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Sunday, January 13, 2008 |
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Millions lose homes, lender CEO gets 88M |
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Angelo Mozilo, the co-founder and public face of troubled mortgage giant Countrywide, is eligible for tens if not hundreds of millions in compensation and perks on the sale of the company to Bank of America.
During calendar 2006, the latest period available for review in Securities and Exchange Commission filings, Mozilo took home $48.1 million in compensation. An early analysis of SEC filings by the Los Angeles Times suggests he could get upward of $115 million when he leaves after the sale is complete, despite the fact that the company tanked during the recent subprime mortgage crisis.
In December, Countrywide reported a record number of foreclosures and delinquencies in its loan portfolio. The value of shares has fallen more than 84 percent since mid-May of last year.
Bank of America today confirmed that Mozilo will stay on with the company through a "transition period." Countrywide wouldn't comment on Mozilo's pay.
His long tenure with the firm — he has been there since its beginning in 1969 — and extensive employment agreement gives him the right to a significant payout when he leaves.
Immediately upon a change in control, Mozilo would get $13.3 million in accelerated vesting of stock grants, according to the terms of his 2004 compensation agreement, included in the company's latest proxy statement.
Should he leave the company after the firm's buyout, Mozilo would get a one-time cash payment of $88 million.
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Posted by Steve at 23:59:48 |
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Wednesday, January 23, 2008 |
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Wells Fargo dropped the ball |
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They have completely ####ed up my escrow account situation. The first year of my mortgage, I paid my county taxes and they sent me a check for the balance in my escrow account. The second year, we both paid my property taxes and they instantly started to bill me for the $5600 in taxes in which I had already paid. I called them up and said "you paid my taxes, which were already paid...it's not my fault." Months later they continue to try and collect from me by adding an extra $1000 to monthly mortgage.
I called and was informed that they cannot collect a refund from the county, the individual has to do it. Not much I could do but go down and file for my refund, which I did. Once I got the refund, I paid off my escrow balance and told them to just cancel my escrow account. By this time, they said my account had moved into "past due" status and they couldn't remove the extra escrow amount (now $550/month) from my account. I probably had 15 calls with them stating they we had set a precedent in the first year when I paid my own taxes and that this situation was entirely their fault. I am basically ####ed now as they continue to charge me an extra $550/month. As soon as the time is right, I'm refinancing with someone else and will never do business with them again.
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Posted by Scott at 00:17:24 |
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Wednesday, January 23, 2008 |
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Bank of America lost my money |
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I did a wire transfer using Bank of America in Baltimore, MD to my own account in India using SWIFT codes. I was told that India is a slow to pay country and it takes about 3 weeks and no investigations would be done till then. It has been 2 and a half months and it hasn't gone through. My bank in India has not received any information regarding this from Bank of America and Bank of America is not willing to help. Every time I contact them, they tell me that they are sending e-mails to the bank in India to find the status and that the money is in India and nothing can be done about it and it is possible that I might lose my money. I have no clue as to how to go about it. Please help!
I had sent all the money from my first pay-check to my parents for Diwali. It is a huge amount for me coming from a lower middle class Indian family. It is emotionally traumatizing to see the callous attitude of the Bank of America Customer service and investigations department. I don't know what to do. |
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Posted by Bevi at 00:22:03 |
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Thursday, January 31, 2008 |
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Getting busy |
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The mortgage business is picking up in Denver. My applications are way up from December. I think the rate cut has helped as 30 year fixed are now in the low 5's. |
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Posted by Seth at 10:45:40 |
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Thursday, February 07, 2008 |
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Bring on the bad credit! |
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I wish the bears understood how important subprime lending is to the thesis about the market going higher. But then again, if they did, they would be forced to cover everything.
For as long as I have been at this game, it has taken a crisis for the Federal Reserve to move. The Fed is always reluctant to move because it needs the crisis as a cover so it doesn't look like it's soft on inflation. Maybe you think we have good growth in this country; I think we just have easy retail comparisons because of nat gas and gasoline bills being down but that in reality we're in a slump that the international portions of our great businesses are saving.
That's not enough for the Fed to cut on. That's not obvious enough.
Ah, but if all of the subprime lenders pull out of that market and if Merrill(MER - Cramer's Take - Stockpickr) and Bear(BSC - Cramer's Take - Stockpickr) and Lehman(LEH - Cramer's Take - Stockpickr) -- big subprime lenders via acquisition -- start saying "it's a crisis" and New Century(NEW - Cramer's Take - Stockpickr) goes belly-up or Accredited Home(LEND - Cramer's Take - Stockpickr) takes down a big part of its book value or Countrywide(CFC - Cramer's Take - Stockpickr) leaves the business -- then we'll have a crisis that can justify not one but maybe three or four cuts.
When you have the housing industry building a fraction of the homes it was building and credit hard to come by, you are giving Benanke the crisis cover he needs.
