home loan Archives

More Homeowners Consider Refinancing

More Homeowners Consider Refinancing

Because of the decrease in mortgage rates to record lows, homeowners’ demand for refinancing has increased across the nation.

According to lenders and mortgage experts, all types of homeowners are attempting to decrease their monthly payments especially with the rates for 30-year mortgages decreasing to less than 4 percent ever since October of the previous year.

Mike Fratantoni, vice president of research for National Mortgage Bankers Association in Washington, D.C., said that nationwide refinance volume is at a three-year high in the past few weeks while mortgage rates stayed at record lows. Fratantoni added that the number one cause for the increase in refinances is interest rates.

Together with months of interest rates at record lows, some of the other factors that push the refinancing boom include the competitive lending market and modifications in a few federal refinancing programs intended for distressed homeowners.

There are advantages in refinancing a mortgage and some of these include reducing the monthly payments, eliminating the uncertainty of an adjustable-rate mortgage by changing it to a fixed rate, opening home equity cash to cover home improvements or college costs, and most importantly, shortening the loan term can result to thousands of savings in terms of interest.

According to John Winters, a wealth adviser at Morgan Stanley Smith Barney, he recommended all his clients to consider refinancing their mortgages, especially those who find it hard to live with little returns on CDs and bonds that have low interest because it can free up monthly income.

When considering refinancing a mortgage, you basically look at how long you think you are going to stay in your present home and whether or not the upfront costs offset the monthly savings. Greg McBride, senior financial analyst at Bankrate.com, said that you are not going to earn back the closing costs if you’re not staying in your home for a year or two.

Banks Review: Mortgage Choice

Banks Review: Mortgage Choice

The good out-turn continues for the Broker Mortgage Choice as the agency reports increase in their loans for household approvals which increased up to $11.2 billion in their last recording year. This increase is 6.4% of their loan book that’s a record of $45.1 billion in their financial year’s end.

The recent data of the Australian Bureau of Statistics reveal that the amount of the new housing commitments is $244.8 billion in the recent fiscal year. It has increased to 2.9% from the last year’s records. The Mortgage Choice has also increased its shares to 4.6%, which is 0.4% more than their last financial year.

Banks use the mortgage broking model to help provide the loans of its clients. This is done with the client paying a commission to the broker when the loan for them is accepted by the bank. There is a small trailing commission that remains with the loan each year. Mortgage Choice pays franchise for new businesses and different percentages for the customers’ commissions.

The average life time of a loan is four to five years and the trailing commission might act very predictable and consistent. They contribute to about 66% of their company’s net income. The company that has been a client for these banks do not have to worry about the risks that might pop up from the loans because the bank is taking on the responsibilities with them and the company won’t have any liabilities for that.

Michael Russell, the CEO of Mortgage Choice says that market suffers from consumer conservatism and passive growth in credit; however this does not pose as a problem for them because they have healthy revenue with a low amount of expenses for their operations.

Regional banks such as Wide Bay, Bendigo and Adelaide Bank Ltd. And Home loans are among other financial institutions that offer housing for applicants. But their method of finance and how they treat mortgages are different from Mortgage Choice. RHG Limited, or better known as RAMS Home Loans was hit by the financial crisis and made it succumb into the turmoil of the economy. It had to stop making new businesses in 2007 which led to the fall of the share prices.

More Young People and Old Generations Live in Family’s Home

More Young People and Old Generations Live in Family’s Home

According to a recent research, there have been an increasing number of cash-strapped households that choose to let the younger generations and senior family members to stay at home in order to save money and resort to ask for loans from friends and family rather than from lenders.

The research conducted by Aviva has revealed that families are taking drastic measures just to make the ends meet since the double-dip recession still continues.

Because of the higher cost of care costs, elderly relatives opt to live with their children. In contrast, the impossibility of several first-time buyers entering the property market indicates there will be more young people staying longer in their family homes.

73 percent of people aged above 18, which is equal to 36 million, have lived with their families even into adulthood. Generally, they save £225 every month by staying in their family home. However, it still costs the family £107 every month.

The key is to assist young people and couples save money in order for them to buy and move into their own home.

