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Using 401(k) Funds For A Downpayment? First, Consider The Tax Implications.

yourmortgageplanner — Tue, 15 Sep 2009 22:15:54 +0000

As downpayment requirements increase, anecdotally, home buyers are tapping 401(k) plans for extra cash.

Classified as a ”hardship withdrawal”, loans against your retirement funds can be cheap and simple.

There’s no credit check or approval process
There’s only a small set of paperwork
Money can be available in as little as a day

But just because you can get access to your retirement money doesn’t mean that you should. 401(k) withdrawals should only be made after careful consideration.

There are some serious negatives, specifically with respect to taxation.

If you open a 401(k) loan and don’t repay according to the loan terms, the withdrawal ends up getting taxed as income, plus a 10 percent penalty for people under 59 1/2.

That’s a stiff penalty.

But, even if you do repay the loan on time, you’re still getting leaving yourself subject to double-taxation.

Taxation #1 occurs when the loan is repaid using post-tax dollars
Taxation #2 occurs upon final withdrawal at retirement

Furthermore, when you borrow against a 401(k), you assume the opportunity costs of having that money out of the market. Since March, the Dow Jones Industrial Average is up 44 percent. If your 401(k) was empty, you’d have missed those gains forever.

Taking a loan against a 401(k) isn’t necessarily a bad idea, there just may be better choices. If you’re planning to withdraw from your 401(k) to make a downpayment on a home, talk with a qualified financial professional first.

You can never have too much good information.

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How To Get A 800 Credit Score

yourmortgageplanner — Fri, 11 Sep 2009 19:14:36 +0000

Since 2007, mortgage lenders have clamped down in many areas of underwriting, but none more so than in the area of credit scoring.

Minimum FICO levels are up 120 points or more and conforming mortgage lenders now levy large fees on borrowers whose scores are below 740.

Keeping your credit scores high is a worthwhile goal, but it’s not always easy to do – especially when you don’t know the ins-and-out of how the credit scoring system works.

The Wall Street Journal wrote a terrific piece on credit scoring this week. It’s full of helpful, relevant tips for home buyers, homeowners, and everyone else.

Aside from covering the five basic components of a credit score — shown at right – the piece provides insightfukl advice on credit-related topics including:

The difference between a “hard inquiry” and a “soft inquiry”
Why paying for your credit report is a foolish use of funds
Why it doesn’t matter if you have an 800 FICO

The article also talks about the optimal balance a person should carry on their credit cards to get the biggest FICO boost.

Credit scores determine your mortgage rate. Therefore, do what you can to keep your scores high. Follow the tips in the Wall Street Journal article and lean on public resources like myFICO.com.

Having good credit can be a real money-saver. Month after month after month.

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#HVCC CALL TO ACTION

yourmortgageplanner — Wed, 10 Jun 2009 20:06:41 +0000

To: All Mortgage Brokers, Real Estate Agents, Appraisers, Lenders, Home Builders, Title Agents, and Consumers
From: Marc Savitt, President- National Association of Mortgage Brokers

After more than a year of exhaustive negotiations with Fannie Mae, Freddie Mac, James Lockhart, Director of FHFA (GSE Regulator), and NY Attorney General Andrew Cuomo, NAMB believes the time has come for your individual voice to be heard.

In order for this “Call to Action” to be effective, we ask that you fully participate, encourage others to join the action and continue calling and emailing every day, until advised to stop by NAMB. This will NOT be a one day action!

We have received hundreds of e-mails through the hvcc@namb.org e-mail address outlining specific cases where the HVCC has created delays and additional costs to consumers. NAMB has categorized and compiled a report of the examples received, which was sent to FHFA Director James Lockhart. Please use your own examples in your conversations with legislators, regulators, or their staff. Also, please visit the NAMB HVCC Resource Center for additional information and documents on the HVCC.

Who will you be contacting?

