Prototype of Standardized Monthly Mortgage Statement is Released, by Jim Puzzanghera, Los Angeles Times


The Consumer Financial Protection Bureau‘s proposed statement is designed to provide clear information about the loan on a single page and wouldn’t change each time your loan is sold to a new servicer.

 

 

Reporting from Washington—

Your monthly mortgage bill soon could get easier to understand, and it wouldn’t change each time your loan is sold to a new servicer.

The Consumer Financial Protection Bureau has developed a proposed standardized mortgage servicer statement designed to provide clear information about the loan on a single page.

The prototype released Monday included a breakdown of how much of the monthly payment went to principal, interest and escrow. The form also detailed the outstanding principal, maturity date, prepayment penalty and, for adjustable-rate mortgages, the time when the interest rate could change.

“This information will help consumers stay on top of their mortgage costs and hold their mortgage servicers accountable for fixing errors that crop up,” said Richard Cordray, the agency’s director. “Given the widespread mortgage servicing problems we’ve seen over the past few years, consumers need clear disclosures they can count on.”

Although many servicers already provide such information on their monthly statements, there are no industrywide standards, the agency said.

Such standards are a good idea, and initial reaction from servicers to the agency’s proposal was positive, said Rod J. Alba, senior counsel in the mortgage markets division at the American Bankers Assn.

The agency posted a working draft of the standardized statement on its website,http://www.consumerfinance.gov to solicit input from the public and industry before a version of the form formally is proposed this summer.

Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group, said simplified mortgage statements would help resolve the broad mortgage servicing problems that were at the heart of last week’s federal and state settlement with five of the nation’s largest banks over botched foreclosure paperwork.

The consumer agency is required under the 2010 financial reform law to put new mortgage servicing rules in place to help consumers, Cordray said. The law has specific requirements for mortgage statements, including a phone number and email address for the customer to get information about the loan, as well as information about housing counselors.

The new mortgage statement is the latest consumer financial paperwork the agency is trying to simplify.

In May, it released two prototypes for shorter, easier-to-understand disclosure forms that lenders would have to give home buyers before they close on a mortgage. The agency has been receiving comments on the forms and tested them last month in Philadelphia.

And in December, the agency proposed a simplified credit card agreement form to make it easier to understand interest rate terms and comparison shop.

The agency also is developing a new disclosure rule for hybrid adjustable-rate mortgages that would require consumers to be notified months before their first interest rate increase, as well as to be provided with a good-faith estimate of the new monthly payment.

jim.puzzanghera@latimes.com

Don’t Be Fooled Again! by Brett Reichel, Brettreichel.com


Many people will tell you that an Adjustable Rate Mortgage (ARM)  is horrible, and something a borrower should never take out.  A friend recently stopped by worried that his ARM was adjusting and that his payment would go through the roof.  We analyzed his paperwork and found out that his interest rate would be going down by MORE THAN 2 PERCENT!  This made a big impact on his payment!

The ARM’s that were bad were:

  • Sub Prime loans where the rate was artificially low
  • Had super short introductory periods like two years or less
  • Had a pre-payment penalty that was in force longer than the first adjustment of the loan
  • Had a payment that didn’t even cover their interest

These loans were definitely toxic.

The difference between today’s ARM’s?  Today’s ARM’s are much safer and better loans.  If you think you are only going to be in a property for 5, 7 or 10 years, you can find an ARM that has a fixed rate time frame that matches!   Here are features to look for in an ARM:

  • A fixed rate period that is the same or longer than the time frame you are planning on staying in the house.  If you think you’ll be there for five years, get a 5 year fixed ARM, or a 7 year fixed ARM.
  • Caps or limits to how high the interest rate a go to both at each adjustment and for the life of the loan.
  • Low margins.  What’s a margin?  Essentially, it’s the lenders “mark up” over the cost of their funds.  The lower the margin, the lower your future interest rate.
  • Most importantly, a lower rate than a 30 year fixed rate loan.  If you are sharing the interest rate risk with the lender, you should get a break in your costs.

 Recent customers of mine who are moving to a new town for just five years, will be saving over 1% in interest rate compared to the thirty year fixed rate loan.  For them this means about $100 per month!  For $100 a month, they can buy their loan officer a steak dinner every month for getting them such a good deal!