Some of my friends who read RealMoney are freaking out about the negative columns that are being written about how dangerous this subprime crisis is. I'm taking those columns very seriously, which is why I am growing more bullish by the day. The fact that the Fed chairman bought into it today in front of the House of Representatives shows me that the Congressional drumbeat -- remember, prime is Republican, subprime is Democrat -- could be building and building fast.
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Posted by Prestonmortgage at 22:11:41 |
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Friday, February 08, 2008 |
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What happened to the 30 year fixed mortgage? |
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Buying a home and having the ability to make the payments sounds simple enough. Up until a few years ago, lenders actually seemed to be concerned about this simple rule. Opening almost any newspaper, one is going to find disturbing trends happening today and it is always caused by breaking this simple rule.
Before you take out a loan it is very important to ask what the highest payment could be after all adjustments and caps have been accounted for. Your mortgage broker should be able to calculate this for you if you can't do it yourself. However, if you can't calculate this yourself, you probably shouldn't do the ARM at all because you should never sign anything that you don't understand.
This is where the fixed rate becomes a viable choice. The rate never changes, therefore the payment never changes.
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Posted by Joecavello at 00:03:27 |
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Thursday, February 14, 2008 |
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Garage Door Parts LLC |
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Attention homeowners. There is a fraudulent company www.garagedoorparts.com called "garage door parts, LLC" out of New Jersey. They are frausulent!! Do not do business with them!! They will take your order and payment and will never ship the product. Then they never answer the phone. They will also never respond to your emails. When you try to get your money back on paypal, his account will be empty. It is owned by a guy named ricardo aquino. They stole $250 from me.
His Email is aquino277@hotmail.com and the addres of the company is
New Garage Door Parts aquino277@hotmail.com
Aquino, Ricardo
127 Columbia Avenue
Passaic, NJ 07055
US
973-458-9414
Stay away!!! Bad business!!!
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Posted by ST at 01:23:21 |
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Thursday, February 14, 2008 |
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WAMU ABSOLUTLEY SUCKS |
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My problems with WaMu actually started with Fleet Mortgage. I found that Fleet was charging me the wrong interest rate, misapplying payments, etc. I did resolve my problems with Fleet Mortgage but only by suing them. During our litigation they had their (first) lawyers (the Weston Adams Law Firm in Columbia SC) to threaten to "put me in jail" and other ugly things that they had no right to do (I did file a complaint with the bar against them). They actually foreclosed on my house at one point without even serving me with papers (I found out about it by accident), fortunately the Judge saw things my way and "vacated" the Judgment after he discovered that they had lied about serving me with the foreclosure papers. They then served me with the foreclosure papers which contained totally false allegations about my account (which fortunately I was able to disprove with my canceled checks and other documentation), and at various times they presented to the court and to myself (this was over a time period of several years) numerous sets of "doctored" accounting each alleging different facts. They also changed attorneys (the Weston Adams Law Firm was totally incompetent) and the second set of attorneys tried to play some of the same games with me but they too were not too "swuft". The fact is that Fleet was never cooperative with any of it's own attorneys and had never told them the truth or given them accurate accounting. I only briefly was represented by lawyers (both lawyers quit on me after I instructed them on how to handle the case - it seems that both attorneys were somewhat intimidated by the fact that I had learned more about foreclosure law than they knew). Fleet did many things to harass me during this time. Fleet called my real estate agent and harassed her, Fleet contacted my insurance company and informed them that they should cancel my insurance (and they did so). One of Fleet's attorneys told the Judge that I had approached him in a threatening manner at the courthouse (absolute lie, I did not even know who he was, he saw me waiting outside the court room and he walked up to me and said "are you Mr. Donnelly" and I said "yes"). I assume that the attorney was trying to make me look like I was hostile or something. Fleet's attorneys also attempted to make me look bad when they told the Judge that I had been tape-recording my conversations with Fleet and also with Fleet's attorneys, but when they did so, it kind of back fired on them when the Judge responded "You are an attorney, you know that Mr. Donnelly has every right to do so. If you do not know that you need to go back to law school". Also they attempted to get sympathy from the Judge by telling him that I had been posting information about the case on various internet sites. He did not seem to care about that either. During the years of litigation I attended many hearings. At first it seemed like my case would be a "slam dunk" simply because I knew that I was right and they were wrong and I had all the documentation to prove that they were wrong plus the Judge ruled in favor of me during my very first hearing. But the case just got stretched out longer and longer. Eventually I realized that the Judge was under the assumption that I was in "the wrong", nothing in particular, just little statements and remarks that he made. At one point Fleet had requested that a court date be delayed and I objected to the date being delayed. The Judge then said "that is the first time that I have ever had someone to object to delaying the foreclosure of his house" - I quickly responded that "my house will not be foreclosed on because my defense and counterclaim has merit" - the Judge responded "well, uuu, we are not discussing the merits of your