NY Attorney General Andrew Cuomo’s Office: (212) 416-8000, Internet Complaint
Federal Housing Finance Agency (FHFA): (866) 796-5595, director@fhfa.gov
Fannie Mae: (202) 752-7000, headquarters@fanniemae.com
Freddie Mac: (703) 903-2000, Internet Complaint
Senators, Representatives and Governors: Click here for contact information.
Also, please contact your local TV and Newspaper outlets.

Below are talking points and background information to assist in your conversations. Please remember we are all professionals and should conduct ourselves accordingly in any communication with the above parties. For the most successful and influential calls, it is important to concisely quantify how the HVCC is affecting your consumer and your business.

Talking Points:

1. NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.

2. Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.

3. AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.

4. HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.

5. No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

Background:

I. Lack of Portability

A. Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.

B. Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.

C. In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.

II. Lack of Quality

A. AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.

i. Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.

B. Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.

III. Increased Cost of Appraisals

A. The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.

B. $150.00 – minimum increase per appraisal
$561.95 – average loan amount of $224,778 at .25% for extended lock period
$711.95 – average total increase per transaction
x 3,870,552* – 2007 HMDA report of residential real estate loans originated
$2,755,639,496 – $2.8BILLION in increased fees to consumers!

IV. Articles Illustrating the Effects of the HVCC

A. The Appraisal Bubble – The Center for Public Integrity

B. The Cure is Worse than the Disease – AppraisalPress

C. Appraisals Roil Real Estate Deals – The Wall Street Journal

i. Feel free to forward these articles and/or reference them in your conversations.

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Mortgage Rates Week Review May 4 – 8, 2009 (Chart)

yourmortgageplanner — Sat, 09 May 2009 21:52:28 +0000

The first week of May is officially over, and Mortgage backed securities once again sold off at the end of the week giving up a total of 30bp this week (FNMA 30 YR 4% Chart). The selloff pushed Mortgage Rates higher for the first week of May. May 2009 Mortgage Rates.

This week we saw the economy shed 539,000 jobs in April, raising the 6-month total to nearly 4 million jobs lost.

And while the April data may look bad, it’s actually 10% better than what was expected.

Now, it may seem odd to categorize 539-thousand lost jobs as “good-for-the-economy”, but it’s important to remember that on Wall Street, expectations are everything.

As it turns out — relative — the actual job loss data wasn’t so bad.

Now, markets are making adjustments and re-forming expectations of what’s ahead for the economy. They’re preparing for things like higher levels of consumer spending in the months ahead, and fewer home foreclosures nationwide. Both outcomes would help to spur the economy from recession.

Other economic data included the second consecutive month, the number of homes under contract to sell increased — further evidence that housing markets may have already bottomed.

As reported by an industry trade association, the Pending Home Sales Index rose by 3-plus percent last month.

A “pending” home is one that’s under contract but has yet to close. This is one reason why the Pending Home Sales Index is an imperfect statistic.

Just because a home is under contract doesn’t mean it will actually sell. A lot can go wrong between the date of agreement and the date of closing. Deals fall apart all the time. But, when the number of pending contracts rises, we can infer that buy-side demand for homes is strong.

It’s likely that the number of homes under contract is being influenced by a combination of low mortgage rates, relatively inexpensive homes, and various tax credits for certain homebuyers. Overall, it’s spurring demand and that’s part of what’s captured by the Pending Home Sales Index.

So long as the demand for homes outpaces its supply, home prices are expected to rise.

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How To Purchase A Home As A Co Borrower

admin — Sat, 09 May 2009 06:20:07 +0000

Both mortgage guidelines and the economy have tightened since 2006, bringing more attention to “joint homeowners” — non-spousal partners that buy and share a home as roommates.

The practice is not new, but, anecdotally, co-purchasing is becoming more common.

In the video above — filmed two years ago but still on-target today – real estate expert Barbara Corcoran provides good advice for co-purchasing partners. Like any business relationship, it’s important to plan ahead.

