ABOUT TIME: Cost to originate mortgages finally gets cheaper

After barely surviving the subprime crisis and housing collapse, and then enduring the agony of burdensome regulatory changes and the advent of a new mortgage watchdog, mortgage originators finally, FINALLY, have some good news to spread.

Well, it only took about 8 years but...  the Mortgage Bankers Association just said that total loan production expenses – commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations – decreased to $6,984 per loan in the second quarter of 2015, from $7,195 in the first quarter of 2015.

This is after years of mortgage production cost slowing inching their way up into the stratosphere. Here's a laundry list of that sad, cruel progression.

What's more, independent mortgage banks and mortgage subsidiaries of chartered banks reported a net gain of $1,522 on each loan they originated in the second quarter of 2015, up from a reported gain of $1,447 per loan in the first quarter of 2015,reported today in its Quarterly Mortgage Bankers Performance Report.

“Average company production volume was up in the second quarter, as purchase volume grew and mortgage pipelines from the first quarter’s refinance boomlet closed,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “The production volume increase resulted in a nominal decrease in per-loan production expenses, which offset a decrease in secondary marketing income.

“However, by historical standards, production expenses remained elevated given that the average company production volume was at the highest level since inception of the study in 2008,” she said.

Other key findings of MBA’s Quarterly Mortgage Bankers Performance Report include:

see more at: http://www.housingwire.com/articles/34862-about-time-cost-to-originate-mortgages-finally-gets-cheaper

Factors to consider on interest-only mortgages

Don't call it a comeback.

Interest-only mortgages got a bad reputation in the aftermath of the housing bust, but they've managed to stick around as an option for homebuyers who can meet stricter lending guidelines enacted by the government in recent years.

The loans can lower monthly mortgage payments by letting borrowers put off paying the principal on their loan for several years. When the interest-only period ends, the borrower's monthly payment spikes as they begin to pay a combination of principal and interest until the loan is paid off.

That monthly payment shock, often accompanied by a higher interest rate on adjustable-rate interest-only loans, is what got many borrowers in trouble a decade ago.



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One reason is that many of those borrowers qualified for their loans on the basis of their ability to repay the lower, interest-only payment. When their monthly payment reset higher, many couldn't keep up.

That's no longer the case. Now lenders are required to determine whether borrowers qualify for any interest-only loans, or other adjustable-rate mortgages, based on whether they can afford to make the eventual bigger monthly payments that await them once the initial interest-only period ends.

As a result, such interest-only loans now make up only about 0.2 percent of all adjustable-rate mortgages, or ARMs, which account for about 4 percent of all home loans for purchase and refinancing, according to data from CoreLogic.

Use of interest-only mortgages peaked 10 years ago at the height of the housing bubble at around 10 percent of all ARMs.

"The big difference here is interest-only loans are back to being the niche product that they traditionally had been," said Greg McBride, chief financial analyst at Bankrate.com. "The go-go days of the housing boom were the exception."

Still, rising home prices can make interest-only loans a tempting option for borrowers who are interested in a lower mortgage payment and can qualify for such a loan under today's stricter guidelines.

At least one lender is looking to expand access to interest-only loans to a broader range of homebuyers, not just the affluent buyers who typically take advantage of such loans.

Last month, United Wholesale Mortgage began making interest-only home loans through its network of mortgage brokers. The loan program covers mortgages as low as $250,000. That's just above the U.S. median home price of $236,400, but well below the recent median price in Southern California of $426,000.

Even with today's stricter guidelines aimed at ensuring borrowers can handle interest-only loans, they carry potential financial risks. Here are some things to consider when weighing whether such a loan is right for you:

read more: http://www.sltrib.com/home/2856006-155/factors-to-consider-on-interest-only-mortgages

There Are Actually 3 Types of Reverse Mortgages

If you are considering taking out a reverse mortgage home loan, there are three different types to consider. We'll give you the details so you can better decide which one is right for you.


Home Equity Conversion Mortgage (HECM)

The most popular of the three reverse mortgage types is the Home Equity Conversion Mortgage (HECM). This is considered the most commonly issued loan of this type, according to the HUD. One reason: it often comes with lower rates and lesser fees than those that would be offered by private lenders. In addition, the FHA backs these loans, making them a more lucrative option for the banks that issue them.

