Wednesday, January 24, 2007


Merger with CitiMortgage would create third-largest
home loan originator

Citigroup Inc. says it will acquire ABN AMRO Mortgage Group, and move ABN's $224 billion mortgage servicing portfolio and 2,500 wholesale brokers to CitiMortgage Inc. in the process.

The combined companies will be the fourth-largest mortgage loan servicer and third-largest originator, Citigroup said in a press release today. Terms of the sale, which is expected to close this quarter, were not disclosed.

ABN AMRO Mortgage Group's primary originations business is via wholesale lending under the InterFirst brand. ABN AMRO Mortgage Group is a subsidiary of LaSalle Bank Corp. and ABN AMRO Bank N.V., and is headquartered in Ann Arbor, Mich.

Headquartered in St. Louis, Mo., CitiMortgage Inc. specializes in residential home lending through retail, wholesale and correspondent loan origination channels.

Monday, January 22, 2007

Inman News

Monday, January 22, 2007


Users can view test scores, class sizes, reviews

Yahoo Real Estate has launched new tools, at, that allow users to research neighborhood schools across the nation.

Users can get view a list of schools and a map of schools in a selected area and sort those schools by name, grade level and type (such as public, private or charter school). The information is provided through a partnership with not-for-profit

The school information can include test scores, reviews, student-to-teacher ratio and average class size, and teacher and student data including dropout rates, student demographics and teacher credentials. Site users can also enter their own reviews of a school.

There are school comparison tools offered through the site and a search tool that allows users to view other amenities such as parks and local businesses in the area.

In addition to the new "research schools" tools at Yahoo Real Estate, which launched Jan. 18, users of that site can post home listings, research communities, search for a Realtor, request a credit score and access home-valuation tools.

Monday, January 22, 2007
Inman News

Wednesday, January 10, 2007


Detroit, Milwaukee, Austin and San Francisco get biggest grants

Local efforts in 12 states to eliminate lead-paint hazards in thousands of privately owned low-income housing units have been awarded more than $31 million in grants from the U.S. Department of Housing and Urban Development.

HUD's grants will help local projects in California, Illinois, Michigan, New Hampshire, New York, Rhode Island, Texas and Wisconsin reduce lead-based-paint hazards and improve living conditions. Eligible jurisdictions for the grant program include those with at least 3,500 occupied rental-housing units built before 1940.

Detroit and Kenosha County, Wis., landed the biggest grants ($4 million each), followed by Milwaukee ($3.9 million); Austin, Texas ($3.8 million); San Francisco ($3.3 million); Albany, N.Y. ($3 million); Woonsocket, R.I. ($2.8 million); Manchester, N.H. ($1.8 million); Lansing, Mich. ($1.4 million), Winnebago County, Ill. ($1.2 million); Buffalo, N.Y. ($1.1 million); and Schenectady, N.Y. ($1 million).

Detroit will produce approximately 200 lead-safe homes, conduct community education and outreach, and perform blood lead testing of young children, HUD said in a press release.
Monday, January 08, 2007
Inman News

Tuesday, January 09, 2007


A reverse mortgage could help you pay for retirement -- or it could cost you and your heirs a lot of money.

The housing boom of recent years has fueled record growth in these products, which give homeowners an income stream they don't have to repay until they sell their home or die. But reverse mortgages have long been weighed down by high costs and complexities. Now, they're coming in for a makeover that may save consumers thousands of dollars.

Sensing growth opportunities as baby boomers retire, financial-services firms such as IndyMac Bancorp Inc. and the privately held Seattle Mortgage Co. have been cutting the costs of reverse mortgages and offering special deals. Now, big national lenders are eyeing the market: Bank of America Corp. recently waded into reverse mortgages with a pilot project in Phoenix, though it won't say when it plans to roll out the program nationally. Countrywide Financial Corp. says it expects to launch a new reverse mortgage in 2007. The competition from both is expected to put further downward pressure on costs.

The federal government, meanwhile, is trying to push down costs as well. The Department of Housing and Urban Development, which insures most reverse mortgages, is looking into lowering the origination costs and mortgage-insurance premiums that homeowners pay, according to HUD officials. At the same time, Ginnie Mae, a federal housing-finance agency, announced in October that, for the first time, it will begin packaging reverse mortgages for sale on Wall Street. Ginnie Mae's move is widely expected to lower interest rates that consumers pay, since studies have shown that the agency's guarantees in the traditional mortgage market lower rates by between 0.5% and 0.8%.

