boomers

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The city of Laguna Beach, Calif. recently offered details of its city-sponsored aging-in-place program, dubbed “Lifelong Laguna,” in a profile published by CNBC. It provides new insight into the measures cities can explore to more easily facilitate aging-in-place goals for older residents.

2021 research from AARP indicates that 77% of adults at or over the age of 50 want to stay in their homes as they get older, but the figure in Laguna Beach is much higher. There, the figure is closer to 90% according to Rickie Redman, director of Lifelong Laguna.

Originally piloted in 2017, Lifelong Laguna is a program that enlists a local area nonprofit to encourage support for aging in place.

“Lifelong Laguna is based on the Village movement, where aging in place is encouraged with community support,” the story reads. “The Laguna Beach program aims to fulfill a specific need for a city where approximately 28% of residents are age 65 and over, while local assisted living and memory care services are scarce.”

Much of the city’s older population has lived in Laguna Beach since they were in their 20s and 30s. Now in their 70s and 80s, they simply do not want to be displaced to live somewhere else, even if another area or dedicated facility could more easily attend to their needs as they age.

“They make this city unique,” Redman told CNBC, saying many of the older residents can trace their journey here to the city’s “artistic roots,” the story explained. “They’re the placeholders for the Laguna that we now know.”

The program currently serves about 200 older residents, and there is no direct cost to them for participating. It is entirely funded by grants and local fundraising efforts, according to Redman.

“Its services address a wide range of needs, including a home repair program the city operates in collaboration with Habitat for Humanity, nutrition counseling and end-of-life planning,” the story explained.

Other cities and communities have adopted similar systems, as aging-in-place preferences have increased dramatically since the onset of the COVID-19 coronavirus pandemic. Data from Genworth Financial indicates that roughly 70% of the 10,000 baby boomers who will turn 65 every day until 2030 will require long-term care at some point in their later lives, CNBC reported.

“There definitely is a mindset change, where people are saying, ‘I do want to stay put, I don’t necessarily want to move into a nursing home or into assisted care,’” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors (NAR) to CNBC.

One beneficiary of the Laguna Beach program told the outlet that her needs have been attended to very promptly, from assistance with yard clean-up to the organization of end-of-life services for her recently deceased husband.

“Anything that I’ve needed, I’ve gotten help,” said Sylvia Bradshaw, an 84-year old Laguna Beach resident when describing her membership in the program.

Source: housingwire.com

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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.

A credit limit is the maximum amount of money a person can currently borrow from a financial institution.

Credit cards and lines of credit let us borrow funds from banks, credit unions and various companies. Credit limits determine just how much money we can borrow without incurring penalties like overdraft fees. Americans tend to gradually increase their credit limits as they age; Experian® reported that the average credit card limit for Generation Z in 2022 was $11,290, while the average credit limit for Baby Boomers was $40,318 that same year.

“What is a credit limit?” may be such a common question because multiple factors can influence a person’s limit. We’ll explore this question and discuss how to increase your credit limit.

Key takeaways:

  • Financial institutions largely set credit limits based on a borrower’s credit history.
  • Credit utilization is based on your credit limit and your available credit.
  • Regularly practicing good credit habits can increase your limit

Table of contents:

How are credit card limits determined?

Your credit limit is determined by the institution you borrow money from, whether they’re a bank, a credit union or a government agency. Credit limits take several factors into account, including your income and credit score. People with higher credit scores and income are normally approved for higher credit limits because lenders view them as financially responsible people.

Annual revenue

When a borrower applies for credit or asks for a credit limit increase, lenders look at annual revenue. From their perspective, a borrower with more income is more likely to make their payments on time—and vice versa.

Credit score

Credit scores help us qualify for auto loans, mortgage interest rates and credit cards—plus the limits we’ll receive when approved. If you have good credit, then you’ll likely be eligible for high-limit credit cards from the get-go.

Debt-to-income ratio

Lenders can use your debt-to-income ratio to set your credit limit by weighing your monthly debt payments against your total income. A low debt-to-income ratio can prompt lenders to offer higher credit limits since your spending habits show you regularly make responsible financial choices.

Employment status

Your employment status can also affect your credit limit largely due to timing. If you apply for a credit card or ask for a limit increase while you’re seeking a job, you’ll most likely receive a lower limit than you would as a full-time employee.

Credit limit vs. available credit

A person’s credit limit and their available credit are heavily tied together, which can cause people to confuse these two terms. To clarify, your available credit refers to the amount of money you can still borrow after calculating your debt. On the other hand, your credit limit refers to the total amount of money that your lender lets you borrow.

For example, if you have a $10,000 credit limit and spend $5,000, you’ll still have another $5,000 in available credit that you can access during this billing cycle. Your credit utilization ratio is calculated by weighing your available credit against your total credit limit. In this case, your credit utilization would be 50 percent.

How does your credit limit affect your credit score?

Whenever you ask a lender to increase your credit limit, they’ll perform a hard inquiry to review your credit history and help inform their decision. Inquiries briefly cause your score to dip, which is why conventional wisdom recommends not attempting to increase your credit limit right before applying for something vital—like a home or a new car.

Credit limits can also affect your score if you consistently have a high utilization ratio. Credit cards with high limits typically help borrowers maintain lower utilization ratios, which is beneficial for credit health.

What happens if you go over your credit limit?

Exceeding your credit limit can have negative consequences, especially if you do so repeatedly. Some of the drawbacks you might encounter include:

  • Account review: A lender may review your longtime credit habits, which could potentially lead to a credit limit reduction.
  • Credit score changes: Credit utilization makes up 30 percent of your FICO® credit score. Repeatedly going over your credit limit could significantly hurt your credit.
  • Increased interest rates: Depending on your lender’s policies, they may issue a penalty APR on the offending account, which can be much higher than your standard rate.
  • Overdraft fees: Most lenders will charge a $35 overdraft (or over-the-limit fee) after a specified time period if you don’t pay off your balance.

How to increase your credit limit

If you consistently make your monthly payments on time and keep your utilization low, the credit card issuer may approve your request to increase your limit. But remember to allow six to 12 months before asking. Your issuer probably won’t raise your limit after just one or two months of opening the account or if you’ve been making late payments.

Some credit card issuers will actively increase your limit after they review your account history. Sometimes, they’ll ask you to update your income. If you’ve earned a raise recently, you can provide that information, and the lender may increase your limit. When an issuer reviews your account like this, it does not cause a hard inquiry because you didn’t ask for them to review the account.

Work on your credit with Lexington Law Firm

Credit cards are fantastic resources that can positively impact your life when used responsibly. Even if you get approved for a high credit limit, it’s best to monitor your spending and borrowing habits. Lexington Law Firm offers great services like credit education tools and credit report analysis that may help you with your credit.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Brittany Sifontes

Attorney

Prior to joining Lexington, Brittany practiced a mix of criminal law and family law.

Brittany began her legal career at the Maricopa County Public Defender’s Office, and then moved into private practice. Brittany represented clients with charges ranging from drug sales, to sexual related offenses, to homicides. Brittany appeared in several hundred criminal court hearings, including felony and misdemeanor trials, evidentiary hearings, and pretrial hearings. In addition to criminal cases, Brittany also represented persons and families in a variety of family court matters including dissolution of marriage, legal separation, child support, paternity, parenting time, legal decision-making (formerly “custody”), spousal maintenance, modifications and enforcement of existing orders, relocation, and orders of protection. As a result, Brittany has extensive courtroom experience. Brittany attended the University of Colorado at Boulder for her undergraduate degree and attended Arizona Summit Law School for her law degree. At Arizona Summit Law school, Brittany graduated Summa Cum Laude and ranked 11th in her graduating class.

Source: lexingtonlaw.com

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There’s cautious optimism in the air among area real estate professionals looking into the 2024 home sales market.

If trends continue, they see mortgage rates going down and listings going up.

