Refinances

massachusetts condominium super lienWe had another interesting year in Massachusetts real estate law. From that controversial $60,000 discrimination penalty for asking a prospective renter “where are you from?”, to the influx of Airbnb rentals, to the tragic murder of Realtor Beverly Carter during a showing, and finally Gov. Patrick’s disappointing scuttling of the title clearance bill.

With pro-business Charlie Baker in the Governor’s Office, the fate of the independent brokerage model with the Supreme Judicial Court, and significant regulatory changes to title and closing services, we should expect another eventful year in 2015. Without further ado, I give you my outlook for 2015:

The Charlie Baker Effect

Gov. Deval Patrick was no friend to the real estate industry, often kowtowing to ultra-liberal activists. Case in point was when he killed the title clearance bill which had broad support within the Legislature and would have helped hundreds of homeowners get out of toxic titles. A new era is here with Republican and former CEO, Charlie Baker. Hopefully the Governor Elect will be more supportive of homeowners, developers, real estate agents, lenders and others in the industry. On the legislative table this year will be comprehensive “smart” zoning reform (including 40B affordable housing development reform), another effort at the title clearance bill and maybe even landlord-tenant legal reform.

Will Realtors Be Treated As Employees or Remain Independent Contractors?

The SJC should decide the closely watched case of Monell v. Boston Padsa class action brought by a group of disgruntled real estate agents at Jacob Realty claiming they should be treated as employees instead of independent contractors. Hanging in the balance is the fate of the historically independent, commission based real estate brokerage office model. An unfavorable result at the SJC would essentially turn this model upside-down, requiring brokerages to pay their agents minimum and overtime wages and provide all the statutory benefits afforded to employees. The real estate office as we know it today would likely cease to exist.

CFPB Compliance: New HUD-1 Statement, GFE, TIL, Back Office Procedures

The new Consumer Financial Protection Bureau rules, which go into effect this summer, have the potential to drastically change how loans are disclosed and transactions closed, affecting loan officers, Realtors and closing attorneys alike. Gone are the Good Faith Estimate, Truth in Lending Statement (TIL) and HUD-1 Settlement Statement, replaced with a longer Loan Estimate and Closing Disclosure. The disclosure timetables will be much, much stricter — the final Closing Statement must be given to the borrower no later than three business days before closing. Lenders and closing attorneys will have to work more efficiently and quicker to meet these new deadlines. Closing attorneys who are ALTA Best Practices Certified will have a competitive advantage over those who aren’t. Smaller firms could fall by the wayside.

Housing Court Expansion

This year will likely see the expansion of Housing Court jursidiction state-wide including in Middlesex, Norfolk and Barnstable counties. The Housing Court will be available in high density rental towns including Cambridge, Framingham, Brookline, Waltham, Dedham, Malden and Somerville.

I hope you all have a happy, healthy and prosperous New Year!

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Concise Disclosures Aimed At Reducing Borrower Confusion and Helping Comparison Shopping

As part of a continuing overhaul of the home mortgage market, the Consumer Financial Protection Bureau on Monday issued proposed rules to bolster fairness and clarity in residential lending, including requiring a new good-faith estimate of costs for homebuyers and a new closing settlement statement.

My understanding is that the new “loan estimate” would replace the current Good Faith Estimate (GFE) and the current Truth in Lending Disclosure (TIL). The new closing disclosure would replace the current HUD-1 Settlement Statement. The new disclosures are open to industry and public comment for 120 days, after which they will be finalized and codified as law. For more details on the new disclosures, go to the CFPB site here.

Here is the new Loan Estimate.

201207 Cfpb Loan-estimate

Here is the new Closing Disclosure

201207 Cfpb Closing-disclosure

I’m interesting in hearing comments on the new forms from mortgage professionals, real estate attorneys and borrowers. Please comment below!

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Richard D. Vetstein, Esq. is an experienced Massachusetts real estate closing attorney who has closed thousands of purchase and refinance transactions. Please contact him if you need legal assistance purchasing residential or commercial real estate.