Qualifications include:
You have to be at least 62 years old.
You have equity on your home.
Your home must meet certain building requirements.
You must have undergone reverse mortgage counseling.
There are no income or credit requirements.
Since these loans are FHA backed, they do have some conditions that must be met. These include:
There are loan limits, and the loan can't exceed 100% of the home's value.
A Mortgage Insurance Premium (MIP) is required for all HECM reverse equity loans.
Reverse Annuity and Home Equity Conversion Mortgages
The other option that you have is with reverse annuity and home equity conversion mortgages. A reverse annuity mortgage comprises an agreement between the lender and the homeowner, where the homeowner borrows against existing equity in the home. The money borrowed has to be repaid only when the home is refinanced or is sold. While reverse annuity mortgages do have three different classes, the most common is the Home Equity Conversion Mortgages (HECM) because it's backed by the FHA.

Private Company Reverse Mortgage

It is possible to get a non-FHA backed loan of this type, commonly referred to as a private company reverse mortgage. But these types of mortgages are typically based upon income and credit score as well as existing home equity, since they are privately backed, and can often come with higher interest rates and more fees because they are offered by private lenders.

If you are considering a reverse mortgage loan, make sure you take the time to research all of your options. You will likely arrive at the conclusion that an HECM loan is the best suited for your needs, namely due to how lucrative they are in comparison to your other borrowing options.

see more: http://www.huffingtonpost.com/michael-lazar/there-are-actually-3-types-of-reverse-mortgages_b_7976494.html

Sunshine State Spotlight: Rise In Reverse Mortgages Set Example For The Rest Of The Country

With the economy recovering from the Great Recession and home values rising in Florida, Donna Linton says all of this is paving the way for more people in her home state to turn to reverse mortgages, including those who want to use them to take their dream vacations.

Linton, a loan originator with Sterling Mortgage Services in Stuart, about 100 miles north of Miami, says a rebound in the local housing market has helped with people turning back to reverse mortgages in the Sunshine State.

"It's picking up, definitely getting better," Linton says. "When home appraisals were down, it was difficult. People interested in getting reverse mortgages don't want to hear that their homes aren't worth what they think they are. Now, that is turning around, and the appraisals are even higher than the estimates I am putting down."

With that untapped potential in their homes being revealed, those seeking a reverse mortgage in her region appear to be younger these days than in the past, with many in their late 60s and early 70s, Linton says. She's not seeing as many older clients in their 80s.

"It's people that just need a little more income or maybe want to have some more money to do more things they don't quite have enough money to do without it, like take a vacation - people like cruises," Linton says. "It's a little more money to enjoy their retirement with."

Linton says her focus is to get more financial advisors and real estate agents interested in getting their clients to consider reverse mortgages. That's an untapped market that's going to help the industry grow, she says.

There are many people who don't want to dip into their stock portfolios or investments or want to maximize their Social Security benefits by waiting until they're age 70 to take them, thus increasing their benefits by 32 percent a month. But they might need extra money to get them there - and a reverse mortgage can bridge that gap.

"A line of credit can be a lucrative thing," Linton says. "It's a very good tool for financial advisors to use if they will take the time to study it. They will understand it will not be a detriment to their client but help them. If they have to sell stocks in a down market, why would they want to do that. If they want to take it from an investment, there might be a penalty. With a reverse mortgage, the money is in a line of credit, and they can draw on that instead. It's a better idea."

The other opportunity is getting realtors interested in the concept, Linton says. There's a lot of opportunity, especially in markets like Florida, for people to use a HECM For Purchase, like this couple did to buy their dream home.

"They look at me like I have four heads, mostly because they are uninformed or don't understand now it works," Linton says.

Many people are coming down to Florida after selling their homes in the Midwest or Northeast and have cash to put down, Linton says. Some are choosing to buy a small condo without realizing they can use a reverse mortgage to buy something a lot bigger than they thought they could otherwise. All they have to do is put 50 percent down, and a reverse mortgage will cover the rest without anymore mortgage payments, she says.

"You can have a lot more home than you thought you could. It just makes a lot of sense, but people don't understand how it works," Linton says. "I'm working on changing that."

