Closing fees high, don't blame the title agent

Vested Land Services title agent title insurance refinance new jersey
Closing fees are a component of the home purchase or refinance.  This article from the New York Times is a tad misleading about these costs and where the blame, if that's the right word, lies.

 FOR some people, a major hurdle to homeownership is the closing costs that come on top of the required down payment. There are fees for everything from title searches to deed recordings, and if you happen to be buying in New York or New Jersey, you’ll find some of the highest costs in the country.

But these fees have been easing, according to a report released last week by Bankrate.com, which found that average closing costs, including mortgage origination fees, fell 7 percent nationwide from 2011 to 2012. In New York they fell 12 percent.

OK, so where do these high fees come from?  Not from third party suppliers such as title agencies, but from lenders and government officials.

Yet, the article continues,

Title insurance is the biggest cost, averaging around 1 percent of the loan balance. Mr. McBride suggested that borrowers shop around, eliciting good-faith estimates from a number of lenders.

Poppycock.  Rates in New Jersey are regulated as they are in New York and costs will be identical from title agent to title agent.  Companies such as ours survive based on the level of service we provide our clients to get buyers and borrowers to the closing table as safely and expeditiously as possible.  (Unless your title agent is owned by a bank or controlled by a real estate agency whose goal is to get you to the table no matter what.)

But the buyer/borrower cannot escape government charges.  The county recording fee for an average mortgage in New Jersey is $240!  And, in New York, you must add government mortgage taxes that add thousands to the cost of a home or mortgage.

The only place where the buyer/borrower can maneuver is with the lender.  There are three words to remember when applying for a loan, shop, shop and shop for the mortgage and if the loan officer cannot explain something to your satisfaction, run for the hills.

Read the full article.

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

Closing costs sound too high? They could be in more ways than one.

Bankrate.com has a great column that answers questions from borrowers and those just shopping around for a mortgage. Dr. Dan Taylor is one of the experts on the Bankrate.com panel. Here's a recent question-

I am halfway to paying off my mortgage. It is a 15-year 5.5 percent fixed-rate mortgage obtained in 2004 for the amount of $90,000. It has an outstanding balance of $47,000, and the monthly payment, including interest, principal and escrow, is $800. I would like to lower the monthly payment. I tried to refinance with a lender, but the estimated closing cost was almost $5,000, so I didn't go with the refinance.

Closing costs are not the only consideration in this type of transaction. Where are the cost savings going to bring you when you are, in effect, extending your mortgage by 7-8 years.

I can understand your reluctance to pay $5,000 in closing costs to refinance a $90,000 loan balance. Bankrate's national average for closing costs in its 2011 Closing Cost Survey is $4,070, although the survey results were for a $200,000 purchase mortgage, not a $90,000 refinancing. While your closing-cost estimate is high, it may be reasonable for your part of the country.

If you're halfway done on your original 15-year mortgage, refinancing into a new 15-year mortgage will cost you money, even with the lower interest rate, because you're extending your existing 7.5-year mortgage into a new 15-year mortgage.

 A lot to consider, isn't there?  Real the full article.

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

Revamping HARP, is relief finally on its way?

The New York Times writes, again, about HARP, the Home Affordable Refinance Program, that was introduced two years ago in an attempt to assist homeowners in refinancing their mortgages and reducing monthly payments.

In “A New Shot at Mortgage Relief” Mokoto Rich writes about William D. Compton.

“Like millions of other homeowners, William D. Compton would like to refinance his mortgage so that he pays less each month for his three-bedroom house in Gulf Breeze, Fla. With the savings, he figures he could afford a few extra movies and restaurant dinners or he could buy a new stove and brakes for his car, purchases he has postponed because finances are so tight.

“Although he would appear to be a good candidate, Mr. Compton, 57, has been turned down twice for a federal refinancing program aimed at homeowners like him.

“Still, he has renewed hope. That’s because the government is expanding the Home Affordable Refinance Program, which was meant to help homeowners whose mortgages are backed by the government and whose home values have declined sharply, even below what the borrowers owe. Mr. Compton is one of those underwater homeowners.”