case today". He granted the delay. Then one day, when I had requested a hearing for a court order compelling Fleet to comply with my Discovery request for HUD documents, the Judges attitude changed. He started the hearing by asking if the issue of me requesting a jury trial had been resolved. I explained that I was under the impression that I would be receiving a jury trial because I had that right, Fleet responded by stating that I had not requested a jury trial during the time limitations set forth by the Rules of Court. The Judged jumped in and stated "I can not believe that you would even make that allegations. I read all the pleadings and Mr. Donnelly made that request in his very first pleading over six years ago." The attorney kind of shyly said "well, that is just my clients position." The Judge ruled in my favor. Then Fleets attorney stated that she had brought the documents that I had been requesting and that they were complete except for a three month period in which she stated the Fleet had no contact with HUD concerning my loan. I quickly realized that this was the same time period in which I had requested a HUD investigation of my account. I presented to the Judge the letters which I had received from HUD which were all dated within that same time period. The letters discussed the fact that HUD had been in contact with Fleet and that Fleet had denied my allegations. Ha! I had caught them in a red faced lie! The Judge then asked Fleets attorney again if Fleet had these documents, and she even more sheepishly replied "It is Fleets position that no such documents exist". The Judge then told me that he could not make Fleet produce what they claim they do not have, and he then recommended me to contact HUD for copies of my entire file. I actually did that but HUD said they would not do that without a federal supina (sp?). All of a sudden, Fleet who's only previous offer to settle out of court for me to pay them money, all of a sudden was offering to pay me money. After six years in litigation they basically wore me down (or did I wear them down) and we settled out of court by them giving me my equity in the house ($11,200) and they agreed to clear my credit (which they did). I gave them the house in exchange. Then Fleet went out of business (they had developed too bad of a reputation and no one would borrow money from them anymore - I actually had a Fleet representative to contact me and tell me that my comments on the internet was hurting Fleets business and he asked that I remove them - I responded that my comments on the internet were intended to hurt Fleets business and that I could not remove them because I did not own the sites that they were posted on). When Fleet went out of business WaMu purchased all of Fleets assets which included Fleets buildings, furniture, employees, computer systems, and other assets including loans. So essentially WaMu is the same as Fleet in my eyes. WaMu is so screwed up that they never bothered to see if I actually still had a loan with Fleet, they just assumed that I did because I was obviously somewhere in Fleets computer system. So WaMu reported to all three credit bureaus that I was six years delinquent on my mortgage. But understand, at that point I had no mortgage. As a matter of fact by that time neither I nor Fleet/WaMu owned that house. It took me 3 months and thousands of dollars to correct this -- which entailed, a few calls to Fleets old attorney, several hundred e-mails, 40-50 phone calls, and finally, 6 straight hours of faxing. I actually think that it was the hundreds of pages of faxes that I sent to them that finally got their attention. They did then have their lies removed from my credit reports. So yes, for the time being my complaints are resolved -- but I fully expect that at some time in the future they will ruin my credit again or maybe even attempt to foreclose on that house (which I do not own or owe on). Actually I am looking forward to it. Basically, I would highly recommend that you never have anything to do with WaMu. I get 80-100 visitors a day on my website and many of them write me and tell me there horror stories (although most of them for some reason will not give me permission to publish their letters). WaMu has to be the worst in customer service ever. Scott
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Posted by Scott at 02:55:58 |
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Thursday, February 14, 2008 |
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Wachovia lost data, sold to identity thi |
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A New York Times article titled "Corporate Profits, From Data Sold to Thieves"[20] published on May 20, 2007 described Wachovia's negligence in screening on taking action against companies connected to identity theft. These companies used stolen identities to remove funds from personal Wachovia bank accounts via unsigned checks. The article goes on to say "In all, Wachovia accepted $142 million of unsigned checks from companies that made unauthorized withdrawals from thousands of accounts, federal prosecutors say. Wachovia collected millions of dollars in fees from those companies, even as it failed to act on warnings, according to records." Furthermore, the article adds "In a lawsuit filed last year, the United States attorney in Philadelphia said Wachovia received thousands of warnings that it was processing fraudulent checks, but ignored them." |
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Posted by joe cook at 02:58:57 |
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Tuesday, March 04, 2008 |
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US Bank robs money with fraudulent "fees" |
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I opened a business account with Colorado National Bank, which then became Central Banks of Colorado, which then morphed into Minneapolis based US Bank. I had the account for over 10 years before I decided to keep the account dormant and leave $500 in there.
Prior to doing that I called to verify that there weren't going to be any fees. I was told that they would remove a status that charged an analysis fee of roughly $16 per month, and move me to a free account status.
Then I neglected to read my statements,(who has time to read everything?) because some months later my account was moved back into the status where fees were charged every month. They also began charging a inactivity fee of $8 dollars.
Long story short, my account was completely drained of the $500 and was now negative $86 and accruing fees of $40 per day.
