Refinance Archives - Hanover Mortgages

May 5, 2021

What Is a Mortgagee? Hint: It’s Not a Typo

Are You a Mortgagee or Mortgagor?

It’s mortgage Q&A time! Today’s question: “What is a mortgagee?”

No, it’s not a typo. I didn’t leave an extra “e” on the word mortgage by mistake, though it may appear that way.

Despite its striking appearance, it’s actually a completely different word, somehow, simply with the mere addition of the letter E.

Don’t ask me how or why, I don’t claim to be an expert in word origins.

Seems like a good way to confuse a lot of people though, and it has probably been successful in that department for years now.

You can blame the British English language for that, or maybe American English.

Anyway, let’s stop beating up on the English language and define the darn thing, shall we.

A “mortgagee” is the entity that originates (makes) and sometimes holds the mortgage, otherwise known as the bank or the mortgage lender.

They lend money so individuals like you and I can purchase real estate without draining our bank accounts.

It could also be your loan servicer, the entity that sends you a mortgage bill each month, and perhaps an escrow analysis each year if your loan has impounds.

The mortgagee extends financing to the “mortgagor,” who is the homeowner or borrower in the transaction.

So if you’re reading this and you aren’t a bank, you are the mortgagor. It’s as simple as that.

Another way to remember this rather confusing word jumble; Who is the mortgagee? Not me!!

Mortgagor Rhymes with Borrower, Kind Of

mortgagor

Here’s a handy way to remember the word mortgagor
It kind of rhymes with the word borrower…
Or even the word homeowner, which is also accurate if you hold a mortgage on your property

I was trying to think of a good association so homeowners can remember which one they are, instead of having to look it up every time they come across the word.

I believe I came up with a semi-decent, not great one. Mortgagor rhymes with borrower, kind of. Right? Not really, but they look and end similar, no?

Anyway, the real property (real estate) acts as collateral for the mortgage, and the mortgagee obtains a security interest in exchange for providing financing (a home loan) to the mortgagor.

If the mortgagor doesn’t make their mortgage payments as agreed, the mortgagee has the right to take possession of the property in question, typically through a process we’ve all at least heard of called foreclosure.

Assuming that happens, the property can eventually be sold by the mortgage lender to a third party to pay off any attached liens, or mortgages.

So if you’re still not sure, you are probably the mortgagor, also known as the homeowner with a mortgage. And your lender is the mortgagee. Yippee!

What makes this particular issue even more confusing is that it’s the other way around when it comes to related words like renters and landlords.

Yep, for some reason a landlord is known as a “lessor,” whereas the renter/tenant is known as the “lessee.” In other words, it’s the exact opposite for renters than it is for homeowners.

But I suppose it makes sense that both landlord and mortgage borrower are property owners.

What About a Mortgagee Clause?

mortgagee clause

An important document you may come across when dealing with homeowners insurance
Stipulates who the lender (mortgagee) is in the event there is damage to the subject property
Protects the lender’s interest if/when an insurance claim is filed
Since they are often the majority owner of the property

You may have also heard the term “mortgagee clause” when going through the home loan process.

It refers to a document that protects the lender’s interest in the property in the event of any damage or loss.

It contains important information about the mortgagee/lender, including name, address, etc. so the homeowners insurance company knows exactly who has ownership in the event of a claim.

Remember, while you are technically the homeowner, the bank probably still has quite a bit of exposure to your property if you put down a small down payment.

For example, if you come in with just a 3% down payment, and the bank grants you a mortgage for 97% of the home’s value, they are a lot more exposed than you are.

This is why hazard insurance is required when you take out a mortgage, to protect the lender if something bad happens to the property.

Conversely, if you buy a home with cash, as opposed to taking advantage of the low mortgage rates on offer, it’s your choice to insure it or not.

But more than likely, you’ll want insurance coverage on your property regardless.

In summary:

Mortgagee: Bank or mortgage lender
Mortgagor: Borrower/homeowner (probably you!)

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 15 years.

Source: thetruthaboutmortgage.com

April 29, 2021

Don’t Swipe Your Credit Card Before You Apply for a Mortgage

Posted on April 29th, 2021

Large Credit Card Purchases Really Can Tank Your Credit Score

While missed payments are arguably the worst offense
Even racking up a lot of debt can lower your credit score significantly
So it’s best to put the spending on hold a few months before applying for a home loan
That way there won’t be any unwelcome surprises when it comes time to pull your credit

You’ve probably heard at some point that making large purchases with your credit card(s) before applying for a mortgage is a no-no.

