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Mortgage Servicing: Making Sure Your Payments Count

Admin — Thu, 02 Jul 2009 14:24:02 +0000

Explains mortgage servicers’ responsibilities, in particular under the RESPA enforced by HUD; urges consumers to keep records of their payments, insurance coverage, and other information; explains how consumers can file disputes with their loan servicer; and includes sample letters that consumers may use when filing a dispute with their lender/servicer or with a credit bureau.

When you apply for a home mortgage, you may think that the lender will hold and service your loan until you pay it off or you sell your house. That’s often not the case. In today’s market, loans and the rights to service them often are bought and sold.

A home may be one of the most expensive purchases you ever make, so it’s important to know who is handling your payments and that your mortgage account is properly credited. The Federal Trade Commission (FTC) wants you to know what a mortgage servicer does and what your rights are.

Mortgage Servicers: Their Responsibilities to You

A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.

Escrow Accounts

An escrow account is a fund held by your servicer into which you pay money to cover charges like property taxes and homeowners insurance. The escrow payments typically are included as part of your monthly mortgage payments. The servicer pays your taxes and insurance as they become due during the year. If you do not have an escrow account, you are responsible for paying your taxes and insurance and budgeting accordingly.

The Real Estate Settlement Procedures Act (RESPA), enforced by the Department of Housing and Urban Development, is the major law covering escrow accounts. If your mortgage servicer administers an escrow account for you, the servicer is generally required to make escrow payments for taxes, insurance, and any other charges in a timely manner. Within 45 days of establishing the account, the servicer must give you a statement that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and totals of those payments.

Under RESPA, the mortgage servicer also is required to give you a free annual statement that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, and other charges.

Transfer of Servicing

If your loan is about to be sold, you generally get two notices: one from your current mortgage servicer; the other from the new servicer. Usually, your current servicer must notify you at least 15 days before the effective date of the transfer, unless you received a written transfer notice at settlement. The effective date is when the first mortgage payment is due at the new servicer’s address. The new servicer must notify you within 15 days after the transfer has occurred.

The notices must include:

the name and address of the new servicer.

the date the current servicer will stop accepting your mortgage payments.

the date the new servicer will begin accepting your mortgage payments.

toll-free or collect-call telephone numbers, for the current and new mortgage servicer, for information about the transfer.

whether you can continue any optional insurance, such as credit life or disability insurance; what action, if any, you must take to maintain coverage; and whether the insurance terms will change.

a statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account.

There is a 60-day grace period after the transfer: during this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer. In addition, the fact that your new servicer may have received your payment late as a result cannot be reported to a credit bureau.

Posting Payments

Some consumers have complained that they’ve been charged late fees, even when they know they made their payments on time. To help protect yourself, keep good records of what you’ve paid, including any billing statements, canceled checks, or bank account statements. You also may check your account history online if your servicer’s Web site has this feature. If you have a dispute, continue to make your mortgage payments, but challenge the servicing in writing (see Sample Complaint Letter to Lender), and keep a copy of the letter and any enclosures for your records. Send your correspondence by certified mail, and request a return receipt. Or send it by fax, and keep a copy of the transmittal confirmation.

Force Placed Insurance

It’s important to maintain the required property insurance on your home. If you don’t, your servicer can buy insurance on your behalf. This type of policy is known as force placed insurance; it usually is more expensive than typical insurance; and it provides less coverage. The primary purpose of a force placed policy is to protect the mortgage holder, not the property owner.

Review all correspondence you receive from your mortgage servicer. Your mortgage servicer may request that you provide a copy of your property insurance policy. Respond promptly to requests regarding property insurance, and keep copies of all documents you send to your mortgage servicer.

If you believe there’s a paperwork error and that your coverage is adequate, provide a copy of your insurance policy to your servicer. once the servicer corrects the error, removes the force placed coverage, and refunds the cost of the force placed policy, make sure that any late fees or interest you were charged as a result of the coverage also are removed.

Fees

Review your billing statements carefully to make sure that any fees the servicer charges are legitimate. For example, the fees may have been authorized by the mortgage contract or by you to pay for a service. If you do not understand what the fees are for, send a written inquiry and ask for an itemization and explanation of the fees. Also, if you call your mortgage servicer to request a service, such as faxing copies of loan documents, make sure you ask whether there is a fee for the service and what it is.

Inquiries and Disputes

Under RESPA, your mortgage servicer must respond promptly to written inquiries, known as qualified written requests (see Sample Complaint Letter to Lender). If you believe you’ve been charged a penalty or late fee that you don’t owe, or if you have other problems with the servicing of your loan, contact your servicer in writing. Be sure to include your account number and clearly explain why you believe your account is incorrect. Your inquiry should not be just a note on the payment coupon supplied by your servicer, but should be sent separately to the customer service address.

Within 20 business days of receiving your inquiry, the servicer must send you a written response acknowledging it. Within 60 business days, the servicer either must correct your account or determine that it is accurate. The servicer must send you a written notice of the action it took and why, along with the name and telephone number of someone you can contact for additional assistance.

Do not subtract any disputed amount from your mortgage payment. Some mortgage servicers might refuse to accept what they consider to be partial payments. They might return your check and charge you a late fee, or claim that your mortgage is in default and start foreclosure proceedings.

Sample Complaint Letter to Lender

The following is a sample qualified written request from you, the borrower, to a lender. Use this format to address complaints under the Real Estate Settlement Procedures Act (RESPA).

Attention Customer Service:

Subject: Your loan number
Your Name
Your Address
Your City, State, Zip Code

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:

Describe the issue or the question you have and/or what action you believe the lender should take.

