Fannie Mae and Freddie Mac, about to close down shop?

CNBC covers the Fannie Mae/Freddie Mac story.

On a Monday morning five years ago this week, thousands of employees at mortgage giants Fannie Mae and Freddie Mac went to work to find a new boss: The federal government.

Crushed under the weight of thousands of defaulted mortgages and bleeding cash, Fannie Mae and Freddie Mac were put into government conservatorship.

Now, a short five years later, the two are making billions of dollars in profit—profit that goes straight to the U.S. Treasury. Against this backdrop, lawmakers are setting the stage for an epic debate on the future of U.S. housing finance, a future that will likely mean the end of Fannie Mae and Freddie Mac.

That's why the debate over government involvement in the mortgage market is so fierce. Lawmakers are eager to protect taxpayers, but they also need to keep home finance afloat. How do you "wind down" two entities that now back two thirds of the U.S. mortgage market? And how do members of Congress reconcile that goal with the fact that the two are now huge cash cows?

What is the role of government in the mortgage industry?  Post-bailout, should the government take its profits and move on? If the government closes Fannie and Freddie down, who will buy mortgages on the secondary market?

Too many questions?  Read and watch the full CNBC report.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Life Without Fannie Mae and Freddie Mac from the New York Times

Where would prospective homeowners and borrowers be without Fannie Mae or Freddie Mac?  That question may become a reality if some have their way and abolish both agencies.

Talk of doing away with Fannie Mae and Freddie Mac is still just that — talk. But as Congress considers whether and how to get rid of these agencies, consumers ought to be aware of how a substantial reduction in the government’s role in housing finance could affect their ability to borrow in the future.

“What’s at stake here is access to mortgages at an affordable price,” said Julia Gordon, the director of housing finance and policy at the Center for American Progress in Washington.

A rise in rates would clearly be on the horizon.

Of course, the Times cannot avoid blaming Fannie and Freddie for the mortgage melt-down of a few years ago.  What the Times studiously avoids saying in its reporting is that Fannie and Freddie opened the money flood gates at the insistence of the Clinton White House and HUD secretary Cuomo.

Read the full article.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Reverse Mortgages - bad news ahead?

We have written before about reverse mortgages.  For some seniors, they are a godsend, for others a hellish nightmare. There start-up costs can be great, but their benefits can be just as great.  Yet,

Major changes are coming to the Department of Housing and Urban Development's reverse mortgage loan program as the agency seeks to shore up its finances and better protect seniors.

The Home Equity Conversion Mortgage Program's two products, the standard and saver options, are being consolidated into one program with tighter restrictions and a bigger education component.

The changes are the result of reforms in the Reverse Mortgage Stabilization Act of 2013, passed by Congress and signed last month by President Barack Obama. Last November, the Federal Housing Administration warned that changes in how consumers were using reverse mortgages had strained its Mutual Mortgage Insurance Fund, and the agency faced a $2.8 billion loss from the program.

Well, and so it goes in mortgage land.  Is a reverse mortgage in your future?

Read the full story.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Adjustable rate mortgages in the news

Adjustable rate mortgages, ARMs for short, are back in the news at the New  York Times.  The Times loves to tout ARMs as risky, but it’s never quite clear who is bearing the risk—the borrower or the investor.

Because adjustable-rate loans carry more risk, rates on them are lower than those on fixed-rate loans. After an initial period of fixed interest, rates may rise — though such loans also come with a lifetime cap that limits ups and downs.

The “risk” to the borrower is, of course, that rates may rise.  But the pain of that risk is the built-in caps on increase in most ARM loans.  For instance, the commonly used 1 year Fannie Mae note provides for a cap on each adjustment AND a maximum interest rate over the life of the loan.  These provisions are designed to avoid the so-called “interest rate shock” that elected politicians love to speak about.

In any event, is an ARM good for you?  Speak to a qualified mortgage loan officer to find out.  And, importantly, compare the numbers.

Here’s the full article:

The New York Times

August 29, 2013

Risks Aside, ARMs Gain Ground

By Marcelle Sussman Fischler

With mortgage rates inching up and homeowners often refinancing before the end of their loan terms, adjustable-rate mortgages are becoming more enticing to more borrowers.

