Typically, a Home Ownership Accelerator loan program (sometimes referred to as an HOA) can be used as if it were a checking account. A borrower’s paycheck, instead of being deposited in a bank account to earn little or no interest, pays down the mortgage balance. The borrower thus earns the mortgage rate starting the day of deposit. As the borrower spends money by writing checks, withdrawing cash from an ATM or using a bill-pay service, the mortgage balance rises. Even if the balance at the end of the month is the same as at the beginning, the average balance and therefore the interest charge is lower. Both an HOA and a home equity line of credit (HELOC) accrue interest daily, and adjust the interest rate frequently, monthly on the HOA, anytime on the HELOC. Borrowers can draw up to a specified maximum amount at any point during an initial 10-year draw period, with repayment required over the ensuing 20 years. (more…)

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An expected surge in home foreclosures will cause U.S. property values to sink by $223 billion, with the most severe impact in minority communities, a new report says. The report released Tuesday by the Center for Responsible Lending estimates that roughly one in three households will see their property values drop by $5,000 on average as mortgages made to borrowers with weak credit in 2005 and 2006 reset at higher interest rates, accelerating the pace of foreclosures. (more…)

Lenders are making it a lot easier to buy a house without the traditional 20% down payment, but you’re going to pay a lot for that option. If you borrow more than 80% of the home’s value, you’ll usually have to pay private mortgage insurance, which protects the lender if you default on your loan. That tends to cost 0.5% to 1% of the loan value, up to $3,500 per year on a $350,000 home, or $5,000 on a $500,000 home. It’s money that doesn’t go toward your principal or interest. If you wait to accumulate the 20% down payment, these extra costs can usually be avoided. You may also qualify for a lower-rate loan and keep your mortgage payments much lower, which gives you a lot more flexibility in the future. (more…)

Experts now agree that a lot of mortgages shouldn’t have been made in recent years. It was foolish for lenders and homeowners to bet housing prices would keep rising. But allowing millions of foreclosures to punish the imprudent isn’t smart. It’ll damage entire neighborhoods. “It’s not like ‘repo-ing’ cars, where you can move them around,” says Richard Syron, chairman and chief executive of mortgage giant Freddie Mac. An empty house loses 20% of its value in six months, he says. Even worse, the larger economy is at risk. Cue Federal Reserve Chairman Ben Bernanke: “A sharp increase in foreclosed properties for sale could weaken the already struggling housing market and thus, potentially, the broader economy.” (more…)

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In a growing percentage of cases, government-linked bodies are the ones putting up the cash for home loans and taking the risk that a borrower won’t pay the money back. Private enterprise’s role is narrowing in many instances to the job of arranging loans, providing the initial funding until the loans can be sold, and handling the monthly paper work. For home buyers, the renewed dominance of government-related entities means the end of the era of endless choice and easy approvals on mortgages. Borrowers now generally must meet tighter standards familiar from earlier years, such as proving their income and making a down payment of 10% to 20%. (more…)

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N.Y.-based Lender Lead Solutions recently introduced Simple60, a new reverse mortgage product available to homeowners aged 60 and older. Reverse mortgages offered to date require that borrowers be at least 62 years old. “For every 100 people I talk with about reverse mortgages, I lose 20 to 30 of them because one spouse is younger than 62 or they don’t want to pay the higher closing costs attached to the entire value of the home,” said David Peskin, Lender Lead Solutions’ chief executive officer. “We do not anticipate the Simple60 to be a substitute for the HECM. Rather, we look at it as an add-on for borrowers fitting in a specific niche. HECMs, or home equity conversion mortgages, are mortgages insured by the U.S. Department of Housing and Urban Development and account for nearly 85 percent of the reverse market. Closing costs on HECMs usually are computed on the home’s value, not on the amount borrowed. The HECM program has insured more than 240,000 reverse mortgages since 1990, while private “jumbo” reverse plans also have been available. (more…)

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For borrowers, higher costs for some home loans and tougher qualifying requirements for approval are becoming the norm among the nation’s mortgage lenders. Risky lending and borrowing habits during the last housing boom left too many homeowners with mortgages they couldn’t afford. That forced lenders to end the boom with the sound of the door on risky loans being slammed shut to lock out losses from failed home loans. Forty percent of loan officials said their institution has tightened lending standards on prime, nontraditional and subprime home loans in the past three months. Forty percent of loan officers surveyed said standards for prime loans had tightened, but the percentages were higher when only nontraditional or subprime loans were considered. Of the 40 banks originating nontraditional residential loans, 60 percent in the October survey, reported tightening lending standards on nontraditional loans, up from 40 percent in July. (more…)

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All the larger lenders have both retail and wholesale divisions. The brokers and lenders receiving wholesale mortgage prices add a markup before quoting retail prices to borrowers. The mortgage interest markup covers the cost of the various retail functions, including marketing to borrowers, counseling and advising them, taking their applications, verifying credit, employment and other information provided by applicants, pulling together all the documents required for the loan to be executed (called “processing”), and arranging for all the third-party services required for the loan including insurance (title, mortgage, flood, homeowner) and closing services. (more…)

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Federal housing-finance agency Ginnie Mae plans to roll out as soon as today what it calls the first “standardized” bond issue backed by reverse mortgages, a move aimed at boosting liquidity for one of the fastest-growing markets targeting baby boomerbaby boomers. The offering, expected to total about $120 million, consists of more than 1,000 government-insured reverse mortgages, which allow homeowners 62 years old or older to turn home equity into income they don’t have to repay until they sell their homes. Such loans have grown rapidly in popularity in recent years, thanks to the nation’s aging population, a lack of retirement savings and the rapid house-price gains in the first half of this decade.

(more…)

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