Attach copies of any related written materials.

Describe any conversations with customer service regarding the issue and to whom you spoke.

Describe any previous steps you have taken or attempts to resolve the issue.

List a day time telephone number in case a customer service representative wishes to contact you.

I understand that under Section 6 of RESPA you are required to acknowledge my
request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

Your name

Fair Debt Collection

By law, a debt collector is a person who regularly collects debts owed to others. Your mortgage servicer is considered a debt collector only if your loan was in default when the servicer acquired it. If that’s true, you have additional rights that you can read about in the FTC’s brochure “Fair Debt Collection.”

Your Credit Report

Many mortgage companies provide information about your payment history to credit bureaus, companies that maintain and sell consumer credit reports — which contain information about your credit payment history — to other creditors, employers, insurers, and businesses. Both the credit bureaus and the information provider have responsibilities for correcting inaccurate or incomplete information.

If you believe that your mortgage servicer has provided inaccurate information to a credit bureau, contact the credit bureau and the servicer. Tell the credit bureau in writing (see Sample Dispute Letter to Credit Bureau) what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts, and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the credit bureau received. Keep copies of your dispute letter and enclosures.

Credit bureaus must re-investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all relevant information you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the credit bureau, it must investigate, review all relevant information provided by the credit bureau, and report the results to the credit bureau. If the information provider finds the disputed information to be inaccurate, it must notify all national credit bureaus so they can correct this information in your file. Disputed information that cannot be verified must be deleted from your file.

If your report contains erroneous information, the credit bureau must correct it.

If an item is incomplete, the credit bureau must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the credit bureau must show that you’re current.

If your file shows an account that belongs to another person, the credit bureau must delete it.

When the re-investigation is complete, the credit bureau must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address, and phone number of the provider.

Also, if you request it, the credit bureau must send notices of corrections to anyone who received your report in the past six months. If a re-investigation does not resolve your dispute, ask the credit bureau to include your statement of the dispute in your file and in future reports.

In addition to writing to the credit bureau, tell the servicer in writing that you dispute an item. Include copies (NOT originals) of the documents that support your position. If a servicer specifies an address for disputes, it is important to send your dispute to that address. If the provider then reports the item to any credit bureau, it must include a notice of your dispute. If you are correct — that is, if the disputed information is inaccurate — the information provider may not report it again.

Sample Dispute Letter to Credit Bureau

Date

Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Credit Reporting Agency
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received. (Identify item(s) disputed by name of loan servicer and loan number.)

This item is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please re-investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)

If You Have a Complaint

If you believe your mortgage servicer has not responded appropriately to your written inquiry, contact your local or state consumer protection office. You also should contact the Department of Housing and Urban Development (HUD) to file a complaint under the RESPA regulations. Write: Office of RESPA and Interstate Land Sales, Department of Housing and Urban Development, 451 Seventh Street, S.W., Room 9146, Washington, DC 20410.

In addition, you may want to contact an attorney to advise you of your legal rights. Under certain sections of the RESPA, consumers can initiate lawsuits and obtain actual damages, plus additional damages, for a pattern or practice of noncompliance. In successful actions, consumers also may obtain court costs and attorney’s fees.

You may want to contact a housing counselor to discuss your situation. You can call HUD’s hotline at 1-800-217-6970 for a referral to a local HUD-approved housing counselor.

The Power Of A Home Equity Loan To Pay Down Debt

Admin — Thu, 02 Jul 2009 14:22:16 +0000

Households across the country are finding themselves in a similar situation. They lack the financial funds to make the necessary changes to their home and need to find a way to fund upgrades and eliminate debt. A popular way of financing these changes without killing themselves is by taking a home equity loan to pay down their debt.

The Home Equity Loan has become a fast-track way of paying down large credit card debt, financing college education and even taking a vacation. Since the stock market has lost quite a bit of appreciation, people have been purchasing homes as a means of investment, thus sending housing prices through the roof. With higher prices comes a great deal of appreciation in the home. People who have found themselves in 20 – 30 thousand dollars in debt can pay it down by taking a home equity loan. Home Equity Loans have been a source of relief and flexibility to get the homeowner out of debt and moving forward in life.

The home equity tax shelter
The greatest benefit from taking a Home Equity Loan is being able to crush debt, but also reduce the amount you owe the government every year. Most loans by design do not provide any tax relief, whereas a Home Equity Loan provides a direct line item to reduce your debt. To figure out your home equity value you can hire a professional appraiser to come out and tell you how much it is worth to a bank or financial institution. once you have that figure you can easily find out how much equity you have in your home. For example, should your home appraise for $150,000 and you owe $ 60,000 you have $90,000 in equity. This equity will not become a taxable event should you buy a bigger home and spend more money. Should you step down in your home, you can be penalized for the difference, provided that you have not already taken the one-time exemption allowed by the government.

Debt relief
Once you have found out how much your home is now worth, it is time to apply for the loan. During the loan process you can bring your credit card statements as well as any other debts you may owe to the table. Explain to the loan officer your situation and ask that these debts also be included in the Home Equity Loan. If your home has at least 40% equity in your property you should have no problem getting them dissolved into the loan. There are many reputable lenders who will help you find the right loan for you. The Home Equity Loan will restart the 15 or 30-year clock from day one. Your payment may increase or decrease depending on how much debt you add or cash you take out of the property.

Time-Barred Debt

Admin — Thu, 02 Jul 2009 14:20:28 +0000

Offers information on debt collection practices as they relate to debts that are past the statute of limitations.

