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Rate-and-term refinancing
Rate-and-term refinancing pays off one loan with the proceeds from the new loan, using the same property as collateral. This type of loan allows you to take advantage of lower interest rates or shorten the term of your mortgage to build equity faster.
Search for low rates on a mortgage refinance.
Rate-and-term refinancing refers to myriad strategies, including switching from an adjustable-rate mortgage to a fixed, or the other way around. For example, if you have an ARM that is set to adjust upward in a few months, you can refinance into a fixed-rate mortgage. Or if you have a fixed-rate loan and you know you’ll move in two or three years, you could refinance into a lower-rate 3/1 hybrid ARM.
Example of a rate-and-term refi
Devyn gets a $100,000 mortgage with an interest rate of 5.5 percent. Three years later:
Interest rates have fallen, and Devyn can refinance with an interest rate of 4 percent.
After 36 timely payments, Devyn owes about $95,700.
In this situation, Devyn can save more than $100 a month by refinancing and starting over with a 30-year loan. Or Devyn can save less every month, while paying off the loan in 27 years — in other words, keeping the original loan’s payoff date.
Loan amount Interest rate Loan term Monthly principal and interest $100,000 5.5% 30 years $568 $95,700 4% 30 years $457 $95,700 5% 27 years $483
Cash-out refinancing
Cash-out refinancing leaves you with cash above the amount needed to pay off your existing mortgage, closing costs, points and any mortgage liens. You may use the cash for any purpose.
To be eligible for cash-out refinancing, you must have sufficient equity.
Equity
Market value – All mortgage debt = Equity
Example:
Kris and Avery bought a house four years ago. Today, it’s worth $200,000 and they owe $120,000 on the mortgage. Their equity is:
$200,000 market value
– $120,000 mortgage debt
= $80,000 equity
Example of a cash-out refi
In the above scenario, Kris and Avery owe $120,000 on the mortgage and have $80,000 in equity. With a cash-out refinance, they could refinance for more than the $120,000 they owe. For example, they could refinance for $150,000. With that, they would pay off the $120,000 on the current loan and have $30,000 cash to pay for home improvements or other expenses. That would leave $50,000 in equity.
Before you refi, make sure your credit is mortgage-ready. Get your free credit score and report from myBankrate.
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By Lance Davis • Bankrate.com
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Which is the better mortgage option for you: fixed or adjustable?
The low initial cost of adjustable-rate mortgages, or ARMs, can be tempting to homebuyers, yet they carry a degree of uncertainty.
Fixed-rate mortgages offer rate and payment security, but they can be more expensive.
Here are some pros and cons of adjustable-rate and fixed-rate mortgages.
Adjustable-rate mortgages
Advantages
Feature lower rates and payments early on in the loan term. Because lenders can use the lower payment when qualifying borrowers, people can buy larger homes than they otherwise could buy.
Allow borrowers to take advantage of falling rates without refinancing. Instead of having to pay a whole new set of closing costs and fees, ARM borrowers just sit back and watch the rates — and their monthly payments — fall.
Help borrowers save and invest more money. Someone who has a payment that’s $100 less with an ARM can save that money and earn more off it in a higher-yielding investment.
Offer a cheaper way for borrowers who don’t plan on living in one place for very long to buy a house.
Disadvantages
Rates and payments can rise significantly over the life of the loan. A 4 percent ARM can end up at 9 percent in just three years if rates rise sharply.
The first adjustment can be a doozy because some annual caps don’t apply to the initial change. Someone with a lifetime cap of 6 percent could theoretically see the rate shoot from 4 percent to 10 percent a year after closing if rates in the overall economy skyrocket.
ARMs are difficult to understand. Lenders have much more flexibility when determining margins, caps, adjustment indexes and other things, so unsophisticated borrowers can easily get confused or trapped by shady mortgage companies.
On certain ARMs, called negative amortization loans, borrowers can end up owing more money than they did at closing. That’s because the payments on these loans are set so low (to make the loans even more affordable) that they cover only part of the interest due. The remainder gets rolled into the principal balance.
