The Pros & Cons of Offering Owner Financing (When You Sell Your Home)

Sometimes, home sellers find a buyer eager to purchase but unable to finance the property with traditional mortgage financing. Sellers then have a choice: lose the buyer, or lend the mortgage to the buyer themselves.

If you want to sell a property you own free and clear, with no mortgage, you can theoretically finance a buyer’s full first mortgage. Alternatively, you could offer just a second mortgage, to bridge the gap between what the buyer can borrow from a conventional lender and the cash they can put down.

Should you ever consider offering financing? What’s in it for you? And most importantly, how do you protect yourself against losses?

Before taking the plunge to offer seller financing, make sure you understand all the pros, cons, and options available to you as “the bank” when lending money to a buyer.

Advantages to Offering Seller Financing

Although most sellers never even consider offering financing, a few find themselves forced to contemplate it.

For some sellers, it could be that their home lies in a cool market with little demand. Others own unique properties that appeal only to a specific type of buyer or that conventional mortgage lenders are wary to touch. Or the house may need repairs in order to meet habitability requirements for conventional loans.

Sometimes the buyer may simply be unable to qualify for a conventional loan, but you might know they’re good for the money if you have an existing relationship with them.

There are plenty of perks in it for the seller to offer financing. Consider these pros as you weigh the decision to extend seller financing.

1. Attract & Convert More Buyers

The simplest advantage is the one already outlined: You can settle on your home even when conventional mortgage lenders decline the buyer.

Beyond salvaging a lost deal, sellers can also potentially attract more buyers. “Seller Financing Available” can make an effective marketing bullet in your property listing.

If you want to sell your home in 30 days, offering seller financing can draw in more showings and offers.

Bear in mind that seller financing doesn’t only appeal to buyers with shoddy credit. Many buyers simply prefer the flexibility of negotiating a custom loan with the seller rather than trying to fit into the square peg of a loan program.

2. Earn Ongoing Income

As a lender, you get the benefit of ongoing monthly interest payments, just like a bank.

It’s a source of passive income, rather than a one-time payout. In one fell swoop, you not only sell your home but also invest the proceeds for a return.

Best of all, it’s a return you get to determine yourself.

3. You Set the Interest Rate

It’s your loan, which means you get to call the shots on what you charge. You may decide seller financing is only worth your while at 6% interest, or 8%, or 10%.

Of course, the buyer will likely try to negotiate the interest rate. After all, nearly everything in life is negotiable, and the terms of seller financing are no exception.

4. You Can Charge Upfront Fees

Mortgage lenders earn more than just interest on their loans. They charge a slew of one-time, upfront fees as well.

Those fees start with the origination fee, better known as “points.” One point is equal to 1% of the mortgage loan, so they add up fast. Two points on a $250,000 mortgage comes to $5,000, for example.

But lenders don’t stop at points. They also slap a laundry list of fixed fees on top, often surpassing $1,000 in total. These include fees such as a “processing fee,” “underwriting fee,” “document preparation fee,” “wire transfer fee,” and whatever other fees they can plausibly charge.

When you’re acting as the bank, you can charge these fees too. Be fair and transparent about fees, but keep in mind that you can charge comparable fees to your “competition.”

5. Simple Interest Amortization Front-Loads the Interest

Most loans, from mortgage loans to auto loans and beyond, calculate interest based on something called “simple interest amortization.” There’s nothing simple about it, and it very much favors the lender.

In short, it front-loads the interest on the loan, so the borrower pays most of the interest in the beginning of the loan and most of the principal at the end of the loan.

For example, if you borrow $300,000 at 8% interest, your mortgage payment for a 30-year loan would be $2,201.29. But the breakdown of principal versus interest changes dramatically over those 30 years.

  • Your first monthly payment would divide as $2,000 going toward interest, with only $201.29 going toward paying down your principal balance.
  • At the end of the loan, the final monthly payment divides as $14.58 going toward interest and $2,186.72 going toward principal.

It’s why mortgage lenders are so keen to keep refinancing your loan. They earn most of their money at the beginning of the loan term.

The same benefit applies to you, as you earn a disproportionate amount of interest in the first few years of the loan. You can also structure these lucrative early years to be the only years of the loan.

6. You Can Set a Time Limit

Not many sellers want to hold a mortgage loan for the next 30 years. So they don’t.

Instead, they structure the loan as a balloon mortgage. While the monthly payment is calculated as if the loan is amortized over the full 15 or 30 years, the loan must be paid in full within a certain time limit.

That means the buyer must either sell the property within that time limit or refinance the mortgage to pay off your loan.

Say you sign a $300,000 mortgage, amortized over 30 years but with a three-year balloon. The monthly payment would still be $2,201.29, but the buyer must pay you back the full remaining balance within three years of buying the property from you.

You get to earn interest on your money, and you still get your full payment within three years.

7. No Appraisal

Lenders require a home appraisal to determine the property’s value and condition.

If the property fails to appraise for the contract sales price, the lender either declines the loan or bases the loan on the appraised value rather than the sales price — which usually drives the borrower to either reduce or withdraw their offer.

As the seller offering financing, you don’t need an appraisal. You know the condition of the home, and you want to sell the home for as much as possible, regardless of what an appraiser thinks.

Foregoing the appraisal saves the buyer money and saves everyone time.

8. No Habitability Requirement

When mortgage lenders order an appraisal, the appraiser must declare the house to be either habitable or not.

If the house isn’t habitable, conventional and FHA lenders require the seller to make repairs to put it in habitable condition. Otherwise, they decline the loan, and the buyer must take out a renovation loan (such as an FHA 203k loan) instead.

That makes it difficult to sell fixer-uppers, and it puts downward pressure on the price. But if you want to sell your house as-is, without making any repairs, you can do so by offering to finance it yourself.

For certain buyers, such as handy buyers who plan to gradually make repairs themselves, seller financing can be a perfect solution.

9. Tax Implications

When you sell your primary residence, the IRS offers an exemption for the first $250,000 of capital gains if you’re single, or $500,000 if you’re married.

However, if you earn more than that exemption, or if you sell an investment property, you still have to pay capital gains tax. One way to reduce your capital gains tax is to spread your gains over time through seller financing.

It’s typically considered an installment sale for tax purposes, helping you spread the gains across multiple tax years. Speak with an accountant or other financial advisor about exactly how to structure your loan for the greatest tax benefits.


Drawbacks to Seller Financing

Seller financing comes with plenty of risks. Most of the risks center around the buyer-borrower defaulting, they don’t end there.

Make sure you understand each of these downsides in detail before you agree to and negotiate seller financing. You could potentially be risking hundreds of thousands of dollars in a single transaction.

1. Labor & Headaches to Arrange

Selling a home takes plenty of work on its own. But when you agree to provide the financing as well, you accept a whole new level of labor.

After negotiating the terms of financing on top of the price and other terms of sale, you then need to collect a loan application with all of the buyer’s information and screen their application carefully.

That includes collecting documentation like several years’ tax returns, several months’ pay stubs, bank statements, and more. You need to pull a credit report and pick through the buyer’s credit history with a proverbial fine-toothed comb.

You must also collect the buyer’s new homeowner insurance information, which must include you as the mortgagee.

