September 4, 2015
REFinBlog has been nominated for The Expert Institute’s Best Legal Blog Competition in the Education Category. From a field of more than 2,000 potential nominees, REFinBlog joins 250 legal blogs in this competition.
Please vote for REFinBlog by clicking on the picture above.
Each blog will compete for rank within its category, while the three blogs that receive the most votes in any category will be crowned overall winners.
Some of the other lawprof blogs that have been nominated are
- The Law Professors Blogs Network
- Eric Posner
- Excess of Democracy
- The Volokh Conspiracy
- Jonathan Turley Law Blog
- The Federal Housing Finance Agency (FHFA) has reported an uptick in mortgage rates from June to July 2015. This is according to the Monthly Interest Rate Survey (MIRS), which measures several indices of new mortgage contracts to arrive at a national average. July’s average was 4.02% up 17 basis points from June’s 3.8%.
- The FHFA has also released its second quarter Home Affordable Refinance Program (HARP) refinance results. According to the report refinances remained unchanged between the first and second quarters of 2015, 31,561 borrowers refinanced with HARP funds, which represented 5% of all U.S. refinances. HARP was established in 2009 in order to assist homeowners unable to refinance because of a decline in their home value. As of March the FHFA estimated that there were over 500,000 borrowers eligible for the HARP program.
- Also according to the FHFA house prices rose 1.2% from the first to the second quarter (Q2) of 2015 and are up more that 5% over Q2 201. This is according FHFA’s House Price Index (HPI) which has been up for the last 16 consecutive quarters.
September 3, 2015
AARP Magazine quoted me in Selling Your Home. It reads, in part,
Judy and Joe Powell recently faced a decision most of us will eventually have to make: Should we sell our home and downsize to save money and effort, or hang on to the homestead because it’s familiar and full of fond memories?
After mulling the choice for a couple of years, the Texas couple decided to sell their 20-acre cattle ranch to move to a nearby college town.
“We are the sole caretakers of this property. It’s 24/7,” says Judy, 69, who mows the pastures with a John Deere tractor while her husband, 71, tends the cattle. “Basically, we don’t want to have to work this hard. We want time to play.”
The Powells now have their sights set on a single-story house in nearby College Station, where, for a monthly fee, someone else will maintain the yard. What’s more, they will be 30 minutes to an hour closer to their friends and doctors. The savings on gas alone will be more than a thousand dollars a year, Judy says.
Most of us aren’t dealing with the rigors of running a ranch. But, like the Powells, many of us will discover at some point that our homes, though we love them, no longer suit our lifestyles, or that they are becoming labor-intensive money pits.
A recent Merrill Lynch survey of people’s home choices in retirement found that a little more than half downsized and, like the Powells, were motivated by the reduction in monthly living costs and by shedding the burden of maintaining a larger home and property. Still, moving is not a decision easily made.
“The tie to one’s home is the hardest thing to understand from the outside. It’s a very personal decision,” says Rodney Harrell, a housing expert with the AARP Public Policy Institute.
Some people may be reluctant to move from a house where they raised children and created decades of memories, he says. On the other hand, the cul-de-sac that provided a safe place for kids may be isolating if driving becomes a challenge.
A good way to begin the process of figuring out what’s best for you is to “recognize the trade-offs,” Harrell says. First, consider the house itself. Is it suitable for your needs, and will it allow you to age in place? Most homes can be easily modified to address safety and access issues, but location is also critical.
“How close are health facilities?” asks Geoff Sanzenbacher, a research economist with the Center for Retirement Research at Boston College. “Are things nearby, or do you have to drive?”
Even if your current home meets these age-friendly criteria, you need to consider whether it is eating up money that could be spent in better ways to meet your changing needs.
For example, the financial cushion provided by not having a mortgage can be quickly erased by rising utility costs, property taxes and homeowner’s insurance. There is also the looming uncertainty of major repairs, which can cost thousands of dollars, such as a new roof and gutters, furnace or central air conditioner. A useful budgeting guide is to avoid spending more than 30 percent of your gross income on housing costs, says David Reiss, a professor at Brooklyn Law School who specializes in real estate finance.
“This isn’t a hard-and-fast rule, but it does give a sense of how much money you need for other necessities of life, such as food, clothing and medical care, as well as for the aspects of life that give it pleasure and meaning — entertainment, travel and hobbies,” Reiss says.
So if your housing expenses are higher than a third of your income or you’re pouring your retirement income into your house with little money left to enjoy life, consider selling and moving to a smaller, less costly place.
Just as important, once you’ve made the decision, don’t dawdle, Sanzenbacher says. The quicker you move, the faster you can invest the proceeds of the sale and start saving money on maintenance, insurance and taxes.
Take this example from BC’s Center for Retirement Research: A homeowner sells her $250,000 house and buys a smaller one for $150,000. Annual expenses, such as utilities, taxes and insurance, typically amount to 3.25 percent of a home’s value, so the move to the smaller home saves $3,250 a year right off the bat.
