First-time homebuyers dove into the market at their highest rate in nearly three years as mortgage rates remained largely unchanged, according to Freddie Mac’s weekly mortgage market survey.
30-year fixed-rate mortgages held steady at 4.02% with an average 0.7 points for the week ending June 25, 2015. A year ago, the rate averaged 4.14%.
15-year fixed rates dipped slightly to 3.21% with an average 0.6 points. The same term priced at 3.22% a year ago.
5-year adjustable-rate mortgages were 2.98% with an average 0.4 points. Last year at this time, an identical ARM averaged the same 2.98%
“Mortgage rates were little changed this week,” said Sean Becketti, chief economist for Freddie Mac, in a news release. “Buyers appear anxious to purchase homes before the expected increase in interest rates later this year. Given the tight inventory of homes for sale, a 5.1-month supply at the current sales pace, home prices are being bid up.”
National housing market continues rebound
Across the nation, the housing market is continuing to solidify, according to Freddie Mac’s market analysis. The mortgage finance company’s Multi-Indicator Market Index, a measure of stability in the housing market in all 50 states, is up 33% from its all-time low in October 2010 — although it’s still in a range that indicates a “weak” market overall.
More than half of the U.S. is in a stable market range, with the states seeing the most improvement month-over-month including Washington, Indiana, Tennessee, Oregon and Mississippi.
“We saw a significant improvement in housing markets nationwide, with 10 more metro areas and nine more states moving within range of their benchmark, stable level of housing activity,” said Len Kiefer, deputy chief economist for Freddie Mac. “The West and Southwest areas of the country continue to lead the way, especially Colorado, Oregon and Utah, and California is right there as well. Unlike a year ago, when the most improving markets were those hardest hit by the Great Recession, we’re now seeing stable markets among the most improving as well.”
Applications and home sales heat up
Home purchases and refinancings are trending up, according to the latest survey by the Mortgage Bankers Association. Mortgage applications were up 1.6% from a week earlier, while refinancings gained 2%, for the week ending June 19.
In another sign of heat in the housing market, new single-family home sales rose 2.2% in May, the fastest pace since February 2008. Tom Woods, chairman of the National Association of Home Builders, says rising builder confidence is tempered only by the challenge of meeting growing demand.
“Our builders are seeing motivated buyers and the release of pent-up housing demand,” Woods said in an NAHB news release. “However, builders are facing supply chain challenges, which is affecting the inventory of new homes.”
Meanwhile, existing home sales, as measured by the National Association of Realtors, increased in May to their highest level since November 2009.
read more: https://www.nerdwallet.com/blog/mortgages/home-sales-fire-mortgage-rates-simmer/
Friday, June 26, 2015
Tuesday, June 23, 2015
'The Fonz' might not be giving all the details about reverse mortgages
No advertisement tells the full story about a product or service.
There are practical reasons for that, such as limited air time or print space. And for obvious reasons, information about costs or risks often is omitted, downplayed or buried in the fine print that flashes quickly across the screen or is in minuscule type.
That's why a recent study critical of reverse mortgage advertisements didn't shock me.
The Consumer Financial Protection Bureau, which seems to be turning up the heat on the reverse mortgage industry, said its research revealed the ads often leave false impressions and don't highlight critical details.
"Perhaps most concerning of all, the ads left the consumers believing that if they purchase a reverse mortgage loan, they will be able to rest assured that they can live in their homes and enjoy financial security for the rest of their lives," bureau Director Richard Cordray told reporters on a conference call. "But a reverse mortgage does not carry such guarantees."
The agency called on potential borrowers to keep their guards up so they aren't misled or confused. While that could happen with any advertisement, the significance here is magnified because these ads target older people who often are vulnerable, on fixed incomes and could be desperate for cash. They may live alone and not have anyone to consult about a reverse mortgage, and not be adept at searching for information online.
You must be at least 62 years old to qualify for a reverse mortgage, which is when the bank or lender pays you, based on the value of the equity in your home, instead of you paying the bank. You still own the home, but the lender holds a lien.
Borrowers are charged fees and interest that accrue monthly, increasing their outstanding balance, but payments aren't required until the loan becomes due. That happens when the borrower sells the home, moves, dies or defaults on the loan by not paying property taxes or homeowners insurance.
Reverse mortgages may be a good fit for some seniors but not a wise move for others, which is why it's important to understand them.
Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, told me people had better get used to reverse mortgages because not only are they here to stay but they also are going to become more common. People are living longer and don't have the savings to fund those golden years but do have equity in their homes, he said.
"It's a product that makes a lot of sense and whose time has come and will be growing," Bell said.
read more: http://www.mcall.com/news/local/investigations/mc-reverse-mortgage-ads-warning-watchdog-20150620-column.html
There are practical reasons for that, such as limited air time or print space. And for obvious reasons, information about costs or risks often is omitted, downplayed or buried in the fine print that flashes quickly across the screen or is in minuscule type.
That's why a recent study critical of reverse mortgage advertisements didn't shock me.
The Consumer Financial Protection Bureau, which seems to be turning up the heat on the reverse mortgage industry, said its research revealed the ads often leave false impressions and don't highlight critical details.
"Perhaps most concerning of all, the ads left the consumers believing that if they purchase a reverse mortgage loan, they will be able to rest assured that they can live in their homes and enjoy financial security for the rest of their lives," bureau Director Richard Cordray told reporters on a conference call. "But a reverse mortgage does not carry such guarantees."
The agency called on potential borrowers to keep their guards up so they aren't misled or confused. While that could happen with any advertisement, the significance here is magnified because these ads target older people who often are vulnerable, on fixed incomes and could be desperate for cash. They may live alone and not have anyone to consult about a reverse mortgage, and not be adept at searching for information online.
You must be at least 62 years old to qualify for a reverse mortgage, which is when the bank or lender pays you, based on the value of the equity in your home, instead of you paying the bank. You still own the home, but the lender holds a lien.
Borrowers are charged fees and interest that accrue monthly, increasing their outstanding balance, but payments aren't required until the loan becomes due. That happens when the borrower sells the home, moves, dies or defaults on the loan by not paying property taxes or homeowners insurance.
Reverse mortgages may be a good fit for some seniors but not a wise move for others, which is why it's important to understand them.
Peter Bell, president and CEO of the National Reverse Mortgage Lenders Association, told me people had better get used to reverse mortgages because not only are they here to stay but they also are going to become more common. People are living longer and don't have the savings to fund those golden years but do have equity in their homes, he said.
"It's a product that makes a lot of sense and whose time has come and will be growing," Bell said.
read more: http://www.mcall.com/news/local/investigations/mc-reverse-mortgage-ads-warning-watchdog-20150620-column.html
Saturday, June 20, 2015
Low-Down Mortgages Picking Up—to Chagrin of Some
Many low-down-payment borrowers—including first-time home buyers—are returning to the market, boosting housing but raising concern among skeptics who worry about the risk of such mortgages.
Such borrowers had largely shied away from the market during the past two spring home-buying seasons, discouraged by weak wage growth and higher fees for loans with small down payments.
Now, lower unemployment and early signs of wage growth are boosting consumers’ finances. At the same time, a sharp fee reduction on loans backed by the Federal Housing Administration has cut the cost of a low-down-payment mortgage, stimulating demand.
Low-down-payment mortgages are “becoming part of the water-cooler discussion again,” said Lawrence Yun, chief economist for the National Association of Realtors. “People are hearing that maybe credit is less tight now than before. They’re sensing that the housing market is open to them again.”
Subprime loans—those to borrowers with especially low credit scores—dried up after the recession and are still largely absent from the market. On the other hand, the availability low-down-payment loans to more-creditworthy borrowers, backed by the FHA and U.S. Department of Veterans Affairs, never went away.
Instead, the high costs of such loans, along with low confidence among the consumers who use them, diminished their role in the market.
The return of first-time buyers could help drive prices higher and boost new-home sales. Those trends in turn may spur economic growth.
But there is concern among some who see such mortgages as a hallmark of the housing bubble and fear that a return to easier lending standards could set off a new crash. Many critics also say the government’s role in encouraging homeownership is misplaced and puts taxpayers at risk.
The perception of an easier borrowing environment is pulling in more first-time home buyers, a cohort that until recently has represented a smaller-than-usual share of purchasers. They accounted for 39.5% of purchases in April, up from 35% a year ago, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey of about 2,000 real-estate agents. That was the highest percentage since 42.8% in June 2010, when first-time buyers rushed into the market to take advantage of an expiring tax credit
see more at: http://www.wsj.com/articles/low-down-mortgages-picking-upto-chagrin-of-some-1434752543
Such borrowers had largely shied away from the market during the past two spring home-buying seasons, discouraged by weak wage growth and higher fees for loans with small down payments.