You need to coordinate with a title company to handle the title search and settlement. They prepare the deed and transfer documents, but they still need direction from you as the lender.

Be sure to familiarize yourself with the home closing process, and remember you need to play two roles as both the seller and the lender.

Then there’s all the legal loan paperwork. Conventional lenders sometimes require hundreds of pages of it, all of which must be prepared and signed. Although you probably won’t go to the same extremes, somebody still needs to prepare it all.

2. Potential Legal Fees

Unless you have experience in the mortgage industry, you probably need to hire an attorney to prepare the legal documents such as the note and promise to pay. This means paying the legal fees.

Granted, you can pass those fees on to the borrower. But that limits what you can charge for your upfront loan fees.

Even hiring the attorney involves some work on your part. Keep this in mind before moving forward.

3. Loan Servicing Labor

Your responsibilities don’t end when the borrower signs on the dotted line.

You need to make sure the borrower pays on time every month, from now until either the balloon deadline or they repay the loan in full. If they fail to pay on time, you need to send late notices, charge them late fees, and track their balance.

You also have to confirm that they pay the property taxes on time and keep the homeowners insurance current. If they fail to do so, you then have to send demand letters and have a system in place to pay these bills on their behalf and charge them for it.

Every year, you also need to send the borrower 1098 tax statements for their mortgage interest paid.

In short, servicing a mortgage is work. It isn’t as simple as cashing a check each month.

4. Foreclosure

If the borrower fails to pay their mortgage, you have only one way to forcibly collect your loan: foreclosure.

The process is longer and more expensive than eviction and requires hiring an attorney. That costs money, and while you can legally add that cost to the borrower’s loan balance, you need to cough up the cash yourself to cover it initially.

And there’s no guarantee you’ll ever be able to collect that money from the defaulting borrower.

Foreclosure is an ugly experience all around, and one that takes months or even years to complete.

5. The Buyer Can Declare Bankruptcy on You

Say the borrower stops paying, you file a foreclosure, and eight months later, you finally get an auction date. Then the morning of the auction, the borrower declares bankruptcy to stop the foreclosure.

The auction is canceled, and the borrower works out a payment plan with the bankruptcy court judge, which they may or may not actually pay.

Should they fail to pay on their bankruptcy payment plan, you have to go through the process all over again, and all the while the borrowers are living in your old home without paying you a cent.

6. Risk of Losses

If the property goes to foreclosure auction, there’s no guarantee anyone will bid enough to cover the borrower’s loan debt.

You may have lent $300,000 and shelled out another $20,000 in legal fees. But the bidding at the foreclosure auction might only reach $220,000, leaving you with a $100,000 shortfall.

Unfortunately, you have nothing but bad options at that point. You can take the $100,000 loss, or you can take ownership of the property yourself.

Choosing the latter means more months of legal proceedings and filing eviction to remove the nonpaying buyer from the property. And if you choose to evict them, you may not like what you find when you remove them.

7. Risk of Property Damage

After the defaulting borrower makes you jump through all the hoops of foreclosing, holding an auction, taking the property back, and filing for eviction, don’t delude yourself that they’ll scrub and clean the property and leave it in sparkling condition for you.

Expect to walk into a disaster. At the very least, they probably haven’t performed any maintenance or upkeep on the property. In my experience, most evicted tenants leave massive amounts of trash behind and leave the property filthy.

In truly terrible scenarios, they intentionally sabotage the property. I’ve seen disgruntled tenants pour concrete down drains, systematically punch holes in every cabinet, and destroy every part of the property they can.

8. Collection Headaches & Risks

In all of the scenarios above where you come out behind, you can pursue the defaulting borrower for a deficiency judgment. But that means filing suit in court, winning it, and then actually collecting the judgment.

Collecting is not easy to do. There’s a reason why collection accounts sell for pennies on the dollar — most never get collected.

You can hire a collection agency to try collecting for you by garnishing the defaulted borrower’s wages or putting a lien against their car. But expect the collection agency to charge you 40% to 50% of all collected funds.

You might get lucky and see some of the judgment or you might never see a penny of it.


Options to Protect Yourself When Offering Seller Financing

Fortunately, you have a handful of options at your disposal to minimize the risks of seller financing.

Consider these steps carefully as you navigate the unfamiliar waters of seller financing, and try to speak with other sellers who have offered it to gain the benefit of their experience.

1. Offer a Second Mortgage Only

Instead of lending the borrower the primary mortgage loan for hundreds of thousands of dollars, another option is simply lending them a portion of the down payment.

Imagine you sell your house for $330,000 to a buyer who has $30,000 to put toward a down payment. You could lend the buyer $300,000 as the primary mortgage, with them putting down 10%.

Or you could let them get a loan for $270,000 from a conventional mortgage lender, and you could lend them another $30,000 to help them bridge the gap between what they have in cash and what the primary lender offers.

This strategy still leaves you with most of the purchase price at settlement and lets you risk less of your own money on a loan. But as a second mortgage holder, you accept second lien position

That means in the event of foreclosure, the first mortgagee gets paid first, and you only receive money after the first mortgage is paid in full.

2. Take Additional Collateral

Another way to protect yourself is to require more collateral from the buyer. That collateral could come in many forms. For example, you could put a lien against their car or another piece of real estate if they own one.

The benefits of this are twofold. First, in the event of default, you can take more than just the house itself to cover your losses. Second, the borrower knows they’ve put more on the line, so it serves as a stronger deterrent for defaults.

3. Screen Borrowers Thoroughly

There’s a reason why mortgage lenders are such sticklers for detail when underwriting loans. In a literal sense, as a lender, you are handing someone hundreds of thousands of dollars and saying, “Pay me back, pretty please.”

Only lend to borrowers with a long history of outstanding credit. If they have shoddy credit — or any red flags in their credit history — let them borrow from someone else. Be just as careful of borrowers with little in the way of credit history.

The only exception you should consider is accepting a cosigner with strong, established credit to reinforce a borrower with bad or no credit. For example, you might find a recent college graduate with minimal credit who wants to buy, and you could accept their parents as cosigners.

You also could require additional collateral from the cosigner, such as a lien against their home.

Also review the borrower’s income carefully, and calculate their debt-to-income ratios. The front-end ratio is the percentage of their monthly income required to cover all housing costs: principal and interest, property taxes, homeowner’s insurance, and any condominium or homeowners association fees.

For reference, conventional mortgage lenders allow a maximum front-end ratio of 28%.

The back-end ratio includes not just housing costs, but also overall debt obligations. That includes student loans, auto loans, credit card payments, and all other mandatory monthly debt payments.

Conventional mortgage loans typically allow 36% at most. Any more than that and the buyer probably can’t afford your home.

4. Charge Fees for Your Trouble

Mortgage lenders charge points and fees. If you’re serving as the lender, you should do the same.

It’s more work for you to put together all the loan paperwork. And you will almost certainly have to pay an attorney to help you, so make sure you pass those costs along to the borrower.

Beyond your own labor and costs, you also need to make sure you’re being compensated for your risk. This loan is an investment for you, so the rewards must justify the risk.

