Mortgage interest rates to rise due to hidden fee

Loan fees are about to rise, and you won't even know it.  The fee in question is a guarantee fee collected by Fannie Mae and Freddie Mac that is part of the interest rate you pay.  It's not set forth on the settlement statement because it does not have to be disclosed.

According to the New York Times,

INSIDE the interest rate quoted on your home lies a small hidden fee that has been charged by government-sponsored entities like Fannie Mae and Freddie Mac for more than three decades. It’s an add-on rate known as the guarantee fee.

Everyone has to make a living, including Fannie Mae and Freddie Mac, don't you think?  But just think of the fees collected over the years that seem to have been squandered in the so-called "sub-prime crisis."  In any event, it means a small rise in interest rates is coming in the days ahead.

Read the full story here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Stephen's Title Agency, LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-227-4724 - Fax 973-556-1628

E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Mortgage brokers getting new rules to play by

The New York Times Lynnley Browning writes about new compensation rules from The Federal Reserve that will affect compensation of mortgages. According to the new rules, borrowers who use brokers “will most likely pay less for their services” and “be offered the lowest possible interest rate and fees for which they qualify.”

Small banks and credit unions which do not fund loans from their resources will also be covered by the rule change.

“But most banks and other direct lenders, including the few mortgage companies that function like banks, are exempt.

“The new rule is known as the Loan Originator Compensation amendment to Regulation Z, part of a strengthened Truth in Lending Act passed by Congress in 2008. Designed to prevent consumers from being steered into high-cost, risky loans, it covers how a loan originator — or any person or company that arranges, obtains and/or negotiates a mortgage for a client — is paid.

“Under the new rule, a lender can no longer pay a loan originator a lucrative rebate known as a yield-spread premium, which is tied to the rate or terms of the mortgage. Banks and other lenders can continue to pay commissions to brokers, but these payments must now be based solely on the loan amount.

“In the past, the higher the interest rate and points, the more money a broker stood to “earn.'"

How does this work?

“Brokerage firms typically earn a yield-spread premium of 1.5 to 2.5 percent of the loan amount, with higher-rate loans paying closer to 2.5 percent. The brokerage and its broker, or loan officer, typically split the rebate. On a $400,000 loan at 5.25 percent, that might total $8,000, based on two points paid, with a point being 1 percent of the loan amount.

“In the new system, the brokerage can earn a fixed commission from the lender, but the amount is not tied to the loan terms. Also, the brokerage cannot pass on a part of the commission to the broker, who must now be paid an hourly wage or salary. The exception is for loans where the lender pays the borrower’s points to the brokerage, typically for higher-rate loans. (The commission range is expected to be 1.5 to 2.5 points.) “

A new day for consumers may be dawning, but you still have to keep a wary eye open for charges, hidden and disclosed, when applying for that mortgage.

Read the full report.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Stephen's Title Agency, LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-227-4724 - Fax 973-556-1628

E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Mortgage Rates May Have Hit Bottom - NYTimes.com

Have mortgage rates hit bottom? The New York Times' Lynnley Browning writes that "a recent and sustained increase may indicate that consumers can expect to pay more in the new year to buy or refinance a home."

"Mortgage rates typically track those of 10-year and 30-year Treasury and other government bonds. Yields, or interest rates, on those notes have been "rising amid lender concerns that the White House’s deal with Congress on Dec. 7. to extend the Bush-era tax cuts and the Federal Reserve’s move in early November to buy back $600 billion in debt to stimulate economic growth will combine to fuel inflation and swell the budget deficit."

Read the full column Mortgage Rates May Have Hit Bottom

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

Refinance costs - how often can they be deducted?

Here's an interesting question from a Kiplinger's reader:

Although I refinanced my mortgage less than two years ago, interest rates are so low that I plan to refinance again. What costs can I deduct when I refinance for a second time?

Folks who refinance and refinance, again, are called serial refinancers. We saw the phenomenon grow during the days of sub-prime lending. But with interest rates now so low, it may make sense to refinance sooner rather than later.

To answer the question,

Serial refinancers get an additional tax break on top of the usual mortgage-interest and property-tax deduction. You can deduct the points you pay to get a mortgage in the year you buy a home -- even if the seller paid the points for you (a point is equal to 1% of the loan). You can also deduct points paid to refinance a mortgage, but normally that deduction must be spread out over the life of the loan. So if you paid two points ($5,000 in this example) on a $250,000, 30-year mortgage, you can deduct just $166.67 per year for 30 years.

The income tax consequences for making a mistake are not light. So caution is in order.

Read the full article, Get a Tax Break for Refinancing Again

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Stephen's Title Agency, LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-227-4724 - Fax 973-556-1628

E-mail Stephenstitle AT comcast.net - www.stephenstitle.com

Good news for credit card users

By the time you are reading this, rules for credit cards will have changed. “Newly purchased gift cards won't expire as quickly, and late fees on credit card payments won't be as punishing."

“The final stage of consumer protections signed into law this year go into effect Sunday. Yet they only curb select practices; other fees and charges still abound.”

Here are some of the new safeguards, but remember, you can still get burned.

Penalty fees:

New protection:

Fees for late payments and other transgressions will be capped to the amount of the violation, up to $25. And, a single violation can no longer result in more than one fee.

Gaps to watch: Technically, there isn't an outright ban on penalty fees higher than $25.

“There aren't any caps on other charges. And not surprisingly, many issuers hiked fees for balance transfers, foreign transactions and cash advances in the past year.”

Rate hikes:
New protection:

“Banks must review a rate hike every six months to decide whether the increase is still warranted. If the factors that prompted the hike are no longer applicable, the rate must be lowered.”

This rule applies to hikes dating to Jan. 1 of last year, when banks began raising rates in anticipation of the new regulations.

Gaps to watch: 

“Even if a bank finds that a rate should be lowered, the reduction doesn't have to restore the previous interest rate.”

Gift cards:

Expiration dates

New protection:

“Gift cards issued after Aug. 22 must have expiration dates that are at least five years from their date of purchase.”

Gap to watch:

“The rule doesn't apply to certain gift cards, such as those issued as part of a rewards or loyalty program.”

Inactivity and service fees:

New protection:

“Such fees can only be charged if the card hasn't been used for at least one year. After that, only one fee can be charged each month.”

Gaps to watch:

“There's no cap on inactivity or service fees. So even though you can only be assessed one monthly fee, it could quickly eat away at a card's value if it's not used.”

It's a first step, some one say a small one, others a big one, in giving consumers more protection.  Let's see what Congress does next.

Read the Associated Press article.

If you have questions about what you see here, contact 

Stephen M. Flatow 

Stephen's Title Agency, LLC

www.stephenstitle.com

StephensTitle@comcast.net