Fixed-rate mortgages
Advantages
Rates and payments remain constant, despite what happens in the broader economy.
Stability makes budgeting easier. People can manage their money with more certainty because their housing payments don’t change.
Simple to understand, so they’re good for first-time buyers who wouldn’t know a 7/1 ARM with 2/6 caps if it hit them over the head.
Disdvantages
To take advantage of lower rates, fixed-rate mortgage holders have to refinance. That means a few thousand dollars in closing costs, another trip to the title company’s office and several hours spent digging up tax forms, bank statements, etc.
Can be too expensive for some borrowers because there is no early-on payment and rate break.
Are virtually identical from lender to lender. While lenders keep many ARMs on their books, most financial institutions sell their fixed-rate mortgages on the secondary market. As a result, ARMs can be customized for individual borrowers, while most fixed-rate mortgages can’t.
All of these things should factor into your decision between a fixed-rate mortgage and an adjustable. But there are other important questions to answer when deciding which loan is better for you:
1. How long do you plan on staying in the home?
If you’re going to be living in the house only a few years, it would make sense to take the lower-rate ARM, especially if you can get a reasonably priced 3/1 or 5/1. Your payment and rate will be low, and you can build up savings for a bigger home down the road. Plus, you’ll never be exposed to huge rate adjustments because you’ll be moving before the adjustable rate period begins.
2. How frequently does the ARM adjust, and when is the adjustment made?
After the initial, fixed period, most ARMs adjust every year on the anniversary of the mortgage. The new rate is actually set about 45 days before the anniversary, based on the specified index. But some adjust as frequently as every month. If that’s too much volatility for you, go with a fixed-rate mortgage.
3. What’s the interest rate environment like?
When rates are relatively high, ARMs make sense because their lower initial rates allow borrowers to still reap the benefits of homeownership. When rates are falling, borrowers have a decent chance of getting lower payments even if they don’t refinance. When rates are relatively low, however, fixed-rate mortgages make more sense.
4. Could you still afford your monthly payment if interest rates rise significantly?
On a $150,000 one-year adjustable-rate mortgage with 2/6 caps, your 5.75 percent ARM could end up at 11.75 percent, with the monthly payment shooting up as well.
How adjustable rates can rise Year Rate Monthly payment 1 3.75% $695 2 5.75% $875 3 7.75% $1,075 4* 9.75% $1,289
Note: ($594 more than first year)
*6% of lifetime cap
Now, let’s compare this worst-case ARM scenario with a fixed-rate mortgage:
ARM vs. fixed mortgage as rates rise during four years ARM Fixed-rate Interest rate 3.75% to 9.75% 4% Total payments $47,208 $34,368 Savings $12,840
In the above case, the fixed-rate mortgage costs less than the worst-case ARM scenario. Experts say that when fixed mortgage rates are low, like they are now, fixed mortgages tend to be a better deal than an ARM, even if you plan to stay in the house for only a few years.
Compare the rates
To find out what the mortgage principal and interest would be on a particular loan you may be considering, use Bankrate’s tools to find the best rates in your area, then proceed to our mortgage calculator.
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Conventional, FHA or VA?
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Posted: Sept. 5, 2017
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By Holden Lewis • Bankrate.com
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For most mortgage borrowers, there are three major loan types: conventional, FHA and VA. Here is how they compare.
1. Conventional loans
Who they’re for: Conventional mortgages are ideal for borrowers with good or excellent credit.
Start out right by shopping today for a mortgage.
How they work: Conventional mortgages are “plain vanilla” home loans. They follow fairly conservative guidelines for:
Borrower credit scores.
Minimum down payments.
Debt-to-income ratios.
Debt-to-income ratio
Percentage of monthly income that is spent on debt payments, including mortgages, student loans, auto loans, minimum credit card payments and child support.
Cost: Lender fees, third-party fees, down payments, mortgage insurance and points can mean the borrower has to show up at closing with a sizable sum of money out of pocket.
Find out more about closing costs and how to save money.
What’s good: Conventional mortgages generally pose fewer hurdles than Federal Housing Administration or Veterans Affairs mortgages, which may take longer to process.