5. Set a Balloon

You don’t want to be holding this mortgage note 30 years from now. Or, for that matter, to force your heirs to sort out this mortgage on your behalf after you shuffle off this mortal coil.

Set a balloon date for the mortgage between three and five years from now. You get to collect mostly interest in the meantime, and then get the rest of your money once the buyer refinances or sells.

Besides, the shorter the loan term, the less opportunity there is for the buyer to face some financial crisis of their own and stop paying you.

6. Be Listed as the Mortgagee on the Insurance

Insurance companies issue a declarations page (or “dec page”) listing the mortgagee. In the event of damage to the property and an insurance claim, the mortgagee gets notified and has some rights and protections against losses.

Review the insurance policy carefully before greenlighting the settlement. Make sure your loan documents include a requirement that the borrower send you updated insurance documents every year and consequences if they fail to do so.

7. Hire a Loan Servicing Company

You may multitalented and an expert in several areas. But servicing mortgage loans probably isn’t one of them.

Consider outsourcing the loan servicing to a company that specializes in it. They send monthly statements, late notices, 1098 forms, and escrow statements (if you escrow for insurance and taxes), and verify that taxes and insurance are current each year. If the borrower defaults, they can hire a foreclosure attorney to handle the legal proceedings.

Examples of loan servicing companies include LoanCare and Note Servicing Center, both of whom accept seller-financing notes.

8. Offer Lease-to-Own Instead

The foreclosure process is significantly longer and more expensive than the eviction process.

In the case of seller financing, you sell the property to the buyer and only hold the mortgage note. But if you sign a lease-to-own agreement, you maintain ownership of the property and the buyer is actually a tenant who simply has a legal right to buy in the future.

They can work on improving their credit over the next year or two, and you can collect rent. When they’re ready, they can buy from you — financed with a conventional mortgage and paying you in full.

If the worst happens and they default, you can evict them and either rent or sell the property to someone else.

9. Explore a Wrap Mortgage

If you have an existing mortgage on the property, you may be able to leave it in place and keep paying it, even after selling the property and offering seller financing.

Wrap mortgages, or wraparound mortgages, are a bit trickier and come with some legal complications. But when executed right, they can be a win-win for both you and the buyer.

Say you have a 30-year mortgage for $250,000 at 3.5% interest. You sell the property for $330,000, and you offer seller financing of $300,000 for 6% interest. The buyer pays you $30,000 as a down payment.

Ordinarily, you would pay off your existing mortgage for $250,000 upon selling it. Most mortgages include a “due-on-sale” clause, requiring the loan to be paid in full upon selling the property.

But in some circumstances and some states, you may be able to avoid triggering the due-on-sale clause and leave the loan in place.

You keep paying your mortgage payment of $1,122.61, even as the borrower pays you $1,798.65 per month. In a couple of years when they refinance, they pay off your previous mortgage in full, plus the additional balance they owe you.

Of course, you still run the risk that the borrower stops paying you. Then you’re saddled with making your monthly mortgage payment on the property, even as you slog through the foreclosure process to try and recover your losses.


Final Word

Offering seller financing comes with risks. But those risks may be worth taking, especially for hard-to-sell properties.

Only you can decide what risk-reward ratio you can live with, and negotiate loan terms to ensure you come out on the right side of the ratio. For unique or other difficult-to-finance properties, seller financing may be the only way to sell for what the property’s worth.

Before you write off the returns as low, remember that your APR will be far higher than the interest rate charged.

Beyond the upfront fees you can charge, you’ll also benefit from simple interest amortization, which front-loads the interest so that nearly all of the monthly payment goes toward interest in the first few years — the only years you need to finance if you structure the loan as a balloon mortgage.

Just be sure to screen all borrowers extremely carefully, and to take as many precautions as you can. If the borrower can’t qualify for a conventional mortgage, consider that a glaring red flag. Seller financing involves risking many thousands of dollars in a single transaction, so take your time and get it right.

Source: moneycrashers.com

Obama’s Broad Based Refinancing Plan

It took a few weeks, but we’ve finally got concrete details regarding the Obama Administration’s so-called “Broad Based Refinancing Plan.”

First off, homeowners with Fannie Mae and Freddie Mac-backed mortgages who are unable to refinance their mortgage to take advantage of the near-record low mortgage rates will be able to go through HARP 2.0.

HARP 2.0 was introduced back in October to address the needs of homeowners who were too deeply underwater to meet the max loan-to-value ratio cap of 125 percent.

Borrowers with underwater mortgages backed by Fannie and Freddie will continue to go through this program assuming they meet the guidelines.

So nothing really changes here, except perhaps the actual adoption of the problem, which appears to have been sluggish thus far.

Refinancing Program for Non-GSE Mortgages

What about all the underwater borrowers with non-GSE mortgages, those that are not backed by Fannie and Freddie?

Well, Obama is “calling on Congress” to pass a new refinancing program geared toward these homeowners, managed by the FHA.

It would be open to all those with non-GSE mortgages (less jumbo mortgages) who have kept up with their mortgage payments.

The big distinction here is that it requires Congressional approval, which may be an uphill battle. So really it’s just an idea at this point, not a live program.

Still, these are the proposed guidelines:

  • Borrower is current on mortgage for past 6 months and hasn’t missed more than one payment in previous 6 months.
  • Minimum credit score of 580
  • Loan amount does not exceed max conforming loan amount
  • Loan is tied to a single-family, owner-occupied property

Borrowers who meet these very simple guidelines will apply via a streamlined process designed to make it easier and cheaper to refinance.

To determine eligibility, a borrower must only prove they are currently employed. However, even the unemployed can qualify if other requirements are met and they present “limited credit risk.”

A new tax return and appraisal is not necessary to refinance.

The Obama administration will work with Congress to set loan-to-value limits for loans submitted to the program.

While a number hasn’t been set, the Administration used 140 LTV as an example, noting that mortgage lenders could write down the balance of mortgages that exceed that number.

How Will the Refinance Program Be Paid For?

Good question. Well, the cost of the refinancing program is estimated to range anywhere from $5 to $10 billion (quite a range isn’t it).

To avoid any taxpayer burden, the refinancing plan will be fully paid for by the proposed “Financial Crisis Responsibility Fee,” which imposes a fee on the largest financial institutions.

This fee will be based on the size of the institution and risk of their activities.

The FHA, who is set to manage the program, will even pay for a borrower’s closing costs if they choose to go with a shorter-term mortgage, such as a 15-year mortgage.

Those who refinance into mortgages with terms of 20 years or less will have their closing costs paid for the FHA. The GSEs will do the same for HARP 2.0 borrowers.

The Administration hopes this will promote responsible borrowing and reduce the amount of time it takes for borrowers to get back above water.

HAMP Expansion

The existing Home Affordable Mortgage Program is also being expanded to help more borrowers receive assistance.

The first-lien mortgage debt-to-income ratio limit of 31% apparently eliminates certain borrowers from the program because it doesn’t address other monthly obligations.

So the program will consider secondary debt with more flexible debt-to-income criteria.

Additionally, rental properties will be added to the program so long as a tenant currently occupies them or the borrower intends to rent the unit.

Finally, the Treasury will offer bigger incentives to the owners of mortgages who agree to write down principal.