Hire an attorney to draft contracts and agreements
Have a plan for when one or both parties wants to move or sell
Consider life insurance policies on each other

The over-riding theme for co-purchasing arrangements is to be prepared. Done right, however, they can create two proud homeowners where there would have otherwise been none.

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B of A rebranding Countrywide = Lipstick on a Pig

yourmortgageplanner — Sat, 02 May 2009 20:45:03 +0000

They might be rebranding there name, although I am sure all the inexperienced and shady Loan officers from Country Wide will still be working their loans!

This is the TRUE meaning of Lipstick on a Pig! It is sad how BIG Marketing dollars can convince millions that you have a great Knowledgeable staff.

Country Wide slung tons of high priced/rate loans, and consumers ate it up. I always shake my head in disbelief when potential client tell me “I am going to go with Country Wide”. I do bask in the joy when I meet clients who tell me “My Last Loan was with Country Wide and it was nothing like they promised”.

Layer that Lipstick on and
Caveat Emptor

And so over the weekend, nearly 10 months after the Bank of America deal closed, Countrywide Home Loans signs came down and Bank of America Home Loans signs appeared at the lender’s 215 storefront offices in California. It was the start of a rebranding of nearly 1,300 Countrywide mortgage offices nationwide. (read full story)

Image: http://www.flickr.com/photos/brent_nashville/240072751/

Bank of America lets go of Countrywide name (money.cnn.com)

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Mortgage Rates April 29, 2009 – FED Minutes (Video)

yourmortgageplanner — Thu, 30 Apr 2009 03:22:30 +0000

The Federal Reserve adjourned from its two-day meeting this afternoon. It’s one of 8 scheduled meetings each year for the Federal Open Market Committee.

Although the FED announced to keep the FED Funds target unchanged, MBS gave up ground with the 30 YR FNMA 4.0% pulling back 22bp. Mortgage Rates held their ground and closed where they ended yesterday.

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent. The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the economy may still be contracting, but that it’s not happening with the same speed as in prior months. Household spending is stabilizing and financial markets are “easing”.

Nevertheless, threats to the recovery are everywhere with the following items on the Fed’s short list:

The growing ranks of unemployed workers
The reduction of housing wealth nationally
Reduced inventories and investment from business

Furthermore, the FOMC fingered today’s inflation levels as too low to support economic growth. This justifies the Fed’s plan to hold the Fed Funds Rate near zero percent “for an extended period”.

The FOMC’s next scheduled meeting is June 23-24, 2009.

Source
Parsing the Fed Statement
The Wall Street Journal Online
April 29, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0904.html

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Mortgage Rates April 27, 2009 – Weekly Forecast

yourmortgageplanner — Tue, 28 Apr 2009 05:16:29 +0000

Monday April 27, 2009 was a great way to start the week, as the FNMA 30 YR 4.0% MBS posted a healthy 18bp improvement today. If the past 4 weeks dictate the future, mortgage rates will start and end the week essentially unchanged.

For active home buyers who have yet to find the “right home”, long-term flatness like this is terrific. While interest rates stay even, buyer purchasing power holds flat and pre-approval letters stay valid.

For buyers under contract or homeowners looking to refinance, though, the market’s pattern is a little more rough. Although rates are holding steady week-to-week, the day-to-day action is quite different. Bond markets are volatile and rate swings of a quarter-percent in a day have been common.

How good of a rate you get depends on day on which you shop. This complicates the process of “locking a rate” and makes it very hard for people trying to time a market bottom.

This week, though, the market may finally make a run and break its range.

Aside from it being an unusually data-heavy week, the Federal Reserve meets Tuesday and Wednesday to discuss monetary policy. The data combined with the Fedspeak may push the markets one way or the other towards economic optimism or pessimism for the latter half of 2009.

Lately, it’s been a combination of the two — a “cautious optimism” — and that’s a big reason why mortgage rates have held in a tight range for so long.