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January in the real estate industry is typically the time for the new year market outlook. For this coming year many of us have seen the template on the macro-economic data which most impacts the real estate industry: 8.5 % unemployment in the latest report, 30 year mortgage rates at record lows at or below 4.0%, and 15 year mortgage rates at or below 3.25%.

Rather than run a standard metrics-based market forecast this year, I decided to survey a cross-section of Massachusetts real estate realtors and mortgage professionals to hear from them on the upcoming spring and the 2012 real estate market in its entirety. Overall, each of the real estate professionals I contacted were optimistic. They tend to see the low interest rates and improving economy as the drivers of a busy 2012 housing market. Thus, here is a compendium of professionals I surveyed:

“I am optimistic that interest rates will remain low at least until the presidential elections. The uncertainty that has constrained spending and lending will keep things from taking off until there is a clearer picture of what policies will be in place (intervention and regulation vs. deregulation and free markets).

The increasing debt woes of EU members creates short term demand for our mortgage bonds and treasuries which drives down interest rates. This won’t be fixed overnight.

The housing collapse hangover continues to cause problems. The economy and in particular the housing market is still too weak to suffer increased interest rates. Rates will remain low until the cash on the sidelines is invested, employment improves and housing sees some recovery. The Fed has shown that they will move to buy mortgage backed securities and treasuries if we see rates start to rise and I can’t see them sitting on their hands if rates rise and threaten to derail this slow economic recovery.

This is an incredible time to buy a home with prices low and the cost of money so low as well.”

–Loan Officer, Bank of Canton, Boston, Brookline and Route 128 suburbs

 “I expect the 2012 real estate market in the greater Boston area to be stable. Overall, buyers will continue to have the upper hand but I don’t think we are going to see any precipitous drop in either sales prices or the number of sales. If interest rates remain low it continues to be a good time to get into the market knowing that you are getting in somewhere close to the bottom.”

–Realtor, Keller Williams, Cambridge,

 “As we embark on the new year there are many reasons to be optimistic. Rates are expected to remain at all time lows for the next 12 months and there is plenty of inventory for home buyers. More importantly, we are starting to see better listing prices from sellers who are clearly more realistic about what to expect. Contrary to what the media would have consumers believe, there is plenty of financing available for qualified buyers – and it doesn’t always require 20% down. First time buyers are surprised to see how affordable it is to own their own home, and with programs available with as little as 3% down and no PMI I expect to see a big surge in this demographic.”

–Loan Officer, Fairway Mortgage, Route 128 Suburbs

 “I see a slow start to the Spring, but a steady stream of inventory equal to purchasers. The best place to be is in a move-up, as buyers will find a greater gain on their more expensive home in spite of possibly losing a bit on the sale side. It seems that there are more foreclosures on the horizon with stable amounts of short sales, another way for a buyers to make immediate gains. Buyers will still dictate values, relative to condition and inventory. The mortgage guidelines have become stricter, so getting a pre-approval from a reputable lender is increasingly important. Sellers should request to see one immediately from a prospective buyer and buyers should be educated about the borrowing and the buying process.”

–Realtor, Realty Executives, Framingham,

 “I have an above normal number of pre-approvals for January.  I’m starting to see movement in the market.  A lot of high-end buyers.”

–Loan Officer, Citizens Bank, Route 128 Suburbs,

“Brookline real estate should receive a spike upwards during the spring market like it always does. It looks like the economy has improved slightly which could also help the confidence of the buyers.”

–Realtor, Coldwell Banker, Brookline

 “I see purchases up 40% for the year, and refinances down slightly.”

–Loan Officer, Mortgage Network, Route 128 Suburbs

 “With 2011 now behind us, real estate agents and others related to the housing industry are hoping that 2012 will bring a significant improvement to the number of units sold and at least stabilization, if not an increase in the median sales price.”

2011 ended with a nice up-tick in sales according to the National Association of Realtors, however, sales remain depressed, as are several of the realtors I spoke with in the Metrowest and Central Massachusetts areas. Central Mass, in particular, seems to have borne the brunt of the home sales price reductions and sales lag. Unit sales within the Route 128 belt have held up nicely, although many homes have experienced a 5-10% appraised value drop, year over year.