Currently, owners receive between 6 to 21 cents on the dollar for principal reductions. This amount will be tripled to 18 to 63 percent on the dollar.

Fannie Mae and Freddie Mac, who do not currently receive compensation for principal reductions on loan modifications, will also receive principal reduction incentives

The Losers

The obvious losers are holders of jumbo mortgages, who are more than likely homeowners in hard-hit states like California and Florida where home prices have plummeted.

There doesn’t appear to be any relief for this type of homeowner, which is certainly a concern.

Additionally, those behind on their mortgage payments won’t benefit from this new refinance program.

So really only borrowers who have been able to make their mortgage payment each month will benefit.

Also, investors who hold non-GSE loans won’t see any benefit. And those with poor credit scores will be out of luck.

In other words, plenty of homeowners will miss out here, but it’s a tall order to include everyone.

Homeowners Bill of Rights

For the record, the Obama Administration also introduced several other initiatives, including a “Homeowner Bill of Rights,” which will once again revamp and simplify mortgage disclosures.

This includes a foreclosure appeals process and guidelines that prevent conflicts of interest that wind up doing harm to homeowners, along with a joint investigation into loan origination and servicing abuses.

Major banks and the GSEs will also provide up to 12 months forbearance for unemployed borrowers.

Additionally, a pilot program that transitions foreclosed property into rental housing will be employed to stabilize neighborhoods and get the housing market out of its funk.

Final Thoughts

At first glance, it sounds like an awesome program to save housing once and for all. But upon closer inspection, a lot of homeowners are left out, as mentioned above.

Along with that, the borrowers that are targeted may not really be the ones that need help.

The reality is that millions of people who are currently behind on their mortgages are going to lose their homes. And this program won’t change that. It’s simply going to help those on the brink, or even those that don’t even necessarily need assistance to make their mortgage payments, but want to catch a break after buying at the wrong time.

Sure, if all goes well, it could reduce foreclosures to some extent, bolster home prices somewhat, and get more money flowing into the economy. But it still requires Congressional approval to work. And even then, we won’t see a housing recovery without meaningful economic improvement.

Source: thetruthaboutmortgage.com

The Hidden Costs of Moving: 11 Extra Fees to Watch For

While some extra services are optional, other charges are out of your control. Know what to expect when you get the final bill.

Besides shipping your household items, most moving companies offer additional services for an extra charge. But it’s not always a matter of choice. Often, the circumstances of your move will necessitate a specific service, such as carrying your belongings upstairs if you move to a building without an elevator.

Each moving company specifies the extra services it offers and sets the rates. While shopping around for movers, see which companies offer additional services that meet your needs and budget. When you receive a moving estimate, make sure it includes all the requested services, and double-check the conditions and charges before making any decisions.

Packing and unpacking

Packing is not only the most time-consuming task in the relocation process but also one of the most crucial aspects of the moving preparations. If you don’t wrap and pack your cherished possessions properly, you risk damaging them during transit.

If you can’t dedicate enough time, or if you just don’t have proper packing and padding materials, find a moving company that will pack for you. The movers will complete the task quickly and efficiently, and they’ll be liable for any damage.

For delicate pieces of art or other valuable and oddly shaped possessions, consider investing in crating — a packing service that places your items in custom-built wooden crates or cardboard boxes cut apart and form-fitted around each piece for better protection.

Unpacking services are available upon request at an additional fee, usually calculated on an hourly basis. If you want the moving company to collect the packing materials and dispose of them, you will pay a disposal fee as well.

Furniture disassembly and reassembly

Your movers can dismantle your larger furniture, but you’ll have to pay for the service. However, if you aren’t sure how to properly disassemble a valuable piece, don’t risk ruining it while trying to separate the detachable parts. Your movers will have the required equipment and knowledge to do it without damaging anything.

Once you reach your final destination, the movers can reassemble the furniture. You’ll have to pay for the service, of course, but it will allow you to jump in and start unpacking.

Handling special items

Movers are not responsible for disconnecting or connecting electrical appliances. If you want them to take your devices to their rightful places and set them up, you’ll have to pay an extra appliance servicing fee.

And many movers charge an extra fee if they need to handle extremely heavy and bulky items that require special packing and treatment, such as pianos, hot tubs, safes and pool tables.

Long carry

If the movers must park more than 50 to 75 feet from your new home’s entrance, the movers are not required to take the shipment inside unless you pay an extra fee. They will just unload the truck and leave, and you’ll have to find a way to move it all inside.

If you want the moving crew to perform this service for you, you’ll have to pay an additional long-carry fee, which is based on the distance the movers need to carry your shipment from the moving truck to the residence.

To avoid this extra fee, reserve a parking space directly in front of your new property for the delivery’s duration.

Climbing stairs

Many movers assess an additional flight charge for taking your household items up the stairs. The cost is calculated either per step or per flight of stairs.

An elevator will partially solve the problem, but movers usually charge an extra fee if they have to wait for it. So, if possible, reserve an elevator in the building for the time when your belongings will be unloaded from the truck and moved to your new place.

Lowering or hoisting (rigging)

If your furniture doesn’t fit through the doors or along narrow staircases and hallways, your movers may set up a rope-and-pulley system to take it through a window. This service comes at an additional price, and it’s only offered if the moving company has the specific equipment and skills required to perform it safely.

Exclusive use of the moving vehicle

Your household items may be loaded on the same truck with a couple of other shipments transported along the same route — especially when you’re moving across the country. Consolidating shipments helps moving companies deliver goods more efficiently and keep your final moving costs down.

However, you may have to wait longer to receive your items, and there will be no guaranteed delivery day. If you don’t want your household goods to be consolidated with other shipments, you may need to pay for the exclusive use of the moving truck.

Shuttle services

If a larger moving truck cannot access your property due to its size, the movers may use smaller vehicles to transport your items — but you’ll be charged extra for the service.

Split pickup and delivery

If your items must be picked up from several different locations, or if you need some of your belongings delivered at your final destination and others someplace else (such as a storage unit or temporary housing), you’ll have to pay an additional fee for split pickup or delivery services.

Waiting time and re-delivery

If you can’t meet the moving truck at your new property on the agreed date, the movers may charge a fee for waiting, or they may store your belongings at your expense.

Storage and warehouse handling

Storage-in-transit may be required if unexpected problems arise. The moving company will charge an extra fee, and the longer your belongings stay in storage, the more you will have to pay.

Remember that any specialty services provided by third-party companies are not included in the standard relocation services, so they’ll incur additional charges.

Additional services and their rates vary from one company to the next. Research all your options carefully, and make sure all the services you request and the charges your movers require are explicitly set in the mover’s paperwork.

All photos from Offset.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published June 12, 2015.

Source: zillow.com

Reverse Mortgages: 10 Things You Must Know

Get a large wad of cash! Never make a mortgage payment again! Stay in your home as long as you want! Sounds like a great deal, right? Well, for some older homeowners, a reverse mortgage can be. 

For others, it’s more perilous than promising. If you’re considering a reverse mortgage, there’s a lot you need to know before signing on the dotted line. 

Here’s 10 things you need to know about reverse mortgages. 

What is a Reverse Mortgage?