Now, lower unemployment and early signs of wage growth are boosting consumers’ finances. At the same time, a sharp fee reduction on loans backed by the Federal Housing Administration has cut the cost of a low-down-payment mortgage, stimulating demand.
Low-down-payment mortgages are “becoming part of the water-cooler discussion again,” said Lawrence Yun, chief economist for the National Association of Realtors. “People are hearing that maybe credit is less tight now than before. They’re sensing that the housing market is open to them again.”
Subprime loans—those to borrowers with especially low credit scores—dried up after the recession and are still largely absent from the market. On the other hand, the availability low-down-payment loans to more-creditworthy borrowers, backed by the FHA and U.S. Department of Veterans Affairs, never went away.
Instead, the high costs of such loans, along with low confidence among the consumers who use them, diminished their role in the market.
The return of first-time buyers could help drive prices higher and boost new-home sales. Those trends in turn may spur economic growth.
But there is concern among some who see such mortgages as a hallmark of the housing bubble and fear that a return to easier lending standards could set off a new crash. Many critics also say the government’s role in encouraging homeownership is misplaced and puts taxpayers at risk.
The perception of an easier borrowing environment is pulling in more first-time home buyers, a cohort that until recently has represented a smaller-than-usual share of purchasers. They accounted for 39.5% of purchases in April, up from 35% a year ago, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey of about 2,000 real-estate agents. That was the highest percentage since 42.8% in June 2010, when first-time buyers rushed into the market to take advantage of an expiring tax credit
see more at: http://www.wsj.com/articles/low-down-mortgages-picking-upto-chagrin-of-some-1434752543
Wednesday, June 17, 2015
Vallejo area home mortgages regaining equity, still lag behind the nation
The number of home owners in Solano County still underwater with their mortgages continues falling, though it’s still higher than the national average, a new industry report shows. This means rising equity, which experts say can spur economic growth.
The most recent CoreLogic home equity report shows some 15 percent — or 13,305 — of Vallejo-Fairfield area residential properties with a mortgage were in negative equity as of the first quarter of 2015. That’s significantly lower than the 17,473, or 19.7 percent, in the same quarter last year. It’s also lower than the 14,221, or 16 percent, it was in the last quarter of 2014, according to the report.
Another 2,447 — or 2.8 percent — of properties here were in near negative equity for the first quarter of this year. This is unchanged from the end of last year and down from the 2,615 — or 3 percent — in the first quarter of last year.
“Equity recovery is well underway in Vallejo and to locals that means continued real estate market improvement. Local homeowners can feel comfortable in knowing that their values have improved over the last year and the future also looks bright,” Solano Association of Realtors President Rose Hadaway said. “As long as interest rates remain level, buyers too, can take advantage of the improvement. So it’s a win/win situation and now is the time to reap those rewards that were lost in the down market.”
CoreLogic, a leading global property information, analytics and data-enabled services provider, this week released new analysis showing 254,000 properties nationwide regained equity in the first quarter of 2015, bringing the total number of mortgaged residential properties with equity at the end of Q1 to about 44.9 million, or 90 percent of all mortgaged properties.
Nationwide, the total number of mortgaged residential properties with negative equity is now at 5.1 million, or just over 10 percent of all mortgaged properties. This is down slightly from the 5.4 million homes, or nearly 11 percent, that had negative equity in the fourth quarter of last year, a quarter-over-quarter decrease of nearly 5 percent. Compared with 6.3 million homes, or nearly 13 percent, reported for a year ago, the number of underwater homes has decreased by 1.2 million, or just over 19 percent.
Negative equity, often referred to as “underwater” or “upside down,” refers to borrowers who owe more on their mortgages than their homes are worth.
The study shows that of the more than 50 million residential properties with a mortgage nationally, some 9.7 million — or 19.4 percent — have less than 20 percent equity which is called being “under-equitied.” It also shows that 1.3 million, or 2.7 percent, have less than 5 percent equity, which is called near-negative equity. Borrowers who are “under-equitied” may have a harder time refinancing their existing homes or obtaining new financing to sell and buy another home, and those with near-negative equity are considered at risk of moving into negative equity if home prices fall, CoreLogic officials said.
read more: http://www.timesheraldonline.com/general-news/20150616/vallejo-area-home-mortgages-regaining-equity-still-lag-behind-the-nation
The most recent CoreLogic home equity report shows some 15 percent — or 13,305 — of Vallejo-Fairfield area residential properties with a mortgage were in negative equity as of the first quarter of 2015. That’s significantly lower than the 17,473, or 19.7 percent, in the same quarter last year. It’s also lower than the 14,221, or 16 percent, it was in the last quarter of 2014, according to the report.