Interest rates have held steady at near record lows. While this is good news for first-time home-buyers and relocating workers, as home affordability is better than at any time in recent memory, many sellers are frustrated.

As home prices continue to drop, more sellers are finding themselves with little or no equity in their homes.  This not only makes them reluctant to price their home to market and sell quickly, for many of them, current rules on Loan to Value, are making them unable to take advantage of today’s low interest rates and refinance.

So what will 2012 bring?  A slight improvement in unit sales, and perhaps a bottom in home prices (I hope!).  Here are my reasons for this conclusion:

  1. Job creation – Over the past several months, it appears that the job market is improving.  The Massachusetts unemployment rate dropped to 6.8% in December.
  2. Continued Low Interest Rates – While we may see an increase in 30 year fixed rates during the next couple of months, as the national economy shows signs of improvement, I do not expect a dramatic rise in rates.
  3. Helping Underwater Homeowners –
  4. Homebuilder Sentiment – Nationally, homebuilding company optimism is making a strong recovery.  Locally, several builders I have spoken with think 2012 will be their best year ever.  Prices may be down, but in many cases so are cost of materials and labor.

There are a few other reasons for optimism including an increase in household formation, as well as talk of programs to rent REO properties, which may help reduce vacant homes and stabilize prices.

–Loan Officer, Greenpark Mortgage, Metrowest and Worcester County

We have a lack of inventory in the greater Franklin area. More buyers and renters than properties on the market. A lot of sellers I talk to are waiting “until later in the year” to list. They need to get started on their preparations now because “later in the year” will be here before you know it!

–Realtor, Hallmark Sotheby’s, Franklin/495 Area

“I feel that the market will be very good for buyers and sellers this spring.

Buyer can take advantage of the great rates and prices. It’s a great time to upgrade to a bigger and better home. It’s also a great time to buy an investment property since rents are on the way up.

On the listing side we need more inventory since most of the homes on the market now are stale and overpriced. I’m a strong believer that if the home is priced well it will sell fast.”

–Realtor, Keller Williams Realty

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Marc E. Canner, Esq. is an experienced Massachusetts real estate attorney with offices in Needham and Bedford, Mass. He is a principal of TitleHub Closing Services LLC and the Law Offices of Marc E. Canner.

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Fannie Mae and FHA Conforming Loan Limits Dropping.  Close by 9/30/2011 or sooner!

A guest post by David Gaffin, Senior Mortgage Lender, from Greenpark Mortgage.

David Gaffin, Greenpark Mortgage

As Congress lets the temporary increase in conforming loan limits expire October 1st, we have received word that some investors will require that all loans affected by these limits close on or before September 30, 2011. Other investors will have their own timelines and will require closings earlier, perhaps weeks earlier.

I have attached a chart below indicating the new loan limits for 1-4 family residences through 12/31/2011 for some investors. 2012 Loan limits for Fannie and Freddie have yet to be announced. For Massachusetts this reduction will impact the these areas as follows: Martha’s Vineyard and Nantucket: Reduced from $729,750 to $625,500; , Essex, Middlesex, Norfolk, Plymouth and Suffolk Counties reduced from $523,750 to $465,750; Bristol county will be reduced to $426,650; Franklin, Hampden, Hampshire and Worcester Counties will remain at $417,000.

Please follow the attached chart for the max loan amounts. It is indicated by county.

                                               1 Family 2 Family 3 Family 4 Family

BRISTOL MA

$426,650

$546,200

$660,200

$820,500

DUKES

MA

$625,500

$800,775

$967,950

$1,202,925

ESSEX

MA

$465,750

$596,250

$720,700

$895,700

FRANKLIN

MA

$417,000

$533,850

$645,300

$801,950

HAMPDEN

MA

$417,000

$533,850

$645,300

$801,950

HAMPSHIRE

MA

$417,000

$533,850

$645,300

$801,950

MIDDLESEX

MA

$465,750

$596,250

$720,700

$895,700

NANTUCKET

MA

$625,500

$800,775

$967,950

$1,202,925

NORFOLK

MA

$465,750

$596,250

$720,700

$895,700

PLYMOUTH

MA

$465,750

$596,250

$720,700

$895,700

SUFFOLK

MA

$465,750

$596,250

$720,700

$895,700

WORCESTER

MA

$417,000

$533,850

$645,300

$801,950

You can also access other states via the website: http://www.fhfa.gov/Default.aspx?Page=185 and click on the HERA Loan Limits at the bottom of the page.