It’s a loan on your house that lets you tap your home’s equity. Like a cash advance, a bank fronts you the money — either as a lump sum, a line of credit or monthly draws — and you have to repay it eventually, with interest.

Unlike a traditional mortgage, you don’t have to repay the loan during the term of the reverse mortgage. Instead, you or your estate pay off the principal you borrowed and the accrued interest all at once at the end of the loan. Homeowners must be at least 62 and should either own their house outright or have paid off most of the mortgage.

You retain title and ownership of your house. You are still responsible for paying the property taxes and the costs of insurance and repairs. If you still have a regular mortgage, you either have to pay it off before taking the reverse mortgage or use part of the proceeds from the reverse mortgage to retire it.

The most popular type of reverse mortgage is the Home Equity Conversion Mortgage, or HECM, which is insured by the Federal Housing Administration. 

(Private lenders may offer proprietary reverse mortgages but this is a small part of the overall market and these loans aren’t federally insured. Because of that, this article mainly addresses HECMs.) 

How Much You Can Borrow with a Reverse Mortgage

The amount you can borrow, which is called the “initial principal limit,” with a reverse mortgage will depend on several factors, including the age of the youngest borrower and interest rates. The calculation also includes either the appraised value of your home or the HECM mortgage limit, whichever is less. The HECM mortgage limit for 2021 is $822,375, up from $765,600 in 2020. 

Generally, the older you are, the lower the interest rate and the higher the house value, the more money you’ll be able to tap. 

You won’t be able to tap 100% of your equity. The calculation leaves room for accrued interest. Instead, you get a portion of the equity in your home and you pay interest on that.

Getting Money from the Reverse Mortgage

You can take a lump sum, open a line of credit to tap whenever you choose or receive monthly payouts (either for a set number of months or for as long as you live in the house). Or you can choose a combination of those options — say, a lump sum for part of the mortgage with the remainder in a line of credit.

A fixed rate is typically only available if you take a lump sum, which could be suitable to lock in costs for those who want to use all of the money at once. Interest accrues on that amount. 

A line of credit or monthly payout comes with an adjustable rate, which can change monthly or yearly. Ideally, you would only take out only the money that you need. You only accrue interest on funds that are dispersed to you so any untapped money won’t rack up interest. 

Additionally, the unused portion also grows larger over time, generally at the same rate as the loan’s interest rate. Unlike a home equity line of credit, which can be reduced or frozen by a lender, a reverse mortgage line of credit is safe, thanks to mortgage insurance.

Non-Interest Costs of a Reverse Mortgage

There is an origination fee, which is 2% on the initial $200,000 loan and 1% on the balance, with a cap of $6,000. You’ll also pay closing costs, such as title insurance and recording fees, that will likely run several thousand dollars.

You must also pay insurance premiums. The FHA insurance guarantees that you will receive your money and that the lender later receives its money. You’ll be charged an upfront premium of 2% of the home value, plus an annual 0.5% premium of the mortgage balance.

Finally, the lender may charge a monthly servicing fee of up to $30 if the loan has a fixed-interest rate or if it adjusts annually. The servicing fee can be no more than $35 each month for loans with a rate that adjusts monthly. The monthly servicing fee will be added to your loan balance, or the lender can include the servicing fee in the mortgage rate. 

It pays to shop around. Fees set by the government won’t vary, but some costs, such as the interest rate and the monthly servicing fee, can differ by lender. Compare reverse mortgages from at least three lenders. Lenders will issue you a “total annual loan cost,” or TALC, for each option to help you compare costs.

Repaying a Reverse Mortgage 

The money does not have to be paid back as long as the homeowner remains in the house and keeps up with taxes, insurance and repairs. Generally, repayment is triggered when the homeowner dies, sells the house or moves out for at least 12 months. If a couple owns the home and one spouse dies, the surviving spouse can stay in the home without having to pay back the loan until he or she dies, sells or moves out for 12 months.

When it’s time to repay the loan, you or your estate will pay the principal you tapped and the accrued interest. Be aware that the interest expense can really accumulate. If you take out the loan in your 60s and stay in your house until your 80s, the interest owed on the loan could be significant. After the loan is paid off, there could be little or no equity left to use, say, for a move to assisted living.

However, HECMs’ “non recourse” feature means you never have to pay back more than the house is worth at the time of sale. If the debt exceeds the sales price, federal mortgage insurance covers the shortfall.

As for taxes, because the reverse mortgage is a loan, the money you receive is not taxable income. But you can’t deduct the interest on your tax return each year. In the year the loan is paid off, you or your estate can write off at least part of the interest (see IRS Publication 936, Home Mortgage Interest Deduction).

Options for Your Heirs

For a HECM, your heirs will have 30 days after receiving the due and payable notice from the lender to buy your house, sell it or turn it over to the lender after you pass away. But they could get up to 12 months to secure financing to buy the house or sell it. They would need to work with the lender to get additional time. 

To keep the home, your heirs will have to repay the full loan balance of the reverse mortgage or 95% of the home’s appraised value, whichever is less, for a HECM. 

Refinancing a Reverse Mortgage

You can refinance a HECM but only in certain circumstances. You have to wait at least 18 months before refinancing. The funds that would be available to you would have to be at least five times the refinancing costs. And the additional cash you would get from the refinance has to equal at least 5% of the new loan’s proposed principal limit.

Consumer Protections for Borrowers 

You can back out of the loan within three days of signing the paperwork. Notify your lender of your decision in writing by sending a letter through certified mail and ask for a return receipt. 

Before you can apply for a HECM, you have to meet with a counselor from a government-approved housing counseling agency. Some private lenders require this as well. The Consumer Financial Protection Bureau has a search option to find a counselor near you. These agencies normally charge a fee, usually around $125, which can be paid for from the loan proceeds. However, you also can’t be turned away because you can’t afford the fee. 

Lenders also have to complete a financial assessment of borrowers to ensure they will be able to pay their property taxes and homeowners insurance. This is meant to help limit the number of foreclosures that occur. 

Watch Out for High-Pressure Sales Tactics 

You should be wary of any unsolicited sales pitches or offers for a reverse mortgage. You should be skeptical if a salesperson pushes you to take out this type of loan or gives you suggestions on how to spend the money from a reverse mortgage. If the person suggests investing the funds in certain financial products, such as long-term care insurance or an annuity, you need to be cautious. Never buy a financial product you don’t fully understand. 

Some salespeople for home improvement companies may suggest this type of loan as a way to pay for upgrades. If you think that’s the right decision, be sure to shop around and calculate the costs associated with a reverse mortgage along with the repair expenses to get a clear picture of the overall costs.  

How to Decide If a Reverse Mortgage is Right for You 

Start by thinking about what you plan to do with the proceeds. For instance, a reverse mortgage might be a good fit for a senior who wants to age in place, with the loan proceeds paying for home health care, instead of moving to assisted living. Some financial planners recommend a reverse mortgage as a line of credit to cover expenses during market downturns. This strategy, which is known as a “standby reverse mortgage,” allows the borrower to pay for their expenses until their portfolio recovers.

