Tech takes paperwork out of home mortgages

Doug Johnson serves as the chief financial officer of two hospitals in the Wisconsin-Minnesota border area but doesn’t consider himself to be especially tech-savvy.

Nevertheless, he was able to complete the entire mortgage-application process for an Arizona vacation home that he and his wife wanted to buy, entirely online. That included shopping for interest rates and terms, inputting personal information and uploading the required supporting documents, including copies of income-tax returns, pay stubs, bank statements and more.

“It went without a hitch,” said Johnson, 47, who admits he was initially concerned about online security. “If you have access to the Internet and a cheap scanner, that’s all you need.”

Johnson did the mortgage-application process through Guaranteed Rate, a national residential mortgage lender based in Chicago. The company’s software guides applicants through the loan-shopping exercise and lets them input personal data, see their credit scores, upload key documents through a private and secure system and receive online approval. Applicants going through the company’s all-digital route currently can qualify for a $250 credit on closing costs.

Guaranteed Rate claims it has the first all-digital mortgage, but many competitors also are going in the same direction, letting customers apply for mortgages, process much of the paperwork and do related tasks day or night, using a desktop computer, tablet or smartphone.

No longer such a slog

Applying for a mortgage and supplying supporting documents — traditionally one of the most time-consuming, paperwork-intensive and frustrating financial exercises around — increasingly is being automated. That means applicants will find the process easier, faster and, possibly, less expensive than before.

Americans already have embraced online interactions for other financial products and services. They pay bills online, check credit card transactions, buy and sell stocks, adjust 401(k) balances and pull up their credit reports. The vast majority of taxpayers file their tax returns online.

Five years from now, digital applications and document submission for home loans might be just as prevalent, though it isn’t quite there yet.

“It’s not as widespread as you might think,” said Rick Hill, vice president of industry technology for the Mortgage Bankers Association. Many people still prefer to meet face to face with a loan officer, especially first-time home buyers.

read more: http://www.usatoday.com/story/money/personalfinance/2015/08/14/digital-breakthroughs-improve-home-mortgage-process/31182619/

Hispanics face hurdles in access to credit, mortgages

WASHINGTON

They make up the fastest growing segment of the U.S. population yet Hispanics are increasingly locked out of home ownership because of tighter lending standards that rely on outdated measures of creditworthiness.

Comprising more than 17 percent of the population right now and projected to double, Hispanics are a political and economic force to be reckoned with. And they potentially represent an answer to turning around a sagging national home ownership rate that’s approaching levels not seen since before the fall of the Berlin Wall.

The national rate of home ownership fell to 63.8 percent over the first three months of 2015. The last time it was lower was the final quarter of 1989 when it stood at 63.7 percent.

The problem for Hispanics, who in 2014 had an ownership rate of 45.4 percent, a 14-year low, is that conventional tools for gauging creditworthiness are locking them out in large numbers.

“Communities of color under the current scoring model aren’t being accurately captured,” said Joe Nery, president-elect of the National Association of Hispanic Real Estate Professionals. “You don’t have the opportunity to establish your credit.”

Hispanics are more likely to pay in cash, and have extended families under a single roof with a higher tendency to pool resources. Yet that counts for little in the traditional scores used by credit-reporting agencies and banks to determine whether an applicant qualifies for a mortgage or car loan.

“The current (credit) models established in the 1980s and early ’90s really don’t account for those methods of payment,” said Nery, a Realtor in Chicago. “Unfortunately that limits the access to loan products, especially for those of minority descent.”

In fact, the Consumer Financial Protection Bureau issued a report in early May noting that 26 million Americans are “credit invisible,” meaning they have no credit history on file with any of the major credit-reporting companies such as Experian, Equifax and Transunion. About 15 percent of African-American and Hispanic consumers are among those 26 million, the report said.

Currently, credit reporting is dominated by FICO scores. They date back to 1956, when software developers Bill Fair and Earl Isaac created a program to gauge the risk of a consumer credit default. Lenders now purchase more than 10 billion FICO credit scores annually for use in making loan decisions. Consumers are granted free access to their FICO score.

FICO’s current methodology dates back to around 2004, and relies on a borrower’s income, payment history, debt load and to a lesser degree how often lenders take a look at a borrower’s credit history.

Here’s the rub for Hispanic borrowers: When looking at payment history, the FICO scoring relies on whether payments have been timely on credit card bills, mortgages, car loans and the like. There’s greater weight given to lengthy repayment of credit.

“For most first-time homebuyers … their largest monthly expense is their rent payment,” said Joe Castillo, the managing broker at ERA Mi Casa Real Estate in Chicago. “And at the current time the credit agencies do not provide landlords larger or even small avenues to report that payment. So that is a huge misstep, or missed opportunity.”