Moving and other associated costs would eat up an estimated $25,000 of profit from the sale, leaving $75,000 to be invested and tapped for income each year.
If all of this sounds good, your next decision is where to move. Your new location depends on any number of personal factors: climate; proximity to family and friends; preference for an urban, suburban or rural setting; tax rates; and access to medical care, among other considerations.
“You want to take an inventory of your desires and start to think, ‘Do I have the resources to make that happen?’ ” Reiss says.
- Corelogic’s recently released, Home Price Indicator (HPI) predicts that home prices will appreciate 4.7% from July 2015 to July 2016.
- MakeRoom’s campaign to bring attention to the millions of families who struggle to pay rent. Every first of the month, when rent due, the organization arranges a concert in the living room of a family struggling to pay rent. On September first the R&B group Miguel played in the home of Devona. Devona, a single mother from Detroit, Michigan who is also raising a nice and nephew, pays over half of her income in rent to keep her family in a safe suburban home.
- The National Housing Conference (NHC) will be hosting a webinar on September 8th to discuss the ways in which affordable housing development policies are linked to educational outcomes and ways in which organizations are addressing the issue.
September 2, 2015
DBRS has posted U.S. Residential Mortgage Servicing Mid-Year Review and 2015 Outlook. There is a lot of interest in it, including a table that demonstrates how “the underwriting box for prime mortgages slowly keeps getting wider.” (7) The report notes that
While most lenders continue to originate only QM [Qualified Mortgage] loans some have expanded their criteria to include Non-QM loans. The firms that are originating Non-QM loans typically ensure that they are designated as Ability-to-Repay (ATR) compliant and adhere to the standards set forth in the Consumer Financial Protection Bureau’s (CFPB) Reg Z, Section 1026.43(c). Additionally, most Non-QM lenders are targeting borrowers with high FICO scores (typically 700 and above), low loan to values (generally below 80%) and a substantial amount of liquid reserves (usually two to three years). Furthermore, most require that the borrower have no late mortgage payments in the last 24 months and no prior bankruptcy, foreclosure, deed-in-lieu or short sale. DBRS believes that for the remainder of 2015 the industry will continue to see only a few Non-QM loan originators with very conservative programs.
CFPB ATR And QM Rules
The ATR and QM rules (collectively, the Rules) issued by the CFPB require lenders to demonstrate they have made a reasonable and good faith determination, based on verified and documented information, that a borrower has a reasonable ability to repay his or her loan according to its terms. The Rules also give loans that follow the criteria a safe harbor from legal action. (8)
that the issuance of the ATR and QM rules removed much of the ambiguity that caused many originators to sit on the sidelines for the last few years by setting underwriting standards that ensure lenders only make loans to borrowers who have the ability to repay them. In 2015, most of the loans that were originated were QM Safe Harbor. DBRS recognizes that the ATR and QM rules are still relatively new, having only been in effect for a little over a year, and believes that over time, QM Rebuttable Presumption and Non-QM loan originations will likely increase as court precedents are set and greater certainty around liabilities and damages is established. In the meantime, DBRS expects that most lenders who are still recovering from the massive fines they had to pay for making subprime loans will not be originating anything but QM loans in 2015 unless it is in an effort to accommodate a customer with significant liquid assets. As a result, DBRS expects the availability of credit to continue to be constrained in 2015 for borrowers with blemished credit and a limited amount of cash reserves. (8)
The DBRS analysis is reasonable, but I am not so sure that lenders are withholding credit because they “are still recovering from the massive fines they had to pay for making subprime loans . . ..” There may be a sense of caution that arises from new CFPB enforcement. But if there is money to be made, past missteps are unlikely to keep lenders from trying to make it.
- On the Cyclicity of Regional House Prices: New Evidence for U.S. Metropolitan Statistical Areas, Michael André Flor & Torben Klarl, CESifo Working Paper Series No. 5471.
- How Mortgage Finance Affects the Urban Landscape, Sewin Chan, Andrew Haughwout & Joseph S. Tracy, FRB of New York Working Paper No. FEDNSR713.
- House-Price Expectations, Alternative Mortgage Products, and Default, Jan K. Brueckner, Paul S. Calem & Leondard I. Nakamura, FRB of Philadelphia Working Paper No. FEDPWP15-1.
- A Cost-Benefit Analysis of Judicial Foreclosure Delay and a Preliminary Look at New Mortgage Servicing Rules, Lawrence R. Cordell & Lauren Lambie-Hanson, FRB of Philadelphia Working Paper No. FEDPWP15-14.
- Sharing Property, Kellen Zale, University of Colorado Law Review (Forthcoming); U of Houston Law Center No. 2015-A-16.
- [Re]Integrating Community Space: The Legal and Social Meanings of Reclaiming Abandoned Space in New York’s Lower East Side, Andrea L. McArdle, 2 Savannah Law Review 247 (2015).
- Bankruptcy Weapons to Terminate a Zombie Mortgage, Andrea J. Boyack & Robert Berger, Washburn Law Journal, Vol. 54, No. 3, 2015.