Another 2,447 — or 2.8 percent — of properties here were in near negative equity for the first quarter of this year. This is unchanged from the end of last year and down from the 2,615 — or 3 percent — in the first quarter of last year.
“Equity recovery is well underway in Vallejo and to locals that means continued real estate market improvement. Local homeowners can feel comfortable in knowing that their values have improved over the last year and the future also looks bright,” Solano Association of Realtors President Rose Hadaway said. “As long as interest rates remain level, buyers too, can take advantage of the improvement. So it’s a win/win situation and now is the time to reap those rewards that were lost in the down market.”
CoreLogic, a leading global property information, analytics and data-enabled services provider, this week released new analysis showing 254,000 properties nationwide regained equity in the first quarter of 2015, bringing the total number of mortgaged residential properties with equity at the end of Q1 to about 44.9 million, or 90 percent of all mortgaged properties.
Nationwide, the total number of mortgaged residential properties with negative equity is now at 5.1 million, or just over 10 percent of all mortgaged properties. This is down slightly from the 5.4 million homes, or nearly 11 percent, that had negative equity in the fourth quarter of last year, a quarter-over-quarter decrease of nearly 5 percent. Compared with 6.3 million homes, or nearly 13 percent, reported for a year ago, the number of underwater homes has decreased by 1.2 million, or just over 19 percent.
Negative equity, often referred to as “underwater” or “upside down,” refers to borrowers who owe more on their mortgages than their homes are worth.
The study shows that of the more than 50 million residential properties with a mortgage nationally, some 9.7 million — or 19.4 percent — have less than 20 percent equity which is called being “under-equitied.” It also shows that 1.3 million, or 2.7 percent, have less than 5 percent equity, which is called near-negative equity. Borrowers who are “under-equitied” may have a harder time refinancing their existing homes or obtaining new financing to sell and buy another home, and those with near-negative equity are considered at risk of moving into negative equity if home prices fall, CoreLogic officials said.
read more: http://www.timesheraldonline.com/general-news/20150616/vallejo-area-home-mortgages-regaining-equity-still-lag-behind-the-nation
Sunday, June 14, 2015
Feds: Beware the Sugar-Coated Reverse Mortgage
If you believe the advertising hype, a reverse mortgage looks like an easy, risk-free way of bridging financial gaps in retirement. But that’s often not the reality, the Consumer Financial Protection Bureau warns.
“While reverse mortgages can help some older homeowners meet financial needs, they can jeopardize retirement security if not used carefully,” the CFPB said in a new report on reverse mortgage advertising.
In a nutshell, a reverse mortgage is a type of loan that allows older homeowners (ages 62 and up) to borrow against the accrued equity in their homes. It’s a way for seniors to convert their home equity into cash, while still keeping their home. It can be a good option for retirees who have a lot of home equity, but little income.
But here’s the deal: Reverse mortgages need to be repaid if the borrower dies, moves or no longer lives in the home. And seniors could lose their homes if they fail to meet the requirements of the loan, such as paying homeowners insurance and property taxes.
Plus, with seniors living longer than ever before, reverse mortgage borrowers risk outliving their loans.
Unfortunately, many ads for reverse mortgages only tout their benefits – cash to help you enjoy your golden years – without mentioning the risks, the CFPB said. What’s worse, some advertising contains inaccurate, incomplete and confusing information about reverse mortgages that misleads consumers and puts them even more at risk.
The CFPB encourages seniors to consider these facts about reverse mortgages:
Reverse mortgages are not a government benefit. A reverse mortgage is essentially a home loan with fees and compounding interest that need to be repaid.
You could lose your home. If you fail to meet the requirements of the reverse mortgage, you could trigger a loan default and potentially lose your home.
You could outlive your loan money. Americans are living longer today than ever before. If you tap into your home equity too early, you risk outliving the loan and draining a potential source of income you may need later in retirement. “It’s important for those considering a reverse mortgage to understand how long their loan proceeds will last them given the loan’s interest rate, their living expenses, home equity balance, and age,” the CFPB said.