What’s not as good: You’ll need excellent credit to qualify for the best interest rates.
2. FHA loans
Who they’re for: Federal Housing Administration mortgages have flexible lending standards to benefit:
People whose house payments will be a big chunk of take-home pay.
Borrowers with low credit scores.
Homebuyers with small down payments and refinancers with little equity.
Shop FHA-approved lenders today.
How they work: The Federal Housing Administration does not lend money. It insures mortgages.
The FHA allows borrowers to spend up to 56 percent or 57 percent of their income on monthly debt obligations, such as mortgage, credit cards, student loans and car loans. In contrast, conventional mortgage guidelines tend to cap debt-to-income ratios at around 43 percent.
For many FHA borrowers, the minimum down payment is 3.5 percent. Borrowers can qualify for FHA loans with credit scores of 580 and even lower.
Cost: Each FHA loan has two mortgage insurance premiums:
An upfront premium of 1.75 percent of the loan amount, paid at closing.
An annual premium that varies. Most FHA homebuyers get 30-year mortgages with down payments of less than 5 percent. Their premium is 0.8 percent of the loan amount per year, or $66.67 a month for a $100,000 loan.
What’s good: FHA loans are often the only option for borrowers with high debt-to-income ratios and low credit scores.
What’s not as good: To get rid of FHA premiums, you must refinance the loan.
3. VA loans
Who they’re for: Most active-duty military and veterans qualify for Veterans Affairs mortgages. Many reservists and National Guard members are eligible. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.
Want to know more? Read up on VA loans.
How they work: No down payment is required from qualified borrowers buying primary residences. The VA does not lend money, but guarantees loans made by private lenders.
Cost: The VA charges an upfront VA funding fee, which can be rolled into the loan or paid by the seller. The funding fee varies from 1.25 percent to 3.3 percent of the loan amount.
The VA allows sellers to pay closing costs but doesn’t require them to. So, the buyer might need money for closing costs. Borrowers may need money for the earnest-money deposit.
What’s good: VA borrowers can qualify for 100 percent financing. Veterans do not have to be first-time buyers and may reuse their benefit.
What’s not as good: According to the VA, there isn’t a cap on the amount you can borrow. “However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.”
Comparison shop for a VA loan today.
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Bankrate.com’s editorial, corrections policy
Updated: Jan. 25, 2017
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About our Mortgage Rate Tables: The above mortgage loan information is provided to, or obtained by, Bankrate. Some lenders provide their mortgage loan terms to Bankrate for advertising purposes and Bankrate receives compensation from those advertisers (our “Advertisers”). Other lenders’ terms are gathered by Bankrate through its own research of available mortgage loan terms and that information is displayed in our rate table for applicable criteria. In the above table, an Advertiser listing can be identified and distinguished from other listings because it includes a “Next” button that can be used to click-through to the Advertiser’s own website or a phone number for the Advertiser.
Availability of Advertised Terms: Each Advertiser is responsible for the accuracy and availability of its own advertised terms. Bankrate cannot guaranty the accuracy or availability of any loan term shown above. However, Bankrate attempts to verify the accuracy and availability of the advertised terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. Click here for rate criteria by loan product.
Loan Terms for Bankrate.com Customers: Advertisers may have different loan terms on their own website from those advertised through Bankrate.com. To receive the Bankrate.com rate, you must identify yourself to the Advertiser as a Bankrate.com customer. This will typically be done by phone so you should look for the Advertiser’s phone number when you click-through to their website. In addition, credit unions may require membership.
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Reasons for cash-out refi
The most common reason for getting a cash-out refi is to pay for home improvements, says Rick Sharga, chief marketing officer of Ten-X, an online real estate marketplace. It’s a good way to use equity because you’re adding to the home’s value, he says.
Another popular reason to get a cash-out refi is to pay for college tuition, Sharga says.
Alternatives to a cash-out refi
Doing a cash-out refinance is one of several ways to turn your home’s equity into cash. Other ways of converting equity into cash are:
Home equity line of credit, or HELOC.
