Tag Archives: mortgage

Wayback Wednesday… Mortgage Thoughts from Ken

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One of my Mortgage Guys, Ken Cook (not the Weather man), write a LOT about mortgages and the best ways to get the best deal and best chances of closing your loan on time and without drama…  a LOT!  He knows his stuff.  And he has NEVER delayed a closing with me because of issues with an approval (ok, there was a time when we had to go get lunch and we closed it after lunch…)

A couple of years ago I grabbed a few quotes from Ken and linked them back to posts he had about those subjects.  Here is a link back to the original post

The subjects I included were…

  • Should you be “pre-approved”?
  • What do the different steps mean (pre-approved, conditional, cleared, etc.)?
  • How to make the whole process go smoother.

Ken knows his stuff.  I trust his opinion…

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Wayback Wednesday… Title Insurance…

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A couple of years ago I wrote a quick little primer on Title Insurance.  (Check out the link for more details…)  Title Insurance is one of the subjects I am questioned about regularly… even by buyers that have previously purchased 3 or 4 homes.

It can be confusing… there are two distinct flavors of Title Insurance, Owner’s and Lender’s.  And while sitting at the closing table, buyers are usually paying for a pant-load of other items.  Sometimes they draw a line and decide that skipping the Owner’s policy is a way to avoid spending another few hundred dollars.  Other times, they just give in and spend the money without knowing what they are buying.

Neither of those situations are good for the buyer.  Some buyers ABSOLUTELY need to have Owner’s Title Insurance.  For others, it is a luxury, or even a waste.  (Sorry, but if you have a loan, you WILL be paying for Lender’s Title Insurance… they will require it, and despite the fact that you won’t benefit, you get to pay for it).

Of course, I would be remiss if I didn’t remind you that I am not a lawyer, and I don’t even play one on TV.  You should always ask your attorney about the legal ramifications of a decision like this.  But keep in mind, the closing attorney is selling the insurance product, and they DO make money from it.  Some of the closing attorneys I have worked with have flat out told buyers that they would NOT answer questions about the suitability of the insurance product because of their conflict of interest.

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Mortgage Rates Lowest in 50 Years… according to Freddie Mac

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Freddie Mac issued their Primary Mortgage Market Survey yesterday, and the rates are unbelievable.  Let me click off a few quotes from the Press Release.

30-year fixed-rate mortgage (FRM) averaged 4.15 percent with an average 0.7 point for the week ending August 18, 2011, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.42 percent.

15-year FRM this week averaged 3.36 percent with an average 0.6 point, down from last week when it averaged 3.50 percent. A year ago at this time, the 15-year FRM averaged 3.90 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.08 percent this week, with an average 0.5 point, down from last week when it averaged 3.13 percent. A year ago, the 5-year ARM averaged 3.56 percent.

1-year Treasury-indexed ARMaveraged 2.86 percent this week with an average 0.6 point, down from last week when it averaged 2.89 percent. At this time last year, the 1-year ARM averaged 3.53 percent.

I guess that is the upside of economic stagnation.  And when combined with the amazing prices on homes in the market right now, it makes for a GREAT time to buy property.  Assuming that you don’t have to sell first.

And that is the flip side.  Many would be buyers are sidelined because they can’t afford to sell their current home.  The best they can hope for is to re-finance with the low rates… of course, that isn’t helping those that have a need to relocate.

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Mortgage Interest Deduction… Good or Bad?

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There is a lot of discussion in the real estate world about the Mortgage Interest Deduction (MID) on Income Taxes.  The National Association of REALTORS® (NAR) is virtually flipping out with just the thought that it could be eliminated by Congress as they look for more “revenue enhancements” (they are unwilling to say “tax increases”).

The NAR position is that with a weak housing market, and the fact that homeowners have benefited form the MID for decades, this is NOT the time to eliminate it, increasing taxes on mostly middle class taxpayers/homeowners.  I can’t argue against that position very forcefully.  It isn’t that I want to agree with the NAR, because I don’t.  And, in fact, my reasoning is much different from theirs.