The key word is “if.”

“Looking ahead to 2024, we anticipate mortgage interest rates to settle in the 6% range, which will attract even more buyers into the market, especially come spring,” said Jeanette Schneider, president of Re-Max of Southeastern Michigan.

“Current homeowners who held onto their home due to a favorable interest rate may decide their interest rate isn’t worth keeping a home that no longer meets their needs, and that should bring a bit more inventory to the market.”

Adds Karen Kage, chief executive officer of Realcomp II Ltd., Michigan’s largest multiple listing service: “We are hopeful for interest rates to continue to trend downward in the new year and consumer confidence levels to rise. As we stand today and look ahead, those are, perhaps, the biggest factors in determining what we might see in 2024.”

Nationally, industry analysts and veterans offer a range of predictions for the upcoming year. Among those:

• Buying a new home will remain expensive, according to Zillow, while Redfin said the median sale price could retreat by 1% in 2024

• The market will still be challenging for first-time homebuyers, but an influx of new apartment units could help manage inflation, according to Lawrence Yun, chief economist for the National Association of Realtors

• Sales of existing homes will rebound in 2025, with home-buying costs leveling off in the second half of 2024, according to investment banker Goldman Sachs

• In Michigan, tech startup real estate tracker Houzeo predicted home sellers will return to the market in 2024 and interest rates will stabilize in the second half of the year.

Locally, Schneider predicted a “slight uptick in home sales in 2024, along with a steady, but moderate increase, in home prices.”

“As boomers consider downsizing, we expect to see more cash offers in the market, providing a challenge for first-time buyers,” she said.

The Press & Guide asked area real estate specialists — with a  combined experience of more than seven decades — to size up the market for the next year.

Interviewed for this story are:

• Susie Armiak, Realtor, MBA Realty Powered by Real Estate One, Grosse Ile, three years experience as a licensed Realtor and more than 25 years as a residential home builder

• Eric Blaine, associate broker and branch manager, Dearborn Office, Real Estate One, 10 years experience

• Tracey Solomon, Realtor, Re/Max Masters, Davis/Solomon Realty Group, Flat Rock, more than four years experience

• Maria Starkey, Realtor, Starkey Team, MBA Realty, Grosse Ile, 24 years experience. Also contributing: Michael Starkey, Realtor

• Benjamin Welch, associate broker, Century 21 Curran & Oberski, Dearborn Heights, 18 years experience, including owning and operating Street Rock Management (property management) for five years

  • Susie Armiak

  • Eric Blaine

  • Tracey Solomon

  • Michael and Maria Starkey

  • Benjamin Welch

Here are edited excerpts of their comments about the year ahead:

Q: Strong demand and tight inventory have defined the real estate market in 2023. How do you see those factors and others shaping the 2024 home sales market?

Armiak: I believe we will continue to see that same trend.  Specifically because the higher interests this past year had many sellers/buyers sitting on the fence and new home construction is still behind the demand.

Blaine: Inventory has begun to rise in many markets and is expected to continue that trend in 2024. We expect demand to remain high, as well, and rising inventory will help.

Solomon: Demand is still outpacing supply. Unless this changes, we can expect more of the same seller-weighted market. Election years are historically slower as buyers and sellers may feel unsure about changing economic policy. Post-election, the market typically stabilizes. I suspect that if demand remains high and inventory low, we may not see that expected slowdown. It would be offset by the continued supply/demand pressure.

Starkey: The current market of strong demand and tight inventory is expected to continue into 2024. More buyers than houses continue to be the trend. This is keeping prices in the Downriver market on the high end for homes that are well-maintained and updated. The year ahead will likely continue to be a seller’s market. Homes in need of updating or with deferred maintenance tend to sit on the market longer, resulting in lower noncompeting offers.

Welch: Predicting the 2024 housing market is like forecasting the weather in Michigan – it’s an assumption with a dash of optimism. If interest rates remain the same, the days a home is on the market will continue to increase.

Q: Mortgage interest rates exceeded 7% in 2023. Where do you see mortgage rates in 2024 and how will that affect sales?

Armiak: The most recent Fed meeting stated they would be dropping interest rates three times in 2024 and we are already noticing the benefits of the recently lowered rate, currently at 6.6% for a 30-year fixed rate. (That rate may vary for buyers based on credit score, income and down payment amount.) This rate drop will entice sellers and buyers to make their move.  My advice is the sooner the better because it’s going to be crowded in the marketplace once again. Be prepared to make swift and decisive decisions.

Blaine: Rates have held steady for a while and even declined slightly. I expect rates to hold somewhat steady in 2024, allowing more consumers to get off the fence and jump back in the market.

Solomon: Mortgage rates seem to be slowly dropping, which is great news for buyers and sellers. If rates continue to decline, more buyers will enter the market and demand will (again) increase. That will mean a continued shortage of homes and continued pressure on buyers to offer incentives to encourage sellers to accept their offers (fewer contingencies, appraisal guarantees, etc.)

Starkey: Interest rates are anticipated to come down into the 6% range in 2024, which likely will bring more buyers into the market. This may encourage more sellers to list their homes for sale. However, I expect home values will stay steady as demand for homes is expected to continue.

Welch: Increasing interest rates have been a major topic of discussion this year. It appears the Federal Reserve is done with rate hikes and Fannie Mae announced that interest rates could drop into the 6% range by the second quarter. If that happens, I expect a flurry of buyers to hit the market and for home prices to continue to rise.

Q: What is your best advice to potential home sellers for 2024?

Armiak: Connect with an experienced Realtor now to generate your personal marketing strategy. There are multiple items that need to be addressed prior to listing your home. Being prepared will put you in the best position to achieve your goals.

Blaine: It is a great time to sell. Values are up and demand is high.

Solomon: Once you’ve found an agent you trust, listen to their advice. Prepare your home for sale, but don’t overdo it. Timing is everything. Waiting to list until it’s perfect can cost you thousands. Consult your listing agent to prioritize your timing and task list. Utilize a pricing strategy that’s proven effective.

Starkey: Consider taking care of any potential deferred maintenance that could bring down home value. Also, be proactive by having a private home inspection done in advance to address any issues that may come up in a buyer’s private home inspection. This can reduce obstacles throughout the transaction. Last, minimize clutter, reduce excess furnishing that may make the space look smaller and — most importantly — provide a clean home for buyers to tour.

Welch: My advice is to hire a professional so you know all of your options. A professional Realtor will provide guidance, resources and a proven plan to facilitate the sale.

Q: What is your best advice to potential home buyers in 2024?

Armiak: Connect with an experienced Realtor now and begin the pre-approval process with your mortgage lender. It generally takes three months from start to finish. The more prepared you are, the stronger your chances are of getting the home of your dreams. And remember, you can always refinance, but you can’t retrofit the home appreciation value as they continue to rise at an annual rate of 4.7%, per FHFA reports.

Blaine: With value rising — a trend we expect will continue — now is the time to buy before values rise more. Waiting will only cost more and interest rates will not drop enough to help overcome appreciation.

Solomon: Find an agent you trust and communicate your needs and wants. Be financially prepared; your pre-approval matters. Set a home budget that works for your life, not just your balance sheet. Love to travel? Eat out? Give charitably? Factor that in. Adjust your price point to accommodate. (Yes, I’m suggesting you spend less so you can live more.)

Starkey: Get into the market early. Homes are hitting the market every day — not just in spring. Buyers who get a head start should have less competition than those who wait for more homes to choose from. If potential buyers find a home they love, go for it. If interest rates come down, you can always refinance. There are mortgage companies that offer a “no fee” refinance within the first two years of purchase.

Welch: If you are waiting for interest rates to come down before buying a home, it’s time to rethink your strategy. It is best to buy now because if interest rates drop, the number of buyers competing for the home you want will increase significantly, making it more challenging to buy that home.

Q: What communities do you see as most active for home sales in 2024 and why?

