound choice,” he said. “Do you value future equity? If so, then reverse mortgages may not be a good choice.”

Source: http://triblive.com/business/headlines/4541058-74/reverse-mortgages-borrowers#axzz2cQE9MiLT

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Mortgage rates level up for loans big and small

8/15/2013

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 While overall mortgage rates have been rising, a curious thing has been happening within the mortgage market itself. The difference between the cost of a conforming loan ($417,000 and under, except for certain high-cost markets) and a jumbo loan (above $417,000) has shrunk to nearly nothing.

The average rate on the 30-year fixed mortgage last week was 4.56 percent; the average rate on the jumbo was 4.57 percent, according to the Mortgage Bankers Association.

"It's a confluence of events, really, and all of them help the spread between jumbo and conventional loans," said Matthew Graham, COO of Mortgage News Daily.

"Nonagency jumbo lenders began dipping their toes in the water as early as 2011, and even more so into the end of 2012. Strong loan quality due to tight underwriting combined with competition between large banks and securitzers has led to relatively increased demand. Wells and Chase are keen to compete with securitizers like Redwood or Sequoia in order to capture potential income streams from jumbo clients' bank business." 

 In addition, Fannie Mae and Freddie Mac, which back and bundle two-thirds of conventional loans, have been raising the fees they charge to banks, so-called guarantee fees, mostly to protect themselves against default. Guarantee fees have nearly doubled in just the past year.

"As G-fees move higher, this increase gets added into conforming mortgage rates," said Guy Cecala of Inside Mortgage Finance. "It's a factor, but not the biggest one, allowing portfolio jumbo lenders to match or undercut conforming mortgage rates."

The bigger factor, said Cecala, is that 92 percent of jumbo mortgages are made by banks that fund the loans with their deposits and then hold them in a portfolio. Given that the interest paid on consumer deposits in banks is still incredibly low, lenders can still make a profit on mortgages priced at 4 percent or less if they want to. In fact, jumbo loans, by some lenders, can actually cost less than conforming. 

 The shrinking spread, or increasing cost to banks of doing business with Fannie Mae and Freddie Mac, is slowly opening the door again to private investors in mortgages. That is by design.

"The FHFA (Fannie Mae and Freddie Mac's regulator) has been clear that it will continue to raise them [G-fees] in order to decrease the agencies' footprint in the industry—hopefully drawing in private capital," noted Graham.

So far, however, that is only happening for the highest-quality loans, warned David Stevens, CEO of the MBA. The spreads are only close for loans with at least a 20 percent down payment made by borrowers with stellar credit.

"For private-label securities investors, there will definitely be an equal competing bid opportunity to buy mortgages that are within the conforming loan limits but only for borrowers with big down payments," noted Stevens.

More risky loans will still go to Fannie and Freddie. "Clearly the private sector can fill in that space and take these mortgages and likely will. You've already seen it with some of the large banks." 

 While the pricing may benefit investors now, it is not like they are all rushing back in. For one thing, investors don't get the revenue from mortgage servicing that banks do, because they just buy the MBS. Overseas investors are now only buying AAA-rated securities, and in the United States there is still tremendous distrust of the ratings agencies.

 "When the bottom fell out of the private-label securities markets in the third quarter of 2007, you had an absolute aversion to buying anything MBS-related that didn't come guaranteed. Now this will require a much higher level of confidence," said Stevens.

There are also new risk-retention rules in place for banks that securitize loans, some of which have not been finalized. That market uncertainty continues to hold investors back, but the door is definitely inching open. 


source: http://www.cnbc.com/id/100962728
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Reverse mortgages likely to get stingier 

8/13/2013

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 WASHINGTON — Three years ago, with his former partner suffering from cancer, Jim Dorsey decided to borrow against the equity on his Vashon Island home with a reverse mortgage. The couple didn’t have children and didn’t plan to move, so a loan that didn’t have to be repaid until he died seemed like a good deal.

Dorsey, 69, isn’t so sure now.

The retired high-school teacher figures the loan — which netted him a $75,000 lump sum after paying off his existing mortgage — will reduce his home equity by $100,000, compared with what it otherwise might have been, if he lives another decade.

Then again, Dorsey can stay in the house for as long as he pays his property taxes and homeowner’s insurance. Plus, he won’t be liable for the shortfall if his final loan balance exceeds hishome’s value, either because of falling real-estate prices or because he lives longer than expected.

That’s because almost all reverse mortgages since 1989 have been insured by the Federal Housing Administration (FHA). The agency collects mortgage-insurance premiums from borrowers, much of which are used to make lenders whole if borrowers default or if home prices drop.