In fact, you may have read that on this very site, since I’ve warned about it on numerous occasions in multiple posts because it’s such a common problem.

You might be aware of this issue, but shrugged it off, thinking what’s a few points, right?

You already have excellent credit so it doesn’t matter if you purchase a new $5,000 couch with your AmEx card for the new digs ahead of time.

Well, think again. It really does matter, and it can do serious damage to your credit score.

I’m not just talking about 5-10 points. I’m talking enough movement to potentially take you out of the running for a mortgage altogether, or at minimum raise your mortgage rate.

My Credit Score Got Rocked After Maxing Out a Credit Card

my score

I maxed out one of my credit cards a few years ago
And my excellent credit score dropped about 50 points seemingly overnight
That’s enough to raise your mortgage rate depending on how low your scores drop
Or worse, disqualify you from obtaining a mortgage altogether if your credit wasn’t great to begin with

Let’s take a look at a very real example; my credit score back in 2016. Yes, I’m using my own credit score to illustrate this very real problem.

Fortunately, I didn’t apply for a mortgage during this period so it wasn’t an issue for me.

Instead, it was a moral blow as I saw my near-perfect credit score drop from over 800 to the mid-750 range, which incidentally is still excellent credit.

But for those who followed my path and did apply for a home loan, it could have spelled serious, serious trouble.

For most of that year, my credit score had been stuck in a range from the low 800s to around 820. This was good because it meant I wouldn’t have any issues qualifying for a mortgage based on credit score alone.

Not only that, but I would have received the most favorable rates and avoided as many mortgage pricing adjustments as possible.

Once you get your credit scores above 760 there aren’t many pricing adjustments (if any) to worry about, so you don’t need perfection.

However, when the holidays hit I started making a lot of purchases on my credit card. There was a promotion with Discover and Apple Pay that offered 23% cash back on all purchases so I hit it hard.

I basically maxed out my Discover card, which had a pretty dismal credit limit (maybe only $5,000 or so) because Discover is a pretty conservative lender.

When all was said and done, I think I had 1% available credit on the card, otherwise known as 99% utilization.

This is not a good idea, especially before applying for a mortgage because it will literally tank your credit score, even if you pay off the balance in full by your due date.

The problem is that the credit bureaus will take a snapshot of your credit balances on a certain date and then compute your credit score based on that information.

Chances are TransUnion flagged this maxed out credit card and docked my score accordingly, basically assuming I was going down a bad path by making a ton of charges in a short span of time.

This is usually a signal that a consumer is in trouble financially, assuming the behavior continues. And the bureaus basically sent out an SOS to new lenders to proceed with caution.

In the matter of a couple months, my credit score fell nearly 50 points. From peak to trough, it fell a total of 65 points.

I went from having stellar credit to having very good credit. Still, my score was below 760, which could cost you on a mortgage.

Tip: If you must swipe, consider spreading the purchases across several credit cards to keep utilization rates on a per-card basis low. This may be less damaging than maxing out a single card.

The Good News Is I Bounced Back Pretty Quickly!

Thankfully my maxed out credit card was a short-lived event
My credit score bounced back fairly quickly once I paid off the credit card debt
So you can resolve it rather easily, assuming you have time to do so
But the takeaway is not to chance it because you might not always have time!

Now the good news. Once I paid my credit card bill in full, and the bureaus took note of the new $0 balance (this isn’t immediate), my credit score shot up to its highest point in the past 12 months.

My 758 credit score went all the way up to 826, not too far from the perfect credit score of 850. It was also the highest it had been since Credit Karma began keeping track of it a couple of years earlier.

So despite the big hit early in 2016, I wound up in even better shape than I had been to begin with.

This was great in hindsight, but had I applied for a mortgage at any time during that 30-45 day window, I could have jeopardized the entire thing.

For someone with a lower starting score, they could have knocked themselves out of eligibility, or at minimum been forced to take on a higher mortgage rate as a result.

Don’t Make the Same Mistake I Did If There’s Even a Tiny Chance You’ll Apply for a Mortgage Soon

If there’s any chance you’ll purchase a home or refinance an existing mortgage in the near future
Put all your credit cards away and avoid any unnecessary purchases
It’s just not worth the aggravation or the possibility of a higher mortgage rate and/or denied application
Just be patient and you can go back to spending once your home loan funds

The moral of the story is to heed the warnings of avoiding large purchases before taking out a mortgage. It’s no joke.