There’s no doubt about it: you are responsible for your debts. If you fall behind in paying your creditors — or if you dispute the legitimacy of a debt — a debt collector may contact you.

“Time-barred” debts are debts so old they are beyond the point at which a creditor or debt collector may sue you to collect. State law varies as to when a creditor or debt collector may no longer sue to collect: in most states, the statute of limitations period on debts is between 3 and 10 years; in some states, the period is longer. Check with your State Attorney General’s Office at www.naag.org to determine when a debt is considered time-barred in your state.

Federal law imposes limitations on how debt collectors can collect debts, including time-barred debts. Under the Fair Debt Collection Practices Act (FDCPA), a “debt collector” generally is any person or organization that regularly collects debts owed to others. The term includes lawyers who collect debts for others on a regular basis, but it does not include creditors collecting their own debts.

The FDCPA prohibits debt collectors from engaging in any unfair, deceptive, or abusive practices while collecting debts. It does not erase any legitimate debt that you owe. To learn more about your rights under the FDCPA, click on www.ftc.gov/bcp/conline/pubs/credit/fdc.htm.

Collecting Time-Barred Debts
Most courts that have addressed the issue have ruled that the FDCPA does not prohibit debt collectors from trying to collect time-barred debts, as long as they do not sue or threaten to sue you for the debt. If a debt collector sues you to collect a time-barred debt, you can have the suit dismissed by letting the court or judge know the debt is, indeed, time-barred.

Whether a time-barred debt — or any debt for that matter — can appear on your credit report depends on how long the debt has been delinquent: debts that have been delinquent more than seven years cannot appear on your credit report, with certain exceptions. In addition, a debt collector may not try to collect a debt that has been discharged in bankruptcy, no matter when it was incurred. To learn more about credit reporting, click on www.ftc.gov/bcp/conline/pubs/credit/fcra.htm.

Contact with Collectors
Can a debt collector continue to contact you about a time-barred debt you don’t think you owe? According to the law, if you send the debt collector a letter stating that you do not owe some or all of the money within 30 days after you receive written notice of a debt, the collector must stop trying to collect until you’ve been given written verification of the debt, like a copy of the bill for the amount you supposedly owe. The collector can renew collection activities once you’ve gotten proof of the debt.

You can stop debt collectors from contacting you about any debt, regardless of whether you owe it, by writing a letter telling them to stop contacting you. once the collector gets your letter, it may not contact you again — except to say there will be no further contact or to let you know that the collector or creditor intends to take some specific action. Sending a letter doesn’t absolve you of the debt if you actually owe it; the debt collector or creditor still could sue you for the debt.

Future Collection Efforts
The best way to protect yourself from future collection on any disputed or partially settled debt is to get a form or letter from the creditor or collector that releases you from further obligation. To make sure the release is valid, you may want to consult an attorney. If you believe that a debt collector violated the law, you have the right to sue in a state or federal court within a year from the date the law was violated. If you win, you may recover money for the damages you suffered, plus an additional amount up to $1,000. You also may recover court costs and attorney’s fees. You also may want to report any problems you have with a debt collector to your State Attorney General and to the Federal Trade Commission.

Looking For The Best Mortgage? Shop, Compare, Negotiate

Admin — Thu, 02 Jul 2009 14:15:36 +0000

Use these three steps to save money on a mortgage or home loan. Includes a mortgage shopping worksheet.

Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage—whether it’s a home purchase, a refinancing, or a home equity loan—is a product, just like a car, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

Obtain Information from Several Lenders

Home loans are available from several types of lenders—thrift institutions, commercial banks, mortgage companies, and credit unions. Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also get a home loan through a mortgage broker. Brokers arrange transactions rather than lending money directly; in other words, they find a lender for you. A broker’s access to several lenders can mean a wider selection of loan products and terms from which you can choose. Brokers will generally contact several lenders regarding your application, but they are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Consequently, you should consider contacting more than one broker, just as you should with banks or thrift institutions.

Whether you are dealing with a lender or a broker may not always be clear. Some financial institutions operate as both lenders and brokers. And most brokers’ advertisements do not use the word “broker.” Therefore, be sure to ask whether a broker is involved. This information is important because brokers are usually paid a fee for their services that may be separate from and in addition to the lender’s origination or other fees. A broker’s compensation may be in the form of “points” paid at closing or as an add-on to your interest rate, or both. You should ask each broker you work with how he or she will be compensated so that you can compare the different fees. Be prepared to negotiate with the brokers as well as the lenders.

Obtain All Important Cost Information

Be sure to get information about mortgages from several lenders or brokers. Know how much of a down payment you can afford, and find out all the costs involved in the loan. Knowing just the amount of the monthly payment or the interest rate is not enough. Ask for information about the same loan amount, loan term, and type of loan so that you can compare the information. The following information is important to get from each lender and broker:

Rates

Ask each lender and broker for a list of its current mortgage interest rates and whether the rates being quoted are the lowest for that day or week.

Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment.

If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down.

Ask about the loan’s annual percentage rate (APR). The APR takes into account not only the interest rate but also points, broker fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.

Points

Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the rate.

Check your local newspaper for information about rates and points currently being offered.

Ask for points to be quoted to you as a dollar amount—rather than just as the number of points—so that you will actually know how much you will have to pay.

Fees

A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and transaction, settlement, and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs. “No cost” loans are sometimes available, but they usually involve higher rates.

Ask what each fee includes. Several items may be lumped into one fee.

