October 11, 2016
Tuesday’s Regulatory & Legislative Roundup
- New York City’s mayor plans to change the affordable housing requirements so that more people are eligible regardless of their credit history or housing court disputes.
- Policy makers in New York analyze the sale of homes in New York that are delinquent in taxes. Public advocates found that many of the homes for sale were in extremely poor conditions which they deemed unacceptable.
October 11, 2016 | Permalink | No Comments
October 10, 2016
Columbus Day on the Red Planet?
Elon Musk
In honor of the explorer’s drive to plunge into the unknown, take a look at Elon Musk’s plans to colonize Mars. They are stunning, visually and otherwise. His immediate mission objectives give you a tiny sense of the challenges he faces:
- Learn how to transport and land large payloads on Mars
- Identify and characterize potential resources such as water
- Characterize potential landing sites, including identifying surface hazards
- Demonstrate key surface capabilities on Mars
Who knows, maybe we will celebrate Columbus Day on Mars one of these years . . .
October 10, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- A local Connecticut resident will not allow her home to be foreclosed by CitiMortgages, Inc. The local resident recently filed suit in a Connecticut court alleging the company has violated state and local foreclosure laws.
- An Arkansas couple will not let Bank of America and Nationstar Mortgage Holdings off the hook. The parties are in court over a dispute regarding inflated mortgages. The couple are the first to argue this case in front of a judge; however, a potential class action suit is arising.
October 10, 2016 | Permalink | No Comments
October 8, 2016
REFinBlog Nominated As Best Legal Blog, Again
REFinBlog has been nominated for the second year in a row for The Expert Institute’s Best Legal Blog Competition in the Education Category. Please vote here if you like what you read, or click on the image above.
The competition will run from October 3rd until the close of voting at 12:00 AM on November 14th.
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
- Eric Posner Blog
- Jonathan Turley Law Blog
- Law Professors Blogs Network
- PrawfsBlawg
- Stanford Law School Blog
- University of Chicago Law School Faculty Blog
- Volokh Conspiracy
Please vote here if you like what you read, or click on one of the images below.
October 8, 2016 | Permalink | No Comments
October 7, 2016
Can Seniors Get Mortgages? Should They?
TheStreet.com quoted me in Can Seniors Get Home Mortgages? Should They? It reads, in part,
Senior citizens can and are getting approved for mortgages, and we are not talking reverse mortgages or home equity lines of credit, but – in many cases – 30-year fixed loans. Even when the borrower might be 85 and the actuarial probability of making it to the end of the loan term is nil.
The federal government is blunt: age cannot be used to discriminate against applicants for home loans. Capacity to repay is a factor – for seniors and every other borrower – but a lender cannot turn down an applicant just because he is 65…or 75…or 85. And loans are getting made.
Which raises the other question: is it wise for the borrower? Bankers can take care of themselves, but seniors need to ask: should I be borrowing a lot of money on a house at my age?
In Vancouver, Wash., Dick Kuiper – who said he is “approaching 70,” as is his wife – “just purchased a new home last year and got a 30 year mortgage at just under 3%, and we both believe this was a brilliant move.”
“We first made sure we made a large enough down payment so we would always have positive equity in the home,” Kuiper elaborates. “With that calculated, we looked at the alternatives, either pay in cash – which would naturally come out of our savings – or take out a mortgage. We looked at what we could get by putting the same amount of money into a retirement annuity with a downside guarantee. That annuity pays a minimum of 5% for life and currently is paying in the 8% to 9% range. Do the math. We’d be crazy to pay cash for the house.”
Kuiper’s right. For his wife and him, it made no sense to pay cash for a house – not when mortgage rates are breathtakingly low.
Case closed? Not at all.
Ash Toumayants, founder of financial advisors Strong Tower Associates in State College, Pa., said that in his experience few seniors ever want another mortgage in retirement after they settled up on their first one. “Most are excited when they pay it off and don’t want another one,” Toumayants says.
Another fact: to get a mortgage, a senior has to demonstrate to a lender a capacity to repay. Age cannot be used against a senior, but lack of cashflow can. And many seniors just have sizable trouble qualifying for a mortgage. “The trick is whether they have enough income to qualify or not,” said Casey Fleming, a mortgage expert in Northern California who said that he right now is working on a loan for an 85-year-old client.