That’s the problem Maria Flores faces in the Hispanic suburbs of Chicago. She sold her home at a loss several years ago amid the Great Recession, and is trying to buy again but her on-time rental payments aren’t factored into her ability to pay. It’s ironic because her monthly mortgage payment had been $2,000 a month. Her rising rental payments now are $1,800, which she routinely pays on time.

“For a bank, we are too low-income,” said Flores, whose truck-driving husband is an owner-operator who earns more than $100,000 before expenses. “Before, it was fine. It was the same as we earn now!”

Post-crisis lending standards are decidedly tougher, and that hits all borrowers. But for Hispanics there’s also the real issue of what is being measured. Cell phone payments are also not counted in conventional payment history. That would have helped Flores, who said she had no credit problems until the Great Recession.

Read more here: http://www.charlotteobserver.com/news/local/article28765174.html

Green Bay plans 1% interest, 20-year fixed mortgages for college graduates

GREEN BAY – Green Bay’s mayor says he has big plans for college graduates looking to buy a house in the city.

Mayor Jim Schmitt talked about his plan Tuesday night during his state of the city address.

Schmitt’s plan would use millions of dollars in expected excess stadium sales tax revenue. However, current law states that money must sit in a fund until 2031.

Schmitt is calling his plan the GRAND program. It stands for Graduate Recruitment and Neighborhood Development.

“This program will work to elevate higher education, energize our talented workforce, reinvest in our neighborhoods, and encourage hundreds of perspective homeowners,” said Schmitt.

Schmitt’s preliminary plan would let someone who graduated college within five years eligible to receive a one percent, 20-year fixed mortgage to buy a house. There would be no closing costs. Eligible homes would be in city limits and at least 50 years old.

“Neighbors and neighborhoods located next to college graduates tend to do better from an appreciation standpoint and a maintenance standpoint,” said Eric Witczak, executive vice president of Nicolet National Bank.

Nicolet National Bank would partner on the program.

The bank used a $109,900 Kellogg Street home as an example to show the potential value of the program. This example uses the minimum 10 percent down payment.

With the GRAND Program, payments over 20 years would be about $454 a month. Under a conventional 30-year mortgage, at 4 percent interest, monthly payments would be about $520.

Nicolet estimates the five-year value of buying the home under the GRAND program would be $19,164. After 10 years, the value would be $35,614.

City Council President Tom De Wane says the mayor’s plan is premature, considering a plan hasn’t been finalized for the excess sales tax revenue.

“That hasn’t passed, so you can’t put it into one category or can’t promise it to one group until it passes,” said De Wane.

more of this at: http://fox11online.com/2015/05/27/green-bay-plans-1-interest-20-year-fixed-mortgages-for-college-graduates/

3 things every real estate agent should know about mortgages

Unless all your clients are cash buyers, mortgages are an integral part of any real estate agent’s business. Knowing some basics about mortgages will make you a better adviser to your clients and a more effective businessperson. Although it is by no means necessary to become a mortgage expert, the following three mortgage insights will increase your value as a real estate professional.

1. Condos have special underwriting requirements.

If you’re working on a condo deal, it is in your and your client’s best interest to work closely with the mortgage loan officer to make sure the property meets the lender’s underwriting criteria. This is typically done through a condo questionnaire the lender will provide you.

Among other things, they will be looking out for things such as pending litigation against the condo association, the percentage of units that are owner-occupied and whether any part of the building is used for commercial activity. Many condo transactions are either seriously delayed or completely derailed by last-minute surprises that should have been discovered early in the process.

2. The minimum down payment is not 20 percent.

The 20 percent down is the amount necessary for a buyer to avoid paying private mortgage insurance (referred to as PMI) on the loan, but most loan programs require as little as 5 percent down. For first-time homebuyers, recent conventional (nongovernment) loan programs introduced to the market allow buyers to get a loan with only 3 percent down. If you work primarily with first-time homebuyers, you should also be aware of down payment assistance programs offered by local governments and municipalities.

3. Shopping around for a mortgage will not hurt your credit score.

Shopping around for a mortgage with multiple lenders is highly recommended, and even though credit inquiries do impact your credit score, there is an exception when it comes to credit inquiries from mortgage lenders. All such inquiries made in the 30-day period prior to scoring your credit are usually ignored. Furthermore, inquiries outside of that 30-day period that fall within a typical shopping period are counted as only one inquiry.

read more: http://www.inman.com/2015/05/14/3-things-every-real-estate-agent-should-know-about-mortgages/

Older homeowners pay more for mortgages

When you're approaching later life there's always the hope that mortgages will become cheaper, as years of making repayments brings down the overall balance and, ideally, the cost. Unfortunately, it doesn't always pan out that way, as research from Saga has revealed that older homeowners are actually being charged more for mortgages, while some find it difficult to source deals at all.