With respect to FHA, more pain is ahead as FHA seeks to lower its market share and reduce exposure. Loan limits decreases will affect Massachusetts dramaticaly, as the chart below indicates:

Continuing HERA Median
Appropriations Limit House Year
Act of Price of Median
Limit 2011 2011 for House
(1-unit) (1-unit) Difference Area Price
MA BarnstableCounty

$462,500

$405,950

($56,550)

$353,000

2008

MA BristolCounty

$475,000

$426,650

($48,350)

$371,000

2008

MA DukesCounty

$729,750

$625,500

($104,250)

$626,000

2010

MA EssexCounty

$523,750

$465,750

($58,000)

$405,000

2008

MA FranklinCounty

$318,750

$274,850

($43,900)

$239,000

2010

MA HampdemCounty

$318,750

$274,850

($43,900)

$239,000

2010

MA HampshireCounty

$318,750

$274,850

($43,900)

$239,000

2010

MA MiddlesexCounty

$523,750

$465,750

($58,000)

$405,000

2008

MA NantucketCounty

$729,750

$625,500

($104,250)

$1,325,000

2009

MA NorfolkCounty

$523,750

$465,750

($58,000)

$405,000

2008

MA PlymouthCounty

$523,750

$465,750

($58,000)

$405,000

2008

MA SuffolkCounty

$523,750

$465,750

($58,000)

$405,000

2008

MA WorcesterCounty

$385,000

$285,200

($99,800)

$248,000

2008

 

Worcester County will get killed! With Loan Limits dropping by almost $100,000, FHA will be effectively increasing the down payment requirements for buyers, if they wish to purchase a home over $298,000. This will have an impact on home prices. FHA is also good for buyers who have less than 740 credit scores. Fannie has price adjustments for lower Ficos and these raise the interest rates to borrowers. The towns of Milford, Westborough, Northborough, Shrewbury, Northborough, among others could be hard hit.

Bottom line, Take advantage of the low interest rates and higher loan limits now. Greenpark is currently accepting purchase loans for the higher limits until 8/25/2011, to close by 9/30/2011.

Please send me an email me, dgaffin@greenparkmortgage.com with any questions and thank you for reading.

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One of the most important jobs of the closing attorney during a Massachusetts refinance or purchase transaction is to fully explain the numerous closing costs that a borrower (and seller) must pay at closing. The best way to explain Massachusetts real estate closing costs in a blog post is the same way we would explain it at the closing–by reviewing the HUD-1 Settlement Statement line by line.

Prior to the closing, you should have received a Good Faith Estimate of closing costs from your lender. A good mortgage professional will always explain closing costs before you arrive at the closing table. The Good Faith Estimate or GFE will be a precursor of what you’ll be charged at closing, and certain closing costs cannot vary by more than 10% from the GFE. Bring your GFE to the closing to compare it with the HUD Settlement Statement.

HUD First Page, Borrower’s Column

We’ll use an actual HUD from a recent transaction, deleting the parties and property of course. This is a purchase for $250,000, reflected in line 101. The buyer is taking out a loan of $243,662.00 (line 202) to finance the sale. This is a FHA low down payment loan where the borrower must pay FHA mortgage insurance.

The total settlement charges, which are fully broken down on page 2 of the HUD (get to that down below), paid for by the borrower are $7,758.09, line 103. Because the closing took place on Jan. 31, in the middle of the tax fiscal quarter, real estate taxes on line 106 must be adjusted and paid for by the borrower through the end of the quarter, 3/31. As is customary in Mass., the borrower is also paying for home heating oil paid for by the seller and left in the tank (line 109–$241.20).