In July, for example, 6.5 percent of mortgage applications nationwide were for adjustable-rate loans, while a year ago, the percentage was 4.2, according to the Mortgage Bankers Association, which expects demand to continue. “We expect ARMs to increase,” said Matthew J. Robinson, a spokesman.

Because adjustable-rate loans carry more risk, rates on them are lower than those on fixed-rate loans. After an initial period of fixed interest, rates may rise — though such loans also come with a lifetime cap that limits ups and downs.

For some borrowers, the initial savings may be worth the risk. By taking an adjustable-rate mortgage with a 5/1 term (with the rate fixed for the first five years) at 3.21 percent rather than a fixed 30-year jumbo mortgage at 4.69 percent, someone borrowing $750,000 could save $637.68 a month off the $3,885.28 payment, enough to “lease a nice car or more,” Keith Gumbinger, the vice president of the financial publisher HSH.com, said in an e-mail.

After 60 months, the borrower would have paid $54,565.92 less in interest, or $114,181.61 rather than $168,747.53. Kept in a piggy bank, it would be “enough to put your kid through at least one year of a good college,” Mr. Gumbinger added.

The potential hitch is that borrower may need to refinance or sell the home before the fixed portion of the loan ends — or possibly “be exposed to significantly higher interest rates and monthly payments,” Mr. Gumbinger said, “which could wipe out the savings pretty quickly, not to mention causing you budgetary duress.”

According to Freddie Mac’s Primary Mortgage Market Survey, for the week ended Aug. 29, a 30-year fixed-rate mortgage averaged 4.51 percent, while a five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.24 percent.

John Aita, a retail sales supervisor for Wells Fargo Home Mortgage in Melville, N.Y., says fewer borrowers these days seem likely to get stuck with a higher rate when the fixed portion of the ARM expires. “People never keep the loans that long anymore,” he said, citing six years as the average. “Either they refinance or they move.”

For first-time buyers who plan to move up to larger quarters as their families grow, or for young professionals whose income will rise in a few years, adjustable-rate mortgages are “a fantastic deal,” Mr. Aita said.

“If you are planning to use the house as a steppingstone and not going to stay 30 years,” he said, “take the adjustable.”

Those planning to downsize after their children go off to college can also benefit.

Six months ago, Beth Zucker, a single mother from Bucks County, Pa., whose twins are 13, refinanced from a 7/1 ARM to a 10/1 interest-only ARM at 3 percent.

She’s not worried about where interest rates will be when the rate adjusts in a decade. “When my twins go off to college,” said Ms. Zucker, who is a financial adviser, “I’m going to sell the house and downsize.”

The most common adjustable-rate mortgages are designated 3/1, 5/1, and 7/1, according to freddiemac.com.

A 3/1 ARM has a fixed interest rate for the first three years. After that, the rate can change annually. A similar rule applies for a 5/1 and 7/1 ARM. If the rates increase, monthly payments increase. And if rates dip, payments may not decrease, depending upon the initial interest rate. Typically, an adjustment “cap” limits how much the interest rate can jump or fall at each adjustment period.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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How Fights Over Fixtures Can Derail a Closing - NY Times

Tales of buyers and sellers at war.

Even at their smoothest, residential real estate closings are not for the faint of heart. At stake is nothing less than the roof over the buyer’s head, but the repercussions can be primal when, just before the culmination of a deal worth hundreds of thousands or, in many instances, millions of dollars, weeks of negotiations unravel when the buyer and seller suddenly squabble over who gets custody of something as inconsequential as a $150 ceiling fan.

Here's the crux of the issue - is the item truly a fixture, that is, something attached to the realty that cannot be removed without doing harm to the premises?

With the stage preset for regret and recrimination, and with lawyers at the ready to advocate in different directions at the drop of a dollar sign, nothing brings the process to a screeching standstill like a quibble over an inanimate item — a dusty chandelier, a sputtering air-conditioner, a wobbly Ikea shoe rack — that incomprehensibly assumes trophy status in the calculations of both buyer and seller.

  In the NYC market, all these high priced players can't avoid that catastrophe from happening!  It's not better in New Jersey.

To get the full gist of what nightmares may exist read the full story here.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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