For the record, the same can be said of spending your cash because you’re depleting your assets if you make large cash purchases.

And you may need more money than anticipated for the down payment, reserves, and closing costs.

This is especially true nowadays with many homes going for above-asking.

Make sure you set aside lots of money in a verifiable account (like a checking or savings account) several months before you begin making bids or inquiring about a refinance.

Also note that the more outstanding debt you have on your credit card(s), the higher your debt-to-income ratio (DTI) will be.

And this just happens to be one of the main reasons why mortgages get declined.

So racking up credit card debt can hurt you in two different ways at the same time if you’re not careful.

In other words, practice frugality before and during the mortgage application process and until the loan is funded.

Those purchases can wait and you’ll be better for it.

After all, mortgages can stick with you for decades – you’d hate for one ill-timed purchase to haunt you for years to come.

Interestingly, once you get your mortgage, you might be able to pay it with a credit card, not that it’s necessarily a good idea either.

Read more: 10 Things You Should Do Before Applying for a Mortgage

Source: thetruthaboutmortgage.com

April 29, 2021

New Fannie/Freddie Refinance Option Drops Adverse Market Fee, Offers $500 Appraisal Credit

Posted on April 28th, 2021

In an effort to undo some of the damage the Federal Housing Finance Agency (FHFA) basically caused itself, it’s throwing a bone to so-called low-income families to save on their mortgage.

It all spurs from the adverse market fee the very same agency implemented back in August 2020 to contend with heightened losses related to COVID-19 forbearance and loss mitigation.

The 50-basis point fee, which went into effect on September 1st, 2020, applies to all new refinance loans backed by Fannie Mae and Freddie Mac.

While it’s not a .50% increase in mortgage rate, the fee does get passed along to consumers in the form of either higher closing costs or a slightly higher mortgage rate, perhaps an .125% increase all told.

Either way, it wasn’t well received at the time, and still isn’t today, and this announcement is a somewhat bittersweet one, as it only applies to a certain subset of the population.

Still, the FHFA believes families who are eligible for this new refinance initiative could see monthly savings between $100 and $250 on average.

Who Is Eligible for Adverse Market Fee Waiver and Appraisal Credit?

Applies to homeowners with incomes at or below 80% of the area median income and loan amounts at/below $300,000
Must result in savings of at least $50 in monthly mortgage payment, and at least a 50-basis point reduction in interest rate
Must currently hold an agency-backed mortgage (Fannie Mae or Freddie Mac)
Property must be a 1-unit single-family that is owner-occupied
Borrower must be current on their mortgage (no missed payments in past 6 months, 1 allowed in past 12 months)
Max LTV is 97%, max DTI is 65%, and minimum FICO score is 620

Perhaps the biggest eligibility factor is the borrower’s income must be at or below 80% of the area median income.

This new refinance program specifically targets what the FHFA refers to as low-income families, which director Mark Calabria said didn’t take advantage of the record low mortgage rates.

Apparently more than two million of these homeowners did not bother refinancing, even though it would have been advantageous to do so (and still is).

He noted that this new refinance option was designed to help eligible borrowers who have not already refinanced save somewhere between $1,200 and $3,000 annually on their mortgage payments.

That’s actually a requirement as well – the borrower must save at least $50 per month in mortgage payment, and their mortgage rate must be at least .50% lower.

For example, if your current mortgage rate is 4%, you’ll need a rate of at least 3.5% to qualify.

Additionally, you must currently have a home loan backed by either Fannie Mae or Freddie Mac, and your property must be owner-occupied and no more than one unit.

I assume condos/townhomes work as well, as long as it’s your primary residence.

The adverse market fee is waived as long as your income is at/below 80% of the area median AND your loan balance is at/below $300,000.

If your loan amount happens to be higher, my understanding is you can still get the $500 appraisal credit.

You’ve also got to be current on your mortgage, meaning no missed payments in past six months, and up to one missed payment in past 12 months.

Lastly, there is a maximum loan-to-value ratio of 97%, a max debt-to-income ratio of 65%, and a minimum FICO score is 620.

Most borrowers should have no issue with those requirements as they are extremely liberal.

Is This New Refinance Option a Good Deal for Homeowners?

It’s an excellent deal for those who haven’t refinanced their mortgages yet
You get a slightly lower mortgage rate and/or reduced closing costs
And with mortgage rates already super cheap it could be a double-win to save you some money
Even though who don’t qualify for this new program should check to see if a refinance could be worthwhile

As Calabria said, many higher-income homeowners probably already refinanced, or are currently refinancing their mortgages to take advantage of the low rates on offer.