When HARP was launched, it was estimated that it

“could help four million to five million homeowners whose home values had plunged. Yet just 900,000 borrowers — whose loans are owned by Fannie Mae and Freddie Mac, the government-sponsored housing finance companies — have successfully refinanced through the program. Starting early next month, though, banks will begin using new criteria intended to make more borrowers eligible: raising the ceiling on how much owners can borrow over the value of their home as well as relaxing rules that might force banks to take back bad loans from the government. In announcing the change, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, carefully eased expectations, suggesting about 900,000 more homeowners would be helped, roughly doubling the size of the program to date.”

We have been critical of the Federal effort to date since the ceiling on property appraisal values was unrealistically low in New Jersey.

Time will tell if the changes to HARP will help New Jersey residents.

Read the full article.

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

Refinance program retooled by Obama adminstration

 

Dow Jones reports:

The Obama administration and a housing regulator on Monday unveiled a revamped home-loan refinancing program, aiming to aid hundreds of thousands of Americans whose homes have fallen in value in the wake of the housing bust.

Didn’t we just go through this last year? Well, yes, but it wasn’t working.

The plan represents the latest federal effort to tackle a key impediment to the U.S. economy--a stagnant housing market caused in part by elevated numbers of homeowners who owe more than their homes are worth. It came after numerous Obama administration efforts to stabilize the housing market have struggled in an economy with stubbornly high unemployment.

The overhaul will let borrowers refinance their mortgages regardless of how far their home prices have plunged in any given market, eliminating a previous restriction that shut out homeowners who owed more than 125% of their homes’ current value.

Officials estimated that the changes will help families save $2,500 or more, on average, annually.

The plan is also designed to streamline the refinancing process by eliminating appraisals and extensive underwriting requirements for most borrowers, as long as homeowners are current on their mortgage payments.

The refinancing program is open to homeowners whose mortgages are owned or guaranteed by Fannie Mae (FNMA) or Freddie Mac (FMCC), the two government-controlled mortgage giants whose rescue three years ago has cost taxpayers $141 billion to date.

Regulators are revamping a program rolled out in 2009, the Home Affordable Refinance Program, or HARP, which lets borrowers with homes whose values have dropped to refinance. So far, only 894,000 borrowers have used it, of which just 70,000 are significantly underwater.

Fannie and Freddie will issue final pricing information and other technical details by Nov. 15, and some banks have said they could begin taking applications under the new program by as soon as Dec. 1. Mortgage insurers have also agreed to make it much easier to transfer existing mortgage-insurance coverage, which has blocked many borrowers from refinancing.

　

Read the full article.

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

Using your home to get rid of $80,000 in credit card debt

Bankrate.com’s Steve Bucci is its Debt Adviser. He answers a question from someone with an $80,000 credit card bill.

Dear Debt Adviser, I am considering refinancing my mortgage. My plan is to take cash out in order to pay off my credit card debt. I owe $80,000 on credit cards, which is actually more than the $63,000 I owe on the house. Would this be a well-advised move, in your opinion? I can very easily handle the new monthly payment. With the savings from not making credit card payments I can make additional payments on the mortgage principal. My current mortgage has 11 years remaining, and the new mortgage would be for 15 years. So in other words, I'd be paying my house off in about the same time frame, anyway. I appreciate your advice. -- Robert

Before he answers, Mr. Bucci has to pick himself up from the floor. Here are the highlights from his response.

Dear Robert, Before I answer your question, I must make a comment: $80,000 on your credit cards?! Because I am the Debt Adviser, I can't help but address your $80,000 in credit card debt first. That is a huge amount of debt. Before you do anything, I want you to seriously analyze how you acquired so much debt. Before doing anything, you must be very sure that you can live day to day without racking up another $80,000 in new debt after any refinancing.

First, remember that the refinancing will not really pay off anything. It will just move your debt around. Furthermore, it could end up hurting you ultimately. That's because your $80,000 in credit card bills will be converted from an unsecured debt to a mortgage secured by your home.

The real message here is that Robert could lose his home over a debt that could be cleared in bankruptcy if everything hit the fan. But there are refinancing options.