“The feds are assuming the risk,” he said. “The bank is in the catbird seat.”

That risk has put the FHA’s reverse-mortgage portfolio $5.25 billion in the hole as worrisome numbers of borrowers fail to keep up with taxes and insurance or convey their homes to the FHA rather than go through the expense of marketing and selling their properties.

In response, Congress last week passed legislation sponsored by U.S. Rep. Denny Heck, D-Olympia, allowing the FHA to fast-track changes to stem the deficit. President Obama signed the bill Friday. The agency plans to use the new authority to tighten lending terms that could reduce loan amounts or even disqualify some borrowers.

Among the proposed changes are requiring a review of applicants’ finances before granting a loan, and mandating an escrow account to set aside money for taxes and insurance.

The new rules are scheduled to take effect Oct. 1.

Drastic changes feared

The legislation’s passage comes on the heels of an FHA administrative action in April to steer borrowers to lower-fee, lower-payout loans to reduce stress on the agency’s insurance fund.

Some consumer advocates fear the pending changes could lock seniors out of reverse mortgages or drastically lower their borrowing limits. That’s a worry because retirement experts expect more pension- and savings-poor Americans to tap their home equity after paychecks end.

Heck said his legislation was a “twofer” win for seniors and taxpayers. Giving the FHA quick authority to shore up its reverse-mortgage program of Home Equity Conversion Mortgages (HECM), Heck said, protects against defaults and minimizes the tab for the Treasury.

Heck acknowledged critics regard reverse mortgages as inherently predatory. Unlike home-equity loans, for instance, reverse mortgages carry origination fees, mortgage-insurance premiums, closing costs and other expenses. Then there are those who believe “the FHA shouldn’t even exist at all,” he said.

Conservative congressional Republicans want to greatly pare back the federal government’s role in insuring private mortgages, including returning the FHA to its original mission of focusing on low-income and first-time buyers.

More complication ahead?

Erin Reardon, a reverse-mortgage counselor with Solid Ground, a nonprofit anti-poverty group in Seattle, warned that the FHA’s new guidelines could sow more confusion with a product that’s already complicated.

Reverse mortgages are available to any homeowner 62 or older. Borrowers receive a portion of the home’s appraised value, with older seniors allowed to tap more equity. The loans do not have to be repaid until borrowers die, move or sell. They are the opposite of traditional mortgages: Loan balances grow, not shrink, with interest, over time, chiseling away equity.

Reardon said one of the attractions of reverse mortgages is that they do not require credit histories or sufficient cash flow. She’s waiting to find out whether the FHA’s new financial-assessment rules might knock out potential borrowers.

Reardon also worried that mandatory reserves for taxes and insurance might leave some seniors with little or nothing from their home equity. The FHA has not issued formal guidelines, but agency officials have indicated the escrow set-asides could equal two years’ worth of taxes and insurance or even cover the full duration of the loan, which can last 30 years or longer.

As of February 2012, a record 54,000 borrowers, or 9.4 percent of reverse-mortgage holders, were at risk of foreclosure because they failed to keep up with property taxes and homeowner’s insurance.

The FHA also intends to limit the amount borrowers can draw at the beginning of the loan, possibly tied to the size of the existing mortgage they need to pay off and other types of debt.

“We will get frantic calls from borrowers,” Reardon said. Any time rules change, borrowers are “rushed into getting the loan when they usually might have taken more time to think about it.”

Hard-pressed retirees

The number of Americans taking out reverse mortgages fell for a third straight year to 54,591 in fiscal 2012. But that number is expected to spike in coming years as more baby boomers finance retirement.

Anthony Webb, research economist at the Center for Retirement Research at Boston College, said the need is being driven by the rising age for Social Security eligibility and inadequate savings.

But Webb put most blame on disappearing pensions. Between 1989 and 2010, the percentage of American workers with defined-benefit pensions that pay specific, promised sums fell by two-thirds to just 8 percent.

“I think more Americans, out of necessity, will turn to reverse mortgages,” he said.

Dorsey, who separated from his partner, said reverse mortgages come with trade-offs: cash now or equity later. He said fees ate up a substantial portion of his original draw. In exchange, he can stay put in his home as long as he keeps it in good repair.

“Do you need the cash? If so, then reverse mortgages may be a sound choice,” he said. “Do you value future equity? If so, then reverse mortgages may not be a good choice.”

Source: http://seattletimes.com/html/localnews/2021579933_reversemortgagexml.html
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