Line 120 tallies up the total amount due from the borrower at closing. Deducted from that number is the buyer’s deposit of $2,500 (line 201), and the buyer’s new loan of $243,662.00 (line 202). This borrower also fortunately received a seller closing cost credit of $5,708.93 (line 204) and a lender closing cost credit of $609.16 (line 205). Those credits really helped this borrower defray the closing costs.

In this transaction, there is a difference of $6,250.00 between the gross amount due from the borrower less the amounts paid by or for the borrower, which must be paid at at the closing (line 303). The borrower must bring a certified or bank check payable to himself (for fraud protection) for that amount to the closing.

Page 2 of the HUD

Page 2 of the HUD Settlement Statement itemizes all of the various closing costs, both from the borrower’s and seller sides.

Line 700 Series–Broker Commissions

In Massachusetts, the seller pays the real estate broker commission. Here, the seller is paying a total of 5% of the purchase price, or $12,500.

Line 800 Series–Lender Closing Costs

In this transaction, the lender is charging an “origination fee” of $1,735.00. This is the fee for procuring the loan. The lender has also charged the borrower for an appraisal for $425.00 but the initials “POCB” means it was paid for outside closing by the borrower. There are also small charges for a credit report and flood certification.

Line 900–Daily Interest and Mortgage insurance

The borrower is responsible for paying interest on the new mortgage loan from the closing date to the first day of the following month. That’s why most closings take place at the end of the month. The borrower is charged one day of interest of $32.54 (line 901). As this borrower is not putting 20% down, this particular loan requires mortgage insurance of $2,412.50 paid at closing by the borrower (line 902).

Line 1000–Escrow Reserves

The vast majority of mortgage lenders require borrowers to fund a real estate tax and homeowner’s insurance escrow account. Occasionally, a lender will waive the escrow for a fee or small interest rate increase. This is an aspect of closing costs that many borrowers have difficulty understanding.

The escrow account helps you and the lender anticipate and manage payment of property expenses by including these expenses as a portion of your monthly mortgage payment. Think of the escrow account as a small savings account for these expenses. An incremental amount of these expenses is added to your monthly mortgage payment, in order to cover these expenses when they are due. The lender will pay, on your behalf, the real estate taxes due on a quarterly basis, as well as the homeowner’s insurance for the following year.

Each year, your escrow account is reviewed to determine if the amount being escrowed each month is sufficient to pay for any change in your real estate taxes or homeowner’s insurance premiums. At closing, the closing attorney will collect sufficient funds to start your escrow account, typically 2-3 months worth of real estate taxes and up to a 12 months of homeowner’s insurance. In this case, the borrower must fund the escrow account with $817.12 (line 1001), which consists of 3 months of homeowner’s insurance and 2 months of real estate taxes. Remember, when you sell your home (or refinance) you will recoup your escrow account monies.

Line 1100–Title Charges

The line 1100 series shows the fees associated with the title examination, closing attorney fees and title insurance. In all transactions the lender requires the borrower to pay for lender’s title insurance and the settlement or closing fee to the closing attorney. In this transaction, the borrower has opted to purchase his own owner’s title insurance policy which protects the owner’s property and is highly recommended for many reasons. Read our post on title insurance here. So the borrower is charged $1,799.00 plus $477.50 for all the title work, closing attorney and both lender’s and owner’s title insurance premiums. The fee for reviewing and drafting the purchase and sale agreement is also included in the settlement fee on line 1102.

Line 1200–Gov’t Fees

The county registry of deeds imposes fees for the recording of the deed ($125) and mortgage ($175) which the borrower pays. The borrower also paid recording fees for an “MLC” which is a municipal lien certificate and a declaration of homestead. The seller pays the fee for the release ($75). The seller also pays a state transfer tax of $2.28 per $500.00 of value.

In Closing…

That’s basically it. Remember that closing costs differ widely between lenders, loan products, loan amounts, and closing attorneys. Make sure you ask to review the HUD Settlement Statement prior to the closing. It should be ready the day before or that day. Again, you should always speak to your mortgage professional about closing costs before you arrive at the closing table.

If you would like to speak with our office about handling your purchase or refinance transaction, please contact us at info@titlehub.com and check out our website at www.titlehub.com. Thanks!