Home equity loan.
Reverse mortgage.
A home equity line of credit works like a credit card, using your house as collateral. You have a credit limit, just as you have with a credit card, and you can spend up to that limit. The interest rate moves up and down with the prime rate.
A home equity loan is a lump-sum loan with a fixed interest rate. Home equity loans aren’t marketed as aggressively as HELOCs, which outnumber home equity loans about 4 to 1, according to CoreLogic.
A reverse mortgage allows homeowners age 62 and over to draw cash from their homes in various ways. The balance doesn’t have to be repaid as long as the borrower lives in the home.
Which is right for you?
When you get a cash-out refi, you’ll pay interest for the life of the loan, which could be 15 or 30 years. So, it’s best to spend your cash-out refi money on a long-term purpose, such as for home renovations or to free up money for a down payment on a second home. If that describes your needs, find your best mortgage deal.
On top of that, it rarely makes sense to get a cash-out refinance at a higher interest rate than you’re currently paying. If you can’t snag a lower interest rate, it’s often better to keep the current mortgage and take cash out of your home via a home equity loan or HELOC.
Similarly, if you want to spend the money on a shorter-term purpose — to buy a car or consolidate credit card debt — it’s usually better to get a home equity loan or HELOC. Why? Because you’ll pay those off faster, and your total interest paid will be lower.
But if you want to use your home’s equity to pay off credit card debt, be aware that you ultimately could lose your home if you don’t repay.
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You don’t need sterling credit to qualify
The VA doesn’t set credit-score requirements for the IRRRL. And it doesn’t require lenders to look at your debt-to-income ratio or credit history.
But individual lenders can draft their own credit requirements for these refi loans — which is a good reason to shop around for your loan.
FICO credit scores for VA refis, including IRRRLs, run the gamut — from 620 to 750, says Bill Banfield, an executive vice president with Quicken Loans. The average score for a VA refi in July 2017 was 700.
At Quicken, all borrowers who are approved for a VA streamline refi get the same current interest rate, regardless of their credit score, Banfield says.
pulls a borrower’s credit, but doesn’t use it to underwrite the loan, says Donna Bradford, an assistant vice president with Navy Federal.
Some lenders don’t even ask if you have a job, because the VA doesn’t require income or employment verification.
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You don’t have to live in the home
Many refinancing programs don’t allow homeowners to refi unless they live in the home. That’s not the case with a VA rate-reduction refi.
If you have a VA mortgage on the home, and you lived there at some point, you meet the refi’s residency requirement.
With an IRRRL, the VA also doesn’t require an appraisal of the home.
Still, even with a VA refi, some lenders may insist on an appraisal and will consider equity and home values when they weigh an IRRRL, says Banfield. So, ask about appraisal requirements when you shop for a lender.
And note that you can be denied if you’re not staying current with the VA mortgage you already have. Some lenders will disqualify you if you’ve been 30 days late with a payment during the past 12 months.
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The refi could save you money
The rate-reduction loan often saves the borrower money, either by cutting the interest rate or shortening the loan term.
In addition, “the VA has a rule that you have to recoup your (refinancing) costs within 36 months,” says Banfield.
Some lenders may “get the veteran excited about lower payments” by spotlighting an adjustable-rate mortgage with an interest rate that can change after three years, says Banfield. But that’s shortsighted.
“Heading into a tightening cycle of interest rates,” Banfield says, “it’s generally a good time to go with a fixed rate.”
Note, however, that refinancing an ARM into a fixed-rate mortgage could potentially result in a higher rate and monthly payment.
The refi comes with a funding fee of 0.5 percent of the loan amount. Some borrowers are exempt. The fee can be paid at closing or rolled into the balance of the loan.
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Just married? Add your spouse to the loan
If you’ve gotten married since you bought the home, the VA’s streamlined refi offers an opportunity to add your spouse to your loan.
Likewise, if you’ve gotten divorced, you can take your ex-spouse off the mortgage.
In either event, the eligible veteran or service member must stay on the loan, unless he or she has died. If that’s the case, a surviving spouse can refinance using an IRRRL as long as he or she was also on the original VA mortgage.