More or less 18 percent of people living with their families are students, and 17 percent are older generations returning to their children’s family home.

According to Louise Colley, head of protection sales at Aviva, nearly 20 percent of inter-generational living is because of families welcoming back the older generations into their homes. Moreover, since the population is rapidly aging, this will more likely be customary in the future. Thus, it is important that families consider this factor especially when purchasing and renovating their homes.

The Family Finances Report of Aviva also discovered that there is an increase in the amount of money being borrowed by cash-strapped families from their friends and family. The usual size of these loans was twice as much in the past three months and reached £1,545 in August, which is currently a record high.

Fannie Mae, Freddie Mac, and FHA is Profitable Again

Fannie Mae, Freddie Mac, and FHA is Profitable Again

These past few years, politicians, economists and Wall Street became concerned for Fannie Mae, Freddie Mac, and the Federal Housing Administration. They were anxious about the agencies’ respective ability to stay solvent. The three agencies have been getting high default rates for almost five years, which resulted to large quarterly losses.

Recently, those concerns have improved, as Fannie Mae reported $5.1 billion profits for the second quarter and Freddie Mae reported $3 billion profits for the second quarter as well.

Towards the end of the year 2008, the two agencies got $188 billion in taxpayer funds as a form of assistance. As of now, they have paid back a quarter of that, and if profitable quarters continue, they will be able to repay the loan in full.

One of the things that helped the agencies return to profitability is the improving housing market. Another reason can be better risk management of the two agencies.

In addition to Fannie Mae and Freddie Mac, FHA is also rebuilding their reserves and recapitalizing.

Ever since the first months of 2009, FHA has increased its mortgage insurance premiums on four separate instances. New FHA homeowners located in high-cost areas (e.g. Orange County, California and Loudoun County, Virginia) currently pay as high as 1.5 percent every year to the FHA’s capital reserves.

A few things that helped FHA to keep a positive capital ratio and move toward its target 2 percent reserve ratio include bigger premiums and fewer FHA defaults.  At present, the capital ratio of FHA is around 0.50 percent. Moreover, $1 billion of the $25 billion mortgage services settlement went to FHA’s bottom line.

One huge factor that contributed to Fannie Mae, Freddie Mac, and FHA’s return to profitability is the increase in U.S. homeowners staying current on their respective home loans. In other words, decrease in defaults indicates fewer losses and more profit.

FHA Refinance Applications Increase Nearly 200 Percent

FHA Refinance Applications Increase Nearly 200 Percent

According to the Single-Family Outlook report for the month of June, there was an increase in the refinance applications for mortgage loans insured by the Federal Housing Administration (FHA) by almost 200 percent from May to June because of the rise in applications for streamline refinance loans.

There were 188,810 FHA loan applications for the month of June, which is up by 52.1 percent from the 124,125 applications submitted one month earlier, and 43.3 percent more than the 131,796 applications submitted in the same month of the previous year.

Moreover, loan applications for refinancing an existing mortgage increased 198.3 percent, from 34,407 applications submitted in May to 102,640 applications submitted in June. It was also up by 190.2 percent compared with 35,367 applications submitted in the same month of the previous year.

In contrast, the number of applications for purchasing a home declined 4.3 percent, from 82,726 applications submitted in May to 79,138 applications submitted in June. It is also decreased by 9.7 percent from 87,674 applications submitted in the same period a year ago.

In terms of completed applications, it decline by 5.7 percent, from 114,008 in May to 107,533 in June. However, June’s completed applications were still 6 percent higher than the 101,469 applications one year earlier.

The loans for purchased homes made up 63.9 percent of the overall completed FHA insured loans in June, which is up by 3.8 percent from May but 7.7 percent lower than June of the previous year.

Refinanced loans made up 31.3 percent of the overall completed loans in June, which is down by 22.3 percent from May but up by 58.5 percent from June last year.

For a home buyer securing FHA loan in June, the average FICO score was 695, which decreased four points from May and five points from the previous year. In addition, the average FICO score for refinanced loans in June was 707, which decreased by four points from May and increased by nine points from last year.

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