“While reverse mortgages can help some older homeowners meet financial needs, they can jeopardize retirement security if not used carefully,” the CFPB said in a new report on reverse mortgage advertising.
In a nutshell, a reverse mortgage is a type of loan that allows older homeowners (ages 62 and up) to borrow against the accrued equity in their homes. It’s a way for seniors to convert their home equity into cash, while still keeping their home. It can be a good option for retirees who have a lot of home equity, but little income.
But here’s the deal: Reverse mortgages need to be repaid if the borrower dies, moves or no longer lives in the home. And seniors could lose their homes if they fail to meet the requirements of the loan, such as paying homeowners insurance and property taxes.
Plus, with seniors living longer than ever before, reverse mortgage borrowers risk outliving their loans.
Unfortunately, many ads for reverse mortgages only tout their benefits – cash to help you enjoy your golden years – without mentioning the risks, the CFPB said. What’s worse, some advertising contains inaccurate, incomplete and confusing information about reverse mortgages that misleads consumers and puts them even more at risk.
The CFPB encourages seniors to consider these facts about reverse mortgages:
Reverse mortgages are not a government benefit. A reverse mortgage is essentially a home loan with fees and compounding interest that need to be repaid.
You could lose your home. If you fail to meet the requirements of the reverse mortgage, you could trigger a loan default and potentially lose your home.
You could outlive your loan money. Americans are living longer today than ever before. If you tap into your home equity too early, you risk outliving the loan and draining a potential source of income you may need later in retirement. “It’s important for those considering a reverse mortgage to understand how long their loan proceeds will last them given the loan’s interest rate, their living expenses, home equity balance, and age,” the CFPB said.
source: http://www.moneytalksnews.com/feds-beware-the-sugar-coated-reverse-mortgage/
Thursday, June 11, 2015
More Options for Mega Mortgages
Super Jumbo—it sounds like an action hero in a summer blockbuster. In fact, the term applies to home loans for colossal amounts—typically $2 million to $20 million and up, depending on the lender. Bigger loans might seem like a bigger risk, but many lenders see them as a sweet spot.
Qualified wealthy home buyers aren’t likely to have trouble finding financing of up to $10 million at the nation’s biggest banks, says Mike McPartland, head of investment finance for Citibank Private Bank North America.
Super-jumbo borrowers usually are already bank customers, typically of the private-bank division, which provides an array of wealth-management services, he adds. “Chances are we know the client, and we know what we are comfortable advancing to that client,” Mr. McPartland says.
The super jumbo’s popularity doesn’t just come down to relationship banking, though. New York-based mortgage bank Guardhill Financial Corp. is finding it significantly easier to finance and sell super jumbos between $4 million and $20 million now than a year ago, says CEO Alan Rosenbaum. Describing the attitude of some of its approximately 50 mortgage investors, “It’s easier to underwrite one loan for $4 million than 10 loans at $400,000 each,” he adds.
What gives lenders confidence is that most high-net-worth borrowers choose, rather than need, to borrow to buy a home or pay for improvements, says Erin Gorman, national director of mortgage sales for BNY Mellon Wealth Management, which has an average mortgage loan size of $1.2 million. With low interest rates, these borrowers calculate they will have a higher yield keeping money invested and avoid capital gains taxes from the sale of a growing asset. “If interest rates were to jump up quickly, they could choose to pay down, pay off or shift to a different loan structure,” Ms. Gorman says.
read more: http://www.wsj.com/articles/more-options-for-mega-mortgages-1433961979
Qualified wealthy home buyers aren’t likely to have trouble finding financing of up to $10 million at the nation’s biggest banks, says Mike McPartland, head of investment finance for Citibank Private Bank North America.
Super-jumbo borrowers usually are already bank customers, typically of the private-bank division, which provides an array of wealth-management services, he adds. “Chances are we know the client, and we know what we are comfortable advancing to that client,” Mr. McPartland says.
The super jumbo’s popularity doesn’t just come down to relationship banking, though. New York-based mortgage bank Guardhill Financial Corp. is finding it significantly easier to finance and sell super jumbos between $4 million and $20 million now than a year ago, says CEO Alan Rosenbaum. Describing the attitude of some of its approximately 50 mortgage investors, “It’s easier to underwrite one loan for $4 million than 10 loans at $400,000 each,” he adds.