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Maxwell, a provider of digital mortgage software and a winner of HousingWire Magazine’s 2017 HW Tech100, announced Monday that it added Scott Stein as the company’s new vice president of sales and business development.
Stein joins Maxwell from Roostify, where he was vice president of sales. Earlier in his career, he also served as vice president of sales at Mercury Network.
In this role with Maxwell, Stein will focus on leading the company’s growth in the mortgage business. Maxwell launched commercially in August 2016, and has facilitated more than $5 billion in mortgages so far, the company said in a release.
“I’m delighted to welcome Scott to the Maxwell team,” John Paasonen, co-founder and CEO of Maxwell, said. “As we continue to expand, Scott’s extensive experience in digital mortgage software, along with his proven sales leadership skills and track record of getting results will be a driving force in continuing to exceed our growth targets.”
In the release, Stein said he is excited about the opportunity with Maxwell.
“I can’t think of a company better positioned, with better software, and an incredibly innovative team than Maxwell,” Stein said. “Their belief that mortgage companies will win by betting on the augmentation of human ability, not by replacing it with faceless technology, has been core to their growth and I’m proud to now be part of the story.”
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From Matthew Graham at Mortgage News Daily: Mortgage Rate Resilience Continues
Mortgage rates held their ground yet again, and are finally starting to look resilient after a relatively sharp move higher over the past 2 weeks. This was true even before mid-day headlines put additional downward pressure on rates. … Some lenders responded to the bond market improvements by adjusting today’s rate sheets. Other lenders maintained the same rates from the morning and thus will be more likely to offer better pricing tomorrow, assuming minimal bond market movement overnight. [30YR FIXED – 3.875-4.0%]
Tuesday:
• At 9:00 AM ET: S&P/Case-Shiller House Price Index for July. The consensus is for a 5.9% year-over-year increase in the Comp 20 index for July.
• At Early: Reis Q3 2017 Apartment Survey of rents and vacancy rates.
• At 10:00 AM ET: New Home Sales for August from the Census Bureau. The consensus is for 583 thousand SAAR, unchanged from 571 thousand in July.
• At 10:00 AM: Richmond Fed Survey of Manufacturing Activity for September.
• At 12:45 PM: Speech by Fed Chair Janet Yellen, Inflation, Uncertainty, and Monetary Policy, 59th NABE Annual Meeting, Cleveland, Ohio
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For Equifax, the fallout from its massive data breach is far from over.
The company is facing inquiries from the Consumer Financial Protection Bureau, the Federal Trade Commission, the House Financial Services Committee, the Senate Finance Committee, the office of New York Attorney General Eric Schneiderman, the New York Department of Financial Services, and a lawsuit from the state of Massachusetts, at least.
The breach exposed serious flaws in the financial system’s consumer data security framework.
But what about the rest of us? How does the financial services industry protect against fraud in the future? And how do we make things safer?
According to a new report from ratings agency DBRS, the answer to making things safer is to further embrace technology.
Specifically, DBRS states that it believes the financial services industry needs to move towards biometric security, which would provide additional layers of protection that a Social Security number can’t provide.
“DBRS believes it is likely that some type of authentication feature will eventually be introduced into the credit process so that lenders can ensure that the person applying for credit is legitimate,” DBRS Managing Director Kathleen Tillwitz writes in the report. “These verifications may include fingerprints, palm prints, retina iris authentication, voice identification and/or facial recognition.”
Basically, the idea is that it would be more difficult to perpetrate financial fraud if financial services companies also required biometric security measures.
Tillwitz writes that since many government agencies and companies are already moving towards biometrics, adoption should not be that difficult.
“Since the technology for these security practices is readily available and currently being used by many companies, including the Federal Bureau of Investigation, law enforcement, department stores, hospitals and Apple, DBRS believes the timeline for implementation could be quick if a company wanted to incorporate these security features into their processes,” Tillwitz writes.