Armiak: I believe all communities will enjoy accelerated activity with the promise of lower interest rates, including those looking for second homes and investment properties. We are already seeing an increase in new listings in what is typically known as a quieter time. However, driving factors will continue to be the usual suspects: marriage, family growth, job change, death and divorce.

Blaine: Southeast Michigan markets, including Dearborn, are going to continue strong sales in 2024.

Solomon: Flat Rock, Woodhaven, Wyandotte and Southgate. All show increased values and searches. “Most active” is a hard metric to use as a measurement. A small community won’t show big sales numbers. However, highly rising values and quick list-to-pending sales dates show they are desirable and likely selling at or above asking with appraisal guarantees. Grosse Ile is a good example.

Starkey: The current market of strong demand and tight inventory is expected to continue into 2024. More buyers than houses continue to be the trend. This is keeping prices in the Downriver market on the high end for homes that are well-maintained and updated. The year ahead will likely continue to be a seller’s market. Homes in need of updating or with deferred maintenance tend to sit on the market longer, resulting in lower noncompeting offers.

Starkey: All Downriver communities will be active for home sales in 2024. The communities with more affordable housing for first-time buyers may see more activity as those buyers get away from renting. Of course, we need homes to come up for sale. Many homeowners are getting older and either moving to warmer climates or looking for less housing maintenance. Investors also like to purchase homes to add to their rental portfolio or to renovate and sell. The “step up” housing may not be as active as many of those homeowners are enjoying 2% to 4% interest rates and are feeling very comfortable with their current housing costs.

Welch: During November in the Downriver area, the number of homes for sale declined by 32% compared with previous months. It’s still a competitive market. With interest floating around 7.5%, there are many buyers just sitting on the bench waiting for rates to come down before they make their move. Imagine what it will be like if, and when, that happens.

Source: pressandguide.com

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Mortgage interest rates continued their decline this week and have hit the lowest level in six months since May of 2023. Mortgage interest rates are now at an average of 6.61%, easing from 6.67% last week. The typical monthly mortgage payment for a $400,000 home is now at $2,046. While NAR’s Pending Home Sales shows flat data from October to November, the recent week’s rate decline should motivate buyers who had been priced out of the market.

There are many signs of encouragement heading into 2024 in the housing market, such as more housing inventory from home builders, lower mortgage interest rates, and demographics. This year, even the youngest baby boomer (born between 1946 and 1964) turned 60 years of age. Baby boomers are the largest share of home buyers and may be looking for their retirement property. Last year, half of older boomers paid all cash for their homes and are less concerned with mortgage interest rates. Additionally, millennials (the largest adult generation) may be looking for their first property or a move-up family home.  Housing demand is apparent. With added inventory and better mortgage interest rates, 2024 looks like a better year.

Source: nar.realtor

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If you spent your teenage years waiting anxiously for one of your siblings to get out of the shower, the idea of selling your spacious, multi-bathroom home and moving into a smaller house or condo may feel like a reversal of fortune.

Yet for many retirees, downsizing makes financial and practical sense. Younger baby boomers — those currently ranging in age from 57 to 66 — made up 17% of recent home buyers, while older boomers — ages 67 to 75 — accounted for 12%, according to a 2022 report from the National Association of Realtors Research Group. Boomers’ primary reasons for buying a home were to be closer to friends and family, as well as a desire to move into a smaller home, the report said. Both younger and older boomers were more likely than others to purchase a home in a small town, and younger boomers were the most likely to buy in a rural area.

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For retirees Fred and Shelby Bivins, selling their home in Green Valley, Ariz., will enable them to realize their dream of traveling in retirement. The Bivinses have put their 2,050-square-foot Arizona home on the market and plan to relocate to their 1,600-square-foot summer condo in Fish Creek, Wis., a small community about 50 miles from Green Bay. They plan to live in Wisconsin in the spring and summer and spend the winter months in a short-term rental in Arizona, where they have family.  

Fred, 65, says the decision to downsize was precipitated by a two-month stay in Portugal last year, one of several countries they hope to visit while they’re still healthy enough to travel. “We’ve had Australia and New Zealand on our list for many years, even when we were working,” says Shelby, 68. The Bivinses are also considering a return visit to Portugal. Eliminating the cost of maintaining their Arizona home will free up funds for those trips. 

With help from Chris Troseth, a certified financial planner based in Plano, Texas, the Bivinses plan to invest the proceeds from the sale of their home in a low-risk portfolio. Once they’re done traveling and are ready to settle down, they intend to use that money to buy a smaller home in Arizona. “Selling their primary home will generate significant funds that can be reinvested to support their lifestyle now and in the future,” Troseth says. “Downsizing for this couple will be a positive on all fronts.”

Challenges for downsizers 

For all of its appeal, downsizing in today’s market is more complicated than it was in the past. With 30-year fixed interest rates on mortgages recently approaching 8%, many younger homeowners who might otherwise upgrade to a larger home are unwilling to sell, particularly if it means giving up a mortgage with a fixed rate of 3% or less. More than 80% of consumers surveyed in September by housing finance giant Fannie Mae said they believe this is a bad time to buy a home and cited mortgage rates as the top reason for their pessimism. “This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon,” Fannie Mae said in a statement. As a result, buyers are competing for limited stock of smaller homes, says Hannah Jones, senior economic research analyst for Realtor.com. 

Here, though, many retirees have an advantage, Jones says. Rising rates have priced many younger buyers out of the market and made it more difficult for others to obtain approval for a loan. That’s not an issue for retirees who can use proceeds from the sale of their primary home to make an all-cash offer, which is often more attractive to sellers. 

Retirees also have the ability to cast a wider net than younger buyers, whose choice of homes is often dictated by their jobs or a desire to live in a well-rated school district. While the U.S. median home price has soared more than 40% since the beginning of the pandemic, prices have risen more slowly in parts of the Northeast and Midwest, Jones says. “We have seen the popularity of Midwest markets grow over the last few months because out of all of the regions, the Midwest tends to be the most affordable,” she says. “You can still find affordable homes in areas that offer a lot of amenities.” 

Meanwhile, selling your home may be somewhat more challenging than it was during the height of the pandemic, when potential buyers made offers on homes that weren’t even on the market. The Mortgage Bankers Association reported in October that mortgage purchase applications slowed to the lowest level since 1995, as the rapid rise in mortgage rates has pushed many potential buyers out of the market. Sales of previously owned single-family homes fell a seasonably adjusted 2% in September from August and were down 15.4% from a year earlier, according to the National Association of Realtors. “As has been the case throughout this year, limited inventory and low housing affordability continue to hamper home sales,” NAR chief economist Lawrence Yun said in a statement. 

However, because of tight inventories, there’s still demand for homes of all sizes, Jones says, so if your home is well maintained and move-in ready, you shouldn’t have difficulty selling it. “The market isn’t as red-hot as it was during the pandemic, but there’s still a lot to be gained by selling now,” she says.

Other costs and considerations 

If you live in an area where real estate values have soared, moving to a less expensive part of the country may seem like a logical way to lower your costs in retirement. While the median home price in the U.S. was $394,300 in September, there’s wide variation in individual markets, from $1.5 million in Santa Clara, Calif., to $237,000 in Davenport, Iowa. But before you up and move to a lower-cost locale, make sure you take inventory of your short- and long-term expenses, which could be higher than you expect. 

Selling your current home, even at a significant profit, means you will incur costs, including those to update, repair and stage it, as well as a real estate agent’s commission (typically 5% to 6% of the sale price). In addition, ongoing costs for your new home will include homeowners insurance, property taxes, state and local taxes, and homeowners association or condo fees.