Meanwhile, lots of lower income borrowers haven’t for one reason or another, perhaps because they’re not aware of the potential savings or had a bad experience with a mortgage lender in the past.

Whatever the reason, those who haven’t yet and meet the income requirement can take advantage of a refinance without the pesky adverse market fee.

That means they could get a mortgage rate maybe .125% lower than other borrowers who aren’t eligible for this program.

Additionally, they’ll get a $500 home appraisal credit from the lender, assuming the transaction doesn’t already qualify for an appraisal waiver.

Either way, eligible homeowners won’t have to pay for the appraisal, which is another plus to save on the refinance itself via lower closing costs.

It’s actually a great deal for those who haven’t refinanced yet because you might wind up with an even lower mortgage rate and reduced closing costs.

And because your new mortgage payment must be at least $50 cheaper per month, there’s less likelihood of it being a meaningless refinance.

All in all, this is good news for the so-called low-income homeowners who’ve yet to refinance, but bittersweet for everyone else.

Still, mortgage rates remain very attractive for everyone, so even if you have to pay the adverse market fee (and the appraisal fee), it could be well worth your while.

The FHFA said the new refinance option will be available to eligible borrowers beginning this summer, though it’s unclear exactly what date that is as of now.

Read more: When to a refinance a mortgage.

Source: thetruthaboutmortgage.com

April 27, 2021

Wells Fargo Hired 5,000 Employees to Handle Mortgage Workload

Last updated on August 9th, 2013

opportunity

San Francisco-based bank and mortgage lender Wells Fargo reportedly hired 5,000 employees to handle its ever-increasing mortgage workload, according to Bloomberg.

Wells Fargo CFO Howard Atkins said in an interview that the bank increased staff over the past couple of months to process its record haul of mortgage applications, which made it the top mortgage lender over Bank of America/Countrywide.

The company originated $101 billion in first mortgages during the first quarter, more than double the $50 billion in the fourth quarter and nearly half the $230 billion for all of 2008.

The correspondent/wholesale channel contributed $49 billion to that, practically double the levels seen in earlier quarters; home equity lines and loans, however, totaled just $1 billion.

All those applications led to the best mortgage origination quarter since 2003, contributing to the company’s record $3.05 billion net income in the first quarter.

But what happens once mortgage rates rise and refinance dries up, pushing volume back to more historical levels?

Sure it’s great that the bank took on thousands looking for work, but it seems to be only temporary employment.

And it’s wonderful that they’re upping their fulfillment areas, but what about staff in the company’s loss mitigation department?

“We remain focused on proactively identifying problem credits, moving them to nonperforming status and recording the loss content in a timely manner,” said Chief Credit Officer Mike Loughlin in a release.

“We’ve increased and will continue to increase staffing in our workout and collection organizations to ensure these troubled borrowers receive the attention and help they need.”

I doubt they’ve hired many employees in their workout and collection units, as they seem pretty focused on bringing in all those new mortgages with the low mortgage rates.

Shares of Wells Fargo were up $1.24, or 6.59%, to $20.05 in midday trading on Wall Street.

(photo: jasontester)

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 15 years.

Source: thetruthaboutmortgage.com

April 27, 2021

Medical Collections Killing Refinance Frenzy?

medical

Everyone knows mortgage rates have plummeted in recent weeks, but what does that actually mean for those looking to refinance?

With tough guidelines in place and flagging property values, it could equate to a lot of spinning wheels and paperwork.

And one mortgage banker is arguing that erroneous medical collections showing up on potential borrowers’ credit reports are throwing another wrench in the deal.

“The tragedy is that the collection accounts, even those that have been paid in full, are lowering these individuals’ credit scores, often to the point that they either can’t qualify for a loan, or will have to pay higher interest rates if they do,” said Rodney Anderson of Rodney Anderson Lending Services.

According to Anderson, 45 percent of the 1,701 loan applications his company received between June and September involved borrowers with at least one medical collection.

And these collections can kill an applicant’s credit score (whether legitimate or not), even if the remainder of their credit profile is sound, eliminating the possibility of any mortgage rate relief.

Anderson noted that medical billing is “notoriously error-prone,” and as a result, has launched a petition to lessen the severity of medical collection-related credit dings, which he says can lower credit scores more than 100 points.