"Lots of forces are at play right now that are working to bring costs down for consumers," says Ken Scholen, director of the AARP Foundation's Reverse Mortgage Education Project. While the changes are still taking shape, he says that in 2007, consumers "will have lower costs and more choice. If you're not facing a really urgent need for cash, the smartest thing you can do is wait."

With a reverse mortgage, homeowners at least 62 years old can tap into a portion of their home's equity without selling their house or taking out a home-equity loan, which can strain monthly finances. Unlike a traditional mortgage requiring monthly principal and interest payments, a reverse-mortgage lender pays the homeowner instead.

Borrowers have several options for receiving the money. Most opt for a lump-sum payment while others choose a line of credit. Some prefer equal monthly payments that last for as long as a borrower remains in the home. (The sum of those payments can stretch beyond the value of the house, in which case the lender will book a loss.)

Reverse mortgages are so-called rising-debt, falling-equity loans, meaning that as debt increases, home equity falls. Lenders recoup this debt -- the accumulated principal and interest payments -- when the home is sold. The debt can never exceed the value of the home, and any remaining equity returns to the homeowner, the estate or heirs.

Roughly 90% of all reverse mortgages are insured by the government through a so-called Home Equity Conversion Mortgage, or HECM. Those mortgages cannot exceed a certain amount, regardless of how much the house is worth. The remainder are not insured by the government. These are typically "jumbo" reverse mortgages tied to pricier homes, and they generally provide greater income, though at higher costs.

In the year ended Sept. 30, homeowners took out a record 76,351 reverse mortgages, according to the Federal Housing Administration. That's an increase of 77% over the previous year. Overall, half of all reverse mortgages ever issued have come in the past two years.

Though the market is relatively small -- nearly 7.4 million traditional mortgages originated in 2005, by comparison -- it's expected to surge as the crush of some 70-plus million baby boomers hits retirement.

Despite their growing popularity, reverse mortgages are not for everyone. Sylvia Heitzmann, a 77-year-old widow who has lived in her La Jolla, Calif., home for 42 years, says she wanted to generate additional income to help afford her needs, as well as those of a handicapped child. A flier in the mail encouraged her to inquire about a reverse mortgage.

But before she took the leap, her financial planner convinced her that she'd be better off increasing the income from her nest egg instead of paying the costs of a reverse mortgage. "For someone who is house rich and cash poor, a reverse mortgage can be a real saving situation, a valuable way to tap your equity and stay in your own home," says the planner, Gil Armour of San Diego. However, he cautions, too few homeowners recognize that they'll pay sizable fees.

Lenders currently charge an origination fee of up to 2% of the home's value, not the smaller loan amount. A mandatory mortgage-insurance premium adds another 2%. Borrowers also pay various closing costs typical of a traditional loan. Thus, the upfront costs on reverse mortgage can exceed $12,000 for a $250,000 home. Pricier houses can mean combined fees that are even higher. Borrowers also pay monthly charges that can add thousands more over the life of a reverse mortgage.

Under federal rules, all consumers who obtain an HECM product must undergo financial counseling to ensure they understand the mortgage they're getting. Lenders providing non-federally insured reverse mortgages also generally require counseling as well.

One concern mentioned in the counseling sessions: Reverse mortgages put a bundle of cash into a consumer's hands, marking an enticing target for financial-product sellers to exploit. Ms. Heitzmann says the sales rep she talked to tried to convince her to buy an annuity with the proceeds. Though the industry says such tactics are rare, California, which originates more reverse mortgages than any other state, recently passed a law that, among other things, specifically bans mortgage lenders from pitching an annuity to consumers as part of the mortgage process.

"We don't know how much of this is occurring, but it doesn't make sense to take out a reverse mortgage to invest the proceeds," says AARP's Mr. Scholen. "You're not going to get a return greater than [the cost of] the loan. It's a losing proposition."

How much a homeowner ultimately receives in a reverse mortgage is based on a person's age, the location and value of a home and prevailing interest rates. The older the borrower and the lower the rates, the larger the income. (You can gauge how much you might get from a reverse mortgage at, an AARP site.)

Urban vs. rural geography plays a big factor in the equation. Rules for federally insured reverse mortgages limit how much of a home's value a homeowner can tap. The current limit in urban areas is $362,790, while most rural areas top out at $200,160. The federal government is considering a single national limit, though nothing has been proposed yet.