Nicholas Bunio, a certified financial planner in Berwyn, Pa., says one of his retired clients moved to Florida and purchased a home that was $100,000 less expensive than her home in New Jersey. Florida is also one of nine states without income tax, which makes it attractive to retirees looking to relocate. Once Bunio’s client got there, however, she discovered that she needed to spend $50,000 to install hurricane-proof windows. Worse, the only home-owners insurance she could find was through Citizens Property Insurance, the state-sponsored insurer of last resort, and she’ll pay about $8,000 a year for coverage. Her property taxes were higher than she expected, too. When it comes to lowering your cost of living after you downsize, “it’s not as simple as buying a cheaper house,” Bunio says 

Before moving across the country, or even across the state, you should also research the availability of medical care. “Oftentimes, those considerations are secondary to things like proximity to family or leisure activities,” says John McGlothlin, a CFP in Austin, Texas. McGlothlin says one of his clients moved to a less expensive rural area that’s nowhere near a sizable medical facility. Although that’s not a problem now, he says, it could become a problem when they’re older. 

If you use original Medicare, you won’t lose coverage if you move to another state. But if you’re enrolled in Medicare Advantage, which is offered by private insurers as an alternative to original Medicare, you may have to switch plans to avoid losing coverage. To research the availability of doctors, hospitals and nursing homes in a particular zip code, go to www.medicare.gov/care-compare.

At a time when many seniors suffer from loneliness and isolation, a sense of community matters, too. Bunio recounts the experience of a client who considered moving from Philadelphia to Phoenix after her daughter accepted a job there. The cost of living in Phoenix is lower, but the client changed her mind after visiting her daughter for a few months. “She has no friends in Phoenix,” he says. “She’s going on 61 and doesn’t want to restart life and make brand-new connections all over again.”

Time is on your side 

Unlike younger home buyers, who may be under pressure to buy a place before starting a new job or enrolling their kids in school, downsizers usually have plenty of time to consider their options and research potential downsizing destinations. Once you’ve settled on a community, consider renting for a few months to get a feel for the area and a better idea of how much it will cost to live there. Bunio says some of his clients who are behind on saving for retirement or have high health care costs have sold their homes, invested the proceeds and become permanent renters. This strategy frees them from property taxes, homeowners insurance, homeowners association fees and other expenses associated with homeownership 

The boom in housing values has boosted rental costs, as the shortage of affordable housing increased demand for rental properties. But thanks to the construction of new rental properties in several markets, the market has softened in recent months, according to Zumper, an online marketplace for renters and landlords. A Zumper survey conducted in October found that the median rent for a one-bedroom apartment fell 0.4% from September, the most significant monthly decline this year. 

In 75 of the 100 cities Zumper surveyed, the median rent for a one-bedroom apartment was flat or down from the previous month. (For more on the advantages of renting in retirement, see “8 Great Places to Retire—for Renters,” Aug.)

Aging in place

Even if you opt to age in place, you can tap your home equity by taking out a home equity line of credit, a home equity loan or a reverse mortgage. At a time when interest rates on home equity lines of credit and loans average around 9%, a reverse mortgage may be a more appealing option for retirees. With a reverse mortgage, you can convert your home equity into a lump sum, monthly payments or a line of credit. You don’t have to make principal or interest payments on the loan for as long as you remain in the home. 

To be eligible for a government-insured home equity conversion mortgage (HECM), you must be at least 62 years old and have at least 50% equity in your home, and the home must be your primary residence. The maximum payout for which you’ll qualify depends on your age (the older you are, the more you’ll be eligible to borrow), interest rates and the appraised value of your home. In 2024, the maximum you could borrow was $1,149,825.

There’s no restriction on how homeowners must spend funds from a reverse mortgage, so you can use the money for a variety of purposes, including making your home more accessible, generating additional retirement income or paying for long-term care. You can estimate the value of a reverse mortgage on your home at www.reversemortgage.org/about/reverse-mortgage-calculator.

Up-front costs for a reverse mortgage are high, including up to $6,000 in fees to the lender, 2% of the mortgage amount for mortgage insurance, and other fees. You can roll these costs into the loan, but that will reduce your proceeds. For that reason, if you’re considering a move within the next five years, it’s usually not a good idea to take out a reverse mortgage.

Another drawback: When interest rates rise, the amount of money available from a reverse mortgage declines. Unless you need the money now, it may make sense to postpone taking out a reverse mortgage until the Federal Reserve cuts short-term interest rates, which is unlikely to happen until late 2024 (unless the economy falls into recession before that). Even if interest rates decline, they aren’t expected to return to the rock-bottom levels seen over the past 15 years, according to a forecast by The Kiplinger Letter. And with inflation still a concern, big rate cuts such as those seen in response to recessions and financial crises over the past two decades are unlikely. 

Note: This item first appeared in Kiplinger’s Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Source: kiplinger.com

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Broker, Fulfillment, Servicing Software Products; Housing for the Aging Population

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Broker, Fulfillment, Servicing Software Products; Housing for the Aging Population

By:
Rob Chrisman

Thu, Dec 28 2023, 10:54 AM

If someone reports their company for tax evasion in the U.S., he or she will receive 30 percent of the amount collected. Have you ever loaned someone money and had them not pay you back? Here’s one thing that you can do to them (IRS’ 1099-C). While we’re on the general topic, despite strong retirement savings, Fidelity Investments’ Q3 2023 analysis reveals a surge in hardship withdrawals and 401(k) loans, addressing short-term financial challenges. By the numbers: 3 percent took hardship withdrawals (up from 1.8 percent in 2022). 8 percent tapped into 401(k) loans (compared to 2.4 percent last year). The silver lining? Retirement balances are on the rise, and savings rates remain steadfast. For those planning retirement, consider suggesting reverse mortgages as a game-changer. They offer an alternative, allowing access to funds without swiftly depleting hard-earned savings. If you haven’t set up reverse division at your shop, well, 10,000 people a day turn 62. Today’s podcast can be found here, and this week’s is sponsored by Gallus Insights. Mortgage KPIs, automated at your fingertips. Gallus allows you to go from data to actionable insights. If you can use Google, you can use Gallus. Hear an Interview with attorney Brian Levy on the NAR lawsuits and the implications for housing finance moving forward.

Broker and Lender Software, Products, and Programs

Are you a compliance nerd? A group of mortgage industry veterans has launched a software company for loan servicing that is getting a lot of attention. Keep your eyes and ears open for MESH software (Mortgage Enterprise Servicing Hub), which is their brand name for a series of software products aimed at loan servicers. The first product runs hundreds of compliance rules on loan portfolios daily, so servicers have a daily review of all loans against everything the CFPB, Agencies and States can throw at them. Look up “MESH Auditor”.

It’s time to start planning for the year ahead! Join the Computershare Loan Services (CLS) team from January 22 – 24 in The Big Easy for MBA’s Independent Mortgage Bankers Conference. With CLS’ originations fulfillment, co-issue MSR acquisition, subservicing, and mortgage cooperative, IMBs can streamline their operations, minimize expenses, and maximize profits. Contact the CLS team today to schedule a meeting in New Orleans.

Ring in the new year with a kinder outlook by joining us for the highly anticipated “Kind Mindset” event presented by Kind Lending. Taking place on January 16th, 2024, at The Buckhead Club in Atlanta, GA, this immersive event is designed to empower attendees with valuable insights on growth, success, and mindset. With an impressive lineup of speakers, including Kind Lending’s CEO/Founder, Glenn Stearns, and special guest Captain Charlie Plumb, 6-year Prisoner of War and former Fighter Pilot, this event promises to be a transformative and inspirational experience. Get ready to cultivate a “Kind Mindset” and embark on a journey of transformation and success. Register today.

Aging, Down Payments, and Housing Demographics

Do you think getting old is hard? The U.S. Census Bureau released a report showing that about 4 million U.S. households with an adult age 65 or older had difficulty living in or using some features of their home. About 50 million, or 40 percent, of U.S. homes had what were considered to be the most basic, aging-ready features: a step-free entryway into the home and a bedroom and full bathroom on the first floor. About 4 million or 11 percent of older households reported difficulty living in or using their home. The share increased to nearly 25 percent among households with a resident age 85 or older. Over half (about 57 percent) of older households reported their home met their accessibility needs very well, but only 6 percent of older households had plans to renovate their home in the near future to improve accessibility.