Ask for an explanation of any fee you do not understand. Some common fees associated with a home loan closing are listed on the Mortgage Shopping Worksheet in this brochure.

Down Payments and Private Mortgage Insurance

Some lenders require 20 percent of the home’s purchase price as a down payment. However, many lenders now offer loans that require less than 20 percent down—sometimes as little as 5 percent on conventional loans. If a 20 percent down payment is not made, lenders usually require the home buyer to purchase private mortgage insurance (PMI) to protect the lender in case the home buyer fails to pay. When government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services are available, the down payment requirements may be substantially smaller.

Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.

Ask your lender about special programs it may offer.

If PMI is required for your loan,

Ask what the total cost of the insurance will be.

Ask how much your monthly payment will be when including the PMI premium.

Ask how long you will be required to carry PMI.

Obtain the Best Deal That You Can

Once you know what each lender has to offer, negotiate for the best deal that you can. on any given day, lenders and brokers may offer different prices for the same loan terms to different consumers, even if those consumers have the same loan qualifications. The most likely reason for this difference in price is that loan officers and brokers are often allowed to keep some or all of this difference as extra compensation. Generally, the difference between the lowest available price for a loan product and any higher price that the borrower agrees to pay is an overage. When overages occur, they are built into the prices quoted to consumers. They can occur in both fixed and variable-rate loans and can be in the form of points, fees, or the interest rate. Whether quoted to you by a loan officer or a broker, the price of any loan may contain overages.

Have the lender or broker write down all the costs associated with the loan. Then ask if the lender or broker will waive or reduce one or more of its fees or agree to a lower rate or fewer points. You’ll want to make sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the rate while raising points. There’s no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.

Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the loan rate. This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed; if rates fall, however, you could end up with a less favorable rate. Should that happen, try to negotiate a compromise with the lender or broker.

Remember: Shop, Compare, Negotiate

When buying a home, remember to shop around, to compare costs and terms, and to negotiate for the best deal. Your local newspaper and the Internet are good places to start shopping for a loan. You can usually find information both on interest rates and on points for several lenders. Since rates and points can change daily, you’ll want to check your newspaper often when shopping for a home loan. But the newspaper does not list the fees, so be sure to ask the lenders about them.

The Mortgage Shopping Worksheet that follows may also help you. Take it with you when you speak to each lender or broker and write down the information you obtain. 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.

Fair Lending Is Required by Law

The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicant’s income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act.

The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin.

Under these laws, a consumer cannot be refused a loan based on these characteristics nor be charged more for a loan or offered less favorable terms based on such characteristics.

Credit Problems? Still Shop, Compare, and Negotiate

Don’t assume that minor credit problems or difficulties stemming from unique circumstances, such as illness or temporary loss of income, will limit your loan choices to only high-cost lenders.

If your credit report contains negative information that is accurate, but there are good reasons for trusting you to repay a loan, be sure to explain your situation to the lender or broker. If your credit problems cannot be explained, you will probably have to pay more than borrowers who have good credit histories. But don’t assume that the only way to get credit is to pay a high price. Ask how your past credit history affects the price of your loan and what you would need to do to get a better price. Take the time to shop around and negotiate the best deal that you can.

Whether you have credit problems or not, it’s a good idea to review your credit report for accuracy and completeness before you apply for a loan. To order a copy of your credit report, contact:

Equifax: (800) 685-1111
TransUnion: (800) 916-8800
Experian: (888) EXPERIAN (397-3742)

Glossary

Adjustable-rate loans, also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered

Annual percentage rate (APR) is the cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay.

Conventional loans are mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA).

Escrow is the holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Fixed-rate loans generally have repayment terms of 15, 20, or 30 years. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan.

The interest rate is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.

Loan origination fees are fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.

Lock-in refers to a written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.

A mortgage is a document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off on the loan.

Overages are the difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.

Points are fees paid to the lender for the loan. one point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs.

Private mortgage insurance (PMI) protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.

Thrift institution is a general term for savings banks and savings and loan associations.

Transaction, settlement, or closing costs may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys’ fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.

This brochure was prepared by the following agencies:

Department of Housing and Urban Development
Department of Justice
Department of the Treasury
Federal Deposit Insurance Corporation
Federal Housing Finance Board
Federal Reserve Board
Federal Trade Commission
National Credit Union Administration
Office of Federal Housing Enterprise Oversight
Office of the Comptroller of the Currency
Office of Thrift Supervision

These agencies (except the Department of the Treasury) enforce compliance with laws that prohibit discrimination in lending. If you feel that you have been discriminated against in the home financing process, you may want to contact one of the agencies listed above about your rights under these laws.

For more information on home lending issues, visit www.consumer.gov, write to the Consumer Information Center, Pueblo, CO 81009 or visit the Center’s Web site. The following brochures are available from the center:

A Consumer’s Guide to Mortgage Lock-lns
A Consumer’s Guide to Mortgage Refinancing
Buying Your Home: Settlement Costs and Helpful Information
Consumer Handbook on Adjustable Rate Mortgages
Guide to Single Family Home Mortgage Insurance
Home Buyer’s Vocabulary
Home Mortgages: Understanding the Process and Your Rights to Fair Lending
How to Buy a Home with a Low Down Payment
How to Dispute Credit Report Errors
The HUD Home Buying Guide
When Your Home Is on the Line
Mortgage Shopping Worksheet Lender 1 Lender 2 Name of Lender Name of Contact Date of Contact Mortgage Amount Basic Information on the Loans Mortgage 1 Mortgage 2 Mortgage 1 Mortgage 2 Type of Mortgage: Fixed rate, adjustable rate, conventional, FHA, other? If adjustable, see below. Minimum down payment required Loan term (length of loan) Contract interest rate Annual percentage rate (APR) Points (may be called loan discount points) Monthly Private Mortgage Insurance (PMI) premiums How long must you keep PMI? Estimated monthly escrow for taxes and hazard insurance Estimated monthly payment (Principal, Interest, Taxes, Insurance, PMI) Fees Different institutions may have different names for some fees and may charge different fees. We have listed some typical fees you may see on loan documents. Application fee or Loan processing fee Origination fee or Underwriting fee Lender fee or Funding fee Appraisal fee Attorney fees Document preparation and recording fees Broker fees (may be quoted as points, origination fees, or interest rate add-on) Credit report fee Other fees Other Costs at Closing/Settlement Title search/Title Insurance For lender For you Estimate prepaid amounts for interest, taxes, hazard insurance, payments to escrow State and local taxes, stamp taxes, transfer taxes Flood determination Prepaid Private Mortgage Insurance (PMI) Surveys and home inspections Total Fees and Other Closing/Settlement Cost Estimates

Mortgage Shopping Worksheet – continued

	Lender 1		Lender 2
Name of Lender
Other Questions and Considerations about the Loan	Mortgage 1	Mortgage 2	Mortgage 1	Mortgage 2
Are any of the fees or costs waivable?
Prepayment penalties
Is there a prepayment penalty?
If so, how much is it?
How long does the penalty period last? (for example, 3 years? 5 years?)
Are extra principal payments allowed?
Lock-ins
Is the lock-in agreement in writing?
Is there a fee to lock-in?
When does the lock-in occur -0 at application, approval or another time?
How long will the lock-in last?
If the rate drops before closing, can you lock-in at a lower rate?
If the loan is an adjustable rate mortgage:
What is the initial rate?
What is the maximum the rate could be next year?
What are the rate and payment caps each year and over the life of the loan?
What is the frequency of rate change and of any changes to the monthly payment?
What is the index that the lender will use?
What margin will the lender add to the index?
Credit life insurance
Does the monthly amount quoted to you include a charge for credit life insurance?
If so, does the lender required credit life insurance as a condition of the loan?
How much does the credit life insurance cost?
How much lower would your monthly payment be without the credit life insurance?
If the lender does not require credit life insurance, and you still want to buy it, what rates can you get from other insurance providers?

Don’t Let an Illness or Unemployment Cost You Your Home

Admin — Thu, 02 Jul 2009 14:11:55 +0000

As a nation of homeowners, we are particularly vulnerable to the effects that accident, sickness, or unemployment could have on our ability to meet our monthly mortgage repayments.

In view of this, it is quite alarming to note that of the 11 million mortgage borrowers in the UK, only 20% currently have any form of independent insurance to protect their mortgage
repayments in the event of accident, sickness, or unemployment.

A large number of borrowers wrongly assume that State Benefit will protect their mortgage repayments if they are off work sick or lose their jobs. But in actual fact, only 30% of people who put in a claim for State Benefit in respect of their mortgage repayments receive any help. This is because: – If you took out your mortgage on or after 1 October 1995 you will not receive any
State Benefit for the first nine months of sickness or unemployment.

- If you took out your mortgage before 1 October 1995 you will not receive any State benefit for the first two months. After that, you will, subject to eligibility, receive 50% of the full entitlement for the next four months.

- If you and/or your partner have more than £8,000 in savings, you will not receive any State benefit. Restrictions also apply if you have more than £3,000 in savings.

- If your partner works for more than 16 hours a week, you will not be entitled to State Benefit.

Even for those who are entitled to State Benefit, this assistance only applies to the interest element of your mortgage repayments. Any capital repayments or any premiums for associated life
cover/savings vehicles are not covered.

If you fall behind with your mortgage repayments and cannot repay the debt, you could end up losing your home. That’s why the Council of Mortgage Lenders encourages all mortgage borrowers to consider taking out mortgage payment protection insurance – also known as accident, sickness and unemployment (ASU) cover.

This type of protection will help you to cover your mortgage repayments and any associated insurance premiums for up to a year if you are unable to work due to unemployment, accident, or
sickness.

- You choose the amount of cover you need per month

- You choose the type and level of cover required

- You choose how long you want to wait before claims are paid

- You pay a low monthly premium

- The policy pays a fixed monthly benefit for up to 12 months if you are unable to work due to accident, sickness, or unemployment.

You will normally be able to make a claim if:
- you have lost your job in circumstances beyond your control – e.g. redundancy – and are registered as unemployed, or

- you are unable to work due to a disability/illness and you are under the regular care of a doctor or consultant.

For more information on protecting your mortgage repayments, visit the UK Mortgages & Remortgages website.

Endowment Mortgages & Endowment Shortfalls

Admin — Tue, 30 Jun 2009 18:30:23 +0000

Endowments and endowment mortgages have received a lot of bad press in recent years, amid concerns over falling policy values and accusations of endowment misselling.

This article attempts to answer some of the questions and concerns you may have about the way endowments work, what’s happening to them, and what you can do to ensure your mortgage is
paid off at the end of the term if you have an endowment mortgage.

What is an endowment mortgage?

There are two basic types of mortgage. The first is a repayment mortgage, where you make one monthly payment to the lender which is part interest and part repayment of the original capital.

Then there are interest-only mortgages, where your monthly payment to the lender is just the interest on the original loan and the mortgage debt remains unchanged. You then make separate
payments into an investment scheme (such as an endowment), with the idea being that at the end of the mortgage term this investment will have grown sufficiently to repay the mortgage.