If you need financing to pay for something like a home improvement, another type of loan might be better, such as a home equity line of credit. Be sure to consider all of your options before taking out a reverse mortgage. Consider discussing the option with a trusted family member or financial advisor. 

Source: kiplinger.com

Mortgage Rates Not as Low as They Could Be

A new Fed study and associated workshop revealed that mortgage lenders continue to offer inflated mortgage rates to consumers, despite ongoing efforts to reduce such borrowing costs.

Over the past several years, the Fed has pledged to purchase billions in mortgage-backed securities (MBS) in an effort to lower consumer mortgage rates.

The plan seems to have worked so far, pushing 30-year fixed mortgage rates from the five-percentage range to around 3.3% today.

However, Federal Reserve Bank of New York researchers Andreas Fuster and David Lucca argue that rates should be even lower.

In fact, the 30-year fixed could be closer to 2.6% if the yield declines in MBS were fully passed on to consumers.

Fat chance.

Lender Profits Clearly Rising

profits

While it’s open for debate, it’s clear that lender profits have risen substantially in recent years, largely because of the widening spread between yields on MBS and primary mortgage rates.

During 2007, this primary-secondary spread was around 45 basis points, but has since risen 70 bps to about 115 bps.

spread

Some of the participants in the workshop attributed the disparity to higher guarantee fees (which are passed on to consumers), costs associated with putback risk (repurchasing bad loans), a decline in the value of mortgage servicing rights, and so on.

But if you look at the mortgage banker profit survey from the Mortgage Bankers Association, the average profit on home loans originated in the third quarter of 2012 was $2,465, up from $1,423 two years earlier.

Profits have nearly doubled in just two years, at a time when banks and lenders have made it appear as if mortgages are no longer cash cows.

Why Won’t They Lower Mortgage Rates More?

You’d think that with profits so high, more competitors would enter the space and offer even lower rates to snag valuable market share. Or that existing lenders would battle one another and force rates lower.

Unfortunately, this hasn’t been the case. It seems as if a smaller group of large players essentially control the market.

Just look at Wells Fargo’s share of the mortgage market, which is now more than a third of total volume.

So why are things different this time around? Well, the researchers argue that lenders are increasingly uncertain about the future.

After all, this is an unprecedented time, and the recent mortgage boom could easily go bust at the drop of a hat, or perhaps at the sight of a fiscal cliff.

It’s no secret that loan origination volume is slated to fall tremendously next year, with refinances expected to slide from $1.2 trillion this year to $785 billion in 2013.

And new market entrants would probably think twice about jumping in if business is expected to slow that dramatically.

If things aren’t expected to last, taking larger profits now makes more sense, even if consumers get the short end of the stick.

Additionally, with mortgage rates already at historic lows, why go lower? I’m sure lenders are sitting back and saying, “Hey, these borrowers are already getting ridiculously low rates.”

And if all banks and lenders are in agreement, they can hold rates a bit higher than they otherwise should be.

At the same time, borrowers are probably satisfied with the rates currently available, meaning they shop less and lenders don’t have to worry about being priced out of the market.

There’s also the thought that it takes time for rates to fall on the consumer-end, as lenders get more and more comfortable with offering such a low rate.

Conversely, lenders will raise rates the second they fear they’re too low to avoid getting burned themselves.

But a more innocent explanation is simply that offering rates too low could overwhelm the banks.

Mortgage volume is already high, and staff is probably still relatively thin thanks to the recent crisis, so lowering rates more would grind things to a halt.

A lack of third-party originators, including mortgage brokers and correspondent lenders, has added to these capacity concerns.

How Low Will They Go?

The researchers summed things up by remarking that mortgage rates probably won’t fall to 2.6% in part because of the higher guarantee fees charged by Fannie Mae and Freddie Mac.

Of course, those guarantee fees should only reflect about a .25% increase in rate for the consumer. As for the remaining .50%, they argued that easing capacity constraints and thereby reducing existing lenders’ pricing power could push rates closer to a more modest 3%.

This could be accomplished by lowering net worth requirements to allow more market participants, extending rep and warranty reliefs to different servicers for streamline refinance programs, such as HARP II, and making more loans already owned by Fannie and Freddie eligible for such programs.

Ironically, the GSEs raised guarantee fees to encourage more private capital in the mortgage market, but instead it appears as if the same banks are just retaining more of the profits.

Source: thetruthaboutmortgage.com

Lexington Law vs. Other Credit Repair Companies What Sets Us Apart

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Healthy credit is an essential bargaining tool that many Americans live without. According to Money-zine.com, over 40 percent of the population’s credit scores dip below 700. When you are focused on finding reputable credit repair services, how do you know who to trust?

Good credit can open doors and save you money. Despite these basic facts, many people choose to adopt the “out of sight, out of mind” mentality when it comes to financial issues. Don’t join the group by waiting to get serious about credit repair. Improving your score could save you thousands in mortgage interest, car payments, credit card debt, and more. Consider Lexington Law as an advocate to help you navigate the road ahead. We aren’t your average credit repair law firm. During 20 years of service, we have helped over a half-million clients find better credit. Aside from our demonstrated results, client comfort and satisfaction is our top priority. We:

1. Invest in your confidence. You don’t have to pay up-front to see our credit repair services at work. We offer a free, no obligation consultation where our qualified staff will help you understand:
o The positives and negatives of your credit report
o The components of credit scoring
o The importance of good credit
o Ways to improve your score in everyday life
Moreover, clients engage our service for discrete monthly servicing periods and pay only for services previously (and completely) delivered. The bottom line: we want you to feel confident in your credit repair decisions. We want our skills to speak for themselves.

2. Design solutions to fit your needs. Different clients have different needs, and we work to fill them. Our three-tiered levels of service are designed to address your issues and suit your budget. Each level includes free support and anytime cancellation. Choose from:

o Lexington Regular—This option covers credit repair basics, including credit report consultation and credit bureau-directed investigations, challenges, and disputes as applicable.
o Concord Standard—Clients enrolled in this level enjoy everything provided in the Lexington Regular service but also benefit from the firm’s legal interventions directed to creditors and others who report information to the credit bureaus.
o Concord Premier—Lexington’s most popular and comprehensive level affords everything available in the Lexington Regular and Concord Standard services as well as TransUnion Credit Monitoring, monthly credit score improvement analyses, ReportWatch™ comparative alerts, and InquiryAssist™ for problematic credit report inquiries that can also damage your credit scores.

3. Don’t make empty promises. While other credit repair companies may offer guaranteed results, we follow the letter of the Credit Repair Organizations Act (CROA), which prohibits such claims. In the world of credit repair, there are no guarantees. What we can promise is exemplary service, legal and fair billing practices, and accurate representation. Our track record speaks for itself. Visit us at www.lexingtonlaw.com to learn more about our services.

Source: lexingtonlaw.com

How Do I Know If Fannie Mae or Freddie Mac Owns My Mortgage?

Last updated on April 7th, 2020

Quick mortgage tip: “How do I know if Fannie Mae or Freddie Mac owns my mortgage?”

One of the key requirements to getting approved under the CARES Act to receive mortgage forbearance is ensuring that your loan is indeed owned or guaranteed by Fannie Mae or Freddie Mac.

