Saturday, April 19, 2014
What Happens When Your Loan is Sold?
Question: We refinanced our home loan in March with an on-line mortgage lender. Within a couple of weeks, we received a letter from another mortgage company advising us that our May payment was to be made to them. A May payment invoice was included. I contacted the original lender, and was told that the loan was not sold. They said if and when that happens, we would receive a "goodbye letter" which has not arrived. We now have May payment invoices from both lenders, and only 2 weeks to go until the first payment is due. We contacted the second lender and they still insist they now own the loan. What should we do? We do not want this to impact on our good credit rating.
Answer: It will not be any consolation to you, this appears to be a common problem. However, there is a federal law that protects you. The short answer: until you get a letter from both lenders advising that your loan has been sold or assigned, you should continue to pay the first lender.
When you get a mortgage loan, your lender has two alternatives. They can keep the loan in house -- called a "portfolio" loan -- or they can sell or assign it to an investor. And as we know, one of the factors that led to the "mortgage meltdown" several years ago was the securitization of loans -- ie where loans were litterly "bundled"together and sold to an investor -- who could be in the US or anywhere else in the world.
Why do lenders sell their loans? Many mortgage lenders do not have millions of dollars in their bank account to enable them to make all of the loans they would like to do. In order to get more cash, they sell the loan for a discount to an investor, thereby enabling them to make more loans.
The original lender makes its money in two basic ways. First, by charging various fees to the borrower -- such as loan origination points or underwriting. If the lender is a mortgage broker, it will also get a fee, which in the trade is called a "yield spread premium" YSP.
Your lender also makes money by servicing your loan. That means that although the original lender may no longer own the loan, it continues to collect your monthly mortgage payments including escrows for taxes and insurance and are paid a servicing fee by the then current lender.
Over the years, there have been serious problems with these mortgage sales. There have been a number of documented fraud cases, whereby an unscrupulous individual obtains the names and addresses of homeowners, and sends them a letter advising the borrower that effective immediately the loan payment should go to this unscrupulous lender. The names and addresses of borrowers are generally publicly available from the Land Records where the deeds of trust are recorded.
Picture the following scenario. You have a loan with the ABC mortgage company, which is a legitimate lender. All of a sudden, you get a letter from the XYZ company, advising you that effective immediately you are to make your new mortgage payment to the XYZ company.
You would be surprised at the number of gullible people in the United States that blindly follow the XYZ companys instructions, without any investigation.
After one or two months of receiving mortgage checks, the XYZ company folds its camp. It moves on to another state, and the scam begins anew.
As a result of these mortgage scams, in 1990, Congress regulated the assignment, transfer or sale of mortgage loans. As part of the National Affordable Housing Act, certain provisions were added to the Real Estate Settlement Procedures Act RESPA.
The law is quite complex, but oversimplified here are some of the protections afforded to individual borrowers whose loan has been sold, transferred or assigned to a new lender.
At the time a potential borrower applies for a mortgage loan from a federally regulated lender, that lender must disclose to the borrower their policy on assigning or selling loans. If a mortgage lender does in fact assign, sell or transfer your loan, both the transferor your current lender and the transferee must make certain disclosures. These disclosures include the effective date of the transfer, the name, address and telephone number of the transferee, and an appropriate contact number at both the transferors and transferees offices. This will afford the borrower the opportunity to ask questions and confirm the transfer.
More importantly, this disclosure statement must state that the transfer does not affect any term of the security instrument other than the servicing provision.
This means that although your loan has been sold, and you must start paying the new lender, the basic terms of your note and deed of trust cannot be changed. Specifically, your interest rate terms cannot be changed. They remain in full force and effect regardless of who holds your legal documents.
Congress also was concerned about payments made during the transition period when a loan is transferred. The 1990 law specifically provides a 60-day grace period if the borrower misdirects payments. For 60 days from the effective date of the transfer, as long as the borrower makes the payment on time in accordance with the terms of the note, no late fee can be charged. The payment cannot be deemed late for any purpose whatsoever, even if that payment is misdirected. In other words, if you send your payment on time to the old lender when it has been transferred to a new lender, for the first 60 days no penalty or other late charge can be imposed on you. This is very important, since it also means that neither the old lender nor the new lender can report you as being late or delinquent to a credit reporting bureau.
