October 25, 2016
The Mortgage After a Spouse’s Death
BeSmartee.com quoted me in What Happens to My Mortgage When My Spouse Dies? It opens,
We would like to help by answering the question of what happens to your mortgage when your spouse dies, and we’ve asked several experts to chime in.
It’s bad enough when your spouse dies, but to also worry about what will happen with your mortgage only adds to the turmoil. We would like to help by answering the question of what happens to your mortgage when your spouse dies, and we’ve asked several experts to chime in.
When You Are on the Deed
If you and your spouse took out a mortgage loan together, you would then be responsible for paying the mortgage by yourself if your spouse dies. ”If the surviving spouses’ name is on the mortgage, they are now responsible for the entire mortgage,” says Randall R. Saxton, a Madison, MS, attorney. But you have inherited your spouses’ half of the home, which typically means you don’t need to change the title.
Your partner’s passing doesn’t disqualify the mortgage or let the lender call it in immediately, using a ”due-on-sale” clause. Such clauses let mortgage lenders demand the entire mortgage be paid if a new owner assumes the mortgage, or they take the house back. But the Garn-St. Germain Depository Institutions Act of 1982 prohibits lenders from using the due-on-sale clause when your spouse dies. But you would need to be able to handle the mortgage payments on your own to keep the house. ”While the lender cannot automatically foreclose due to the death of the mortgagee, they will be able to foreclose if the surviving spouse is unable to pay,” says Saxton.
Saxton has a suggestion: ”I always recommend life insurance policies, which would enable the surviving spouse to either pay off or maintain the payments of the mortgage.”
When You Are Not on the Deed
If you are not on the mortgage deed and your partner dies, your partner’s will should determine whether you get the house. If your partner didn’t have a will, your spouses’ assets will be distributed according to your state’s intestate laws.
Typically you, as the surviving spouse, will get your spouses’ assets after all expenses, such as funeral expenses and other debts, are paid. If there are enough assets in the estate, the mortgage will be paid. ”The estate will pay off the mortgage during probate,” says Aviva S. Pinto, CDFA, a wealth advisor at Bronfman E. L. Rothschild in New York City. ”If there are not sufficient assets to cover all debts, the house will have to be sold to pay off the debt,” says Pinto.
If you have children, your share is split with them. ”For example, if there is only one child of the deceased, the surviving spouse will own 50 percent of the property, and the child will own 50 percent of the property,” says Saxton. ”If neither [of you] pay the mortgage, the lender will be able to foreclose.”
Your Mortgage Lender Should Offer Help
No matter your particular situation, if your partner dies, you should contact your mortgage lender as soon as possible. They can help guide you on what will happen and your options. ”The Consumer Financial Protection Bureau has recently issued a rule to provide more protections to the survivors of a homeowner,” says David Reiss, professor of law at Brooklyn Law School. ”The rule gives widowed spouses some help in dealing with mortgage issues at a difficult time.”
Here are some specifics on how your mortgage lender can help, according to Reiss:
1. Mortgage servicers have to tell the widowed spouse about the documents that are necessary to confirm his or her status as a successor in interest to the deceased spouse.
2. Servicers are also required to provide many of the same notices and documents to the surviving spouse who is a successor in interest that the deceased spouse would have received.
October 25, 2016 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- Governor Cuomo returned 250,000 dollars to Brooklyn residents. The state found that overall 52,000 tenants were overcharged roughly 2.8 million dollars.
- The U.S. Department of Housing and Urban Development created a new rule to protect victims of sexual assault, domestic violence, and dating violence. The department determined that many of the people protected by this rule often times experienced higher rates of eviction or coercion to leave the premises.
October 25, 2016 | Permalink | No Comments
October 24, 2016
Home Equity Loan Resets
Newsday quoted me in Know What To Do When Your Home Equity Loan Resets (behind paywall). It opens,
Whoever said what you don’t know can’t hurt you, was wrong. Take for example the 43% of U.S. homeowners polled by TD Bank, who over the next couple of years will have their Home Equity Lines of Credit (HELOC) reset. More than a quarter of them don’t know when their draw period ends.