If it isn’t, you might still be eligible for mortgage relief as long as your loan is backed by the FHA, USDA, or VA. For those explicit government loans, it’s a little more straightforward.

Knowing who owns your loan can also be helpful to determine if you’re eligible for a particular loan modification, or if you can pursue certain foreclosure prevention options via each agency.

Fortunately, the pair has made it very simple to find out if your mortgage is owned or backed by either.

Fill Out the Short Form

  • To find out if Fannie Mae or Freddie Mac own your mortgage
  • All you have to do is fill out a short form on their website
  • You will be notified immediately if they do or do not own it
  • If they do you’ll be directed to options for assistance

Fannie own

All you have to do is fill out a short form with your name, last four of your social, and property address, and they’ll let you know immediately if they own your home loan.

You will receive one of two status messages. Either that no matches were found, or that a match was indeed found. If it’s the latter, you may be eligible for help.

For Freddie Mac inquiries, click here, and for Fannie Mae inquiries, click here.

No Matches?

no match

Match Found!

match found

Assuming a match is found, it will list the mortgage company that owns your loan (or that originated it before transferring it to a new loan servicer) and the mortgage loan closing date, which I believe is the day it funded.

You will also see some questions at the bottom of the page, including if you’ve been delinquent on your mortgage in the past 12 months, and if you anticipate being late in the near future (next 2-3 months).

These are basically next steps if you’re looking up loan ownership in order to apply for mortgage assistance.

Watch Out for Address Errors

Note: If you own a condo or townhome, the search feature will often say there is no match if you put your street address and unit number in the separate boxes.

Instead, try putting it all in the street address box if you’re pretty certain Fannie/Freddie owns your loan, but it’s not showing up as a match.

For example, put in 123 Fake St. Apt. A all in the “address” box as opposed to broken up in the “condo or unit #” box.

It might also be possible to get a match without even inputting your unit number. Just make sure it lists your name and everything looks right on the results page.

Also notice that you’re required to check a box that says you are the owner of the property or you have the consent of the property owner to look up the information.

What to Do Once You Know It’s Owned by Fannie or Freddie?

  • Take note of the lender or loan servicer listed on the results page
  • If you make payments to that company still, reach out to them for help
  • If you pay a different company due to a servicing transfer, call them instead
  • Generate a mortgage forbearance letter so you can send it to them to get the ball rolling

In terms of qualifying for mortgage forbearance via the CARES Act, it appears to pretty straightforward, with very little paperwork needed.

There is even a free tool that helps you generate a mortgage forbearance letter in minutes.

However, it’s also a brand new program, so loan servicers and lenders are probably still figuring it all out themselves.

Once you know that Fannie Mae or Freddie Mac own your mortgage, you should contact your loan servicer (the company you make your mortgage payments to each month).

Let them know your loan is owned by Fannie or Freddie, and that you need assistance due to the COVID-19 epidemic. Mention the CARES Act and have that letter ready to send their way.

Lastly, keep in mind that there are also loss mitigation programs available with individual banks and mortgage lenders if you don’t qualify for government assistance.

I have a list of mortgage assistance options for coronavirus-related loss of income that you can peruse as well.

Basically, everyone is providing some form of relief, though the government program appears to be the best, with waived payments for 6-12 months without any extra cost.

Read more: How is mortgage forbearance paid back?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

Mortgage Forbearance Rate Up Near 8%, Housing Assistance Fund Proposed

Posted on May 11th, 2020

The mortgage forbearance rate increased again last week, rising to 7.91% from 7.54% a week earlier, per the Mortgage Bankers Association (MBA).

That marked the smallest weekly increase (4.91%) since the newly-created Forbearance and Call Volume Survey was launched, but it’s important to remember it was only 0.25% back in March.

Additionally, the weekly gains just aren’t going to be headlines anymore because it’s hard to move the needle once millions are already in forbearance plans.

Still, it’s pretty clear we’re heading to 10% sooner or later, which is pretty remarkable and sure to stress a lot of loan servicers.

It’s also time to start thinking about more than just the next 12 months.

Forbearance Rate Close to 11% for Ginnie Mae Loans

  • 10.96% of FHA/USDA/VA loans in forbearance
  • 6.08% of Fannie/Freddie loans in forbearance
  • 8.88% of private-label and portfolio loans in forbearance
  • Depositories (8.75%) faring worse than independent nonbanks (7.54%)

Once again, home loans backed by Ginnie Mae exhibited the worst forbearance rate at 10.96%, up from 10.45% a week prior.

Meanwhile, Fannie Mae- and Freddie Mac-backed mortgages saw forbearance creep up to 6.08% from 5.85%.

Private-label securities and portfolio loans fell in between those levels with a forbearance rate of 8.88%, up from 8.30%.

And depositories continue to fare worse than independent mortgage bank (IMB) servicers, otherwise known as nonbanks, which is relatively good news because the former have money on hand.

Keep in mind this includes data through May 3rd, possibly before we see a flood of forbearance requests for the month of May.

We’ll know more in a week, and potentially even more a week later, but there’s probably some time lag.

More importantly, some of the temporary layoffs we’ve heard about are becoming permanent, which could mean not only more forbearance, but bigger problems once the forbearance dries up.

Clearly that is going to manifest itself in these forbearance numbers at some point.

[Will coronavirus lower home prices?]

Calls to Loan Servicers Increased Last Week

  • Calls increased from 7.2% to 8.6% (as a percent of servicing portfolio volume)
  • Average time to answer up to 2.6 minutes to 2.4 minutes
  • Abandonment rate increased to 6.6% from 5.8%
  • Average call length 7.4 minutes from 6.9 minutes

It’s not just fear that forbearance rates will go up because it’s a brand-new month – we’re seeing it in the call volume numbers.

The report found that phone calls to loan servicers increased from 7.2% to 8.6%, as a percent of servicing portfolio volume.

And wait times, call times, and abandonment rates all increased after seeing some declines in prior weeks.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted the loss of “more than 20 million jobs, and a spike in the unemployment rate to the highest level since the Great Depression.”

With more calls to loan servicers last week, it’s likely a sign that forbearance requests will also rise in coming weeks as these individuals seek assistance.

There aren’t many other reasons to call your loan servicer unless you’re curious about your annual escrow statement.

So expect a higher forbearance rate as the new month sinks in, and the unemployment numbers keep rising.

Housing Assistance Fund Coming Soon?

  • $75 fund would provide mortgage payment assistance post-forbearance
  • Could allow for principal reductions to those unable to resume mortgage payments
  • Would also provide assistance to prevent mortgage delinquencies and evictions
  • And help to pay core utilities like electric, gas, internet, and water

Separately, the MBA and National Association of Realtors (NAR) wrote a letter supporting recent proposed legislation that would fund emergency mortgage and rental assistance to those financially affected by coronavirus (COVID-19).

The goal is to ensure the more than 33 million Americans who have filed unemployment claims can remain in their homes.

Part of that legislation includes a $75 billion “Housing Assistance Fund” that would put money in the pockets of all state-level Housing Finance Agencies (HFAs).

It works off the Hardest Hit Fund (HHF), which Senators Sherrod Brown (D-OH) and Jack Reed (D-RI) unveiled back in 2010.