What gives lenders confidence is that most high-net-worth borrowers choose, rather than need, to borrow to buy a home or pay for improvements, says Erin Gorman, national director of mortgage sales for BNY Mellon Wealth Management, which has an average mortgage loan size of $1.2 million. With low interest rates, these borrowers calculate they will have a higher yield keeping money invested and avoid capital gains taxes from the sale of a growing asset. “If interest rates were to jump up quickly, they could choose to pay down, pay off or shift to a different loan structure,” Ms. Gorman says.
read more: http://www.wsj.com/articles/more-options-for-mega-mortgages-1433961979
Thursday, June 4, 2015
Why small home mortgage loans are hard to find
Providing small mortgage loans at non-subsidized prices affordable to the borrower has always been a challenge. The core problem is that the high cost of originating and servicing a mortgage loan is no smaller for a small loan than for a large one, but the dollar amounts of interest and origination fees received by the lender are smaller on small loans.
The obvious remedy, charging a higher interest rate or upfront fees on smaller loans, may make it unaffordable -- or could be interpreted as "price-gouging" and invite the attention of regulators.
Home mortgage lenders prefer to avoid these problems by setting minimum loan amounts, which today are generally in the range of $50,000 to $75,000. Below $50,000, mortgage loans are generally not available. This is a problem for isolated communities in which home prices are very low, and also for borrowers anywhere who are looking to refinance small loan balances.
The problem of the small isolated town
"In my town, we need mortgage loans from $5,000 to $30,000, and they just aren't available. Is there anything that can be done?"
The town is Winters, Texas, population about 3,000. There are few jobs there or anywhere very close, and median household income is about $26,000. Houses in Winters sell for less than $60,000.
Mortgage loans are not available in Winters. In part, this is because the town is so isolated and the demand so small that it can't support a lending facility. There are no appraisers, for example; if one is needed the cost will be double the cost in a larger center because of the time it takes for the appraiser to get to Winters and back.
The combination of exceptionally high origination costs and exceptionally small loan amounts is deadly. The best option for residents of Winters who need funding is an unsecured loan, as discussed below.
The problem of refinancing small loans
Another category of borrowers who are potentially vulnerable to the small-loan problem are those who have paid their loans down substantially and would like to take advantage of lower interest rates by refinancing.
source: http://www.dailyherald.com/article/20150516/entlife/150519271/
The obvious remedy, charging a higher interest rate or upfront fees on smaller loans, may make it unaffordable -- or could be interpreted as "price-gouging" and invite the attention of regulators.
Home mortgage lenders prefer to avoid these problems by setting minimum loan amounts, which today are generally in the range of $50,000 to $75,000. Below $50,000, mortgage loans are generally not available. This is a problem for isolated communities in which home prices are very low, and also for borrowers anywhere who are looking to refinance small loan balances.
The problem of the small isolated town
"In my town, we need mortgage loans from $5,000 to $30,000, and they just aren't available. Is there anything that can be done?"
The town is Winters, Texas, population about 3,000. There are few jobs there or anywhere very close, and median household income is about $26,000. Houses in Winters sell for less than $60,000.
Mortgage loans are not available in Winters. In part, this is because the town is so isolated and the demand so small that it can't support a lending facility. There are no appraisers, for example; if one is needed the cost will be double the cost in a larger center because of the time it takes for the appraiser to get to Winters and back.
The combination of exceptionally high origination costs and exceptionally small loan amounts is deadly. The best option for residents of Winters who need funding is an unsecured loan, as discussed below.
The problem of refinancing small loans
Another category of borrowers who are potentially vulnerable to the small-loan problem are those who have paid their loans down substantially and would like to take advantage of lower interest rates by refinancing.
source: http://www.dailyherald.com/article/20150516/entlife/150519271/
Tuesday, June 2, 2015
High Court: Underwater Homeowners Can’t Void Second Mortgage in Bankruptcy
In a win for banks, the U.S.’s top court Monday ruled that underwater homeowners can’t get rid of a second mortgage by filing for bankruptcy protection.
All nine Supreme Court justices agreed that filing for chapter 7 bankruptcy protection doesn’t give homeowners the power to cancel a second mortgage when their properties aren’t even worth the value of the first mortgage.