“Therefore, in addition to increased cybersecurity measures, DBRS anticipates some type of biometrics will eventually be incorporated into the credit approval process at many firms as companies try to find new and innovative ways to save them the millions of dollars currently being lost due to fraud,” Tillwitz adds.
Tillwitz also notes that Sen. Elizabeth Warren, D-Massachusetts, is leading a push in Congress for increased data security, and writes that Warren’s effort may prove successful.
“Senator Elizabeth Warren has launched an investigation into consumer data security, the results of which will likely end in tighter safeguards being implemented at firms that collect and maintain consumer data and hefty fines for those that do not comply,” Tillwitz writes.
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Jason van den Brand, founder and CEO of Lenda, an online mortgage company, constantly faces criticism on the idea and desire for fully online digital mortgages.
Even two years ago, in an interview with HousingWire, van den Brand defended the company’s lending style, explaining that most of the negative feedback comes from lenders.
What makes Lenda stand out is that it eliminates the middleman in the mortgage process — like TurboTax does with tax filings — to complete loans faster, without paperwork and for less money.
Now that is not to say that loan officers are going away. van den Brand said that there will always be that niche market. All they are suggesting is that there is not going to be as many. “There is plenty of room at the $1.4 trillion table that we sit at in the mortgage industry,” he said.
And now more than two years later, the story van den Brand tells is not too different, as the industry still hasn’t wholly embraced the idea of an online mortgage.
During an interview with HousingWire, van den Brand recapped a recent conference where he was sitting on a panel that discussed the future of mortgages when an attendee got visibly upset at his viewpoint on digital mortgages and eliminating loan officers.
Not letting the discussion go after the session, the panelist confronted van den Brand afterward.
van den Brand explained that the argument against his company is that mortgages are complex, which he doesn’t disagree with.
However, van den Brand clarified on what he means when he says a fully online digital mortgage will be the standard way to originate mortgages.
The key is that people are right in today’s world.
By 2025, 75% of the workforce will be Millennials, said van den Brand. And that group will expect things to be done differently.
So, van den Brand said while he doesn’t disagree with him now, he disagrees with him in the year 2025. By then, Millennials will come to expect a different process.
After walking the disgruntled attendee through the facts, van den Brand surprisingly said that the attendee was so convinced that he even asked van den Brand if he could work at Lenda.
Now, maybe not everyone is as quick to get on board the digital mortgage train, but the shift in the industry is happening.
“We aren’t the first ones to go into this world. That’s a telling leading indicator,” said van den Brand, pointing out the retail industry vs. Amazon and the taxi industry vs. Uber as examples for change.
Even if it’s not exactly in 2025 and instead 2023 or 2027, van den Brand said, “It’s going to happen because it needs to happen if you just follow the customer demand.”
As far as money goes, investors are at least sold on the idea. Lenda recently closed a Series A round of funding, raising $5.25 million from a group of investors. Lenda said it plan to use the money to fill “key” management positions and invest in improving its software platform.
“All of this funding goes toward our technology and back end platform,” said van den Brand. “We have seen a lot of peers spend money on marketing on the front end. We have historically focused more on the back end and what makes a mortgage a mortgage. How do you take customer data and get it underwritten fast and accurately?”
van den Brand explained that every time they raise capital, the vast majority of the investment goes toward technology, which ties back to the overall mission of the company: “Let’s reimagine homeownership.”
Lenda currently services customers in California, Oregon, Texas, Colorado and Washington, and plans to keep growing with at least seven more state applications in the works.
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Mortgage Rate Resilience Continues
Mortgage rates held their ground yet again , and are finally starting to look resilient after a relatively sharp move higher over the past 2 weeks. This was true even before mid-day headlines put additional downward pressure on rates. The headlines in question quoted North Korean officials saying that the US had “declared war” and that North Korea had the right to shoot down US warplanes even outside North Korean airspace. When news headlines include the words “US, declares, and war” financial markets tend to respond, even if much of that response is driven by headline-reading trading algorithms. To quote myself from Friday: “in general, these sorts of headlines lead investors to shed risk–something that frequently takes the form of selling stocks and buying bonds. When investors buy bonds
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This week, President Donald Trump and Republican leaders plan to release their tax plan which could bring major changes to the housing industry, if acted upon.