The funds could be used by the HFAs to help struggling households with mortgage payment assistance and utility payments to prevent eviction, mortgage delinquency, foreclosure, and so on.

It would also allow borrowers to receive a principal reduction after forbearance if they were unable to make regular mortgage payments.

This goes above the beyond the proposed partial claim for Fannie/Freddie loans that would set aside the missed payments until paid off or refinanced.

Ultimately, it appears lawmakers are now looking at this as more than just temporary, more than just the next six or 12 months.

And it makes sense that the MBA/NAR would support it to ensure the real estate market isn’t flooded with foreclosures, and lenders aren’t stuck with millions of mortgages in default.

Read more: How is mortgage forbearance paid back?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

Nearly 4 Million Homeowners Now in Mortgage Forbearance Plans, Servicers May Get $500 Payments

Posted on May 5th, 2020

The mortgage forbearance rate worsened yet again compared to last week, though as expected the increase has slowed as the pool of borrowers grows larger.

As of April 26th, some 3.8 million homeowners were in forbearance plans, per the Mortgage Bankers Association’s (MBA’s) most recent Forbearance and Call Volume Survey.

The forbearance rate increased from 6.99% to 7.54%, a mere eight percent rise from a week earlier, but still more bad news for loan servicers.

And I should note that we’re about to begin a new month, so those on the fence last month could request forbearance this week, creating a new surge.

Forbearance Rate Tops 10% for FHA/VA Loans

  • Ginnie-backed loans have a forbearance rate of 10.45%
  • Fannie/Freddie loans have forbearance rate of 5.85%
  • Private-label securities and portfolio loans have rate of 8.30%
  • Depository banks have rate of 8.41%, independent mortgage bank (IMB) servicers have rate of 7.13%

In terms of loan type, government-backed home loans continue to fare worst, with Ginnie Mae mortgages (FHA loans and VA loans) seeing forbearance rates climb to 10.45% from 9.73%.

Meanwhile, the Fannie Mae and Freddie Mac forbearance rate rose from 5.46% to 5.85%.

Other mortgages, such as private-label securities and portfolio loans, which can include jumbo loans, increased from 7.52% to 8.30%.

With regard to institution type, depository banks saw their forbearance rate go up from 7.87% to 8.41%, and independent mortgage bank (IMB) servicers saw their rate move from 6.52% to 7.13%.

It’ll be interesting to see what happens in the second week of May once the next wave of borrowers request forbearance.

It seems we’ve kind of plateaued for the month of April, but a new month means new layoffs, business closures, losses of income, etc.

And regardless, the numbers are already way above what was originally forecast, perhaps because the forbearance offered via the CARES Act is very attractive to homeowners.

MBA Senior Vice President and Chief Economist Mike Fratantoni noted that the millions of additional Americans filing for unemployment throughout the week will likely make matters worse, “particularly as new mortgage payments come due in May.”

$500 for Each Mortgage in Forbearance?

  • More relief for mortgage servicers may be on the way
  • Via a $500 credit paid by Fannie/Freddie for each loan in forbearance
  • Unclear if the same would be extended to Ginnie Mae servicers
  • Or if it’s enough to offset the massive losses some servicers are experiencing

That brings us to how loan servicers will fare in all of this, especially nonbanks that might not have as much access to capital.

We know that Fannie Mae and Freddie Mac have agreed to buy mortgage loans in forbearance, and only require servicers to advance the first four months of missed payments.

But those enormous costs could still put enough strain on some servicers to wipe them out.

To further ease the situation, it has been reported that Fannie Mae and Freddie Mac will pay servicers $500 per loan in forbearance to ease the pain.

This is according to Jack Navarro, president of Shellpoint Mortgage Servicing, who spoke about the developing situation during a Tuesday morning conference call, per Inside Mortgage Finance.

The so-called “$500 deferment fee is scheduled to take effect on July 1,” assuming it’s approved by the Federal Housing Finance Agency (FHFA).

That fee would obviously offset some of the cost associated with the forbearance advances, at least partially.

But if the forbearance rate keeps climbing higher in May, it still might prove to be too little too late.

Navarro also spoke to what happens after forbearance, saying the plan is “to allow borrowers to very quickly go from the forbearance process to a current loan with payments deferred to the end of the mortgage.”

That backs up the Fannie/Freddie partial claim I spoke about last week, which would make it relatively painless for borrowers who regain their job/income to continue making mortgage payments and put this all behind them.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

19 of the Best Home Decor Shops and Galleries in New York, According to Top Designers – Architectural Digest

NiLu

“As a longtime Harlem resident, I believe the presence of mom-and-pop shops is vital to maintaining a sense of community in our neighborhood. I’ve known owners Katrina Parris and her husband, Mark Pinn, for several years—when they first opened [now-shuttered] Katrina Parris Flowers—so it’s good to see they’re still servicing our area with their current shop NiLu, which promotes artworks, decorative housewares, home fragrances, and gifts by local makers and creatives.” —Keita Turner

191 Malcolm X Boulevard

NiLu.

NiLu.

Photo: Courtesy of NiLu

Noble Showroom by Incausa

“I’m a sucker for a gorgeous basket, but I also love Incausa’s emphasis on process and the makers behind each product.” —Kelly Behun

162 Noble Street, Brooklyn

Noble Showroom by Incausa.

Noble Showroom by Incausa.

Photo: Vinicius Vieira de Vieira

MoMA Design Store

“This shop is perfect for gifts and decor for the design-obsessed. It also stocks fun objects that are awesome conversation starters.” —Joy Moyler

11 West 53rd Street; 44 West 53rd Street; 81 Spring Street

MoMA Design Store.

MoMA Design Store.

Photo: Noah Kalina/MoMA Design Store

Ralph Lauren

“You can never go wrong with the high style of R.L. I love the barware for gift-giving. The bedding is outstanding.” —Joy Moyler

888 Madison Avenue

Ralph Lauren Madison Avenue.

Ralph Lauren Madison Avenue.

Photo: Joshua W. Mchugh 

Ralph Pucci

“Pucci has a fantastic design program, bridging exceptional European and American designers to the U.S. market. His collection of designers are classic and timeless, all connected by their impeccable focus on craftsmanship and hypnotic detail. Hervé van der Straeten and Eric Schmitt, in particular, are masters among many found there.” —Tony Ingrao

44 West 18th Street

Ralph Pucci.
Ralph Pucci.Photo: Antoine Bootz

Roman and Williams Guild

“This is the place for wonderful handmade ceramics, dinnerware, candlesticks, and vases. The pieces are seductive.” —Joy Moyler

53 Howard Street

Roman and Williams Guild.

Roman and Williams Guild.

Photo: Adrian Gaut

Shop Cooper Hewitt

“I love a good museum shop. Shop Cooper Hewitt is the perfect choice for finding unique and stylish housewarming gifts or decorative wares. Curated by the team at the Cooper Hewitt, Smithsonian Design Museum, Shop is filled with eclectic treasures that will bring both delight and inspiration to your environment.” —Keita Turner

2 East 91st Street

SHOP Cooper Hewitt.
SHOP Cooper Hewitt.Photo: Matt Flynn

Source: architecturaldigest.com