Federal regulatory changes about the use of reverse mortgages has helped reduce the skepticism and negativity that some people and advisors have had for their use, Linton says. For example, doing a financial assessment on the borrower will help, because about 10 percent of reverse mortgages were going into foreclosure because people couldn't afford to pay their taxes and insurance, Linton says. They were living on Social Security, taking out loans and using up the money.

"They couldn't afford those payments and unfortunately when you have people 70 and 80 years old that you're going to have to foreclose on, that's not a good situation," Linton says. "But now it will be much better that we will know for sure that these people are able to afford to keep up their payments and go forward with their reverse mortgages. It will be a much better situation for them."

see more: http://www.huffingtonpost.com/buck-wargo/sunshine-state-spotlight-_b_7942566.html

Should You Consider a Reverse Mortgage?

As financial devices, reverse mortgages (RMs) are like 3-D printers. They can do some interesting and useful things, but they are complex and can be expensive.

Reverse mortgages were originally designed for those who came up a little short when they reached retirement age. Today, however, they are being used for purposes other than just retirement income.

Should you consider a reverse mortgage? Read on to learn about what they are, how you can use them, what they cost, and their drawbacks.

What They Are
Unlike traditional mortgages, which require a monthly payment to pay off principal and interest, RMs tap the equity in your primary residence to provide you a monthly payment or lump sum. You can take out an RM on a home you've been living in for a long while, or one you're buying. It's a loan that uses your home as collateral. You defer paying off the loan until you move out, sell, or die.

As products that didn't exist before 1990, RMs are relative newcomers to the home-finance world. Their volume has grown from less than 200 loans some 25 years ago to more than 51,000 last year. The biggest year was 2009, when more than 114,000 RMs were originated, according to the U.S. Department of Housing and Urban Development (HUD), which insures the loans through its Federal Housing Administration. Although the current market for RMs is relatively small--only about 3% of those who qualify have them--they are expected to grow in popularity as baby boomers age.

The first RMs, also known as Home Equity Conversion Mortgages, were variable-rate products that adjusted monthly. HUD capped their volume until 1998, when the government allowed 150,000 RMs to be issued annually. Their popularity boomed immediately before and after the housing boom (2006-11), as more homeowners tapped their equity for a variety of purposes.

The housing bust, which resulted from the popping of a credit bubble in 2007, forced some RM holders into difficult financial situations, which were compounded by job losses and a recession. Some 10% of reverse-mortgage holders faced defaults when they were unable to pay property tax or insurance bills.

see more: http://news.morningstar.com/articlenet/article.aspx?id=709015

J.P. Morgan Loosens Terms for Jumbo Mortgages

 J.P. Morgan Chase & Co. is loosening its underwriting criteria for big mortgages, as lenders ramp up competition to grab a bigger share of the high-end housing market.

The nation’s largest bank by assets plans to announce Wednesday that it is lowering the minimum credit score and down payment it requires for mortgages as big as $3 million.

The New York firm’s moves follow similar steps at Bank of America Corp. , Wells Fargo & Co. and other banks on requirements for “jumbo” mortgages—those that exceed $417,000 in most parts of the country or $625,500 in pricier markets. At the same time, some big banks are backing away from smaller loans where they see higher regulatory costs and litigation risks.

Since the financial crisis, a recovery in the mortgage market has faced several challenges, but the jumbo market—popular with well-heeled borrowers—has bounced back along with sales of higher-priced homes. In the second quarter, overall jumbo originations rose to an eight-year high of $93 billion, up 58% from a year ago, according to a preliminary estimate from industry newsletter Inside Mortgage Finance.

By dollar volume, jumbo mortgages given out by lenders last year accounted for about 20% of all first-lien mortgages, used mostly to purchase or refinance a home, according to Inside Mortgage Finance. That is up from 5.5% in 2009. The last time jumbo mortgages accounted for a larger share was in 2005.
“There’s no question that the jumbo market has probably recovered more than any sector of the mortgage market since the housing crisis,” said Guy Cecala, publisher of Inside Mortgage Finance.

Lenders have more flexibility to change criteria for jumbo mortgages, as they generally hold them on their own books. Many smaller home loans are sold by lenders to mortgage-finance giants Fannie Mae and Freddie Mac, and must conform with their criteria.

source: http://www.wsj.com/articles/j-p-morgan-loosens-terms-for-jumbo-mortgages-1438709863