Let's say you decide to do a traditional 15-year fixed-rate refinance of your existing mortgage with a cash-out option to pay off the $80,000 credit card debt. If so, I would encourage you to organize your budget so you can repay the loan in five to seven years. As an alternative, depending on the current rate of interest on your existing mortgage loan, you might consider using a home equity line of credit, or HELOC, instead of obtaining a new, larger first mortgage. The HELOC interest rate would likely be lower. You should be able to pay off the debt in a shorter period of time. That would save you on interest payments. It will also reduce the time period where you'll be most at risk to financial surprises like illness or a layoff. My experience is that as soon as you make yourself vulnerable to a problem, it shows up.

A traditional refinance may be the best option if your goals are to: first, get a lower rate on your primary mortgage, and second, pay off the credit cards. However, if you already have a fairly low interest rate on your mortgage, a HELOC might be the better option. I want you to lose your debt, not your home. So here's an added note of caution: You are taking on added risk with either a HELOC or a mortgage. You are moving a rather large debt from unsecured terms -- credit card accounts -- to a secured loan using your home as collateral. If for any reason you default on your new loan, your home is at jeopardy. I've seen enough unexpected things happen to otherwise smart people because they took on a risk they didn't understand.

There is also a tax risk. If the unthinkable should happen and you go into foreclosure, the $80,000 used to pay off your credit cards would not qualify for debt forgiveness under the Mortgage Forgiveness Debt Relief Act. The result: You would owe income taxes on the $80,000 when you can least afford it.

 Read the full article.  To ask a question of the debt adviser, go to Bankrate.com.

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

Federal Housing Finance Agency extends the Home Affordable Refinance Program

On March 11, 2011, the Federal Housing Finance Agency (FHFA) announced a one year extension of the Home Affordable Refinance Program (HARP) to June 30, 2012. The program expands access to refinancing for qualified individuals and families who are current on their mortgage payment and who have loans owned or guaranteed by Fannie Mae or Freddie Mac with loan-to-value ratios of between 80 percent and 125 percent. Since the beginning of the program in 2009, Fannie Mae and Freddie Mac have purchased or guaranteed 621,803 loans under HARP (190,180 in 2009 and 431,623 in 2010).

Read FHFA press release.

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

Looking to refi? "Be Cynical About the Refinance Process"

The New York Times’ Jennifer Saranow Schultz writes about the refinance process.

“As least until recently, we’ve been in the midst of a refinancing boom. So consumers applying for refinancings should at least expect some delays.

“While lenders are leery about releasing details about how long refinancings are taking to close today versus a year ago, some are willing to admit that processing times are longer today for a number of reasons, including regulatory changes and historically low rates.”

I’m not sure of the “refinance boom” since most home values in New Jersey fell dramatically over the past two years.

“Kris Yamamoto, a spokeswoman for Bank of America, said in an e-mail that the longer processing times are the result of the “dramatic changes” the mortgage environment has undergone in recent years, including “new underwriting standards being enforced and regulatory changes enacted” to ensure that consumers can safely afford their mortgages. She also pointed to the low rates.”

How about the family that can afford its current mortgage but wishes to take advantage of a lower rate? Unless you had 30% equity, or more, in your home when you took your last mortgage, you can pretty much forget about it since home values have fallen as much as that number. Lenders will not make 100% loan to value mortgages despite encouragement by the Federal government.

So, what to do when you apply and you find your loan application dragging? Some lenders, after already locking the interest rate for 90 days are extending the rate longer if the delay can be found on the bank side. My suggestion—when the lender asks for a document, send it immediately, retain proof of delivery, for example, the fax transmission report or FedEx delivery receipt, and keep in touch with your processor in writing.

Read the full Times story including two cautionary accounts posted by other readers.

What do you think about this issue?

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

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

How Underwater Mortgages Can Float the Economy

We have previously written about the plight of homeowners whose homes are now worth less than the mortgage. Some have decided to walk away from property while others are making their mortgage payments. In the face of low mortgage interest rates, refinancing would be a good idea but with LTVs, loan to value ratios, being what they are homeowners cannot refinance.


The Federal government stepped in with a program allowing banks to make loans up to 125% of LTV, but there have been few loans made.

The Sunday New York Times carries an Op-ed on the issue written by Glenn Hubbard and Chris Mayer.