So I called the bank's number of 303-585-8585 which I have named the "US Bank go screw yourself hotline" and was told to contact the branch. I was given the wrong number that led to a different branch who could not help me. I finally was able to get to the right branch and that the US Bank Park Meadows Branch. I then spoke with a lady who said I need to speak with the manager, Joseph because she can't make refunds that large. I was placed on hold and then hung up on 10 minutes later. I called back and the manager was at lunch. |
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Posted by Seth at 17:32:40 |
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Tuesday, May 06, 2008 |
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50 largest American banks |
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ABN AMRO North America • Associated • Bank of America • Bank of New York • BancWest • BB&T • BOK Financial • Capital One • Charles Schwab • Citigroup • Citizens Financial Group • Colonial • Comerica • Commerce Bancorp • Commerce Bancshares • Compass • Fifth Third • First BanCorp • First Citizens • First Horizon National • Fulton • Harris • HSBC Bank USA • Huntington • JPMorgan Chase • Key • M&T • Marshall & Ilsley • Mellon • National City • New York Community • New York Private Bank & Trust • Northern Trust • PNC • Popular • Regions • RBC Centura • Sky • State Street • SunTrust • Synovus • Taunus • TD Banknorth • U.S. Bancorp • UnionBanCal • W Holding • Wachovia • Webster • Wells Fargo • Zions Bancorporation
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Posted by Colin at 01:15:55 |
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Tuesday, May 06, 2008 |
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US Bank Rip Off |
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I cried because I had no shoes...until I met a person who had no
feet!
That's right folks...Like many of the other folks who had been
taken for a ride by US Bank, I too had been cheated of a couple of
hundred bucks. After being lied to multiple times, I just gave up
while being amazed at the level of deception this bank would stoop
to in order to save a paltry $200.
Then I came across this wrenching story (dated 13 Oct 2006):
http://www.zwire.com/site/news.cfm?newsid=17322452&BRD=1719&PAG=461&
dept_id=25271&rfi=6
Silas Braxton (who suffers from end-stage renal failure) and his
wife Evelyn Casey-Braxton were served foreclosure papers by US Bank
because...get this...US Bank lost their mortgage payment checks!
An excerpt from the article:
---------------------------------------
"In fact, we have a receipt to prove it," Casey-Braxton said. (
that they had paid their monthly mortage )
When the Braxtons went back to the bank to complain, they showed
the clerk the receipt that proved they had paid their bills before
the loan had been foreclosed on. They were stunned to hear that it
didn’t matter.
"They told us that anyone can (make a fake) receipt," Braxton said.
"What’s the point of giving them out if they won’t honor their own
receipts?"
He said people at the bank made him and his wife feel like it was
their fault, even though the bank had lost the checks.
---------------------------------------
Let me repeat that:
He said people at the bank made him and his wife feel like it was
their fault, even though the bank had lost the checks.
Read the article and do your own due diligence before doing
business with this evil institution!
Remember in the late 50s, Ford tried to save its embarrassing
failure of a car by flooding magazines with ads that screamed "The
Edsel is a success."? The public was not taken in by these flashy
slogans. My question to those reading this review is: Will you fall
hook, line and sinker for US Bank's 5 Star guarantee while they
continue to hoodwink the likes of the Braxton couple? What did the
Braxtons do to deserve this hell?
By the way, this is not a chance happening! About two years back, I
had come across another identical case of US Bank foreclosing on a
property in an almost identical manner!
A challenge: Find me a single bank among the nation wide chain of
banks that is WORSE than US Bank!
I am continually amazed at good hearted nature of the American
public that pitches in to save a stranded whale or indulges in
similar acts of random kindness.
Do your good deed for the week. Print the above mentioned article
and this review. Take it to your nearest US Bank location and give
it to the customers who are unaware that they are selling their
souls to the devil! Needless to say, if you have an account at the
bank, close it out!!
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Posted by Gwen at 01:22:10 |
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Sunday, August 08, 2010 |
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When to Refinance |
Have interest rates fallen? Or do you expect them to go up? Has your credit score improved enough so that you might be eligible for a lower-rate mortgage? Would you like to switch into a different type of mortgage?
The answers to these questions will influence your decision to refinance your mortgage. But before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms. Remember that, along with the potential benefits to refinancing, there are also costs.
When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Refinancing may remind you of what you went through in obtaining your original mortgage, since you may encounter many of the same procedures--and the same types of costs--the second time around.
Why consider refinancing?
Lowering your interest rate
The interest rate on your mortgage is tied directly to how much you pay on your mortgage each month--lower rates usually mean lower payments. You may be able to get a lower rate because of changes in the market conditions or because your credit score has improved. A lower interest rate also may allow you to build equity in your home more quickly.
For example, compare the monthly payments (for principal and interest) on a 30-year fixed-rate loan of $200,000 at 5.5% and 6.0%.
Monthly payment @ 6.0% $1,199
Monthly payment @ 5.5% $1,136
The difference each month is $ 63
But over a year's time, the difference adds up to $ 756
Over 10 years, you will have saved $7,560
Adjusting the length of your mortgage
Increase the term of your mortgage: You may want a mortgage with a longer term to reduce the amount that you pay each month. However, this will also increase the length of time you will make mortgage payments and the total amount that you end up paying toward interest.