Understand, though, that when mortgage rates finally do move, they’re going to move in a big way. So, if you’re among the crowd looking for lower rates, the best possible outcomes you can hope for this week are:

Weak consumer confidence data (Tuesday, Friday)
Weak consumer spending data (Thursday)
Falling “cost of living” calculations (Thursday)
Fed concerns about deflation and/or recession (Wednesday)

Any of these four events would likely temper hope for a quick economic revival, sending mortgage rates lower. On the other hand, if confidence or spending is strong, or the Fed has no regard for deflation or recession, expect mortgage rates to rise.

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Mortgage Rate Week Review April 24, 2009

yourmortgageplanner — Sat, 25 Apr 2009 19:20:25 +0000

Mortgage rates ended the week of April 24, 2009 lower. The MBS FNMA 30 YR 4.0% finished up 21bp higher for the week (higher is better for the MBS, price and interest are inverse). The historically low rates for both conforming and FHA products are intended to help stimulate the economy by giving home owners a reduction in monthly housing obligations. The low rates are also intended reduce the excess supply of

mortgage-rates-april-24-09

home sitting on the market. One would hope the Monetary and Fiscal policy will eventually lead us to equilibrium and a stable economy and housing market.

Friday’s better than expected New Home Sales number (337K estimated 356K actual). The positive number could be the first chute to sprout for this spring recovery.

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What Is A Reverse Mortgages

yourmortgageplanner — Thu, 23 Apr 2009 17:41:45 +0000

With reverse mortgages seniors now have some additional cash-flow alternatives. This type of loan allows mature borrowers to convert their home equity into tax-free income without leaving their current home or making mortgage payments – and they do not need an existing income to qualify.

How does a Reverse Mortgage Work

Reverse mortgages are probably best understood when compared side-by-side with traditional home mortgages, otherwise known as “forward” mortgages. The following table shows the differences between the two:

FORWARD MORTGAGE	REVERSE MORTGAGE
Uses income to pay debt	Uses home equity to get cash or credit
Monthly mortgage payments	No payments; debt is due when the borrower(s) pass away or relocate.
Falling debt, rising equity	Rising debt, falling equity

Both loans incur debt against your home, and both affect equity, but they do so in different ways. Traditional home mortgages require making monthly payments to a lender. With a Reverse Mortgage, payments are made to you.

What a Reverse Mortgage Involves
Here are some important points to know when considering a reverse mortgage:

Eligibility: To qualify for a reverse mortgage, you must be at least 62 years of age. All owners who are on the title deed must meet this age requirement. You must also have paid off all, or most, of your home mortgage. Lastly, the home you reside in must remain your principal place of residence.

Mandatory Counsel: In order to ensure that homeowners are fully aware of the financial ramifications of obtaining a reverse mortgage, you must undergo counseling with an unbiased third party before completing a loan. Once approved, HUD and AARP oversee a network of counselors who can provide this service, and it should be offered for either a nominal fee or at no charge.

Tax-Free Income: One of the advantages of a reverse mortgage is that the money you receive will not be taxed. The amount you’ll obtain depends on several factors including the plan you select, the type of cash advances you choose, your age, and the value of your home. Typically, the older you are the larger the loan, as you will have more equity in the house.

Cost: The cost of a reverse mortgage varies considerably from one type to the next. However, you can typically use the money you receive to offset the loan fees. The costs will be added to the loan balance and must be repaid with interest once the loan terminates.

Repayment: Reverse mortgages do not require any payment as long as the borrower(s) remain in the home. Should the borrower(s) pass away, sell the home, or permanently relocate, then the loan would be due in full, along with interest and additional costs. If two borrowers are on the loan and one dies, the loan would not be due since one of them still occupies the home.

Home Equity Conversion Mortgage – The Federally Insured Loan
The most common type of reverse mortgage is the Home Equity Conversion Mortgage, otherwise known as a HECM mortgage. This is the only reverse mortgage program that’s federally insured and backed by the U. S. Department of Housing and Urban Development (HUD). This type of reverse mortgage is popular for a few reasons:

• Ability to choose your own interest rate.
You can select one that changes annually or one that changes every month.