Congress also created a complaint resolution mechanism in the 1990 law. If you, the consumer borrower, have a question or a complaint about the transfer of your loan, you have the right to send a written request to the lender. Please note that in order for the complaint resolution mechanism to be effective, you have to send a separate correspondence, and cannot me>
Your lender must either take action or respond to your letter within 20 business days of receiving your correspondence. Furthermore, the lender has 60 business days from the date of receipt of the request to either correct the problem and give the borrower notice that the problem has been corrected, or give reasons in writing why the account is correct or the information requested by the borrower is unavailable. The lender is required to conduct an investigation before it responds to your letter.
Finally, Congress added incentives to make sure that lenders would comply with this new law. If a lender violates the law, an individual consumer can recover any actual damages, and any additional damages that a court might allow if the court finds that there is a pattern or practice of non-compliance with the RESPA provisions. The damages are limited to 1,000.00 per individual consumer. Furthermore, if the consumer files a lawsuit in court, the court can award reasonable attorneys fees if the consumer prevails.
These are obviously technical issues. The bottom line is that you really do not have to worry about your loan if your current lender sells or transfers your loan to another lender. Obviously, you want to make absolutely sure that this is not a scam, and that it is a legitimate transfer. Contact both lenders and make sure that you have something in writing from both the old and the new lender before you send your next mortgage payment check.
The normal procedure nowadays is for the borrower to get a joint letter from the old and the new lender, advising that the loan has been sold and where the monthly payments should now be sent.
In your situation, since you have not received a letter from your first lender, you should continue to pay that lender. But advise the new lender in writing what you are doing, and I also suggest that you send a copy of your letter to the old lender, as well as to the consumer protection office of your States attorney general.
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Make These Upgrades to Save Energy amp; Boost Your Homes Resale Value
Most homeowners would benefit from a home energy audit, especially those with older homes. An audit will uncover where your home is wasting energy and how to best remedy the situation. Remodeling your kitchen, bathroom or living room may add to your homes resale value, but the following energy-efficient upgrades add value and save you money on your monthly utility bills - and youll help the environment, too.
Replace Windows amp; Roofing
If you have old, drafty windows with loose frames or gaps that let conditioned air escape, youre losing money. Replace them with energy-efficient windows. You will improve your indoor comfort and reduce heating and air conditioning costs. In addition, window treatments can keep you cooler in summer and warmer in winter. The U.S. Department of Energy DOE reports that treatments such as awnings and blinds reduce solar heat gain by as much as 77 percent, and shutters and storm panels reduce heat loss in winter.
The same principle applies to your roof. A new, properly installed roof will lower your energy costs and increase your homes resale value, according to Champion Home Exteriors. Make sure you use a >
Seal amp; Insulate
Take the time to seal your homes walls, windows, vents and any other cracks or gaps, and consider adding insulation, too. Not only does this improve comfort and save on utilities, but it also reduces outside noise, prevents an inflow of dust, pollen, insects and debris, and provides better humidity control. Brett and Elna Wells of Shelbourne, Vermont, told Mother Earth News how they added 19 inches of insulation in their attic and added foam sealant around their foundation, and not only did they lower their energy consumption, but they received a 2,900 rebate from their electric utility, too.
One of the home improvement projects with the best return on investment is replacing your current siding with new vinyl siding, according to Remodeling Magazines Cost vs. Value Report. It provides a whopping 78 percent return on investment. To realize savings on your energy bill, make sure the contractor uses ENERGY STAR-rated underlayment and corner wrap to protect your home from moisture.
Get an Energy-Efficient Furnace
Linda Barnwell is a certified eco-broker with the real estate franchise company Keller Williams. She told Fox News that an energy-efficient furnace will boost energy savings and a homes resale value. Airtight homes with newer furnaces are what homebuyers are looking for, and it can even drive the outcome of a real estate deal. Sellers whose homes have furnaces that are 20 or 30 years old may see sales negotiations stall, or buyers may demand you replace the furnace as a condition of the sale.