People use HELOCs for things like home renovations, medical bills and college tuition. With HELOCs, you borrow — often for 10 years — and make interest-only payments. When that “draw period” ends, you pay principal and interest. Monthly payments can jump significantly.
However, only 19% of those polled understood that a reset would increase their monthly payments and 34% thought they would decrease.
Confusion is costly.
- Understand the terms
What is the current interest rate? When does it reset? When it resets, how is the new interest rate determined? When are principal payments first due? What will the new payment be? Can the HELOC convert to a fixed interest rate? Know the answers to these questions, says David Reiss, a Brooklyn law school professor, specializing in real estate.
- Come up with a game plan
“Don’t wait until the final month of the interest-only period to evaluate the impact the payment has on your budget,” says Chuck Price, vice president of lending at NEFCU in Westbury.
October 24, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- Investors suing Wells Fargo for mishandling “mortgage backed securities investments” are urging a New York court to deny Wells Fargo’s motion to dismiss based upon a California Supreme Court ruling.
- Airbnb had enough. The temporary home rental company is suing the state of New York in Federal court so that they can defeat Governor Cuomo’s law that bans specific types of advertising of the company.
- Two apartment buildings in Chicago have survived a 15 year dispute between the owners and the city of Chicago. Owners of the building hope that the United States Supreme Court will make decision in their favor.
October 24, 2016 | Permalink | No Comments
October 21, 2016
Advancing Equitable Transit-Oriented Development
MZ Strategies has posted a white paper funded by the Ford Foundation, Advancing Equitable Transit-Oriented Development through Community Partnerships and Public Sector Leadership. It opens,
Communities across the country are investing in better transit to connect people of all income levels to regional economic and social opportunity. Transit can be a catalyst for development, and the demand for housing and mixed-use, walkable neighborhoods located near quality transit continues to grow. In some places like Denver, Seattle, and Los Angeles (to name just a few) land prices and rents near transit have increased substantially creating concerns with the displacement of small businesses and affordable housing.
In response, multi-sector coalitions are forming in a number of regions to advance Equitable Transit-Oriented Development (eTOD), which aims to create and support communities of opportunity where residents of all incomes, ages, races and ethnicities participate in and benefit from living in connected, healthy, vibrant places connected by transit. These transit-oriented communities of opportunity include a mixture of housing, office, retail and other amenities as part of a walkable neighborhood generally located within a half-mile of quality public transportation. This white paper pulls together emerging eTOD best practices from four regions, and highlights opportunities to use federal finance and development programs administered by US Department of Transportation to create and preserve inclusive communities near transit. It offers lessons learned for other communities and a set of recommendations for the Federal Transit Administration to better support local efforts by transit agencies to advance eTOD.
Achieving eTOD involves an inclusive planning process during the transit planning and community development phases. This entails long-term and active engagement of a diverse set of community partners ranging from local residents, small business owners, community development players, and neighborhood-serving organizations located along the proposed or existing transit corridor, to regional anchor institutions and major employers including universities and health care providers, to philanthropy, local and regional agencies and state government partners.
Equitable outcomes require smart, intentional strategies to ensure wide community engagement. Successful eTOD requires planning not just for transit, but also for how this type of catalytic investment can help to advance larger community needs including affordable housing, workforce and small business development, community health and environmental clean-up. (1, footnote omitted)
The report presents e-TOD case studies from Minneapolis-St. Paul; Los Angeles; Seattle and Denver. These case studies highlight the types of tools that state and local governments can use to maximize the value of transit-oriented design for broad swathes of the community.
October 21, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- Since this spring the U.S. Department of Housing and Urban Development has issued several new guidelines and rulings to the Fair Housing Act, a law passed in 1968 that prohibits housing discrimination based on race, color, national origin, religion, sex, disability or family status. These new guidelines clarify certain actions or policies by landlords, property managers, real estate agents or lenders that could be classified as discrimination against those protected under the act.
- A NYT article explains how new programs from major lenders and mortgage investment giants Fannie Mae and Freddie Mac can help millennials, immigrant families and first-time buyers of all backgrounds.
- The Federal Reserve expects to increase its benchmark interest rae “relatively son” if the economy continues to advance at a reasonable pace, according to an account published Wednesday of the bank’s most recent policy meeting.