• You have several payment options.
You may receive monthly loan advances for a fixed term or for as long as you live in the home. You may also choose to receive a line of credit or combine monthly loan advances with a line of credit.

• The loan can be used for any purpose.
With a HECM, you don’t have to designate the loan to a specific use; you can apply the funds to anything you choose.

• Protection.
This is one of the most attractive features of a HECM. This plan protects you by guaranteeing continued loan advances even if your lender defaults.

Sell or Stay?
The main reason people choose a reverse mortgage is to gain financial independence and maintain an adequate standard of living without leaving their current home. The best way to decide if a reverse mortgage is right for you is to compare it to the other option of selling your house. To do this, ask yourself these three questions:

1.    How much cash can I get by selling my home?
2.    How much will it cost to buy or rent a new place?
3.    Is it worth my moving now, or do I prefer to do something else with the money?

Perhaps you’ll confirm what you knew all along, where you now live is the best place to be.

If you feel that a Reverse Mortgage would benefit you or a family member, Feel FREE to contact me to discuss your options!

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1.	NAMB conservatively estimates (breakdown below) that the HVCC is costing consumers over 2.8 BILLION dollars a year in extra fees, created by long delays (extended lock-in fees) and higher appraisal costs.
2.	Unregulated Appraisal Management Companies (AMCs), who have been the subject of several misconduct investigations, are the centerpiece of the HVCC. The original Cuomo investigation involved a federally chartered bank and an AMC.
3.	AMCs are driving honest appraisers and mortgage brokers from business, eliminating competition, increasing costs to consumers and reducing state revenue. The HVCC is causing significant delays in real estate transactions, hurting real estate agents, title companies and other third parties reliant on turnaround time.
4.	HVCC does nothing to reduce fraud, as it legitimizes the same failed model, which was the subject of Attorney General Cuomo’s investigation.
5.	No Portability! Consumers are “trapped” with a specific lender. If a better deal becomes available with a different lender, the consumer is forced to pay for another appraisal.

I.	Lack of Portability
	A.	Lenders are not allowing borrowers to transfer appraisals, regardless of the reason.
	B.	Forces the borrower to pay for another appraisal and wait for a new appraiser to be assigned and complete it, increasing the total cost and time needed for obtaining a home. Delays in turnaround times also cause the borrower to miss rate lock deadlines and possibly face penalties charged by the lender.
	C.	In a poll conducted by NAMB, 75.8% of respondents said that 0% of their appraisals are portable since the enactment of the HVCC.
II.	Lack of Quality
	A.	AMCs are assigning appraisers from a different municipality, county, or even state to appraise the target house, therefore unfamiliar with the neighborhood and unable to produce an accurate appraisal.
		i.	Because of this, the HVCC is forcing appraisers to be in direct violation of the Uniform Standards of Professional Appraisal Practice (USPAP) for jurisdictional competence.
	B.	Because AMCs pay appraisers such low fees, those assigned appraisers willing to do the work are often inexperienced and fail to adequately appraise the home.
III.	Increased Cost of Appraisals
	A.	The minimum increase we have seen in direct consumer cost is $150 per appraisal. That, coupled with the drastically increased appraisal turnaround times that impose extended lock periods at an average expense of $561.95 per loan, is now costing consumers an estimated additional $711.95 per transaction.
	B.	$150.00 – minimum increase per appraisal $561.95 – average loan amount of $224,778 at .25% for extended lock period $711.95 – average total increase per transaction x 3,870,552* – 2007 HMDA report of residential real estate loans originated $2,755,639,496 – $2.8BILLION in increased fees to consumers!
IV.	Articles Illustrating the Effects of the HVCC
	A.	The Appraisal Bubble – The Center for Public Integrity
	B.	The Cure is Worse than the Disease – AppraisalPress
	C.	Appraisals Roil Real Estate Deals – The Wall Street Journal
		i.	Feel free to forward these articles and/or reference them in your conversations.