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30 Oct 12 No Cost Refinancing Can Save You Big Time

BankRate published a recent article, claiming that there is “no such thing as no-cost mortgages.” The article asserts that lender fees and closing costs are covered by a higher mortgage rate. According to Jake Emmons who works as a loan manager at V.I.P. Mortgage in Aliso Viejo, “the no cost mortgage, typically costs less than .25 of a point.” Financially speaking if a borrower keeps the new mortgage for thirty years,(that means that the borrower never refinances this loan) that is doesn’t pencil out to choose the refinance with no closing costs, but how often does that happen? According to a recent survey at the Mortgage Bankers Association, more than 35% of homeowners that refinanced in 2011 or 2012 have done multiple times. Following this logic, it would be difficult to argue that the “average borrower” will pay off their existing mortgage with 360 payments prior to refinancing. Of course with refinance rates at record lows, there will be a point in time when rates start rising substantially and homeowners that have record low rates actually stop refinancing. In most cases, a no cost mortgage is paid by the lender in what is called “yield spread premium.”

The Most Significant Benefits of a No Cost Refinance

  • New mortgage balance does not increase
  • Borrowers that refinance frequently would save thousands by avoiding lender fees
  • Preservation of savings because people would not have to come “out of pocket” to pay closing costs


23 Sep 10 Home Mortgage Rates Remain Low

Mortgage company Freddie Mac, says home loan rates for fixed-rate home loans were unchanged for qualified borrowers this week .  But other surveys are indictating that rates are declining again and hitting all-time lows in reaction to a Federal Reserve statement Tuesday that the markets interpreted as likely to drive down long-term interest rates.

Today, Freddie Mac said that its national survey showed lenders offering at an average 4.375% for a thirty-year mortgages with fixed rate terms and 3.825% for a 15-year fixed rate mortgages remained the same as the rates posted in the Freddie Mac’s previous weekly survey. Jumbo mortgage loans say higher mortgage rates ranging from 4.875% to 5.25% depending on loan to value and credit scores.

According to Sean Downs, a Colorado mortgage lender, “Interest rates are the problem right now.  Rates are great, but getting borrowers qualified by meeting the equity and credit guidelines has been very challenging this year.  Conventional and FHA lenders like Downs Financial continue to report difficulties finding borrowers who meet today’s tighter loan guidelines.


21 Jul 10 California Mortgage Brokers Get Criminal Checks Yet Banks Are Exempt

One would think after the recent mortgage debacle and housing crisis that the government would really want to implement mortgage loan reform that closed the “loop holes” to significantly reduce the foreclosures and loan defaults that have been costing U.S. tax-payers billions of dollars each year.  California mortgage brokers face closer scrutiny as the state adopts a federal law aimed at curbing the fraud and abuse that helped decimate the housing market.  According to Bloomberg, mortgage brokers in the nation’s most populous state will be required by July 31th to have passed criminal-background and credit checks, as well as licensing exams. California, along with about a third of U.S. states, previously didn’t require mortgage sellers to have individual licenses.

That’s about to change as all states by January 1st must implement the national rules, which Congress developed after record mortgage defaults and foreclosures were triggered by rampant lending to people who couldn’t afford to repay their loans or never intended to. Brokers will be assigned identification numbers to enable regulators and borrowers to track their lending histories.  “When someone buys 100 shares of stock, they must go through a licensed securities broker,” said Senator Dianne Feinstein, a California Democrat and co-sponsor of the law, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. “Until recently, some purchased their home — a far more valuable asset — through an independent mortgage broker or lender who may have had a criminal background or no license at all. This lack of accountability enabled unscrupulous brokers to commit fraud at the expense of unsuspecting homebuyers.”

Why Are Banks Exempt?

The 2008 law, dubbed the SAFE Act, doesn’t require testing for mortgage brokers at federally regulated mortgage lenders. That may help companies such as BofA Home Loans, Citi Mortgage and Wells Fargo Home Mortgage increase market share because they face fewer training requirements and costs, said William Emerson, chief executive officer of Quicken Loans Inc., a closely held nonbank lender in Livonia, Michigan.  “For large, independent, nonbank lenders, this is certainly an operational challenge,” Emerson, whose company originated $25 billion in mortgages in 2009, said in a telephone interview. “It certainly adds costs.”  Bank of America and Wells Fargo together accounted for 46 % of the residential-lending market in the first quarter, according to data compiled by Inside Mortgage Finance Publications in Bethesda, Maryland. Of $320 billion in new mortgages in the quarter, about $184 billion, or 57 %, was originated by lenders whose employees are exempt from the licensing exams, according to Inside Mortgage Finance data.  “You see mortgage brokers take the test and fail it and wind up working for banks,” Emerson said. “If you can’t pass a test and work for an independent, why are you qualified to work for a bank?”  According to according to Pete Marks from the Conference of State Bank Supervisors, about 71 % of people who took the national broker exams passed on the first try, which was assigned responsibility under the SAFE Act to maintain the licensing system and national registry. Mortgage originators must also pass separate tests in each state they do business.