The petition essentially calls for a new federal law mandating the removal of a medical collection from a borrower’s credit report within 30 days of it being paid or settled, instead of it kicking around for seven years.

Medical billing is certainly an area that needs to be looked at, but the whole credit reporting industry is in need of some serious revamping, and could easily be blamed for a share of the mess were in now.

(photo: paulkeleher)

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 15 years.

Source: thetruthaboutmortgage.com

April 26, 2021

Senator McCain Unveils Mortgage Refinance Plan

bailout

U.S. Senator and presidential hopeful John McCain delivered a speech today at a small business roundtable in Brooklyn, unveiling his so-called “HOME” plan to tackle the ongoing housing crisis.

McCain applauded recent bipartisan efforts aimed at easing the mortgage crisis, but offered up his own solution that seems to be an amalgam of suggestions conjured up by the likes of the Senators Frank and Dodd and the Treasury.

It essentially allows good borrowers who fell behind on their mortgage payments to refinance into more affordable, federally guaranteed 30-year fixed mortgages while restructuring any debts if they’re upside down.

So mortgage lenders would need to voluntarily write down principal if borrowers were underwater, and any profit from a subsequent sale would be split amongst the lender, the borrower, and the government.

McCain also called on financial institutions to follow suit and get their balance sheets in order while shoring up capital, and said the DOJ must crack down on alleged abusers and bring justice to those who contributed to the housing mess.

That said, it’s likely the HOME loan program will only be available for those borrowers who filled out loan applications honestly, without fudging income and asset numbers (debt-to-income ratio) to get more house than they could afford.

It’s not really a new concept, but McCain’s version could be less of a “bailout” if he chooses to focus solely on those who were led astray by mortgage brokers, loan officers, banks, and lenders.

In related news, the Senate voted 84-12 in approval of the controversial bipartisan housing bill.

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 15 years.

Source: thetruthaboutmortgage.com

April 26, 2021

MBA Ups 2009 Mortgage Forecast by $800 Billion

bloom

More good news…for loan originators. The Mortgage Bankers Association increased its 2009 mortgage lending forecast by $800 billion to $2.78 trillion thanks to the expected refinance bonanza.

The group now expects refinancing to total $1.96 trillion in 2009 and purchase originations to ring in at $821 billion.

The refinance figure is up from an estimated $765 billion in 2008, while purchase money mortgage originations were actually revised downward from $851 billion, below the 2008 estimate of $854 billion.

Total originations could rise to the fourth-highest level on record (behind only 2002, 2003, 2005), thanks to an unprecedented drop in interest rates, spurred by the Fed’s move to scoop up mortgage-backed securities and treasuries.

“While the Fed has not announced that it is targeting specific rates for either 10-year Treasury rates or rates on 30-year fixed-rate mortgages, the effect of having the Fed bid in the market for a sustained period is enough to create a refinance incentive for a tremendous number of homeowners,” said Jay Brinkmann, the MBA’s chief economist.

“The vast majority of mortgages originated before the latter part of 2008 are probably going to have at least a 50 basis point refinance incentive for at least the next several months, with mortgage rates hitting lows not seen since the early 1950s and late 1940s.”

Of course, only borrowers with home equity, solid credit scores, and verifiable income will be be able to take advantage of the low, low mortgage rates.

Underwater borrowers will still be left out in the cold, and jumbo loan-holders will have a more difficult time securing financing, though Bank of America is reportedly rolling out a new program to facilitate such deals.

Another concern is the capacity to deal with the increase in refinance transactions, as staff levels were cut to match soft demand last year, coupled with the fact that many warehouse lenders have pulled out.

Loan originations this year will be “almost entirely” backed by Fannie Mae, Freddie Mac or the FHA, in contrast to previous record origination years dominated by jumbo and subprime loans.

(photo: mattmcgee)

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 15 years.

Source: thetruthaboutmortgage.com

April 25, 2021

Bank of America Refinancing Under Making Home Affordable Program

Last updated on February 2nd, 2018

bankofamericarates

Bank of America said today it has begun processing refinance applications under the Treasury’s “Making Home Affordable” program, with nearly 200,000 customers contacting the company to determine eligibility.

“Combined with historically low interest rates, this program has generated significant interest from borrowers seeking the benefit of lower mortgage payments,” said Barbara Desoer, president of Bank of America Mortgage, Home Equity and Insurance Services, in a release.

“We are proud to be one of the first lenders to take loans from application to closing under the Treasury’s plan, providing the opportunity for more Americans to save money on their monthly mortgage payments and supporting efforts to stabilize the nation’s housing market.”