Although the Republican plan has yet to be released, details circulating among lobbyists in Washington give an inside peak at what’s coming, according to an article by Sahil Kapur for Bloomberg.
The White House never looked more beautiful than it did returning last night. Important meetings taking place today. Big tax cuts & reform.
— Donald J. Trump (@realDonaldTrump) September 25, 2017
One of the most prominent changes, which could affect businesses across the U.S., is cutting the corporate tax rate to 20%, down from 35%.
From the article:
Trump’s plan would double the standard deduction that benefits many middle-class Americans, making it the centerpiece of the tax relief Trump has promised them. It would also seek to pay for some of the tax cuts by ending the state and local tax deduction, which is used mostly by middle-to-high earners in high-tax states like California, New York and New Jersey. The tax break, which is worth more than $1 trillion over 10 years, is favored by representatives of influential industries, like real estate.
The full details of the plan have yet to be determined. For example, Republicans have not yet agreed on what tax deductions to eliminate in their quest to simplify the tax code.
Many in the mortgage and housing industry are already taking a stand against increasing the standard deduction, saying it is an indirect threat to the mortgage interest tax deduction and to the housing industry as it would decrease homeownership.
Previously, U.S. Department of the Treasury Secretary Steven Mnuchin reiterated that the mortgage interest tax deduction will stay put during the Trump administration. But just because the administration isn’t getting rid of the mortgage deduction, it doesn’t mean it can’t be changed.
Late last year, HousingWire began following the danger Trump’s new tax plan poses to the mortgage interest deduction, as his plan to increase the standard deduction would make it irrelevant. Groups across the housing industry explained that making the mortgage interest deduction irrelevant could have detrimental affects on the already low homeownership rate.
However, even with Republicans controlling the House and Senate, the new reform could still be difficult to accomplish. And housing experts such as the National Association of Homebuilders, the Mortgage Bankers Association and the National Association of Realtors are responding to this “indirect threat” to the mortgage-interest deduction and the housing industry.
Community lenders continue to push lobbying efforts as the Community Home Lenders Associationpenned a letter to address its serious concerns about the future of the mortgage interest deduction, also saying it could eventually bring about a lower homeownership rate.
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notarize-rolls-out-new-update-to-fully-automate-online-closings
Notarize, an online notarization company, announced it rolled out a new update that will eliminate all manual processes in creating an online closing.
The company already broke ground earlier this year when it introduced the first eClosing that borrowers can complete remotely, with a notary not having to physically be present.
Compared to the previous option that requires either some in-person contact or a notary to eSign closing documents via a shared tablet, the company’s solution allows borrowers to FaceTime or Skype with the notary.
According to the company’s latest announcement, Notarize Mortgage API is now live and allows users to integrate directly with their LOS or other systems to create fully digital online closings.
Up until this point, while the industry has boasted a fully online digital mortgage, it has struggled when it came to the closing process, bringing everything out of the digital world.
Rather than upload the closing files into the system by hand and manually organizing them, LOS systems can integrate with Notarize Mortgage API to order a closing automatically. Users can then click a button in the existing tools to offer borrowers an online closing.
Other new features include:
Users can add or modify a full document package
Track real-time status
Receive fully executed closing documents immediately
Notarize added that this update falls in line with its previously announced integration with ResWare, now making all sides of the closing fully automated. Through the previous integration, title agents can offer borrowers an online closing through their existing tools and as part of their current workflows in ResWare.
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rebuild-efforts-dented-by-labor-shortages-in-hurricane-harvey-aftermath
The recovery efforts after Hurricane Harvey are hitting the same issue that long plagued the Texas housing market: A shortage of construction workers.
Following early concerns from the National Association of Home Builders, rebuilding Texas’ housing market down south, along with the still much-needed new housing inventory in North Dallas, will take time due to a lingering labor shortage and rising lumber prices.
According to an article from the Star-Telegram by Andrea Ahles, “Hurricane Harvey, which devastated Houston and Beaumont with floodwaters, is expected to swamp home builders throughout the state as well, including in North Texas.”