Jumbo mortgages, which have no limit, provide greater income to owners of higher-value homes, regardless of the home's geographic location. The catch: These mortgages come with interest rates that can be as much as two percentage points higher.

Regardless of a home's worth, lenders will finance only a portion of its value. In a program launched this fall by Reverse Mortgage of America, a unit of Seattle Mortgage, for instance, a 68-year-old homeowner with a $1 million house could get a jumbo reverse mortgage of about $386,000, according to the company. With an HECM loan, that same homeowner would receive no more than between $108,000 and $210,000, depending on location. At age 72, a homeowner with the same $1 million house would get about $434,000 through a jumbo mortgage. At 80, the value jumps to $494,000.

At the same time, Reverse Mortgage of America has also begun to waive the origination fee or provide a credit, depending on the mortgage amount. Meanwhile, Financial Freedom, a unit of IndyMac Bank, this summer lowered fees and restructured its reverse mortgages so that consumers receive about 50% more in cash than they did previously. Through the year's third quarter, the firm has funded 36,000 reverse mortgages, 16% more than the 31,000 it funded throughout all of last year.

-- January 05, 2007

By Jeff D. Opdyke
The Wall Street Journal Online

Sunday, January 07, 2007


Various economic rates start year mixed

Mortgage rates posted mixed results this week on news of improvement in manufacturing and home sales and a disappointing employment report, according to surveys conducted by Freddie Mac and

In Freddie Mac's survey, the 30-year fixed-rate mortgage held steady at an average 6.18 percent, while the 15-year fixed-rate average inched up to 5.94 percent from last week's 5.93 percent. Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.4 on the 30- and 15-year loans.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.02 percent this week, with an average 0.4 point, up from last week when it averaged 5.98 percent. The one-year Treasury-indexed ARM averaged 5.42 percent, with an average 0.6 point, down from last week when it averaged 5.47 percent.

"Interest rates were flat this past week, reflecting the mixed messages from recent economic indicators," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. "The recently released manufacturing report showed an improvement, and while construction spending for November was down, it was still better than expected. On the other hand, a private sector employment report suggested that the labor market was weaker than anticipated. As a result, 30-year fixed-rate mortgage rates started off the year at about the same level as this time last year."

Nothaft said the market may get a "clearer signal" of where the economy is heading after the U.S. Department of Labor releases its jobs report on Friday.

In's survey, mortgage rates moved slightly higher on a week highlighted by better-than-anticipated home sales figures. The average 30-year fixed-rate mortgage is now 6.24 percent, the highest since Nov. 15, with an average of 0.27 discount and origination points.

The average 15-year fixed-rate mortgage popular for refinancing increased to 5.99 percent, and the same was true for larger loans, with the average jumbo 30-year fixed rate up modestly to 6.47 percent, reported. The average 5/1 ARM climbed to 6.15 percent and the average one-year ARM edged up to 5.94 percent. said movements in mortgage rates were subtle during the holiday season, with little in the way of economic data or market volatility to push rates one way or the other. The most significant news came in the form of better home sales figures for November, which pushed bond yields and mortgage rates higher on the belief that the Federal Reserve would be unlikely to cut interest rates any time soon.

The following is a sampling of's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:

New York - 6.18 percent with 0.05 point

Los Angeles - 6.29 percent with 0.39 point

Chicago - 6.41 percent with 0.04 point

San Francisco - 6.22 percent with 0.41 point

Philadelphia - 6.19 percent with 0.3 point

Detroit - 6.29 percent with no points

Boston - 6.27 percent with 0.04 point

Houston - 6.25 percent with 0.48 point

Dallas - 6.2 percent with 0.43 point

Washington, D.C. - 6.09 percent with 0.53 point

Thursday, January 04, 2007
Inman News

Thursday, January 04, 2007


Brian Diez, a former military man, entered the mortgage business after a career as a stockbroker, in part figuring he would like the opportunity to help families buy their first homes. He learned quickly, however, that not all mortgage brokers have their clients' best interests at heart.

"What became clear to me is every company was really interested in selling as many loans as they can, and not really helping clients," says Mr. Diez, sales manager for First Class Equities in Oceanside, N.Y. His quest to inform consumers prompted him to create a blog on the topic,

The "dirty tricks" he has seen and heard of range from brokers steering clients into products clearly unsuitable for them to shady switcheroos at the closing table.