Increased Protections from Bank Lenders

Bank of America, based in Charlotte, North Carolina, conducts background investigations and credit checks of all hires and provides training in legal compliance and regulations, Terry Francisco, a spokesman, said in an e-mail. Wells Fargo takes similar precautions, said Jason Menke, a spokesman for the San Francisco-based bank.

Borrowers were victimized last year by brokers engaged in fraudulent loan-modification plans, home appraisals and applications for the first-time homebuyer tax credits, the Federal Bureau of Investigation said June 17 in its annual report on mortgage fraud. The top states for fraud in 2009 were California, Florida, Illinois, Michigan and Arizona, based on law enforcement and industry data, according to the bureau.  In a law-enforcement crackdown on mortgage fraud announced by the FBI on June 17, mortgage brokers accounted for 169 of the 1,215 defendants charged in the operation; 56 of the 485 arrests; and 46 of the 336 convictions to date.  “From homebuyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” FBI Director Robert Mueller said in a statement.

Mortgage Fraud Repercussions

According to RealtyTrac Inc, mortgage companies will take-over more than one million homes this year, forecast July 15th. Mortgage defaults soared to 10.1 % and foreclosures reached 4.63 % in the first quarter, both records, the Mortgage Bankers Association said May 19. Median existing-home prices have fallen 22 % to $179,600 since the July 2006 peak, the National Association of Realtors said June 22.

The number of U.S. mortgage brokers shrank to 246,900 in May, less than half of the February 2006 high of 504,400, according to the U.S. Bureau of Labor Statistics. The decline was driven by tighter compliance standards, said David Olson, president of Access Mortgage Research & Consulting, a firm in Columbia, Maryland, that works with residential lenders.

The personal identification number will help weed out brokers with histories of writing home loans that quickly go bad, said Ann Fulmer, vice president of Interthinx Inc., an Agoura Hills, California-based company that sells mortgage-fraud detection software.  “One of the things we saw over and over during the boom was that a bad actor would work at a shop for several months, frequently ending up as the ‘top producer,’ and then leave for presumably greener pastures,” Fulmer said in an e-mail. “In actuality, they usually left because their bad loans were about to start blowing up and, if they stayed, they’d be discovered.”

Mortgage Modification Implications

The U.S. Department of Housing and Urban Development, which oversees compliance with the SAFE Act, has proposed that employees handling loan modifications for struggling homeowners also meet the licensing requirements, a policy opposed by banks. Mandating licenses for loan modification advisors would slow hiring and stall efforts to reduce foreclosures, said John Courson, CEO of the Mortgage Bankers Association.  “We say this is not originating a new loan, it’s reducing the terms of their loan to get them to affordability,” he said in a telephone interview.

The housing department hasn’t set a deadline for a decision, said Lemar Wooley, a spokesman.  It costs $3,000 to $6,000 to train and pay the fees for each new employee to comply with the mortgage-licensing system, said Anthony Hsieh, CEO of, an online mortgage originator based in Irvine, California. “The law is supposed to make sure we kick the bad ones out,” said Hsieh. “It could be the opposite — keep the good ones out.”

States with the highest fraud and foreclosure rates are among the last to put the national mortgage-licensing system in place. Nevada, which had the highest foreclosure rate in the first half of this year, goes live Oct. 1. Behind the delay was the state’s multilevel approval process, said Elisabeth Daniels, a spokeswoman for Nevada’s Department of Business and Finance.  Florida, where a 2008 Miami Herald investigation found state regulators allowed 10,529 people with criminal backgrounds to work in the mortgage industry, also is scheduled to begin issuing licenses Oct. 1.  States including Georgia, Illinois, New Jersey, Ohio and Virginia have already adopted the SAFE Act.  Article written by John Gittelsohn for Bloomberg



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