An online mortgage calculator can give you an idea of the difference in payments to your lender between an interest-only mortgage and a repayment mortgage.

Interest-only endowment mortgages were very popular in the 1980s and 1990s and were often chosen in the belief that the endowment would end up being large enough to clear the mortgage and still leave a tidy sum of money left over as a bonus.

How do endowments work?

An endowment is a long-term savings policy, typically running for ten to twenty-five years. An endowment plan has what is known as a “sum assured” value. If the policyholder dies during the life of the endowment, it pays out the sum assured. In the case of endowments linked to mortgages, the sum assured is equal to the size of the mortgage. The payout in the event of the death of the policyholder is guaranteed but, if the policyholder survives, the final value of the endowment at the end of its term is not guaranteed.

Endowments can be unit linked, which means that you buy units in a fund, or they can be “with profits”.

How does money grow in a with profits endowment?

There are two ways in which a with profits endowment can increase in value. Firstly, the insurance company may add a bonus to your policy each year. This is known as a reversionary bonus and is usually a percentage of the amount of profit made by the fund over the previous years.

The amount added in this way may only be a small amount. However, once added, these bonuses cannot be taken away – hence the name reversionary bonus – and will belong to you when the policy matures.

Then there is the terminal bonus. This is a separate sum of money which the insurance company can add to your endowment policy when it matures. These terminal bonuses are discretionary and may not be applied at all.

What are the advantages of with profits endowments?

The idea of a with profits endowment is to smooth out fluctuations in the stockmarket.

With a non-with profits endowment, your investment is linked 100% to the stockmarket. Therefore, there is always the possibility that the investment value could fall just at the time when you need the money.

By using with profits endowments, insurance companies get round this problem by giving you a slightly smaller percentage of any fund growth as an annual bonus and try to smooth out future
annual bonus declarations.

The point of this is to try to ensure that, no matter what happens to the returns of the fund, you are guaranteed a certain minimum amount when then endowment policy matures.

Why don’t you get the entire year’s gains as a bonus?

On the one hand, the insurance companies and their fund managers want you to have as much security as possible – hence the reversionary bonuses which cannot be taken away at a later date.
On the other hand, they are also trying to maximise long-term growth by investing your money in stocks and shares, property, gilts, and cash. All of these involve a degree of risk.

What is the problem with endowments?

Anyone taking out an endowment policy, whether on a with profits or unit linked basis, has to be given a written illustration by the insurance company of how much the policy might be worth at
maturity. When providing these illustrations, insurers have to make an assumption as to the rate of growth per annum that will apply to the money you are paying into the endowment. This assumed rate is known as the projected rate, and there is no guarantee that this rate will be met in reality.

Until a few years ago, the projections were usually based on a mid-range growth rate of 7.5% per annum. In the early 1980s, the assumed growth rates used in the illustrations were even higher.
Therefore, the monthly endowment premiums were low by today’s standards, because they were set to reflect these high projected growth rates.

Interest rates and other economic factors, such as stockmarket growth and interest rates, are much lower now than they were in the 1980s and 1990s, so it has now been necessary to reduce
projected rates of growth for people taking out a new endowment policy today. As a result, the monthly premiums for a new endowment policy today will be higher than they were in previous
decades.

How does this affect existing policyholders?

Because actual growth rates have been lower than the projected 7.5% rate, an endowment policy taken out in the 1980s or 1990s may now not be worth enough at maturity to pay off the
interest-only mortgage to which it is linked.

Insurance companies are therefore assessing the state of people’s policies and contacting them to advise what action they should take now to avoid a potential shortfall at the end of their mortgage.

How will I be affected?

In most cases, if you took out a with-profits endowment in the mid-1980s or earlier, the fund should be sufficient at maturity to pay off the mortgage. This is because the money in your
endowment policy will have benefited from the higher rates of interest and better stockmarket growth of the 1980s.

But, the shorter the length of time your endowment has been running, the greater the potential for a shortfall at maturity.

It is impossible to predict exactly how large this shortfall may be, as so much depends on future fund performance between now and the time when your endowment matures. Insurance companies are trying to assess the issue by looking at how much has been accumulated in your fund so far and making more conservative estimates about future growth.

What can I do now?

There are a number of options:

1. You can increase payments into your existing endowment policy (subject to Inland Revenue rules), or take out additional endowment policy with the same insurer or a different insurer.
However, you may decide you don’t want to be tied into another endowment.

2. You can ask to extend the term of your endowment policy, subject to your mortgage lender agreeing. This is probably not a good idea if it means your policy would continue beyond your
retirement age.

3. You can set up an additional investment, such as an individual savings account (ISA). An ISA may be cheaper and can offer a wide range of investment choices to suit your attitude to risk.

4. You can ask your mortgage lender to switch part of your mortgage (equivalent to the projected shortfall on your endowment) to a repayment mortgage. You can get an idea of the costs of the new repayment part of your mortgage by using an online mortgage calculator.

5. You can use any other spare lump sum to pay off part of your mortgage. You will need to check first to see if this would make you liable for any early redemption penalties from your lender.

Which is the best option?

Everyone’s situation is different, and everyone has their own particular preferences. If you are unsure what to do, you should take professional mortgage advice to help you review your options
and come to a decision as to what to do.

Should I just cash in my endowment?

This would almost certainly be a mistake. Many endowment policies are structured such that the management charges are highest in the early years. If you surrender the policy early on, the amount you get back may well be less than the amount you have paid in up until now.