“RECENT calls for another federal stimulus package raise an important question: Before considering costly short-term measures to raise overall consumer demand, have we done enough to ensure that financial markets will work properly and lead us to recovery? For housing — the sector at the center of the crisis — the answer is no. But the good news is that it might be possible to improve the housing market and invigorate the economy in a way that won’t require a costly stimulus package.

“In a normally functioning mortgage market, almost all homeowners would have refinanced their mortgages to take advantage of low rates. Yet today, low interest rates are doing little to stimulate the housing market because of other stresses, including declines in house prices, falling household incomes and banks’ wariness of making loans.

“To change this dynamic, we propose a new program through which the federal government would direct the public and quasi-public entities that guarantee mortgages — Fannie Mae, Freddie Mac, Ginnie Mae, the Department of Veterans Affairs loan-guarantee program and the Federal Housing Administration — to make it far easier and quicker for homeowners to refinance.”

Whoa, haven’t we been down this road? But, they write,

“This program would be simple: the agencies would direct loan servicers — the middlemen who monitor and report loan payments — to send a short application to all eligible borrowers promising to allow them to refinance with minimal paperwork. Servicers would receive a fixed fee for each mortgage they refinanced, which would be rolled into the mortgage to eliminate costs to taxpayers.”

How does this work in dollars and cents?

“Consider a family that bought a home in 2006 for $225,000, taking out a $200,000 fixed-rate mortgage at the prevailing 6 percent interest rate with monthly payments of about $1,200. That home is now worth about $175,000. The family still owes $189,000 and thus cannot refinance because they are underwater.

“But under our proposal, the family would be offered a new mortgage at today’s prevailing rate of 4.3 percent. The family would see a 15 percent decline in their monthly mortgage payment, saving more than $2,000 per year. This would not only help homeowners through the current crisis, but would be the equivalent of a 26-year tax cut of more than 4 percent of income, assuming the family spends around 30 percent of income on housing.”

But prior experience has shown mortgage programs to be a bust. They know that and ask,

“What went wrong? First, the program was not widely publicized relative to the federal government’s efforts to help with more modest loan modifications. Second, the refinancings require substantial upfront costs for borrowers. Third, many borrowers — those with second liens or shaky incomes — were locked out. (About 20 percent of all borrowers with federally backed mortgages have a second lien.) Last, many borrowers do not know the current value of their homes, and are reluctant to pay to get an appraisal only to be turned down for a refinancing.

“THE program we propose addresses these issues. It would have minimal costs, which we would roll into the cost of the mortgage rather than forcing homeowners to make a big upfront payment. For mortgages with second liens, the government could request a blanket approval from all servicers to allow the new mortgages to have priority over existing second ones. It is in the interest of the servicers of second liens to allow such refinancings, because they reduce payments on the first mortgage and thus lower default risk on the second lien.”

Seems like common sense to me, what do you think? Read the full Op-ed.
Glenn Hubbard, the chairman of the Council of Economic Advisers under President George W. Bush and the co-author of “Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity,” is the dean of the Columbia Business School, where Chris Mayer is a senior vice dean.

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

Greedy mortgage brokers charged with theft.

The Asbury Park Press reported

Three executives from Hawthorne Capital Corp., a mortgage brokerage with offices in Manalapan, New York and Pennsylvania, have been charged with theft for failing to pay off original loans after refinancing mortgages, the Monmouth County Prosecutor's Office said.

New Jersey customers used the company to refinance their mortgages, the Prosecutor's Office said. Typically when that happens, the lender pays off the original mortgages. But the Prosecutor's Office said it received a complaint from a Monmouth County homeowner who said a check sent to her original mortgage company had been returned for insufficient funds after the homeowner refinanced with Hawthorne.

Now, this is interesting because we normally find a title company and/or lawyer involved in the actual disbursement the new mortgage loans, not the mortgage broker, and there is no mention in the story or the Prosecutor's press release of any involvement. So, we think there’s more here than meets the eye. We’ll try to follow this story.

The Monmouth County, New Jersey Prosecutor's press release can be found here.

If you have questions about what you see here,
contact Stephen M. Flatow
Stephen's Title Agency, LLC
StephensTitle@comcast.net
973-556-1628 Fax