In general, Zillow expects home prices to remain roughly flat in 2024, with only a 0.2% increase in its housing market index. Existing home sales are expected to fall further to 3.74 million. Zillow does mention that this forecast does not take into account the latest forecast from the Fed, and the expectation for big rate cuts in 2024.

Falling mortgage rates have put some spring in the step of the homebuilders, according to the latest NAHB / Wells Fargo Housing Market Index. As one would expect, with mortgage rates down roughly 50 basis points over the past month or two, builders are reporting an uptick in traffic as some prospective buyers who previously felt priced out of the market are taking a second look. With the nation facing a considerable housing shortage, boosting new home production is the best way to ease the affordability crisis, expand housing inventory and lower inflation. But builders have lagged production for so many years…

Non-builder loan officers find the builder world a tough nut to crack. Many, if not most, big builders are dealing with the mortgage rate issue by subsidizing buy-downs. Builders generally build free upgrades into their models, and these funds are being used to buy down the rate. The builder gets full price for the house, loses a few points on the mortgage, which might have instead gone to upgraded countertops or something else.

Even if one can get approved for a loan, buying can still be prohibitively expensive. Receiving help from family and friends for that crucial down payment can be a major turning point for many consumers. In fact, nearly 2 in 5 homeowners (39 percent) have received down payment assistance, according to LendingTree’s Mortgage Down Payment Help Survey, of nearly 2,000 U.S. consumers. 78 percent of Gen Z homeowners reported some financial support for a down payment, mostly from their parents. 54 percent of millennials have received down payment help, followed by 33 percent of Gen Xers.

Almost a third (31 percent) of Americans think putting down 20 percent for a down payment is obligatory. However, 59 percent of current homeowners say their down payments were less than 20 percent of the home’s purchase price, and just 29 percent put down 20 percent or more. One in 10 Americans never took out a mortgage, while 15 percent had a mortgage but have since paid it off. Baby boomers are the most likely to have paid off their mortgages, at 29 percent.

As anyone shopping for a home can tell you, it’s slim pickings out there. For many years we have been seeing the biggest squeeze in the starter home category. It appears that for years part of the problem is a lack of confidence to move up to the next category. People in starter homes are staying put, which is keeping homes off the market.

Capital Markets

It was another slow news day yesterday without any meaningful economic data or news to move sentiment. However, investors are laden with optimism as a soft-landing for the economy comes into view and seem to be throwing caution to the wind with over 150 basis points of Fed Funds easing fully priced in for next year. In accordance with that, benchmark bonds rallied to fresh highs yesterday after the U.S. Treasury sold $58 billion in 5-year notes to excellent demand. The strong auction exposed some short positioning, and it invited additional late buying. That followed Tuesday’s $57 billion 2-year Treasury auction that attracted a record number of indirect buyers to snap up high yields before the Fed’s anticipated rate cuts, which are fully priced in to begin at the March meeting in just over 80 days. Yields on benchmark treasuries have dropped to levels not seen since the summer.

Today has a fuller calendar than the past two sessions in regard to economic news. We are under way with initial jobless claims (+12k to 218k, a little higher than expected), continuing claims, advanced economic indicators for November (goods trade balance, retail inventories, and wholesale inventories), none of which moved rates. Later today brings the NAR’s Pending Home Sales Index for November, Freddie Mac’s Primary Mortgage Market Survey, and another large amount of supply from the Treasury, headlined by $40 billion 7-year notes. We begin the day with Agency MBS prices worse a few ticks (32nds), the 10-year yielding 3.81 after closing yesterday at 3.79 percent, and the 2-year is down to 4.25.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

Collectively, Americans carry trillions in household debt. And the biggest single element of that burden by far is mortgage debt: It comprises close to $12 trillion of the $17.29 trillion overall.

Latest statistics on average mortgage debt

Mortgage

  • The average mortgage debt balance per household is $241,815 as of Q2 2023, a 4% increase from 2022.

  • The total mortgage debt balance in the U.S. is $12.14 trillion as of Q3 2023, an increase of $126 billion over the previous quarter.

  • The average mortgage balance exceeds $1 million in 26 U.S. cities, primarily on the East and West Coasts.

  • Mortgage originations collectively total $386 billion, as of Q3 2023, well below the trillion-dollar levels in 2020-21.

  • Total home equity line of credit debt equals $349 billion as of Q3 2023, more than a $25 billion year-over-year increase.

  • The average credit score for purchase mortgage holders is 733 as of November 2023.

  • The total debt service to income ratio (DTI) of U.S. households is projected to rise to 11.7% by 2025, up from  9.9% in 2022. The mortgage DTI alone will increase to 4.5%.

  • Total U.S. household debt is $17.29 trillion as of Q3 2023, an increase of $3.1 trillion since the end of 2019.

Annual average mortgage debt

Mortgage debt is the heavyweight when it comes to household debt, dwarfing credit card balances, student loans and auto loans. After the tough blow dealt by the 2007-08 subprime mortgage crisis, the annual average mortgage debt declined sharply. However, since 2013, the pendulum began to swing back, with mortgage debt on a steady rise. Since the pandemic, increases in home prices and in interest rates kicked the climb into overdrive.

So, what does this mean for the annual average American mortgage debt in 2024? With housing inventory still tight, interest rates still elevated, and people seeking larger homes to accommodate their evolving lifestyles, mortgage balances will likely continue to grow, though perhaps at a slower pace.

Most common types of debt

Mortgages continue to be a significant portion of household debt in the United States, with a current total of $12.14 trillion owed on 84 million mortgages. This equates to an average American mortgage debt of $144,593 per person listed with a mortgage on their credit report. Despite interest rates hovering above 7 percent, mortgage demand remains strong, driven by two key factors: an increase in the number of people seeking mortgages, and larger mortgages at that.

The record-low mortgage interest rates of recent years allowed buyers to purchase higher-priced homes or refinance their existing mortgages while maintaining low monthly payments. This has led to a rise in outstanding mortgage debt, which currently accounts for 70.2 percent of consumer debt in the U.S., according to New York Federal Reserve figures.

Here’s a look at the other common types of debt among American households, based on credit reporting company Experian’s midyear consumer debt review:

  • Auto loans. In the year between Q2 2022 and Q2 2023, auto loan debt witnessed a 5.8 percent increase, rising from $1.42 trillion to $1.5 trillion. This rising trend in auto loan debt can be attributed to persistent inventory shortages, escalating prices for new and used vehicles, and supplementary expenses such as auto insurance.

  • Credit card debt. Between Q2 2022 and Q2 2023, credit card debt surged by 16.3 percent, amounting to a total of $1.02 trillion. This increase is largely attributed to factors such as inflation and increasing credit card interest APRs. In a similar vein, unsecured personal loans also saw a 21.3 percent growth spurt, moving from $156.1 billion in 2022 to $189.4 billion in 2023.

  • Home equity lines of credit (HELOCs). As of Q2 2023, HELOCs have seen an 8.5 percent increase compared to the same quarter in 2022, reaching a total of $322 billion. This growth can be attributed to several factors. Firstly, the ongoing rise in home prices has increased homeowners’ equity, making it easier for them to tap into their home’s value through HELOCs. Additionally, the current high interest rate environment has made borrowing against home equity more attractive than refinancing a mortgage or taking out other types of loans.

  • Student loan debt balances. Student loan debt has long been a significant player in U.S. household debt. However, an 8 percent decrease occurred between Q2 2022 and Q2 2023, with loan balances falling from $1.51 trillion to $1.39 trillion. Influential factors behind this decline include the moratorium on interest on student loans, borrowers making payments during the three-year payment pause that concluded this year, and loan forgiveness initiatives introduced by the Department of Education.