Also, you need to bear in mind that a large proportion of the final value of a with profits endowment depends on its terminal bonus. The size of this bonus will not be known until the policy matures.

So, the best strategy is normally to keep the endowment in place. If you need to cut down on your monthly outgoings, you can leave a policy “paid up” (although you may incur penalties for doing this). This means that you do not pay any more money into the endowment, but leave it to mature on the original date for a lower amount. If you do this, you will need to make sure you
still have sufficient life cover to protect your mortgage.

It is possible to sell endowment policies on the second-hand endowment market. The amount you get will depend on the policy and how long it has left to run. Again, this is an area where you
would be well-advised to talk to a professional before taking any action.

The SEC Mutual Fund Cost Calculator

Admin — Tue, 30 Jun 2009 18:26:49 +0000

The Mutual Fund Cost Calculator enables investors to easily estimate and compare the costs of owning mutual funds. The Cost Calculator takes the mystery and math out of the cost equation, revealing how costs add up over time.

Mutual fund costs take a big chunk out of any investor’s return. That’s why it’s important for investors to know what costs they are paying, and which cost structure is best for them. By using the Cost Calculator investors will find answers quickly to questions like this: Which is better, a no-load fund with yearly expenses of 1.75% , or a fund with a front-end sales charge of 3.5% with yearly expenses of 0.90% ?

The Cost Calculator is great for understanding costs, but costs aren’t the only thing that should be considered when investing in a mutual fund. Other things to assess include:

the number of years needed to reach an investment goal,
the type of stocks, bonds, or other securities that the fund buys,
the risk of the fund,
the fit between the fund and the investor’s portfolio (diversification),
the fund company or portfolio manager who runs the fund,
the fund’s track record or performance over time, and
the types of services offered by the fund company.

Please review the frequently asked questions before beginning. This page provides answers and an e-mail address for comments. The FAQ page will be updated from time to time, so be sure to check back often.

Run the JavaScript SEC Cost Calculator (requires a JavaScript-enabled browser, such as Netscape Navigator^TM 2.0 or higher, or Microsoft^® Internet Explorer 3.0 or higher.)

Mortgage Consumer Bill of Rights

Admin — Tue, 30 Jun 2009 18:25:09 +0000

This bill of rights was laid out by Franklin Raines, President of Fannie Mae on January 15, 2000. The Mortgage Consumer Bill of Rights is a pledge of $2 trillion over 10 years to help consumers gain access to home ownership. It also includes an “Open Book” approach to underwriting where customers can see all of the factors that go into evaluating their creditworthiness and the process of applying for a home loan.

One of the most ambitious parts of this plan is to bring more technology to the Mortgage Industry and reduce their paperwork by over 17%. Less reliance on paper, equals more automated evaluations and quicker loan approvals. This means customers who look for lenders and apply online are definitely at the forefront of the Mortgage industry.

The Basic Tenets of the Mortgage Consumer Bill of Rights

All Americans Have A Right to Access to Mortgage Credit
Fannie Mae hopes to decrease the gap in home ownership between whites and blacks, low income earners and middle class families, and other underserved populations. There are more procedures and practices in place to prevent predatory lending, fraud and discrimination. You can be assured that you can find a lender that will approve and finance your loan even if you are not extremely wealthy or you don’t have perfect credit.

Consumers have a right to the lowest-cost mortgage for which they qualify.
Fannie Mae is chartered as a private company to hold down the costs of mortgages. Their strategy is to offer mortgage products that allow lenders to qualify more home buyers for low cost conventional financing. There are mortgage programs to allow lenders to serve the needs of first time home buyers, women, minorities, rural and inner city residents, singles and more. one of their most popular packages is the Timely Rewards Program. If you have less than ideal credit, you can qualify for mortgage rates that are up to 2% lower than the sub-prime market, and the rate can be reduced another 1% if you make all of your loan payments on time for the first 24 months.

Homeowners have a right to know the true cost of a mortgage
Customers have a right know the true cost of their mortgage. There are many components that make up a mortgage package, each with its own variable cost. Make sure that you know what is in your package and the exact dollar amounts before you close on your home loan. Some of the items are down payments, interest rates, points, closing fee, appraisal costs and insurance payment for the first month.

To encourage this open practice nationwide, Fannie Mae has created a True Cost Calculator. Customers can enter their information and see what the true total cost will be for their mortgage, and their options for saving some money.

Homeowners have right to be free of regulatory burden
You have the right to get new homes and mortgage financing without too much intrusion from the government as far as regulatory fees, paperwork and time are concerned. This does not free your or your builder from abiding by local laws and zoning ordinances. Instead, this type interference will be reduced and not hamper your ability to qualify for a mortgage, or leave you open to huge fees when you try to close.

Homeowners have a right to know about mortgage decisions
There will be more transparency among lenders and brokers so that customers know what goes into a mortgage package, who makes the decisions, when are decisions being made, and what you can do if the outcome is not what you intended, or what you would like to happen. It should always be clear, or feel free to ask your Broker, Banker or Lender: what else can you do to make the application process smooth and efficient?

And what are your rights as far as making changes later on and if there are any fees attached to changing your mind.

Every banker or lender in the industry should be familiar with your Mortgage Bill of Rights. You can find out more at the Fannie Mae Website.

How To Get A Mortgage If You’re Self-Employed

Admin — Tue, 30 Jun 2009 18:22:57 +0000

A self-employed person is someone who runs their own business and works for themselves without an employer. Directors of small limited companies, although technically employed on a PAYEE basis, will generally be classed as self employed when it comes to applying for a mortgage or remortgage.