Decrease the term of your mortgage: Shorter-term mortgages--for example, a 15-year mortgage instead of a 30-year mortgage--generally have lower interest rates. Plus, you pay off your loan sooner, further reducing your total interest costs. The trade-off is that your monthly payments usually are higher because you are paying more of the principal each month.
For example, compare the total interest costs for a fixed-rate loan of $200,000 at 6% for 30 years with a fixed-rate loan at 5.5% for 15 years.
Monthly payment Total interest
30-year loan @ 6.0% $1,199 $231,640
15-year loan @ 5.5% $1,634 $ 94,120
Tip: Refinancing is not the only way to decrease the term of your mortgage. By paying a little extra on principal each month, you will pay off the loan sooner and reduce the term of your loan. For example, adding $50 each month to your principal payment on the 30-year loan above reduces the term by 3 years and saves you more than $27,000 in interest costs.
Changing from an adjustable-rate mortgage to a fixed-rate mortgage
If you have an adjustable-rate mortgage, or ARM, your monthly payments will change as the interest rate changes. With this kind of mortgage, your payments could increase or decrease.
You may find yourself uncomfortable with the prospect that your mortgage payments could go up. In this case, you may want to consider switching to a fixed-rate mortgage to give yourself some peace of mind by having a steady interest rate and monthly payment. You also might prefer a fixed-rate mortgage if you think interest rates will be increasing in the future.
Tip: If your monthly payment on a fixed-rate loan includes escrow amounts for taxes and insurance, your payment each month could change over time due to changes in property taxes, insurance, or community association fees.
Getting an ARM with better terms
If you currently have an ARM, will the next interest rate adjustment increase your monthly payments substantially? You may choose to refinance to get another ARM with better terms. For example, the new loan may start out at a lower interest rate. Or the new loan may offer smaller interest rate adjustments or lower payment caps, which means that the interest rate cannot exceed a certain amount. For more details, see the Consumer Handbook on Adjustable-Rate Mortgages.
Tip: If you are refinancing from one ARM to another, check the initial rate and the fully-indexed rate. Also ask about the rate adjustments you might face over the term of the loan.
Getting cash out from the equity built up in your home
Home equity is the dollar-value difference between the balance you owe on your mortgage and the value of your property. When you refinance for an amount greater than what you owe on your home, you can receive the difference in a cash payment (this is called a cash-out refinancing). You might choose to do this, for example, if you need cash to make home improvements or pay for a child’s education.
Remember, though, that when you take out equity, you own less of your home. It will take time to build your equity back up. This means that if you need to sell your home, you will not put as much money in your pocket after the sale.
If you are considering a cash-out refinancing, think about other alternatives as well. You could shop for a home equity loan or home equity line of credit instead. Compare a home equity loan with a cash-out refinancing to see which is a better deal for you. See What You Should Know about Home Equity Lines of Credit.
Tip: Many financial advisers caution against cash-out refinancing to pay down unsecured debt (such as credit cards) or short-term secured debt (such as car loans). You may want to talk with a trusted financial adviser before you choose cash-out refinancing as a debt-consolidation plan.
Back to top
When is refinancing not a good idea?
You’ve had your mortgage for a long time.
The amortization chart shows that the proportion of your payment that is credited to the principal of your loan increases each year, while the proportion credited to the interest decreases each year. In the later years of your mortgage, more of your payment applies to principal and helps build equity. By refinancing late in your mortgage, you will restart the amortization process, and most of your monthly payment will be credited to paying interest again and not to building equity.
Amortization of a $200,000 loan for 30 years at 5.9% [d]
Your current mortgage has a prepayment penalty
A prepayment penalty is a fee that lenders might charge if you pay off your mortgage loan early, including for refinancing. If you are refinancing with the same lender, ask whether the prepayment penalty can be waived. You should carefully consider the costs of any prepayment penalty against the savings you expect to gain from refinancing. Paying a prepayment penalty will increase the time it will take to break even, when you account for the costs of the refinance and the monthly savings you expect to gain.
You plan to move from your home in the next few years.
The monthly savings gained from lower monthly payments may not exceed the costs of refinancing--a break-even calculation will help you determine whether it is worthwhile to refinance, if you are planning to move in the near future.
Are you eligible to refinance?
Determining your eligibility for refinancing is similar to the approval process that you went through with your first mortgage. Your lender will consider your income and assets, credit score, other debts, the current value of the property, and the amount you want to borrow. If your credit score has improved, you may be able to get a loan at a lower rate. On the other hand, if your credit score is lower now than when you got your current mortgage, you may have to pay a higher interest rate on a new loan.
Lenders will look at the amount of the loan you request and the value of your home, determined from an appraisal. If the loan-to-value (LTV) ratio does not fall within their lending guidelines, they may not be willing to make a loan, or may offer you a loan with less-favorable terms than you already have.