Opponents of the MID argue that homeowners shouldn’t get special treatment v. renters in getting a tax credit for a portion of their mortgage.  And that IS  a strong argument, but there is one HUGE flaw…

Renters might not get a tax credit, but Landlords DO.  They may or may not pass that savings along to the renter (depending on the competitiveness of their rental market), but as a business, interest is a deductible interest expense.  So, in effect, a homeowner would be penalized for occupying a home that they own.  And with all of the talk of “fairness” coming out of Washington, DC, taxing the Mortgage Interest for Owner/Occupants, while not taxing it for investors seems kind of dumb. 

Also, this would be going after the heart of the middle class.  Many opponents argue that upper middle class families benefit more from the MID than those with lower incomes… although, the truth is that income isn’t as much of a determinant as is mortgage debt.  BUT, those with higher incomes might have a tool available that those with lower incomes may not.  Many are already business owners.  And, it wouldn’t be that tough for them to incorporate, transfer the ownership of their home to their business, and rent the house. 

This would give them the tax deduction for the mortgage interest as a business expense.  Homeowners with smaller mortgages and/or smaller incomes might not be able to swing the same deal… meaning that they would be more adversely impacted by the change than higher income and/or higher debt homeowners. 

One other thing, which I personally think is important, but a back burner aspect of the debate, is the benefit of a home-ownership society.  Simply put, home owners are a more stable group than renters.  They have a stake in their neighborhoods, schools and communities.  Renters want nice neighborhoods, schools and communities, but have a much easier time escaping if things go sour.  They won’t pay a financial penalty for getting out… in fact, if demand increases for a specific area, they might actually end up having to pay more.

BTW, I DO consider business deduction of interest to be something that should NOT be taxed.  It is a legitimate business expense.  And since I don’t think businesses should have to pay taxes on the interest THEY pay, I don’t think it would be right to force owner/occupants to pay interest for the exact same thing.

What do YOU think?  I’d love to hear your thoughts.  Add a comment.

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Wayback Wednesday… A Foreclosure Mitigation Too Good to be True…

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I don’t know about you, but I have heard the stores and even seen the occasional late night TV ad talking about getting out of your mortgage for free.  Two years ago, I wrote about how it was the latest scam being pulled on people facing foreclosure.  And be aware… it is nothing but a scam.

Here is the “meat” of the old post…

Here is the way it works (and it all sounds so legit…):

  • Mr. and Mrs. Consumer buy a house and get a mortgage from MonsterMegaMortgageCompany (MMMC).
  • MMMC sells their mortgage to Investor Pool #1.
  • Then it is bundled and sold to IP#2… and #3 and #4 over a span of a few years.
  • Mr. & Mrs. Consumer start having problems, and despite everything they are facing foreclosure.
  • To try to get help they contact a “Foreclosure Mitigation” Law Firm that fights the foreclosure by filing a “missing title” lawsuit.
  • The law firm (or other entity) charges an up-front fee (maybe $2000) and then monthly fees (maybe $1000 or $1500)… as well as a contingency fee upon settlement of either 50% of the reduction or 75% or 80% of the value if the mortgage were completely eliminated.
  • After stringing along Mr. & Mrs. Consumer for a few months or longer (collecting fees), they fail to actually prosecute the case.
  • Mr. & Mrs. Consumer lose their home…

According to a few of the sources I looked at, their are no recorded examples of any suit of this type EVER being resolved in the consumer’s favor.

There are also a couple of links.  As an update, there are a couple of stories over the last few years of judges setting aside mortgages because the holder could not produce the right paperwork.  But, you have a better chance of getting hit by lightning.  The lenders have gotten smart and are making sure their paperwork is better… and in the few cases that I have heard about mortgages being set aside, the lenders also committed fraud in ginning up the paperwork… and that isn’t likely to happen many more times.

Follow the link above and visit the old post…  It’s lonely.

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