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We welcome for the first time, guest blogger Ricardo Brasil. Ricardo is a Vice President at one of America’s largest Banks, and is recognized as one of the top mortgage originators nationally. For more info, go to his website at www.ricardobrasil.com or call him directly at (617) 897-5192.

Ricardo Brasil

Quantitative Easing Policy I (QE I): The First Go-Around

Some feel there is a good chance that the FOMC’s planned announcement to purchase U.S. treasury bonds will cause mortgage rates to fall even further. Unlike the Fed’s first quantitative easing (QE I) program, however, borrowers could see a muted (or even negative) response by the time QE2 winds down next June when it comes to rates for home loans.

Mortgage rates improved substantially the last time the Fed carried out its first Quantitative Easing program from December 2008 through March 2010. $1.75 trillion in bonds and mortgage backed securities were purchased during that time and mortgage interest rates dropped by more than 1% over the same period for a 30-year fixed rate mortgage. In 2010 they have fallen further to just over 4% last week with no points.

Quantitative Easing Policy II (QE II): The Here & Now

There are those who argue the Fed’s second attempt at Quantitative Easing, known as QE2 or QEII, is different. Mortgage rates have the QE2 effect ‘baked into the cake’ according to many industry pundits. The goal of this type of Fed action is to lower real interest rates and increase spending in sectors that respond to interest rate changes. This includes home purchases as well as business spending and investment. Quantitative easing could decrease mortgage rates by increasing mortgage backed securities’ liquidity enough that the lower end MBS’s begin to sell. On the contrary, the purpose of quantitative easing ultimately is to stimulate the economy, and if it is successful, over time there should be real indicators of growth that show up in production and employment figure increases. These will surely put pressure on interest rates to rise.

Additionally, the direct impact on the economy of this quantitative easing policy will be a weakening of the US dollar. A weaker dollar in turn should make US products cheaper to foreign countries and cause exports to rise. With a weak dollar imported products of all kinds from clothes to consumer electronics will increase in price because it will take more dollars to buy the same amount of products. The increased cost of imports will drive up retail prices and increase inflation. As a result, inflation will cause home prices to rise and mortgage rates as well. This wouldn’t happen immediately but could be expected in the in the not too distant future. Moderate inflation and job growth are what the Fed is looking for.

Rising production of exported products should generate more profits for domestic companies and those profits should result in increased production and job growth. That in turn will lead to the stock market going up and for those in the mortgage industry who know this all too well, mortgage rates tend to follow the direction of the financial markets. Rates rise when the economy is clicking on all cylinders and equity markets are moving higher.  Rates decrease when the economy and equity markets struggle.

Float or Lock Down? Don’t Fight The Fed

As the cliché goes, don’t fight the Fed. Well, when it comes to mortgage rates, when we know the Fed is trying to stimulate the economy and put off dealing with inflation, I would do away with any floating bias and will be taking advantage of historically low rates for the time being without holding off for lower rates that we may not see.

Mortgage rates are currently hovering at record lows and remain very attractive especially in combination with low home prices. Although there will continue to be fractional fluctuations in rates over the next few months, mortgage rates should be low but range bound for the foreseeable future before being forced higher by inflationary pressures. After rates improved a bit following the Fed’s announcement they have gone up as recent economic news has been quite sanguine especially with the 151,000 jobs added in October. Mortgage bonds have fallen a whopping 143 basis points in the past 5 days and the yield on the 10yr-note has spiked 28 basis points higher.

Ricardo Brasil can be reached at www.ricardobrasil.com or call him directly at (617) 897-5192.

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David Gaffin of Greenpark Mortgage,  www.massmortgageblog.com, is here with a superb summary of what’s now going on with Massachusetts (and national) residential mortgage market.

The National and Massachusetts Mortgage Lending Picture

Lot’s has been happening in the Mortgage World lately. Refinance business is very good. Purchase business is fair, heading into the all important year end buying season.

I will let this post be a little more free-form than my taking a particular topic and expounding on it (or beating it to death) depending on your perspective.

FHA has changed guidelines… Again.