If housing prices fall, your home may not be worth as much as you owe on the mortgage. Even if home prices stay the same, if you have a loan that includes negative amortization (when your monthly payment is less than the interest you owe, the unpaid interest is added to the amount you owe), you may owe more on your mortgage than you originally borrowed. If this is the case, it could be difficult for you to refinance.
What will refinancing cost?
It is not unusual to pay 3 percent to 6 percent of your outstanding principal in refinancing fees. These expenses are in addition to any prepayment penalties or other costs for paying off any mortgages you might have.
Refinancing fees vary from state to state and lender to lender. Here are some typical fees and average cost ranges you are most likely to pay when refinancing. For more information on settlement or closing costs, see the Consumer’s Guide to Settlement Costs.
Tip: You can ask for a copy of your settlement cost papers (the HUD-1 form) one day in advance of your loan closing. This will give you a chance to review the documents and verify the terms.
Application fee. This charge covers the initial costs of processing your loan request and checking your credit report. If your loan is denied, you still may have to pay this fee.
Cost range = $75 to $300
Loan origination fee. The fee charged by the lender or broker to evaluate and prepare your mortgage loan.
Cost range = 0% to 1.5% of the loan principal
Points. A point is equal to 1 percent of the amount of your mortgage loan. There are two kinds of points you might pay. The first is loan-discount points, a one-time charge paid to reduce the interest rate of your loan. Second, some lenders and brokers also charge points to earn money on the loan. The number of points you are charged can be negotiated with the lender.
Cost range = 0% to 3% of the loan principal
Tip: The length of time that you expect to keep the mortgage helps you determine whether it is worthwhile to pay points up front to reduce your interest rate. Unlike points paid on your original mortgage, points paid to refinance may not be fully deductible on your income taxes in the year they are paid. Check with the Internal Revenue Service to find the current rules for deducting points.
Appraisal fee. This fee pays for an appraisal of your home, in order to assure the lenders that the property is worth at least as much as the loan amount. Some lenders and brokers include the appraisal fee as part of the application fee. You are entitled to a copy of the appraisal, but you must ask the lender for it. If you are refinancing and you have had a recent appraisal, you can check to see if the lender will waive the requirement for a new appraisal.
Cost range = $300 to $700
Inspection fee. The lender may require a termite inspection and an analysis of the structural condition of the property by a property inspector, engineer, or consultant. Lenders may require a septic system test and a water test to make sure the well and water system will maintain an adequate supply of water for the house. Your state may require additional, specific inspections (for example, pest inspections in southern states).
Cost range = $175 to $350
Attorney review/closing fee. The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender.
Cost range = $500 to $1,000
Homeowner’s insurance. Your lender will require that you have a homeowner’s insurance policy (sometimes called hazard insurance) in effect at settlement. The policy protects against physical damage to the house by fire, wind, vandalism, and other causes covered by your policy. This policy insures that the lender’s investment will be protected even if the house is destroyed. With refinancing, you may only have to show that you have a policy in effect.
Cost range = $300 to $1,000
FHA, RDS, or VA fees or PMI. These fees may be required for loans insured by federal government housing programs, such as loans insured by the Federal Housing Administration (FHA) or the Rural Development Services (RDS) and loans guaranteed by the Department of Veterans Affairs (VA), as well as conventional loans insured by private mortgage insurance (PMI). Insured loans and guarantee programs generally apply if the amount you are borrowing is more than 80% of the value of the property. Both government and private mortgage insurance cover the lender’s risk that you will not make all the loan payments.
Cost ranges: FHA = 1.5% plus ½% per year; RDS = 1.75%; VA = 1.25% to 2%; PMI = 0.5% to 1.5%
Title search and title insurance. This fee covers the cost of searching the property’s records to ensure that you are the rightful owner and to check for liens. Title insurance covers the lender against errors in the results of the title search. If a problem arises, the insurance covers the lender’s investment in your mortgage.
Cost range = $700 to $900
Tip: Ask the company carrying your current title insurance policy what it would cost to reissue the policy for a new loan. This may reduce your cost.
Survey fee. Lenders require a survey, to confirm the location of buildings and improvements on the land. Some lenders require a complete (and more costly) survey to ensure that the house and other structures are legally where you say they are. You may not have to pay this fee if a survey has recently been conducted for your property.
Cost range = $150 to $400
Prepayment penalty. Some lenders charge a fee if you pay off your existing mortgage early. Loans insured or guaranteed by the federal government generally cannot include a prepayment penalty, and some lenders, such as federal credit unions, cannot include prepayment penalties. Also some states prohibit this fee.
Cost range = one to six months' interest payments
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What is "no-cost" refinancing?
Lenders often define “no-cost” refinancing differently, so be sure to ask about the specific terms offered by each lender. Basically, there are two ways to avoid paying up-front fees.
The first is an arrangement in which the lender covers the closing costs, but charges you a higher interest rate. You will pay this higher rate for the life of the loan.
Tip: Ask the lender or broker for a comparison of the up-front costs, principal, rate, and payments with and without this rate trade-off.