Average mortgage debt by generation

Americans generally begin taking on debt as young adults, taper off their pace of borrowing in middle age and work to pay off loans near or during retirement.

Generation

Average mortgage debt

Generation Z

$229,897

Millennials

$295,689

Generation X

$277,153

Baby boomers

$190,441

Silent Generation

$141,148

Source: Experian

For each generation, this trend has taken place in tandem with mortgage rate fluctuations and home price appreciation, which has accelerated dramatically in recent years. In February 2012, the median existing-home price was $155,600, according to the National Association of Realtors. By the same time in 2017, the median was $228,200. As of November 2023, the median home price was $387,600.

States with the highest and lowest mortgage debt

These states had the highest average outstanding mortgage balance per borrower as of the end of 2022, according to Experian:

  1. District of Columbia – $492,745

  2. California – $422,909

  3. Hawaii – $387,277

  4. Washington – $331,658

  5. Colorado – $319,981

In these states, borrowers are much closer to paying off their home loans:

  1. West Virginia – $124,445

  2. Mississippi – $139,046

  3. Ohio – $139,618

  4. Indiana – $141,238

  5. Kentucky – $144,222

How mortgage debt compares to other household debt

In comparison to other types of household debt, mortgage debt often tends to take the lion’s share — largely due to the substantial cost of real estate (a home is likely to be the single biggest asset an individual ever purchases). While mortgage debt tends to be sizable, it is spread over a lengthy period, usually over a term of 15 to 30 years. This mitigates its impact on a household’s monthly budget, especially when compared to high-interest, short-term debt like credit card balances.

That longevity works to borrowers’ advantage in another way: Lenders often view mortgage-holders favorably for their demonstrated ability to manage large, long-term financial commitments. In fact, in contrast to other obligations, a mortgage is often viewed in a positive light by creditors, because — unlike with personal loans or credit card bills — your payment acts as an investment in an appreciating asset. Each monthly installment you pay reduces the principal owed on your house, increasing your stake in the property over time. This home equity can later be leveraged for financial liquidity or for securing lower-interest loans — or just held onto, enhancing your net worth and those of your descendants.

In short, a mortgage is considered “good debt,” due to its role in building equity, growing wealth and demonstrating creditworthiness.

Source: finance.yahoo.com

Apache is functioning normally

Knightvest, a real estate investment and management company, has published its inaugural annual Multifamily Renter Sentiment Report findings. The survey offers insights into the decision between renting and buying, the consequences of high mortgage interest rates, and variations in rental preferences across different generations.

  • Most renters (59%) choose to rent rather than feel forced to rent.
  • Among the respondents, 51% of Millennials and 54% of Gen Z individuals have actively chosen to rent.
  • A surprisingly high number of renters (31%) feel ambivalent or uninterested in home ownership.
  • 74% of renters report that their timeline to purchase a home has significantly lengthened due to increased mortgage rates
  • Older Americans are selling homes to live in apartments.
  • 73% of people say that social interaction is essential in an apartment community
  • Baby Boomers value social interaction more than Millennials (78% versus 71%)
  • On the whole, Gen Z respondents are slightly more enthusiastic about the idea of owning a home compared to Millennials (29% vs. 25%).
2023 Knightvest Multifamily Renter Sentiment Report Infographic

The rent-versus-buy decision is increasingly nuanced given this dynamic macroeconomic environment, and it’s interesting to see the data support what we’re hearing anecdotally from residents: if you create communities built on quality, service and care, then apartments can become sought-after destinations where residents thrive through multiple seasons of their lives.

David Moore, Knightvest Founder and CEO

Top Reasons Why People Rent

  • The high cost of owning a home is a concern for 62% of people.
  • The reduced responsibility for maintenance and repairs is a factor for 51% of individuals.
  • 35% of renters cite the increased flexibility to relocate as a reason they choose renting instead of buying.

Also, it is interesting to note that:

  • 29% of renters have previously owned a home.
  • 71% of Baby Boomer renters have owned a home before, and their primary reason for renting is to have fewer maintenance and repair responsibilities.

Finally, The surge in mortgage rates has caused a significant delay in decision-making for those looking to buy a home.

  • An overwhelming 74% of survey participants have indicated that the timeline for their home purchase consideration has been prolonged due to the substantial increase in mortgage rates.
  • Within this group, a staggering 79% have reported that this extension ranges from a few years to indefinite.
  • Millennials and Gen Z individuals have expressed similar salary expectations required to afford a home.
  • On average, Millennials have stated a need for a salary of $139,000 to purchase their desired home, while Gen Z has mentioned a requirement of $137,000.

As we head into 2024, this data underscores the enduring demand for apartments and reveals insights that will continue to shape the real estate landscape for years to come. At Knightvest, we remain focused on executing our strategy to renovate and reposition apartment communities to create compelling, modern living environments at an extraordinary value. With people staying in apartments longer, this work has never been more important than it is today.

David Moore, Knightvest Founder and CEO.

Knightvest conducted the survey in the Multifamily Renter Sentiment Report from November 20 to November 30, 2023, on an online platform. 4,100 U.S. apartment renters participated voluntarily and did not receive payment for their opinions.

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Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.

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Source: realtybiznews.com

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CRM, MSR Valuation, QC Trends Products; STRATMOR Strategy Report; Lower/Thrive M&A Deal; Renegotiations

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CRM, MSR Valuation, QC Trends Products; STRATMOR Strategy Report; Lower/Thrive M&A Deal; Renegotiations

By:
Rob Chrisman

Thu, Dec 14 2023, 11:21 AM

Everyone’s above average, right? This morning I head to Chicago where residents have the dubious honor of being the worst when it comes to estimating home values. Homes are expensive… Who knew? Apparently not the vast majority of Americans, which reminds me of the saying, “Never underestimate the intelligence of the average person.” All Star Home surveyed Americans in the most populous U.S. cities, prompting them to guess home prices in their communities to determine where people have the best and worst home value intuition, and 86 percent of people were surprised at how high home prices are in their area. Boomers (91 percent) are most surprised by high home prices, followed by millennials (87 percent), Gen X (85 percent), and Gen Z (84 percent). San Francisco locals excel in home price intuition, but Chicago residents fare the worst. (Today’s podcast can be found here, and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades. Today’s has an Interview with Xactus’ Greg Holmes and Shelley Leonard on advancing the modern mortgage through data-driven insights.)

Lender and Broker Products, Programs, and Services

Are you curious about the strategic insights that could shape a successful 2024 in the mortgage industry? As the holiday season unfolds, consider whether optimizing your tech stack could be the key to operational excellence in the coming year. Read the latest blog by DarkMatter Technologies for an in-depth look at addressing common tech stack pain points, identifying success indicators, and exploring solutions like the Empower® LOS. Take a moment amidst the holiday warmth to reflect on how a well-optimized tech stack may be the missing piece for a prosperous 2024. Ready to unlock these strategic secrets? Check out Empower and all Dark Matter Technologies has to offer.

Holiday fun fact: Santa’s sleigh is actually led by female reindeer because they’re the only ones with antlers this time of year. Seemingly minor details like this can make a big difference, just like lender production trends revealed in MMI’s Benchmark Reports. The latest edition shows that lenders in the Prime (>$5B in production volume) and Capital tiers ($500M-$5B) experienced a nearly 9% decrease in production in October compared to September. However, lenders in the Select tier ($50-500M) only saw a 4.4% decline and gained an edge over the Capital tier regarding average deal size ($354.1K v. $352K). Sign up for the MMI Benchmark Report today to receive valuable industry insights like these in your inbox each month.