Brian Koss, executive vice president of Mortgage Network, an independent mortgage lender in the eastern U.S., elaborated: “For seniors thinking about getting a mortgage, it’s all about income flow. If you have a consistent source of income, and a mortgage payment that fits that income, it makes sense. Something else to consider: if you have income, you have taxes and a need for a tax deduction. With a mortgage, you can write off the interest.”
* * *
But then there is an ugly issue to confront. Is the senior arriving at this purchase decision on his own steam? Brooklyn Law professor David Reiss explained why that needs to be asked. “Seniors should discuss big financial moves with someone whose judgment they trust (and who does not stand to benefit from the decision). Elder financial abuse is rampant.”
Reiss added: “What has changed in their financial profile that is leading them to do this? Is someone – a relative, a new friend – egging them on or leading them through the process?” Reiss is right in the caution, and that’s a concern that has to be satisfied.
October 7, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- The ADP National Employment Report predicted a gain in jobs in September similar to the previous month’s increase.
- Predictions from the National Association of Realtors, the Mortgage Bankers Association,Fannie Mae and Freddie Mac show that home sales are going to heat up in 2017, according to a blog by NAR.
- While small, mortgage applications ticked up 2.9% from one week earlier, according the Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey for the week ending Sept. 30.
October 7, 2016 | Permalink | No Comments
October 6, 2016
Credit Card Debt and Your Mortgage
Realtor.com quoted me in Fannie Mae Taking a Closer Look at Applicants’ Credit Card Payments. It opens,
If you feel like you’ve been managing your debt just fine, making the minimum payment on your credit cards on time every month, you might want to change your ways before applying for a home loan.
Fannie Mae, which offers government-backed loans to more than a quarter of mortgage applicants nationwide, has just revised its risk assessment software to factor in more details about how borrowers pay off their debts.
Historically, the credit report generated by Fannie Mae—and scrutinized by lenders—mainly showed how much of your available credit you’d used and whether you’d made your monthly payments on time. But the newest version of Fannie’s Desktop Underwriter software (used by about 2,000 lenders and more than 10,000 mortgage brokers) kicks things up a notch. Now, it also details just how much you coughed up each month over the past two years—whether you’re parting with only the minimum, laying out the full monty, or hovering somewhere in between.
Fannie officials say these new details, known as “trended credit data,” can help lenders better assess how well people manage their debts—and, consequently, how well they’ll manage their mortgage payments.
“Generally, the new underwriting model gives weight to how borrowers pay off their credit debt,” explains David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “While it is not clear how finely tuned the new system is, there is clearly a move toward a more granular approach to debt repayment.”
How this news affects your prospects of a home loan
So far, FICO and other credit score measures aren’t factoring in this extra info, so your score won’t get dinged. But your application could be affected in another way.
“If you compare two people with exactly the same credit profiles except that one pays more than the minimum amount due or the entire balance, that person would be considered to be a lower credit risk by Fannie Mae,” says Reiss. “As a result, that person would be more likely to be approved for a mortgage.”
But you might not have to pay much more than the minimum to boost your chances of getting that loan.“At this time it’s unclear what impact to mortgage scoring and automated underwriting the payment history will have, but we believe anyone that is paying 30% or more of their balance monthly will see improvement,” says San Diego loan officer Michael Rosenbaum at CrossCountry Mortgage.
Of course, people who pay off the whole balance every month will be favored even more, and with good reason.
“Research has indicated that borrowers who paid off their credit card debt every month are 60% less likely to become delinquent than borrowers who make only the monthly minimum payment,” Rosenbaum adds.
And while this might sound ominous, it could actually be helpful if you had some credit blemishes in your past.
“Fannie has also indicated that paying more than the minimum due will particularly help borrowers with delinquencies on their credit report, because it will allow borrowers to ‘demonstrate that a late payment was not deeply reflective of their general debt repayment ability and behavior,’” Reiss notes.
October 6, 2016 | Permalink | No Comments