- Mortgage rates climbed higher this week following long-term U.S. Treasury yields. With the bond market anticipating a Federal Reserve rate increase later this year, Treasury prices fell this week, pushing yields to four-month highs. Investors have been selling bonds because they expect the Fed to raise short-term rates before the end of the year. Rising oil prices also pushed up yields.
- Freddie Mac continues to believe that mortgage lending is on track for a big year this year, but now expects the market to tap the brakes in 2017. Last month, Freddie Mac’s monthly outlook report showed the government-sponsored enterprises’ analysts were continuing to project that mortgage originations will top $2 trillion this year, which would be the first time originations have been that high since 2012.
- Unsurprisingly, mortgage applications barely moved in the Mortgage Bankers Association’s newest Weekly Mortgage Applications Survey for the week ending Oct. 14. However, the week did get cut short due to the Columbus Day holiday, which impacted the results.
October 21, 2016 | Permalink | No Comments
October 20, 2016
Homes v. Bonds
U.S. News & World Report quoted me in Your Home Is a Better Investment Than Bonds. It opens,
With bonds paying next to nothing, where can you turn for a respectable yield, guaranteed?
Well, how about your home?
Many homeowners look upon the homestead as a valuable asset they can tap for retirement through downsizing or a loan. They typically count on building equity the old-fashioned way, by gradually paying off the debt and enjoying some price appreciation.
There’s another option: making extra principal payments on the mortgage to reduce the debt faster. Every dollar used to pay down the loan earns a “yield” equal to the loan rate, since it saves you from having to pay that amount of interest. If your loan charges 4 percent, prepayments earn 4 percent, a lot more than you’d get in bank savings or a 10-year Treasury note, now yielding a paltry 1.8 percent.
“The advantage to paying off a mortgage over buying bonds depends on the cash flow created,” says Wyatt A. Moerdyk of Evidence Advisors in Boerne, Texas. “If the cash flow created by paying off a mortgage is greater than the yield of a bond investment, paying off the mortgage may be a wise move.”
“A very conservative investor who is averse to debt may find paying off his or her mortgage is the right choice,” says Eric Meermann, a planner with Palisades Hudson Financial Group in Scarsdale, New York. “If the alternative is sticking your money in a money market or savings account, you’re better off paying (the mortgage off) early.”
He adds, though, that prepaying a mortgage is not a good alternative to investments such as stocks that could be more profitable in the long run.
Mortgage payments involve various charges, often including sums for property taxes and homeowner’s insurance, but the key parts are the interest charge on the remaining debt and the principal payment that gradually reduces the debt over the years.
You have a right to pay extra principal, every month or in lump sums, and the payment slip you send with your check probably has a space for recording the amount.
Paying down a mortgage has a snowballing effect, since it reduces interest charges going forward. On a fixed-rate loan, that allows more of each month’s payment to go to principal rather than interest, and the loan is paid off early. With an adjustable-rate mortgage, extra payments reduce the required payment after the next annual reset, which applies the new interest rate to the remaining debt. After that, you can either pay less or pay what you have been, with more going to principal.
Prepayments can substantially reduce your interest charges over time, since less interest is required each month as the debt gets smaller. They also allow you to build equity faster.
A homeowner with a $300,000 mortgage for 30 years at 4 percent would pay $1,432 a month in principal and interest. By adding about $150 a month in prepayments, the loan could be paid off five years early, reducing total interest charges by about $40,500. Without the prepayments, the homeowner would still owe nearly $78,000 after 25 years.
“Many people like to have paid off their mortgage before they retire, and making extra payments on your mortgage can be part of that strategy,” says David Reiss, who teaches about residential real estate at Brooklyn Law School in New York City.
But although today’s low bond yields make mortgage prepayments appealing, stocks returns could beat prepayment yields substantially. Index funds tracking the Standard & Poor’s 500 index are up nearly 8 percent this year, and averaged 6.7 percent a year over the past decade. That’s a lot better than you’re likely to do with a mortgage prepayment, though the prepayment yield is guaranteed while a fund’s return is not.
October 20, 2016 | Permalink | No Comments