Don’t be fooled by so-called experts.  ARMS are a great deal IF MATCHED to the correct situation.  Thirty year fixed rate loans are great, but sometimes an ARM is a better option.

Mortgage Rates Continue to Climb, Closing in on 5% Mark, by Carrie Bay, DSNEWS.com


Borrowing costs on home loans continue to increase, with mortgage rates rising sharply for the past five weeks in a row. New data released Thursday show that the average rate for a 30-year mortgage jumped 22 basis points over the last seven days. Freddie Mac reports that rates for a 30-year fixed mortgage averaged 4.83 percent (0.7 point) for the week ending December 16, 2010. That’s up from last week’s average of 4.61 percent. Last year at this time, the 30-year rate was 4.94 percent.

The GSE’s weekly rate survey is based on data gathered from about 125 lenders across the country, and it showed increases across the board.
The 15-year fixed-rate mortgage this week averaged 4.17 percent (0.7 point) in Freddie’s study. Last week, it was 3.96 percent, and a year ago at this time, it was 4.38 percent.

Adjustable-rate mortgages (ARMs) also climbed higher. Freddie says the 5-year ARM averaged 3.77 percent (0.7 point) this week, up from 3.60 percent. Rates on 1-year ARMs came in at 3.35 percent (0.7 point), compared to 3.27 percent the previous week.
A separate study released by Bankrate Thursday, which derives its figures from data provided by the top 10 banks and thrifts in the top 10 U.S. markets, shows that 30-year rates among its covered lenders already hit the 5.00 percent (0.4 point) mark this week. That’s up from a 4.89 percent average reported by Bankrate last week.
It’s the first time since May that the 30-year rate has hit the 5 percent threshold in Bankrate’s study. As recently as November 3, mortgage rates were at a record low of 4.42 percent, according to the tracking firm’s analysis.
The average 15-year fixed mortgage increased to 4.37 percent (0.38 point), and the larger jumbo 30-year fixed rate rose to 5.58 percent in Bankrate’s study.
Adjustable rate mortgages were also higher, with the average 5-year ARM jumping to 3.95 percent and the average 7-year ARM climbing to 4.36 percent.
Bankrate surveys a panel of mortgage experts each week to gauge which way they think rates are headed over the next seven days. Nearly three-quarters of the panelists, 73 percent, expect mortgage rates to increase and only 7 percent predict rates to decline. The other 20 percent forecast that rates will remain more or less unchanged over the next week.

Home Purchase Loan Applications Highest Since May, thetruthaboutmortgage.com


It was a good week for home purchase applications as refinance apps fell for a fifth straight week, according to the Mortgage Bankers Association.

Overall, mortgage application volume decreased 0.2 percent on a seasonally adjusted basis for the week ending October 1.

The refinance index slipped 2.5 percent from the previous week and the seasonally adjusted purchase index jumped 9.3 percent to the highest level since the week ending May 7.

The unadjusted purchase index was up 9.1 percent compared with the previous week, but still 34.7 percent lower than the same week a year ago.

“The increase in purchase activity was led by a 17.2 percent increase in FHA applications, while conventional purchase applications also increased by 3.6 percent,” said Jay Brinkmann, MBA’s Chief Economist, in a release.

“This is the second straight weekly increase in purchase applications and the highest Purchase Index level since the expiration of the homebuyer tax credit program.

Brinkmann noted that FHA loan apps may have jumped as borrowers rushed to get applications in before the new FHA requirements took effect on October 4th, which include higher credit score and down payment requirements.

The increase in purchase activity pushed the refinance share of mortgage activity to 78.9 percent of total applications from 80.7 percent the previous week.

Mortgage Rates Hit New Record Lows

Meanwhile, the popular 30-year fixed-rate mortgage hit a new record low 4.25 percent, down from 4.38 percent a week earlier.

The 15-year fixed also hit a record low, falling to 3.73 percent from 3.77 percent.

Finally, the one-year adjustable-rate mortgage increased to 7.11 percent from 7.04 percent.

The mortgage rates are good for mortgages at 80 percent loan-to-value – pricing adjustmentscan lower or raise your actual interest rate.

Keep in mind the MBA’s weekly survey covers more than half of all retail, residential loan applications, but does not factor out duplicate or rejected apps, which have surely increased since the mortgage crisis got underway a few years back.