From the article:
Now, with months of reconstruction work just starting along the Gulf Coast, it may take even longer for new homes in the Metroplex to go up, experts say.
“There is a labor shortage all around and generally Harvey did not help,” said Scott Jacobsen, purchasing manager at Riverside Home Builders, which builds communities in Fort Worth and Dallas. While his company has contracts in place to keep prices fixed for supplies like lumber, Jacobsen said he wouldn’t be surprised to see overall material prices increase.
The sentiments echo early comments from NAHB’s builder confidence report that said homebuilders are growing less certain after the recent hurricanes in Florida and Texas.
“The recent hurricanes have intensified our members’ concerns about the availability of labor and the cost of building materials,” NAHB Chairman Granger MacDonald said. “Once the rebuilding process is underway, I expect builder confidence will return to the high levels we saw this spring.”
As an example of the impact, D.R. Horton, a Fort Worth, Texas-based homebuilder, drastically cut its 2017 forecast for cash flow from operations due to delays caused by the recent hurricanes, according to a Reuters article.
“D.R. Horton also said it expected backlog conversion to be about 85% for the current quarter ending Sept. 30. The company had forecast a range of 88% to 90%,” the article stated.
Meanwhile, other numbers have also started to roll in on the impact of Hurricane Harvey as well.
The first numbers from Black Knight Financial Servicescame in last week, and according to the report, more than 6,700 new 30-day delinquencies can be attributed to Harvey.
And the report stated that the heaviest impact on mortgage delinquency rates hasn’t occurred yet, with the worst part to happen in September.
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duy-has-the-fed-abandoned-its-reaction-function
by Bill McBride on 9/25/2017 01:44:00 PM
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mortgage-lenders-begin-to-ease-credit-standards-on-gse-eligible-loans
Credit standards continued to ease in the third quarter, and lenders expect they will continue this trend over the next three months, according to Fannie Mae’s third quarter 2017 Mortgage Lender Sentiment Survey.
During this quarter, more lenders said they had eased credit standards rather than tightened them, according to the survey. If fact, the net share of lenders reporting they eased credit standards over the past three months continued a trend started in the fourth quarter of 2016, reaching new survey highs.
As far as their future outlook, lenders’ expectations held steady from the second quarter for credit easing over the next three months. But when focusing in on GSE eligible loans, the share of lenders who expect to ease credit standards surged to a new survey high.
“Lenders further eased home mortgage credit standards during the third quarter, continuing a trend that started in late 2016,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “In particular, both the net share of lenders reporting easing on GSE-eligible loans for the prior three months and the share expecting to ease standards on those loans over the next three months increased to survey highs.”
“Lenders’ comments suggest that competitive pressure and more favorable guidelines for GSE loans have helped to bring about more easing of underwriting standards for those loans,” Duncan said. “We believe that the GSEs’ attempts to relieve repurchase concerns and expand credit for creditworthy borrowers have contributed to the easing trend.”
Over the past few months, the GSEs introduced new products that could help ease access to credit and simplify the mortgage process.
And the Senate also continues to look for ways to increase access to credit, including considering how to end the FICO monopoly at Fannie Mae and Freddie Mac.
When measuring on an annual basis, more lenders than last year expect credit standards to ease during the fourth quarter for all loan types.
Part of the reason for easing credit standards can be contributed to lender’s negative profit margin outlook, which remained down for the fourth consecutive quarter. The main factor lenders cited was competition from other lenders, which reached a new survey high for the third consecutive quarter.
Lenders who reported growth in purchase mortgage demand decreased for all loan types from last year, reaching the lowest third-quarter reading in the past two years. However, there is still hope for the next quarter as lenders expecting an increase in mortgage demand over the next three months remained stable from the third quarter last year.
“Market competitiveness also led to the fourth consecutive quarter in which lenders’ net profit margin outlook deteriorated,” Duncan said. “The share of lenders citing competition from other lenders as the key reason for a negative profit market outlook rose to a new survey high.”
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