As we approach the final weeks of 2023, AmeriHome Correspondent would like thank clients and partners for supporting AmeriHome through its first 10 years and making it the #2 Correspondent Lender in the country! Looking ahead to 2024, AmeriHome, backed by the strength of Western Alliance Bank, wants to speak to you about how a relationship with AmeriHome will help you navigate the coming year. Combining Western Alliance’s Warehouse Lending, MSR Financing, and Treasury Management services with AmeriHome’s industry leading loan purchase platform, makes this is a “must-have” relationship for mortgage bankers of all sizes. Financial institutions, IMBs, and Emerging Bankers alike benefit from AmeriHome’s Delegated and Non-Delegated options, full suite of conventional and government products, and Bulk, Bulk/AOT, and Best-Efforts delivery options. Check out Upcoming Events for details on where they’ll be in 2024, find your sales rep here, or send them an email to learn more about partnering with AmeriHome! They wish a happy and healthy holiday season to all!

Tis’ the season of giving! Click n’ Close has been helping lenders and brokers deliver the gift of homeownership to borrowers through its down payment assistance (DPA) program faster than you can say ‘Happy Holidays’ all year long. With more than 1.5 billion dollars in DPA-related financing to over 6,000 borrowers through its SmartBuy suite of products, with an average of nearly $12,500 in assistance per transaction, Click n’ Close is feeling pretty good about being on the nice list this year. Unlike state or municipal DPA programs, SmartBuy isn’t subject to budgetary shortfalls and offers tremendous flexibility to accommodate a wider range of borrower scenarios, making it ready to help your borrowers achieve homeownership. Reach out to our wholesale (Adam Rieke, Kerry Webb and Soliman Martinez) or correspondent team (Julas Hollie) to learn more.

What if your fee collection process wasn’t a “process” at all? Click button. Borrower gets text. Borrower pays fee. LOS updated. Easy Fee-sy with Fee Chaser!

“One Year. One Tool. $10B in Additional Loan Applications. We’ve spent the past year trying to explain everything Total Expert Customer Intelligence can do and all the ways it’s changing the game for modern financial institutions. But there’s one thing that doesn’t need an explanation: results. Lenders, banks, and credit unions across the country are generating incredible ROI for their businesses while building deeper, lifelong relationships with borrowers by using Customer Intelligence to enrich their contact profiles and engage them at the moments that matter. Let us show you how to stop playing hide and seek with high-quality loan opportunities and start driving exponential growth. Explore Customer Intelligence.“

ACES Q2 2023 Mortgage QC Trends Report finds Critical Defect Rate declines for the third consecutive quarter! Summary of findings include the overall critical defect rate declined 3.37% ending the quarter at 1.72 percent, defects in Credit & Liabilities categories increased for the 2nd straight quarter, FHA defect increased significantly, and the majority of defect categories experienced improvement this quarter. “Q2 2023 proved to be better than expected, as the critical defect rate continued to decline in the face of a surge in origination volume over the previous quarter. However, deteriorating quality in the core underwriting categories remains of concern and should be an area in which lenders increase their focus in the coming months. We implore all lenders to keep quality at the center of their operations to ensure a safe, sound, and prosperous new year.” – Nick Volpe, EVP of ACES Quality Management. Read the report.

Do you have a servicing portfolio? Do you understand how it is being valued? With the decline in overall production in 2023, the MSR asset has become more critical than ever and effectively managing that asset demands ongoing oversight. MCT offers portfolio valuations that are accurate and easy to understand, with built-in safeguards focused on client and borrower data security. MCT’s fair value analysis and reports are customized to support servicer’s internal requirements and objectives. Their extensive number of clients and MSR market knowledge keep your valuations timely, accurate, and reliable. Schedule a phone call with the MCT MSR experts to discuss a customized approach for valuing your MSR portfolio.

‘Twas the holiday season, just two weeks to go, loan officers in town faced a challenging low. But behold, in the distance, a solution did gleam, Velma CRM appeared like a holiday dream. Tailor-made for small lenders, banks, and credit unions, no more complexity, no more costly intrusions. Automated drip emails are sent in a flash, customized flyers for your next open house bash! Plug-n-play convenience, a breeze to employ, with all tools in one place, your business primed to deploy! Loan officers can thrive, their work takes flight, with Velma’s assistance, everything’s right. So, join the Velma revolution, don’t delay, transform your lending business this holiday!

STRATMOR on Strategies for 2024

What’s the moral of the story for the mortgage industry in 2023? In STRATMOR Group’s December Insights Report, STRATMOR reviews the plot and moral of each InFocus article from the year and summarizes them to provide key takeaways that will help lenders think outside the box, evaluate new strategies, take risks and survive the downturn that is likely to continue into the first quarter of 2024. Lenders, and vendors who serve the mortgage industry, if you need guidance in developing your business strategies for 2024, contact STRATMOR, and don’t miss “The Moral of the 2023 Mortgage Industry Story” in the December Insights Report.

Mergers and Acquisitions

Out of Texas and Ohio comes news that Thrive Mortgage, LLC and Lower, LLC have plans to merge the two brands, Thrive Mortgage and Lower.com. Thrive CEO Selene Kellam and production head for Thrive Mortgage, Randell Gillespie, will join the combined executive team with Lower under the leadership of Lower CEO and Co-Founder Dan Snyder, expected in the first quarter of 2024. The STRATMOR Group acted as transaction advisor to Lower.

Lower CEO Dan Snyder stated “we’re building a better approach to mortgage with Lower’s streamlined tech powering multiple channels. Thrive is an award-winning, national lender with the same belief and we’re excited to bring them onto our platform.”

“The commitment of Thrive to our team and our customers has always been to deliver the best mortgage experience with the highest quality resources” said Thrive Mortgage Chairman Roy Jones. “This has driven us to focus on having the best people with the most forward-thinking technology in the industry, all of which is propelled forward with this partnership with Lower.”

Thrive CEO Selene Kellam added, “last year, we acquired AMSCo, a storied Midwest company that added incredible talent to our model. We are now excited to share another amazing opportunity that has presented itself to join Lower.com.” Thrive, licensed in 42 states, was the first company in Texas to close a fully electronic note with a remote notary.

Leadership at Thrive were specifically attracted to Lower’s future-forward path, including five key pillars of differentiation: progressive leadership and vision, cutting-edge marketing strategy, a standout private-label platform, unified technology stack, and the venture capital funding to pioneer new paths.

Lower, LLC is a multi-channel, digital lender ranking as the 30th largest home lender in the country. Backed by top VC firm Accel, Lower operates an online consumer-direct channel, offline retail channel, and third-party origination platform servicing both brokers and other fintechs like Opendoor.

M&A is not confined to lenders. Out of Arlington, VA, news came out that Titleworks, Inc., founded in 1995 and led by industry veteran Becky Taylor, and Cobalt Settlements, LLC founded in 2014 and led by Jeff Nowak, Esq., have announced a strategic merger. “This union will carry the name of Cobalt Settlements, LLC and marks a pivotal moment, combining Cobalt’s innovative resources and attorney-backed capabilities with the deep-rooted client relationships and industry expertise of Titleworks.”

Capital Markets

Renegotiations and early pay off penalties will now occupy capital markets staffs as those hoping for a holiday gift from the Fed in the form of projected rate cuts in 2024 finally found something in their stocking. In a unanimous decision, the FOMC agreed to leave the target range for benchmark federal funds rate at 5.25 percent to 5.5 percent yesterday, and while the door was left for additional tightening beyond what is currently the highest federal funds rate since 2001, the updated forecast projects at least three rate cuts over the next 12 months. After a period of nearly two years of rapid monetary policy tightening, and pauses at the most recent three FOMC meetings, a pivot to cuts next year filled investors with joy and caused a massive rally in the bond markets. Fed Chair Powell also acknowledged that the FOMC discussed when it will become appropriate to begin dialing back its policy restraint.

While the Fed kept rates unchanged, something entirely expected, it was the shift from a hawkish pause, one with a rate hike bias, as was the case after the last two meetings, to a dovish pause, a pause with a future rate reduction bias due to the declining inflation rate, that led to a record Dow Jones close. Discussion will now focus on the date of the first cut.