If a professional home energy audit isnt possible, try this energy-savings calculator from the DOE.
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Outdoor Sofa, Mac Books and More in This Weeks Deals and Steals
If youre looking for chocolate bunnies this week, youre in luck. Theyre EVERYWHERE, and you can eat yourself into a little chocolate bunny coma for a couple of bucks. If youre looking for furniture, electronics, or home goods, this is a good week for you too. Our weekly scouring of ads and stores and more ads and more stores has turned up some great steals and deals. Check em out right here.
The IKEA ARHOLMA sofa combination offers a high-end look for outdoors at a fraction of the cost. Even by IKEA standards, this is a good deal. Their regular price of 550 is still far less than you will find outdoor sectionals like this; at 415, its definitely a steal. Thats a member price, so make sure to sign up for this free program in the store.
Throw an outdoor rug, like this Arizona Ivory amp; Brown Rug by Wildon Home, in front of the outdoor couch, and youve got yourself a good-lookin space. For just 24.99.
This is just one of the many outdoor rugs Wayfair currently has on sale for 50 percent off.
Macmalls Easter sale means some pretty cool savings on some pretty cool Apple products, like 599 off the Apple 13.3" MacBook Pro with Retina display, Dual-core Intel Core i7 3.0GHz, 8GB RAM, 512GB flash storage, Intel HD Graphics 4000 Turbo Boost up to 3.7GHz.
Light up your indoor, or outdoor area, with SONOMAs Wooden Pillar Candle Lantern, on trend and on clearance at Kohls for 29.99, down from 99.
Plus youll save up to 30 percent off by using your Kohls card and get a bonus 10 for every 50 spent basically, Kohls will pay you to take this home.
Redoing a bathroom? This VIGO Square Shaped White Phoenix Stone Glass Vessel Bathroom Sink will give you a modern look at a great price. Just 119.61, down 65 percent from the regular price of 221.79 on Overstock.
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The Five Biggest Mortgage Mistakes You Can Make
For most buyers, the mortgage is the largest monthly expense they will have. Yet most borrowers will do little to no preparation, negotiation, or shopping to get the best deal. And they end up paying much more for their loans than they need to. You? Youre smarter than that, or you wouldnt be reading this article. Here are five of the biggest mistakes that can cost you real money.
1. Believing advertised rates are what youll pay
Unless you have perfect or near-perfect credit, most advertised rates are out of your league. To get boasting rights on a rate that good, you have to pay part of a point one percent of the loan amount a point, or more to get the best rates.
Your lender will go over your credit with a fine-tooth comb to find anything to raise the rate. That includes qualifying you at the beginning of the transaction, and then running your credit again a day or two before youre supposed to close on the home and loan. If theres been any change in your debt-to-income ratio, goodbye low mortgage rate.
2. Not comparing lenders
Just like everyone knows two or three real estate agents or more, everyone knows a loan officer or a mortgage broker. A loan officer works for a bank or savings and loan and can only offer you loan packages that the bank has put together. A mortgage broker prequalifies you just like a loan officer, and shops your deal around to various lenders.
Whether you talk to a loan officer or a mortgage broker, youre going to have to share personal financial information in order to get a realistic rate. Reputable brokers will show you what certain banks and credit unions quoted and you can pick the loan you like best.
If youd rather do your own shopping, consider talking to a local bank, a national bank, a credit union, and a savings and loan, but remember, unless you give them personal information and permission to run your credit, its just talk.
3. Not paying attention to terms
Advertised rates even for those with perfect credit arent what you will actually pay. The true cost of the loan is the APR or annual percentage rate, which includes fees from the lender.
Understanding loan terms is harder than shopping for a new mattress. There are so many ways lenders can inch up the fees. A loan origination fee is also called a processing fee. It pays the loan officer or mortgage broker, so this fee can vary widely. You may pay one lender more for an appraisal than another might charge you.
One lender may charge more for pulling your credit than another. Its all in your good faith estimate, which you dont get until youve applied for the loan.
