Mortgage Market Makeover

Agency plans home mortgage market makeover

WASHINGTON – July 9, 2012 – The Consumer Financial Protection Bureau says it’s planning for some major changes to the home mortgage market in the next six months. Its main goal: to improve the fairness and clarity for borrowers applying for home mortgages.

The newly created agency has made the mortgage market its top agenda item.

“It’s the market where consumers have the most at risk, and they have the most at stake,” Richard Cordray, the bureau’s director, told The New York Times. “I expect that the mortgage market in the fairly near term will look different in the sense that, first of all, it will be a clearer and more straightforward place for consumers; and second, it will be a more reliable market.”

As a first step, the agency says it will propose new lender rules later this summer for revising “good faith estimate” forms, the forms which homebuyers receive before closing that lists borrowers’ costs. The agency wants the forms to clearly state the interest rate on the loan that borrowers will pay, how this rate potentially could change over the term of the loan, and exactly how much cash they’ll need at closing.

The agency says the changes will help make often-confusing forms more understandable and complete for buyers.

The agency also has plans to overhaul how mortgage servicers provide services to borrowers facing foreclosure, requiring clearer information and improved service options.

“If we do all of those things from beginning to end, I think the mortgage process will work better,” Cordray said. “And that’s good for the economy.”

Source: “New Agency Plans to Make Over Mortgage Market,” The New York Times (July 5, 2012)

Extra-Low Mortgage Rates

3 Reasons Not to Refinance at Extra-Low Rates

Be on guard against those low, low mortgage rates - you may end up spending more by refinancing than if you had stuck with your current mortgage, even if your new interest rate would be under 3 or 4 percent financial planners warn.
Here are 3 warning signs for not refinancing your home at a lower rate:
-You're one of the many homeowners who owe more than what the home is worth. Lenders may ask you to pay a higher rate of interest, perhaps a quarter or half percent more than the average national home loan interest rate, mortgage brokers say. Even worse, a prospective lender may ask you to pay property mortgage insurance, which will add thousands of dollars to the cost of your loan, says Deerfield Beach, Fla., financial planner Blair Shein.
-There's a chance you might move to take a new job. If you don't stay in your home for at least two years then you may actually lose money on refinancing, says Plantation, Fla., financial planner Matt Saneholtz, who is president of the Financial Planning Association of Greater Fort Lauderdale. That's because you won't have time to recoup the closing costs, he said.
-You will end up paying more. If you have less than five years to pay, then you will generally pay more if you take out a longer loan, even if it offers a much lower interest rate, Shein said. That's because the longer loan length means more interest costs although your monthly payment will be smaller, he says. You only come out ahead if you continue making your existing loan's bigger payments on the new loan. That will ensure you will pay less interest - and pay off the loan even quicker, he said. "But the reality is that most people don't that," Shein says.
Homeowners should examine all the costs before signing up for a new loan. "Do the math," financial planner Saneholtz says. And beware of the hidden closing costs: You may not have to pay any when you sign for the mortgage, but those costs will be added to your new loan - often involving thousands of dollars, he says.

©2012 Sun Sentinel (Fort Lauderdale, Fla.) Distributed by MCT Information Services and RISMedia

Mortgage Rates Continue To Drop!

Mortgage Rates for a 30 year loan are down from 4.64% average in May 2011 to 3.8% average this last May 2012. With rates going even lower it is a good time to buy or refinance.