The Fed has spent recent months attempting to dampen expectations that it is about to reverse course and lower rates. Changes in the policy statement from this meeting, however, made clear that the pace of rate reductions in 2024 is now the focus as inflation concerns continue to fade. Fed Chair Powell had previously said that pain, traditionally in the form of millions of lost jobs, would be necessary to quell inflation. But at 3.7 percent, the unemployment rate is about where it was when the Fed began raising rates in March 2022. Meanwhile, the pace of inflation’s decline leaves it only one percentage point above the central bank’s 2 percent target. An updated Summary of Economic Projections also featured an improved growth outlook for 2023, and a lowered inflation outlook for 2023 and 2024.

In addition to any ongoing response to the FOMC today, markets will also be dealing with monetary policy decisions from the SNB, Norges Bank, the BoE (still fearing inflation), and the ECB with the post-meeting press conference from President Lagarde. No changes were expected nor delivered. Domestically, yesterday’s Fed news overshadowed this morning’s import and export prices for November, jobless claims, and retail sales for November. Later today brings Business inventories for October follows, Treasury announcing sizes for next week’s reopened 20-year bonds and 5-year TIPS auctions, and Freddie Mac’s latest Primary Mortgage Market Survey. We begin the day with Agency MBS prices better by a solid .250 than Wednesday’s close as prepayment fears continue to creep into the market. The 10-year is yielding 3.94 after closing yesterday at 4.02 percent; the 2-year is down to 4.30.

Employment

It’s clear that new construction homes will be a primary driver of originations in 2024. Picture yourself as a Planet Home Lending MLO with this product lineup: Purchase Edge, a game-changer with benefits for borrowers looking to move; One Time Close construction loans, the traditional powerhouse; and purchase and renovation loans for Accessory Dwelling Unit (ADUs). As you move into this niche, an experienced construction lending team supports you by unlocking the secrets of construction lending success. The path to your 2024 breakthrough begins when you contact Talent VP Peter Briggs or 435-709-6287; all inquiries will be held in strict confidence.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

What should you do with your 401k or 403b when you leave your job? This is a question that confronts more and more people. According to the Department of Labor young Baby Boomers held on average 11.3 jobs from age 18 to 46. So it was no surprise when I received the following email from a reader named Juan:

In this article, we’ll look first at your options. Then we’ll cover some factors to consider as you choose the best option for your circumstances. And finally, we’ll cover some of the mechanics of actually rolling over a 401k to another 401k or IRA. Note that this article applies equally to both 401k and 403b retirement accounts.

Listen to this Article:

Options for a 401k When You Leave a Job

The first thing is to understand are options. When you leave a job with a 401k or 403b you have potentially four options when it comes to your retirement plan:

Take the Money: While I include this as an option, it’s not one that will do your retirement planning any favors. Taking the money will trigger ordinary income tax. If you are not 59 1/2 or older (or otherwise able to take a qualified distribution), you may also get hit with a 10% additional tax. So while this is technically an option, I’m going to assume for the sake of this article that it’s not one you are considering.

Leave it Alone: Most 401k plans allow you to leave your money in the 401k at your old employer. You won’t be contributing to the account anymore, but you can continue to invest the money in the funds available in the plan. Note that this option may not be available for 401k accounts with balances of less than $1,000. For balances of less than $5,000, you may need to take steps to prevent your old employer from automatically distributing the funds to you.

Rollover to Current Employer’s 401k: If your new employer has a 401k or 403b and permits rollovers, you can rollover the money to the retirement plan at your new employer.

Rollover to an IRA: Finally, you can always rollover the 401k to an IRA.

Considerations in Making Your Choice

What should you consider in deciding which option is best for you? While there is no one right answer for everybody, there are some important factors to take into consideration. The very first factor is access to good investment options.

Investment Options

One of the big potential downsides of a 401k or 403b is that some of them have lousy investment options. For that reason, it’s important to consider the investing options at both your old employer and your new employer. Part of this evaluation should look at the expense ratios of the mutual funds in both plans. Also, keep in mind that you may not need every mutual fund choice in a plan to be a good option. As you build your asset allocation plan across multiple accounts, you may only need one or two good investment choices with your 401k.

If the investment options at the old employer are good and fit your asset allocation plan, leaving them there is a reasonable option. You don’t have to go through the hassle of moving the money. In fact, that’s exactly what I did with my first employer. I was there for 10 years. When I moved to another job, I left my money in the company’s retirement plan because I was happy with the investment choices.

Simplicity

The second thing to consider is simplicity. The fewer accounts you have, the easier it is to manage. That’s true when it comes to rebalancing a portfolio and keeping track of your investments. If you have good investment options at your new employer, rolling your account over from your old employer to your new employer minimizes the number of accounts you have. If you happen to have good investment choices at both your old and new employer, you’ll have to weigh the inconvenience of the rollover with the inconvenience of managing two accounts. In the long run, I favor the simplicity of consolidating accounts. Further, as we’ll cover in a moment, it’s not at all difficult to rollover a 401k.

Age 55 Rule

The third thing is the age 55 rule. This is one I think a lot of people tend to forget. If you leave your employer in or after the year you turn 55 you can begin to take withdrawals from your 401k without incurring the 10% penalty. What happens if you leave your employer at age 54? Can you wait a year until you turn 55 and then start taking money out without penalty? No. This exception only applies if you leave your employer in the year you turn 55 or later. Of course, you’ll have to pay ordinary income tax assuming it’s a traditional 401k or 403b.

So what does this have to do with a 401k rollover? The age 55 rule does not apply to IRAs. If you rollover a 401k to an IRA, you cannot take advantage of this rule. Therefore, you should consider this factor when deciding what’s best for your retirement account.

Rollover Tips

If you decide to rollover your 401k or 403b, you’ll want to use what’s called a direct rollover. A direct rollover is the movement of your investments from one plan directly to another plan. In other words, you don’t get access to the funds. A direct rollover is quick and convenient.

There is such a thing as an indirect rollover where you do touch the money. The money comes to you and you then have 60 days to roll it over into the IRA or 401k. There are several drawbacks to an indirect rollover. First, your old employer may withhold 20 percent of the rollover for taxes. While you’ll get that money back eventually, you’ve got to come up with that extra 20 percent now to roll over the whole amount into your new account. Further, if you fail to rollover the assets within 60 days, the IRS treats the assets as a distribution. The result can be a very big tax bill, including the 10% penalty.

Finally, the easiest way to begin the direct rollover process is to contact the new plan administrator where you want your money to go. They likely have an entire department dedicated to helping investors execute a 401k rollover. They will walk you through the paperwork and make sure everything is processed properly.

Where Should You Open an IRA?

If you’re going to open up an IRA, where do you open it? The key to answering this question is to decide first what types of investments you’ll purchase. For example, if you want to invest in funds at Fidelity, then it makes sense to open the IRA at Fidelity. That’s true if you want to invest in funds at any mutual fund company. If you have a certain fund company you prefer, open the IRA with the mutual fund company. Not only do you invest for free into their investment products, but you can always add a brokerage account to invest in stocks, bonds, or ETFs.

If you want to invest in a broad array of ETFs and stocks, then a low-cost brokerage makes the most sense. Brokers offer IRA accounts that enable you to rollover a 401k. TD Ameritrade is my personal favorite because trades are inexpensive and they have physical offices just about everywhere. I’ve also used OptionsXpress, which offers a $100 new account bonus. You may have a different broker you prefer, but if you’re going to trade a lot of ETFs and individual stocks, a low-cost brokerage is a good option for an IRA.

The fourth option, of course, is a robo-advisor. These tools take a lot of the work out of creating an asset allocation plan and rebalancing your portfolio in exchange for a fee.

Related: How to Build Your Own Benefits Plan If You Leave Your Job

  • Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.

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