The second is when refinancing fees are included in (“rolled into” or “financed into”) your loan—they become part of the principal you borrow. While you will not be required to pay cash up front, you will instead end up repaying these fees with interest over the life of your loan.
Tip: When lenders offer a “no-cost” loan, they may include a prepayment penalty to discourage you from refinancing within the first few years of the loan. Ask the lender offering a no-cost loan to explain all the fees and penalties before you agree to these terms.
How do you calculate the break-even period?
Use the step-by-step worksheet below to give you a ballpark estimate of the time it will take to recover your refinancing costs before you benefit from a lower mortgage rate. The example assumes a $200,000, 30-year fixed-rate mortgage at 5% and a current loan at 6%. The fees for the new loan are $2,500, paid in cash at closing.
Example Your numbers
Your current monthly mortgage payment
$1,199
Subtract your new monthly payment
- $1,073
This equals your monthly savings
$ 126
Subract your tax rate from 1
(e.g. 1 - 0.28 = 0.72)
0.72
Multiply your monthly savings (#3) by your after-tax rate (#4)
126 x 0.72
This equals your after-tax savings
$ 91
Total of your new loan's fees and closing costs
$2,500
Divide total costs by your monthly after-tax savings (from #6)
$2,500 / 91
This is the number of months it will take you to recover your refinancing costs
27 months
Tip: Calculate the financial benefit of refinancing in one, two, or three years. Does the benefit compare with your plans for staying in your home?
If you plan to stay in the house until you pay off the mortgage, you may also want to look at the total interest you will pay under both the old and new loans.
You may also want to compare the equity build-up in both loans. If you have had your current loan for a while, more of your payment goes to principal, helping you build equity. If your new loan has a term that is longer than the remaining term on your existing mortgage, less of the early payments will go to principal, slowing down the equity build-up in your home.
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Refinancing calculators
Many online mortgage calculators are designed to calculate the effect of refinancing your mortgage. These calculators usually require information about your current mortgage (such as the remaining principal, interest rate, and years remaining on your mortgage), the new loan that you are considering (such as principal, interest rate, and term), and the upfront or closing costs that you will pay for the loan. Some may ask for your tax rate and the rate of interest you can get on investments (assuming you will invest your savings). Refinance calculators will show the amount you will save compared with the costs you will pay, so that you can determine whether the refinancing offer is right for you. The National Bureau of Economic Research has an example of a refinancing calculator .
How can you shop for your new loan?
Shopping around for a home loan will help you get the best financing deal. Shopping, comparing, and negotiating may save you thousands of dollars. Begin by getting copies of your credit reports to make sure the information in them is accurate (go to the Federal Trade Commission's website for information about free copies of your report).
The Mortgage Shopping Worksheet--A Dozen Key Questions to Ask - PDF (33 KB) may help you. You can also use our In-Depth Mortgage Shopping Worksheet PDF (34 KB). Take one of these worksheets with you when you talk with each lender or broker, and fill out the information provided. Don’t be afraid to make lenders and brokers compete with each other for your business by letting them know that you are shopping for the best deal.
Talk to your current lender
If you plan to refinance, you may want to start with your current lender. That lender may want to keep your business, and may be willing to reduce or eliminate some of the typical refinancing fees. For example, you may be able to save on fees for the title search, surveys, and inspection. Or your lender may not charge an application fee or origination fee. This is more likely to happen if your current mortgage is only a few years old, so that paperwork relating to that loan is still current. Again, let your lender know that you are shopping around for the best deal.
Compare loans before deciding
Shop around and compare all the terms that different lenders offer--both interest rates and costs. Remember, shopping, comparing, and negotiating can save you thousands of dollars.
Lenders are required by federal law to provide a “good faith estimate” within three days of receiving your loan application. You can ask your lender for an estimate of the closing costs for the loan. The estimate should give you a detailed approximation of all costs involved in closing. Review these documents carefully and compare these costs with those for other loans. You can also ask for a copy of the HUD-1 settlement cost form one day before you are due to sign the final documents.
Tip: If you want to make sure the interest rate your lender offers you is the rate you get when you close the loan, ask about a mortgage lock-in (also called a rate lock or rate commitment). Any lock-in promise should be in writing. Make sure your lender explains any costs or obligations before you sign. See the Consumer’s Guide to Mortgage Lock-ins.
Get information in writing
Ask for information in writing about each loan you are interested in before you pay a nonrefundable fee. It is important that you read this information and ask the lender or broker about anything you don’t understand.
You may want to talk with financial advisers, housing counselors, other trusted advisers, or your attorney. To contact a local housing counseling agency, contact the U.S. Department of Housing and Urban Development toll-free at 800-569-4287, or visit the agency online to find a center near you.
Use newspapers and the Internet to shop
Your local newspaper and the Internet are good places to start shopping for a loan. You can usually find information on interest rates and points offered by several lenders. Since rates and points can change daily, you’ll want to check information sources often when shopping for a home loan.