If you are self-employed, work on a contract basis, or have an income that is irregular or comes from multiple sources, it will generally be harder for you to get a mortgage than it is for someone who is an employee and can easily prove their income.

With over three million self-employed individuals in the UK, the attitude of many mortgage lenders towards the self-employed population is a problem that can affect a large number of people, even though many self-employed people often earn more than a lot of salaried workers.

The problem stems from the fact that the majority of mainstream mortgage lenders require proof of income when assessing a mortgage or remortgage application. Employed people can use their
payslips and P60 as proof of salary, but there is no such straightforward equivalent if you are self-employed.

In place of payslips, self-employed workers may be asked to provide audited accounts that show their income over the last three years. However, in many cases, these accounts will not give
an accurate reflection of how much money a self-employed person is making. This is because if the accountant who prepared the accounts is doing his job properly, he will have offset as many
allowable expenses as possible against tax. This has the effect of reducing the self-employed person’s net profit, upon which the lender will base the size of mortgage or remortgage they are
prepared to offer.

The situation is even worse for the newly self-employed, as they may not yet have been trading long enough to have had three years’ worth of accounts prepared.

This is where mortgage lenders who specialise in self-certification mortgages and self-employed mortgages come into their own. These types of lenders appreciate the different and complex working patterns of the self-employed, contract workers, and people whose jobs are seasonal. They are prepared to look at each case individually and assess each mortgage application on its own merits, rather than just applying a series of one-size-fits-all income tests. In many cases,
self-certification means that you do not need to supply any proof of income – you just declare what your income is without having to provide any supporting documentation.

In addition, specialist self-employed and self-certification lenders are more likely to offer flexible mortgage products that allow overpayments and underpayments. This is ideal for people whose income can fluctuate throughout the year, as it means you can overpay when times are good and underpay if you’re business is going through a quiet period.

If you want more information on self-certification mortgages for self-employed people, please visit Clean Slate Mortgages.

The Benefits Of Secured Loans

Admin — Tue, 30 Jun 2009 18:20:13 +0000

Borrowing money has become more and more popular in the UK over recent years, and this is partly due to the fact that it has become far easier to borrow money. The rising popularity of consumer finance has also been aided by the wide variety of deals and the low interest rates available these days. Secured loans have become very popular with those that own property, and this type of finance deal offers affordability and excellent value for money. Secured loans are available from a wide pool of lenders, which means that consumers have plenty of choice when it comes to selecting and applying for secure loans.

The amount available to borrow with secured loans is dependant upon the amount of equity available in your property, which means the amount of the market value minus any loans or mortgage outstanding on it. There are many benefits available with secured loans, and you will find that this type of finance is one of the most cost effective options available. With secured loans you can look forward to far lower interest rates than most standard, unsecured loans, and this is because there is less of a risk to the lender since the loan is secured against an asset.

Secured loans also offer far high borrowing levels than unsecured loans, although the amount available to borrow will depend in your equity. However, you could find yourself eligible to borrow tens of thousands of pounds with secured loans, which could prove invaluable if you are looking to raise a large amount of finance for just about any purpose. The repayment period with secured loans is also far longer than with unsecured loans, which means that your monthly repayments will be far lower.

The other great thing about secured loans is that they are far more easily accessible to those with poor credit than a standard, unsecured loan. This is because the lender has to take less of a risk with secured loans, as they are secured against an asset, and the lender is therefore usually more willing to consider those with bad credit for this type of finance. Bad credit secured loans are available at really reasonable rates, which means that you can enjoy lower repayment terms even if your have a tarnished credit history.

One of the most common reasons for taking out secured loans is to consolidate other loans and credit. Many people pay out a fortune each month on a selection of high credit loans and cards. With secure loans you can wrap up all of that expensive credit in to one convenient loan, and you can then pay just one lot of interest and make just one repayment each month. You can use bad credit secured loans to wrap up your other more costly credit, and even to pay of some debts, and this can go some way toward improving and repairing your credit.

Secure loans are widely available online, and by browsing and booking via the Internet you can quickly ascertain which of these secured loans best suits you in terms of conditions and interest rates. See a great resource at http://www.clickgofind.com/?page=SearchResults&keyphrase=secured+loans

It is always wise to compare the various deals available on secured loans in order to check that you are getting a competitive deal and rate.

Whatever you are looking to fund or purchase, secured loans make it more affordable and more achievable. If you are using a secure loan in order to consolidate your other loans and credit, you can look forward to far lower repayments each month as well as an overall reduction in the amount of interest you pay. Finding, comparing and applying for secured loans is simple when you harness the power of the Internet, and you can rally speed up the process as well as benefit from total convenience and ease. You are also more likely to find really competitive deals on secured loans when you look online, giving you an even better chance of getting great value on your borrowing.

If you find yourself in need of a fairly large sum of money and you have equity in your property, it makes sense to look into the range of secured loans available. With secured loans you don’t have to worry about unmanageable repayments, because the lower interest rates and longer repayment periods on offer mean that your monthly repayments will be far lower than those of an unsecured loan. Most secured loans can be processed quite quickly these days, and when you apply online you can complete your secured loan application from the comfort of your own home.

With such great deals on offer when it comes to secured loans, this is by far the most cost effective option open to property owners. With many people sitting on large sums of money that is tied up in their property, paying extortionate fees on some unsecured loans makes little sense when you could enjoy far better rates with secured loans, which simply enable you to unlock the money that would otherwise be tied up in your property.