Tag: Mortgages

Mortgages
08/13/07 11:17am

Why You Might Want To Price Your Home Around $417,000

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Remember a month ago, when the Chronicle reported that high-priced homes in Houston were selling well, despite all the problems at the lower end of the market?

Sales of homes priced $500,000 and higher were up 11.7 percent so far this year.

How long will that continue? Rates for jumbo mortgages (currently greater than $417K) and Alt-A loans have risen dramatically in recent weeks, while other rates have dropped, Bankrate reports.

Investors now believe that stated-income borrowers are going to default on their jumbo loans in bigger than previously expected numbers. So they have virtually stopped buying Alt-A and especially jumbo Alt-A mortgages. When lenders can’t sell the loans, they stop offering them to borrowers — or they ration them by jacking up the rates. That’s what happened.

But why are jumbo-mortgage customers being penalized for the actions of the no-doc-loan crowd?

When jumbo mortgages are securitized, the loan pools contain a mixture of mortgages in which borrowers documented their incomes along with mortgages in which borrowers merely stated their incomes, without providing documentation. In other words, they mingle jumbo and Alt-A.

It’s not hard to imagine an effort to unbundle those two loan classes, but don’t hold your breath.

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Augusta Pines
07/24/07 10:22pm

Where the Real Estate Market Got Too Hot

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Financing, Fraud, Insurance, Spring
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Burned Shell of 7802 Links Crossing Lane in SpringFor months, the giant, burned-out shell of a home has been sitting on an acre lot at the corner of Links Crossing Lane and Augusta Pines Parkway in Spring, less than half a mile from the baby Bermuda grass fairways of the Augusta Pines Golf Course and its 100,000-sf “southern style” clubhouse. But now Harris County Fire Marshal investigators are reporting that the fire that destroyed the 7000-sf McMansion in February was a poorly concealed arson. While owner Michael Macomber was vacationing in the Bahamas, a man named Adnan Aquil filled the home with 25 five-gallon cans of gasoline he had purchased over several days from Wal-Mart and arranged them so they would ignite spectacularly.

According to investigators, Macomber has now confessed that he paid Aquil $10,000 for his handiwork, before filing a $1.2 million insurance claim.

What made Macomber do it? Was he tired of being overextended on an overmortgaged, overpriced, and oversized home in an overmarketed subdivision in Northwest Houston?

“He was holding on to everything,” [Harris County Senior Arson Investigator Dustin] Deutsch said. “His credit score was getting impacted, payments were getting impacted. The county probably didn’t appreciate him bouncing his tax check. . . .”

Of course there’s more to the story:

“After further scrutiny of the closing paperwork, investigators determined that the residence’s value was grossly overvalued by a local real estate appraiser,” Harris County Arson Investigations officials stated in a media address. “It was also learned that Macomber grossly inflated his stated income to the mortgage company. This embellishment included forged financial documents and other misleading credentials.”

In return for paying an inflated price for the Augusta Pines McMansion in March 2006, Macomber allegedly received a $171,000 kickback from the seller. In all, seven people, including a neighbor couple, have been charged in fraud related to this home. According to KHOU, every house on the street has been foreclosed on.

Yes, it’s a short street.

Photo of 7802 Links Crossing Ln.: KHOU

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Financing
07/18/07 9:43am

Why Mortgage Closing Costs Are So High in Texas

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Insurance, Mortgages
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Bankrate’s annual survey of home-mortgage closing costs shows Texas has the second-priciest mortgage closing costs of any state. How come? Title insurance and title searches. Texas has the most expensive in the country:

. . . the insurance department sets (or “promulgates”) the rates, with heavy input from the title agencies and insurance companies. Because the state establishes the rates, title companies don’t compete for consumers by offering lower prices.

How do title insurers compete in states where regulators set prices? According to a report issued in April by the Government Accountability Office, “title agents do not market to consumers, who pay for title insurance, but to those in the position to refer consumers to particular title agents, thus creating potential conflicts of interest.” The report says the industry is rife with kickbacks and undisclosed referral fees among title agents, real-estate agents and lenders.

The study showed that title insurance in Houston (the only Texas city polled for the study) averaged $1,185.06 for a $200,000 mortgage, 68 percent higher than the national average of $707.30. Title search costs averaged $305.08, 54 percent higher than the national average of $197.71.

In his blog, report author Holden Lewis adds a personal comment:

As a native of the Lone Star State, I urge my erstwhile neighbors to ask their members of the Lege why they allow the insurance department to get bulldozed by the title insurance industry. Maybe Texas could set a reasonable objective to have the fifth-most expensive title insurance in the country? That’s doable, right? I mean, Texas doesn’t have to be No. 1 in everything. Or maybe the state could force title insurers to compete in a free market — although cartels are pretty good at making a mockery of a market.

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Mortgages
05/11/07 12:00pm

No No Fee Mortgage

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Bank of America’s new no-PMI, no-fee mortgage program isn’t all it’s cracked up to be, claims Lending Clarity:

BofA will give you a conforming 30 year fixed rate for 6.25% with 1.001 Points. Wait a minute, points? I thought this was a No Fee loan? Apparently, in BofA’s world, points are not fees.

So how does this quote compare to a typical market deal? No difference.

It may not be common knowledge to consumers. But when putting less than 20% down on a conventional loan, anybody can do a single loan and not pay for mortgage insurance. It’s called lender-paid mortgage insurance. Rather than collecting a premium for a third party MI company, the lender charges a higher interest rate and self-insures against the potential loss. It just isn’t used much because mortgage insurance is temporary and the higher rate is permanent.

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Mortgages
04/20/07 7:19am

Coming Soon: The 50-Year Mortgage

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Commenting on reports that Fannie Mae and Freddie Mac are trying to create standards for new loans for high-risk borrowers, mortgage broker Marc Brinitzer at mortgage blog Lending Clarity says

Rumors are that Freddie Mac . . . has been working on a 50 year loan with an initial 10 year interest-only period. This would certainly smooth out the ride, assuming borrowers have the equity and income to qualfiy.

Hope your home lasts that long, too.

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