All terms are negotiable, so dont be afraid to ask what a particular fee is for and can it be reduced or eliminated.
4. Waiting for a better rate
Its great to have bragging rights on a low rate, but you dont want to lose the home of your dreams over a quarter of a point in interest.
Theres a big picture here you could be missing. No matter what your interest rate is, youre going to pay thousands of dollars in interest up front before you make any serious gain in equity. If you go all the way to the end of your loans term, youll pay so much interest that you could have bought the same home two or three times.
Instead of focusing on the percentage rate, work on how quickly you can build equity. Make one extra payment a year. Pay 25, 100, or 500 extra per month and youll more than offset the rate youre paying.
Down the road, if rates drop through the floor, you can refinance, but even thats not an ideal solution. Youll pay loan origination fees, title search fees, appraisal fees and so on -- enough to equal the closing costs you paid the first time around.
And dont forget, youll start the amortization schedule all over again -- with most of your payments going to interest instead of principal.
5. Choosing the wrong type of loan
Many families were hurt post-9/11 when lenders opened the spigots and gave a loan to almost anyone who could sign the paperwork. Suckers bought homes that were too expensive using balloon loans with low teaser rates.
The type of loan you choose should depend on current market conditions and how long you plan to stay in your home, not how much home you want to buy.
Current market conditions favor fixed rates, because rates are rising from all-time lows. Yes, they cost more than hybrid loans or adjustable rate loans, but the base amount is fixed and doesnt change. Only your taxes and hazard insurance will cost you more over the years.
If you get an adjustable rate mortgage, you are at the mercy of market conditions. While theres a cap on how high your interest rate can go, its still a risk.
If you plan to stay in your home five years or more, get a fixed-rate mortgage. If you plan to sell your home sooner, youre taking a risk. It takes most borrowers five years just to earn back their original closing costs in equity.
Once youve narrowed your choice of lenders, ask them on the same day to give you a quote. If you wait even one day, rates may have changed, so youre no longer comparing apples to apples.
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Seven Great Reasons To Move
Just move already. Face it. Your house sucks.
Maybe youve been there so long youve lost sight of how cluttered and unwelcoming and old and ugly it is. Or the sheer volume of stuff that needs to be done is so overwhelming you just ignore it altogether.
Updating is long overdue and the projects that have been started were never finished. And, you have zero DIY skills clearly. And maybe you even have a bad neighbor thats making it unpleasant to live there.
Pack it up. Its time to move on. Really. Sometimes we just need a little push to make the hard choice. Want to know if its time for you to git along? Here are seven reasons you should just move already.
You should move if:
1. You have the money
Its not cheap to buy a new home, nor is it cheap to move. But neither are the overhauls you probably have to do to your kitchen and your bathrooms and your flooring and dont forget about patching those holes in the walls and re-sodding your backyard. Plus, if youve been paying your mortgage and are in an area that has appreciated, you may have more than enough equity to make it happen - without dipping into savings. And if youre willing to get your savings involved, well, your ultimate dream home just might be on the table.
2. You can qualify
Qualifying for a mortgage isnt as easy as it was when banks were seemingly handing out zero-down, five-year, interest-only loans to pretty much anyone who applied. If youve got the credit score and the down payment, it might be a good idea to take advantage of still-low interest rates and get into something newer, bigger, and better before rates inevitably go up and you run the risk of being priced out of your move-up home.
3. You can rent it
In many markets, it costs more to rent than it does to own. That can play to your advantage if you want to hold on to your house and move up or out. If your house payment is currently 1500 and rent for a comparable home in your area is 1800, you just found a way to bank 300 a month. Even if you hire a management company to take care of the property, youll still make a profit, Yay for passive income
4. Your house is just plain old
Older homes are more prone to issues, and those issues can get expensive. It might make sense to trade up to something newer and avoid having the expense and headache of repairs when the air conditioning goes out or the hot water heater stops making hot water or the roof starts leaking. Get out before you have to.