Be careful with advertisements
Any initial information you receive about mortgages probably will come from advertisements, mail, phone, and door-to-door solicitations from builders, real estate brokers, mortgage brokers, and lenders. Although this information can be helpful, keep in mind that these are marketing materials--the ads and mailings are designed to make the mortgage look as attractive as possible. These advertisements may play up low initial interest rates and monthly payments, without emphasizing that those rates and payments could increase substantially later. So get all the facts and make sure any offers you consider meet your financial needs.
Any ad for an ARM that shows an introductory interest rate should also show how long the rate is in effect and the annual percentage rate, or APR, on the loan. If the APR is much higher than the initial rate, that is a sign that your payments may increase a lot after the introductory period, even if market interest rates stay the same.
Tip: If there is a big difference between the initial interest rate and the APR listed in the ad, it may mean that there are high fees associated with the loan.
Choosing a mortgage may be the most important financial decision you will make. You should get all the information you need to make the right decision. Ask questions about loan features when you talk to lenders, mortgage brokers, settlement or closing agents, your attorney, and other professionals involved in the transaction--and keep asking until you get clear and complete answers.
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Posted by Joe at 22:39:38 |
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Sunday, August 08, 2010 |
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Credit and Liquidity Programs and the Balance Shee |
This section of the Board of Governors' website is an additional step following several that the Federal Reserve has taken in recent years to enhance transparency of monetary policy. Other actions have included: the issuance by the Federal Open Market Committee (FOMC) of a statement announcing and explaining its monetary policy decision immediately after each of its meetings; the FOMC's release of detailed minutes of its meetings three weeks after each meeting; the FOMC's publication of quarterly summaries of policymakers' economic forecasts; and, pursuant to the Emergency Economic Stabilization Act passed in October 2008, the Federal Reserve's issuance of regular reports to the Congress on each of its lending programs that rely on its authorities under section 13(3) of the Federal Reserve Act. More recently, the Federal Reserve has begun publishing a monthly report on Credit and Liquidity Programs and the Balance Sheet.
In light of improved functioning of financial markets, many of the new policy tools described in this section have expired or been closed. These include the Money Market Investor Funding Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility. The temporary liquidity swap arrangements between the Federal Reserve and other central banks were also terminated, in February 2010, but in May 2010 the dollar liquidity swap lines were re-established with some central banks, in response to the re-emergence of strains in short-term U.S. dollar funding markets.
Related
Federal Reserve System Purposes and Functions
The Structure of the Federal Reserve System
Federal Reserve Act
This section serves, in particular, as a resource for describing the new policy tools that the Federal Reserve has implemented to address the financial crisis that emerged during the summer of 2007. Greater public understanding of these tools and their use can increase understanding of the measures implemented by the Federal Reserve--and the rest of the federal government--to strengthen financial markets and institutions and encourage a resumption of economic growth.
The Federal Reserve considers transparency about the goals, conduct, and stance of monetary policy to be fundamental to the effectiveness of monetary policy. The Federal Reserve Act sets forth the goals of monetary policy, specifically "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Financial stability is an important prerequisite for achieving those goals.
Transparency about monetary policy also helps promote the accountability of the Federal Reserve to the Congress and the public. Such accountability is especially critical when nontraditional policy tools--which are less familiar to the public than traditional policy tools--are employed.
This section of the site brings together information on the various Federal Reserve liquidity and credit facilities and greater background on the Federal Reserve's balance sheet. The links at the top of this page group this information as follows:
Crisis response provides information about the Federal Reserve's strategy since the beginning of the financial crisis.
Federal Reserve's balance sheet discusses the Board's weekly H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," which contains the Federal Reserve's balance sheet and related information.
Federal Reserve System financial statements include annual financial statements for the individual Reserve Banks, the Board of Governors, Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, and the Commercial Paper Funding Facility LLC.
Federal Reserve liabilities discusses the key liabilities on the Federal Reserve's balance sheet, including currency and reserve balances.
Recent balance sheet trends provides a graphical depiction of selected assets and liabilities of the Federal Reserve.
Open market operations discusses this traditional policy tool, including its evolution during the financial crisis.
Central bank liquidity swaps discusses the use of reciprocal currency arrangements with other central banks, in response to the global nature of the financial crisis.
Lending to depository institutions discusses the primary, secondary, and seasonal credit facilities as well as the Term Auction Facility.
Lending to primary dealers discusses the Primary Dealer Credit Facility and securities lending programs.
Other lending facilities presents information about the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, and the Term Asset-Backed Securities Loan Facility.
Support for specific institutions discusses special lending arrangements with specific institutions, including those with Bear Stearns and the American International Group.
Collateral and rate setting provides details on eligible collateral for a number of lending facilities and a summary of the terms and conditions of the Federal Reserve's lending facilities.
Risk management explains how the Federal Reserve manages the risk associated with various liquidity programs, and provides details on the rapid expansion of its balance sheet.
Longer-term issues discusses some of the challenges the Federal Reserve will likely face in the future as the financial crisis evolves. |
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Posted by Joe at 22:41:08 |
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