The case involved two Florida homeowners who tried to cancel their second mortgages from Bank of America, arguing that because a second mortgage gets paid after the first, it is essentially worthless. Lenders, however, fought to keep the second mortgage liens, arguing that the debt could someday be fully paid once property values rise.
In Monday’s opinion, Justice Clarence Thomas said the court’s decision took into consideration “the constantly shifting” value of real estate.
“Sometimes a dollar’s difference will have a significant impact on bankruptcy proceedings,” he wrote in the nine-page decision.
Consumer advocates said the ruling will make it harder for bankrupt homeowners to get a fresh start.
“Some consumers may be forced to catch up on thousands of dollars of [payments] or lose their homes,” said Carol Colliersmith, an Atlanta bankruptcy lawyer.
Bank of America declined to comment Monday on the ruling. But the bank’s lawyers had argued that the dispute “may be the single most important unresolved issue in consumer bankruptcy.”
The 11th U.S. Circuit Court of Appeals upheld bankruptcy court decisions that stripped Bank of America of its liens. The bank appealed.
The dispute pitted homeowners, who saw property values plummet during the housing crisis, against mortgage lenders and their allies. Lending groups, including the Loan Syndications and Trading Association and American Bankers Association, backed Bank of America.
The AARP Inc. fought for loan cancellation, saying in a brief that it is “far more difficult for older people to bounce back from enormous financial setbacks” like bankruptcy or medical problems.”
Monday’s opinion clarifies the rules for bankruptcy judges who have disagreed on this issue. In 1992, Supreme Court justices determined that a bankrupt homeowner doesn’t have the power to cancel the lien on an underwater first mortgage, but it is less clear what power a bank with an underwater second mortgage has in bankruptcy.
Second mortgages were far less common at the time of the U.S. bankruptcy code’s last major overhaul in 1978.
Amid the confusion, some consumer experts argued that despite the sticking power of a lender’s lien after bankruptcy, bankruptcy should also give struggling homeowners a way to fix their housing-related financial problems.
read more: http://www.wsj.com/articles/supreme-court-underwater-homeowners-cant-void-second-mortgages-in-bankruptcy-1433173699
All nine Supreme Court justices agreed that filing for chapter 7 bankruptcy protection doesn’t give homeowners the power to cancel a second mortgage when their properties aren’t even worth the value of the first mortgage.
The case involved two Florida homeowners who tried to cancel their second mortgages from Bank of America, arguing that because a second mortgage gets paid after the first, it is essentially worthless. Lenders, however, fought to keep the second mortgage liens, arguing that the debt could someday be fully paid once property values rise.
In Monday’s opinion, Justice Clarence Thomas said the court’s decision took into consideration “the constantly shifting” value of real estate.
“Sometimes a dollar’s difference will have a significant impact on bankruptcy proceedings,” he wrote in the nine-page decision.
Consumer advocates said the ruling will make it harder for bankrupt homeowners to get a fresh start.
“Some consumers may be forced to catch up on thousands of dollars of [payments] or lose their homes,” said Carol Colliersmith, an Atlanta bankruptcy lawyer.
Bank of America declined to comment Monday on the ruling. But the bank’s lawyers had argued that the dispute “may be the single most important unresolved issue in consumer bankruptcy.”
The 11th U.S. Circuit Court of Appeals upheld bankruptcy court decisions that stripped Bank of America of its liens. The bank appealed.
The dispute pitted homeowners, who saw property values plummet during the housing crisis, against mortgage lenders and their allies. Lending groups, including the Loan Syndications and Trading Association and American Bankers Association, backed Bank of America.
The AARP Inc. fought for loan cancellation, saying in a brief that it is “far more difficult for older people to bounce back from enormous financial setbacks” like bankruptcy or medical problems.”
Monday’s opinion clarifies the rules for bankruptcy judges who have disagreed on this issue. In 1992, Supreme Court justices determined that a bankrupt homeowner doesn’t have the power to cancel the lien on an underwater first mortgage, but it is less clear what power a bank with an underwater second mortgage has in bankruptcy.
Second mortgages were far less common at the time of the U.S. bankruptcy code’s last major overhaul in 1978.
Amid the confusion, some consumer experts argued that despite the sticking power of a lender’s lien after bankruptcy, bankruptcy should also give struggling homeowners a way to fix their housing-related financial problems.
read more: http://www.wsj.com/articles/supreme-court-underwater-homeowners-cant-void-second-mortgages-in-bankruptcy-1433173699
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