USDA is still not guaranteeing loans.

Fannie and Freddie need another $200 billion of taxpayer money.

Foreclosures stopped and started again. What could that mean to you and me?

The Fed is meeting on Nov 3 to either lay the hammer down on Quantitative Easing II or will do nothing and really mess up interest rates.

Refinance Now!

1.  So you want to refinance? My suggestions:  A. Get started now! Loan pipelines continue to be backed up. Remember the bad old days when rates were an exorbitant 4.75% for a 30 year fixed rate and everyone re-fied? When was that again? Oh, right. JUNE. Well many of those same people are now re-fiing again in the low 4′s, possibly high 3′s. And people who were late to the party are adding on. So don’t expect your file to be closed in less than 60 days. Many lenders are at 120 days for refinances. If you have a current home equity line of credit that you plan to keep open, add another 30 days or so.

It is not all doom and gloom. I know of many files that were closed in less than 45 days. Purchases always get priority and about 30-35 days is the requirement. If you lender can’t get it done in that time, well my contact info is below.

Don’t be cranky with your loan officer or processor when they request enough paper work to rebuild a forest. The secondary market has really toughened its verification guidelines, cause no one wants to be left holding the bag on a loan that goes bad. Everyone wants to ensure that the underwriting, appraisal and income verification has been double and triple checked.

Good news for Realtors

End of year buying season has begun and the clients that want to be in their new homes by year end must make some decisions soon. We should see a boost in P & S activity over the next 30 days. If that doesn’t come to fruition, it could be a long dark winter for many of my realty friends.  But rates are great! If you bought the same priced home 2 years ago, you would have paid 5-20% more than current prices and your interest rates could have been more than 2.00% higher. Now is a GREAT time to buy. I know that is self-serving, but I am a numbers and value guy. I don’t like seeing the value drop in my house either, but if I were buying I would be psyched!

FHA has changed it guidelines again as of Oct 4

FHA needs money to keep guaranteeing its loans against default. Every borrower pays a fee to get into the program and to ensure its continuation. So the fees got changed.  FHA lowered the UPMIP (up-front mortgage insurance premium) from 2.25% to 1.00%.  Sounds good right? With one hand they giveth and the other taketh away. The monthly mortgage insurance will virtually all FHA borrowers pay has moved from .55% of the base loan amount to .84% monthly. On a $200,000 loan the old cost over  7 years was $12,200 and the monthly MI was $91.67.  Now the projected expense is $13,760 and the monthly MI is $140.00. Most investors have now raised the minimum credit score requirement from 620 to 640. FHA is still the best choice for borrower’s with credit scores under 660 and who may have little equity or down payment or who need higher tolerance levels for debt to income ratios.

USDA Loans

The USDA which offers a great program, or at least did, can’t seem to get its funding in order and therefore cannot issue any conditional guarantees for loans. USDA offers several advantages over conventional and FHA loans but they are proving very hard to get. If  you would like more information on the availability of these loans, send me an email.

Freddie and Fannie are in more trouble with losses.

Do we shut them off and let the private sector take over?  We can but rates would rise dramatically and put an even further damper on the housing market.  Given that TARP actually turned a profit, I think any additional funds to rescue the GSE’s should have an opportunity for the taxpayer to make a return on the re-sold properties even if it takes years to divest the shadow inventory that they own.

Foreclosure Mess

Speaking of shadow inventory… Foreclosures are on again/off again/on again.  For legal thoughts on this check out the Mass Real Estate Law Blog by Rich Vetstein and Marc Canner.

My thoughts are that although there will be a delay to ensure that the legal work has been properly done, people will unfortunately continue to lose their homes. Many will lose them due to the economic downturn or medical reasons. Others will have lost them to predatory lenders or poor decision making on their parts. I don’t really want to get started on “It was all the lender’s fault.” Needless to say, a reason the paperwork requirements exist today, is reliant upon the the lack of paperwork requirements and shoddy underwriting in the past.

I could write several scrolls on this whole mess, but I don’t wish to bore. It may already be too late.