Consumers can protect themselves by doing some research online before talking to a mortage broker or banker, to have an idea of their mortgage options, Mr. Diez says. They should also request copies of and review their credit reports to know what their credit looks like before the discussion begins.

You may never find that altruistic mortgage lender: It's rare when commission-earning individuals -- whether selling mortgages, stocks or automobiles -- can completely divorce their self interests from a sale, says Joseph Badal, senior executive vice president at Santa Fe, N.M.-based Thornburg Mortgage.

But there are ways you can shop more wisely for a mortgage so you won't get fooled by salespeople who are more concerned about commissions than clients:

Beware of products that seem too good to be true. Watch out for low-payment advertisements, says Kate Crawford, chairwoman for the consumer protection committee of the National Association of Mortgage Brokers.

"What it is, it's a teaser ad...that could lead to negative amortization," she says. In a negative amortizing loan, borrowers aren't paying the full amount of interest accrued each month and the unpaid amount gets added to the principal, thus increasing the balance. Homeowners with this type of loan can find themselves owing more than they bought the house for -- something especially important to remember in a softening housing market.

Although certain exotic loans make sense for some borrowers, they're not for everyone, Mr. Badal says. To find the best rates and terms, compare estimates from a few lenders, he adds.

Ask about prepayment penalties. Mortgages with prepayment penalties are those which charge a borrower fees for paying off the entire mortgage or a large portion of the principal during a certain period of time. Penalties can also apply should the borrower choose to refinance.

Terms of the penalties can be found in the Truth in Lending statement given to borrowers. But if the loan has a penalty for prepayment, it may be best to keep shopping. "There are so many [loans] out there that don't have them," Mr. Diez says. "There's no need to put a client into a mortgage that has a prepayment penalty."

Don't cave to pressure, and protect your identity. If terms change at the closing table, don't sign the contract, Ms. Crawford says. "A borrower can walk away at any time. That's their right," she says. And never sign a contract stating an origination fee must be paid if the loan isn't closed, she adds.

She also recommends following common-sense measures: Don't ever sign a blank form, and get a copy of every paper that is signed. Don't give out a Social Security number before it's time to actually apply. For paperwork bank statements and paycheck stubs that a lender might require, make a copy and always keep the original.

And while at your lender's office, take a glance around to see how paperwork is handled -- it may be one indication of how careful a company is with sensitive information, Ms. Crawford says.

-- January 04, 2007

By Amy Hoak
From MarketWatch

Monday, January 01, 2007


Paying mortgage points rarely pays off for borrowers: study

CHICAGO (MarketWatch) -- A new report claims that borrowers tend to purchase too many points when selecting a mortgage -- and in the process end up paying more than they would have with no points and a higher interest rate.
The study was co-authored by Abdullah Yavas, Elliott Professor of Business Administration at Penn State's Smeal College of Business, and Yan Chang of Freddie Mac. The two considered 3,785 individual mortgages originated from 1996 to 2003, looking at the points paid, interest rates and loan length.

Data showed that, on average, those who buy points are overestimating the amount of time they will hold their loans. They tended to pay off their mortgages about 37.5 months too early for the purchase of points to actually pay off -- defaulting, moving or refinancing before hitting a break-even point so the strategy made financial sense.

By purchasing points, borrowers lower the interest rate on the mortgage. One point is equal to 1% of the mortgage, charged as prepaid interest. Points that you pay to purchase your primary residence are deductible in the year you pay them on your federal income-tax return; points you pay to refinance must be written off over the life of your mortgage.

"We underestimate the possibility that we may refinance in the near future -- or refinance again in the near future -- and we underestimate the possibility that we may have to move, either for job relocation or other reasons," Yavas said.

Only 1.4% of borrowers who purchased points held their loans long enough to make it pay off; of those who didn't buy points, only 1.5% would have been better off purchasing them, according to the study.

It's significant to mention, however, that the data covers a time of decreasing interest rates and increasing property values, which led to a lot of refinancing activity, Yavas pointed out.

The report also found that borrowers who buy points often don't treat them as costs they can never recover and so are less likely to refinance. When they do refinance, they often do it late, perhaps hoping to compensate for the points paid. If a borrower "paid too many points and the interest rates come down quickly, refinancing right away would be the same as accepting the fact that you shouldn't have paid those points," Yavas said.

Yavas took an interest in the topic after he decided to refinance his own home a few years back and considered the trade-off between points and interest rates.

"Although I teach this stuff, it's not a trivial question," he said.

Dec 20, 2006

By Amy Hoak