However, the bank seems to be focused on specific applicants, namely those with Bank of America or Countrywide serviced loans and no mortgage insurance on their current loans.

The bank said additional customers will be served “as systems become operational.”

In the next two weeks, the company expects to begin offering trial loan modifications under the Treasury Department’s “Home Affordable Modification” program, and has extended its foreclosure moratorium on potentially eligible loans until April 30.

Bank of America, since snatching up former top mortgage lender Countrywide Financial, services roughly one out of five mortgages in the United States.

I’ve been told by my friends in the industry that Bank of America has been offering mortgage rates much lower than the competition, effectively pricing out them out in the process.

The company is also planning to roll out a jumbo mortgage program focused on loan amounts between $730,000 and $1.5 million, with 30-year fixed mortgage rates beginning in the upper five-percent range.

Apparently there are profits to be made in mortgage.

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 15 years.

Source: thetruthaboutmortgage.com

April 25, 2021

Obama Urges Americans to Refinance Mortgages

refinance now

During a Housing Refinance Roundtable today, President Obama urged homeowners to take advantage of the record low mortgage rates currently on offer.

He made the remarks while sitting with a number of families who were able to refinance their mortgages after struggling with unaffordable mortgage payments (what about all those who are too far underwater or hold jumbo loans?).

“What you’ve seen now is rates are as low as they’ve been since 1971,” Obama said. “Three-quarters of the American people get their mortgages through a Fannie Mae-Freddie Mac qualified loan.”

“And as a consequence of us being able to reduce the interest rates that are available, we have now seen some extraordinary jumps in the rate of mortgage refinancings.”

“We’ve already seen a substantial jump — 88 percent increase in refinancings over the last month. We’ve seen Fannie Mae refinance $77 billion of mortgages in March, which is their highest volume in one month since 2003. And rates on 30-year mortgages have dropped to an all-time low of 4.78 percent.”

He noted that the families who accompanied him at the event were able to achieve more sustainable monthly mortgage payments via refinancing, and estimated that the average family could save $1,600 to $2,000 a year if they took advantage of the offers currently on the table.

“So the main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates.”

He added that the Administration is also working to implement some “additional phases of the program,” such as its loan modification program for “responsible homeowners who made their payments” but fell behind because of job loss, sickness, etc.

“The main message we want to send today is, is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them make some changes that will leave money in their pockets and leave them more secure in their homes.”

Obama plugged the MakingHomeAffordable.gov website several times throughout his address to ensure homeowners actually knew where to go to get help.

He also warned against loan modification scams, urging homeowners to steer clear of companies that demand money for services upfront.

I’m somewhat curious if we’re helping the banks/mortgage lenders more than the homeowners here because private label mortgages seem to be at the root of the problem, not Fannie/Freddie loans.

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 15 years.

Source: thetruthaboutmortgage.com

April 24, 2021

Rate and Term Refis Reduce Mortgage Payments by Billions

Last updated on November 30th, 2011

save

Cash out refinancing hit its lowest point since late 2003 last quarter, but that’s not necessarily bad news.

During the second quarter, just 38 percent of refinances resulted in loan sizes five percent or higher than the previous balance, while 16 percent resulted in a lower loan amount, according to Freddie Mac.

That compares to 43 percent and 13 percent, respectively, a quarter earlier, meaning more borrowers are obtaining lower mortgage rates without sucking out home equity (that’s a good thing).

“A big part of the benefit of refinancing is the lower monthly payment that borrowers enjoy – the payment savings from ‘rate-and-term’ refinancing done during the quarter is about $160 a month on a $200,000 loan,” said Freddie Mac chief economist Frank Nothaft, in a statement.

“But these borrowers also accumulate principal faster than they would have with a higher-rate loan even after taking into account the longer terms of the new loans. In aggregate, second-quarter refinancers will have about $200 million additional principal paydown after a year than they would have under their old loans.”

In total, refinances carried out during the second quarter will reduce mortgage payments by $3.4 billion over the coming year, providing relief for many on the brink.

Half of the borrowers who refinanced their loan over the past three months lowered their mortgage rate by at least 20 percent, with the new rate about 1.25 percentage points below the old rate.

The lack of cash out refinancing was attributed to both stricter guidelines for such lending and a lack of available equity to draw from.

Rates are still historically low, but not at the record low levels seen back in April.

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 15 years.

Source: thetruthaboutmortgage.com