Big Federal Reserve Meeting

Possibly the greatest short to mid-term driver for interest rates will be what the Fed decides or doesn’t decide to do at it’s next meeting. The market has baked in that the FED will ease monetary policy further. If they don’t come through in a big way the stock market most likely will drop and interest rates will rise.  But how much will rates rise? Probably enough that any one who re-fied this summer won’t be able to do so again, or at least until some other economic driver comes to bear. So get off the fence and talk to your loan officer NOW.

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Sometimes the best blog posts are the frequently asked questions from our clients. With interest rates at all time lows, we’ve been doing a ton of refinance closings. Here are 5 questions which often come up.iStock_000005550102XSmall-300x199.jpg

1. Why does the payoff of my existing mortgage seem higher than I thought?

In many cases, borrowers will focus only on the “principal balance” figure in their mortgage statement. However, this figure does not provide the complete figure necessary to pay off the loan. You must also pay any unpaid interest calculated up to the time that they actually receive the payoff check. Mortgage interest is not like traditional rent in which the monthly payment is for the upcoming month. Mortgage interest is paid in arrears, or backwards. Thus, your monthly mortgage payment is allocated partially to principal, but also pays the daily interest accumulated during the last month.

Therefore, if your refinance loan is funding on August 15, we must pay off your existing principal balance plus the interest that accumulated from August 1 to August 15 (plus additional days necessary to get the payoff check to the bank). That unpaid daily interest makes your payoff is higher than just the principal balance. Frequently included in your payoff is also a $75.00 registry discharge recording fee and a fee to issue a payoff statement (usually between $10.00 to $60.00).

2. What is an escrow account and why is my lender collecting so much money for it?

 

An escrow account is established with a lender to pay for recurring expenses related to your property, such as real estate taxes and homeowner’s insurance. It helps you to anticipate and manage payment of these expenses by including these expenses as a portion of your monthly mortgage payment. At the time you establish an escrow account, your annual real estate taxes and homeowner’s insurance are estimated, based on your most recent bills and premiums. An incremental amount of these expenses is added to your monthly mortgage payment, in order to cover these expenses when they are due.

Each year, your escrow account is reviewed to determine if the amount being escrowed each month is sufficient to pay for any change in your real estate taxes or homeowner’s insurance premiums. At closing, we will collect sufficient funds to start your escrow account, typically 2-3 months worth of real estate taxes and up to a 12 months of homeowner’s insurance.

 

3. Why is my lender escrowing money for my homeowner’s insurance if I have already paying it?

 

Although you have paid the first annual premium in advance, the lender needs to begin collecting money to pay next year’s annual premium. Since the lender will be paying the annual premium for you next year, they need to be sure that they have enough money in their account to pay that bill approximately one year from your closing. Because you will not make a mortgage payment in the month after your closing occurs and the lender usually pays the bill in the month before it is due, you will likely only have made 10 payments by the time they pay the bill. Thus, they need to collect 2-3 months at closing so that they will have sufficient funds to pay the bill.

 

4. When will my refinance proceeds be available?

Federal law requires that borrowers of a refinance loan must be given three days to rescind the transaction. This is commonly referred to as the “three-day right of rescission.” You cannot waive this right of rescission. Therefore, your lender cannot fund your loan until such rescission period has expired. When calculating the rescission period, the day that the closing occurs, Sundays and Holidays are not rescission days and are not counted. Thus, if your closing occurs on a Thursday, it will fund on the following Tuesday (Friday, Saturday and Monday being the three rescission days – Thursday of closing and Sunday not counted).

 

5. Should I pay the next tax bill due after my closing?

If your next tax bill is due within 60 days of closing, our office will administer payment that tax bill. The lender will require our office to take the necessary funds from you at closing and pay that tax bill. This is the case regardless of whether you are escrowing your taxes with the lender or not. If you are escrowing taxes with the lender, our office will administer payment of tax bills due within 60 days and the lender will administer payment of any tax bills thereafter. If you are not escrowing your taxes, we will administer payment of tax bills due within 60 days of closing, and you will have to pay any tax bills thereafter.

If you would like us to close your refinance loan, please contact us at 781-247-4250 or at info@titlehub.com.

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