5. Your projects exceed your budget - and your skill level
DIY is not for everyone, but hiring out can get expensive. A home that has key updates kitchens, baths are tops will command a higher sales price, but a They will delay your move; b You might not recoup everything you spend; and c Oh goodness, thats not the way you hold that saw DIY is REALLY not for you. Depending on just how outdated home is, it might be smarter to just cut your losses and let someone else deal with making it pretty.
6. You hate your neighbors
If driving into your neighborhood raises your blood pressure because of the grumpy old man down the street with whom you have had a running list of issues your dog walking down the street, your kids playing catch in the street, your car being parked in front of your own house, your gardener cutting the grass before noon on a Saturday, just go. Nothing is worth being unhappy in your own neighborhood.
7. Your house makes you sad
Yes, nothing is worth being unhappy in your own neighborhood. Unless its being unhappy in your own house. If your house gives you the sads because its not big enough, not new enough, not pretty enough, you can do something about it. Go where the happy is. A new house will do it every time.
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Tips for Keeping Your Electric Bills Low This Summer
As the temperature begins to rise, so do the numbers on our electric bill. Greater energy output = greater dollar output. Its a frustrating reality of summer. But there are a few tips and tricks that can help you keep your energy usage - and costs - down.
Take care of the air
The air conditioner, that is. This energy sucker can account for as much as 50 percent of your electric bill in the summer, according to Womans Day. Setting and maintaining it correctly can help.
"An air conditioner set at 70 degrees can cost twice as much to operate as one set at 78 degrees," said Houselogic. Setting it for a higher temp when youre out of the house is a given for keeping costs down. But turning it off altogether may backfire. "Its less efficient to cool the house back down than to leave it set at a higher temperature."
If you dont have a way to automatically program the temperature or if its time for an upgrade, a small investment can pay big dividends. The Nest Thermostat is one of a new wave of products that uses smart technology to help keep you comfortable and keep costs down. "The Nest Learning Thermostat learns your schedule, programs itself and can be controlled from your phone," they said. "Teach it well and the Nest Thermostat can lower your heating and cooling bills up to 20 percent."
Replacing your filters regularly can also help. "Clogged, dirty filters block air flow and make a unit work much harder. A clean filter can save up to 10 percent on your bill," said Houselogic.
Cover those windows
"A method that is frequently used to keep heat in during the winter time, can also effectively keep the chill from the air conditioner in the house during the warm summer months," said Investopedia. In fact, Houselogic said that keeping windows and drapes closed during the day "can reduce cooling costs by 30 percent." If you get afternoon sun, adding thermal-backed drapes and exterior solar shades can also help keep costs down.
Look to the ceiling
That ceiling fan is your friend. It "uses about as much energy as a 100-watt bulb, but it can make a room feel up to eight degrees cooler," said Houselogic. But make sure you are using it right.
If you have turned the fan blades clockwise for the winter months, make sure to turn them back so the air is being pushed down into the room. Youll also want to turn off the fan when you are home, said US News. "Ceiling fans dont actually cool your home; they only circulate air to make you feel cooler. So when youre at home, by all means, let your fans whirl away. But to let the blades spin for hours on end when youre gone -- that just adds to your electric bill."
Listen to your mother
Remember when she was always telling you to turn off the lights? Now that you pay your own electric bill, it makes a lot more sense, right? Turning off your lights during the day is "a simple way to conserve energy and lower your electric bill," said Investopedia. Ditto for turning them off when you leave a room at night. Whats not so easy? Getting your kids to comply.
Give your oven a break
The oven is hot, and not just inside. It can also heat up the kitchen and raise the temperature of your home, which means youre using more energy. "You bought your stove for a reason," said US News.
Still, its probably not a bad thing to be aware that any time you use a toaster oven, electric skillet, slow cooker or microwave, you use less energy." Hint: the microwave uses as much as 90 percent less energy than the oven.
Wait until dark
Running washing machines and dishwashers at night can help you conserve energy and keep electric bills lower because the appliances dont have to fight with your air conditioner. "These appliances produce heat, which will cause your air conditioning to work harder," said US News. "Holding off in the evening helps your neighbors, too. It can also reduce any potential strains on the grid."
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