Risky behaviour

According to a Saga Personal Finance poll, a large number of those aged 50+ are concerned about the behaviour of mortgage lenders, with many providers introducing arbitrary upper age limits on lending criteria and even placing a ban on older borrowers getting a better deal. In fact, 12% of those in their 50s said they've been refused a better mortgage rate or were unable to move to a more competitive deal simply because of their age, so it seems that these concerns could well be realities.

The findings come despite the fact that working life is becoming longer for many people, not only because of the rising state pension age and the abolition of firms being able to set compulsory retirement ages, but also because many simply want to continue working in later life. This means a lot of homeowners will have a secure income with which to make mortgage repayments well into their 60s and beyond, so lenders could be penalising older borrowers unnecessarily.

Time for change

The survey revealed that an overwhelming majority (85%) thought that lending criteria should be based on ability to pay, taking into account individual income and lifestyle choices – as it is for younger borrowers – and not just on a person's age, and a further 52% thought the industry regulator should intervene to ensure fair treatment.

"It appears that mortgage lenders are blind to the fact that the world of work is changing," said Paul Green of Saga. "It simply beggars belief that people are being denied mortgages or forced to pay more for uncompetitive deals simply because of their age. This smacks of lazy lending and not bothering to understand your customers, and is another example of the industry not responding to the needs of an aging population."

Saga is joining the call for the regulator to take a proactive stance with mortgage lenders to ensure that lending criteria is fair and based on more than just age – lenders may be under more pressure to ensure affordability since the Mortgage Market Review was introduced last year, but ability to pay doesn't end as soon as a borrower is in their 60s.

Happily, it seems that the tide could be turning – earlier this month, the Financial Ombudsman Service upheld a complaint against HSBC for refusing a mortgage to a couple in their 40s on the grounds that the husband would have been over 65 at the end of the term. It's the first time this kind of age-related complaint has been upheld, with the lender being criticised for "unfair" application of its age policy, and it's hoped that this landmark decision will pave the way for future changes and acceptance of borrowing in older age.

What next?

see more: http://moneyfacts.co.uk/news/mortgages/older-homeowners-pay-more-for-mortgages/

Commercial mortgages triple in South Florida

Overall commercial mortgage volume more than tripled in South Florida between 2009 and 2014, according to a study released by Miami-based BridgeInvest, a private mortgage lender.

Over $11.4 billion in commercial mortgages were financed in 2014, up from about $9.8 billion in 2013 and $3.5 billion in 2009

Miami-Dade County captured the biggest slice of mortgage volume in the region in 2014 with 57 percent, followed by Palm Beach County at 23 percent and Broward County at 20 percent.

BridgeInvest used data from CRS Power Tool Mortgage, a Cushman & Wakefield research publication, for the study.

While Miami-Dade captured almost two-thirds of the commercial mortgage volume in 2014, the county also saw the most growth with a 42 percent year-over-year increase, compared to the 13 percent growth in Palm Beach and a 26 percent decline in Broward over the same period.

“Miami-Dade consistently has had more, but it’s considerably more this year when compared to Broward and Palm Beach,” said Alex Horn, managing partner of BridgeInvest. “Miami grew so much more. It’s very interesting and alludes to the fact that we’re seeing so much changing in the county,” he said.

The study broke out into seven classes of mortgages: land and construction, retail, multifamily, industrial, office, hotel and other. Land and construction dominated, with about $10.1 billion in mortgages, or 23 percent, followed by retail with $9.4 million, or 18 percent, and multifamily with $7.1 billion, or 17 percent.

see more at: http://www.bizjournals.com/southflorida/blog/morning-edition/2015/04/commercial-mortgages-triple-in-south-florida.html

Mortgages become bright spot in big banks’ earnings report

Some of the nation’s biggest banks have received a lift from mortgage lending during the first quarter after sharply cutting back on production over the last few years.

JPMorgan Chase not only reported earnings of $5.9 billion but it also saw a spike in net income from mortgage banking during the first quarter. The company’s mortgage banking income rose to $326 million from $132 million in the first quarter of 2014.

JPMorgan’s mortgage banking net revenue was $1.7 billion, an increase of $151 million compared to the previous year, driven by lower mortgage servicing rights risk management losses, partially offset by lower servicing revenue, according to its earnings report.

One of the main drivers of the increase was a 45% year-over-year increase in mortgage originations. According to Chase, its’ mortgage originations rose from $17 million in 2014’s first quarter to $24.7 billion in 2015’s first quarter, which was also a 7% increase over 2014’s fourth quarter, which saw mortgage originations of $23 billion.

JPMorgan is the second biggest mortgage lender with 7% of 2014 loans, according to Inside Mortgage Finance. The bank announced in February that it had reduced its mortgage staffing in 2014 by 12,000 people. Additionally, JPMorgan’s annual mortgage business expenses have declined by $2.3 billion, or 30%.

see more at: http://www.mpamag.com/mortgage-originator/mortgages-become-bright-spot-in-big-banks-earnings-report-22099.aspx