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The Mortgage Professor: Why do borrowers pay for mortgage insurance?

Consumer / Home and Consumer News /

Last week, I wrote an article on how home mortgage borrowers who have been required to purchase mortgage insurance could earn a high rate of return by paying it off -- with the help of a new spreadsheet now on my website. That article ignored what would have been the first question posed by a smart visitor from Mars: Why does the borrower pay ...Read more

The Mortgage Professor: Looking for a safe investment with a high yield? Pay off your mortgage insurance

Consumer / Home and Consumer News /

Home purchasers who were obliged to take out private mortgage insurance, or PMI, because their down payment was less than 20 percent have the right to cancel it, ridding themselves of the monthly premium. Borrowers should take advantage of the opportunity if they can but they must meet the cancellation rules.

Cancellation rules

Under federal ...Read more

The Mortgage Professor: Keeping tabs on a HECM reverse mortgage: A new tool for seniors

Consumer / Home and Consumer News /

In 2010, when she desperately needed additional income, a woman named Sheila P. took out a reverse mortgage, even though her home in Nevada had fallen sharply in value during the previous four years. Home prices in Nevada rebounded sharply, however, and by 2016, her home had almost doubled in value. Sheila responded by refinancing her home ...Read more

The Mortgage Professor: The 'reverse' in reverse mortgages and 'skipping' payments

Consumer / Home and Consumer News /

Occasionally, I like to play professor by answering some of the more-interesting questions I have received. The ones I respond to below are all interesting for different reasons.

Q: What is "reversed" in a reverse mortgage?

A: The reversal is in the typical pattern of loan-balance change. On a standard mortgage, the balance usually is at its ...Read more

Could the 30-year mortgage survive without the government?

Consumer / Home and Consumer News /

WASHINGTON -- Republicans are raising the prospect of making the biggest change to home loans since the New Deal.

Two of President-elect Donald Trump's Cabinet picks, along with Republican lawmakers, have been speaking publicly about curbing government backing for the kind of loan that the majority of Americans rely on to buy a house: the 30-...Read more

The Mortgage Professor: Market dysfunction is a remediable weakness of the home-loan market

Consumer / Home and Consumer News /

With a new administration in Washington, the time is ripe to reconsider some fundamental features of our housing finance system. In recent articles, I focused on three weaknesses of the system, and on how to fix them.

––The rigidity of the mortgage payment obligation makes the standard mortgage very difficult to manage. The proposed remedy ...Read more

Feds allege Minnesota bank discriminated in lending practices

Consumer / Home and Consumer News /

MINNEAPOLIS -- The U.S. Justice Department has accused Minnesota-based KleinBank of "redlining," the practice of unlawfully structuring its mortgage lending business to avoid serving minority neighborhoods around the Twin Cities.

In a federal lawsuit filed late Friday, lawyers from the department's civil rights division said Chaska-based ...Read more

The Mortgage Professor: How retired homeowners can avoid running out of money: Alternative strategies compared

Consumer / Home and Consumer News /

An increasing number of retirees, who are living longer and are less likely to be covered by a defined benefit pension than previous generations, risk running out of money. Those who have significant equity in a home, however, can reduce or eliminate the risk if they use their equity wisely.

This article will compare three strategies for using ...Read more

This company will help with a down payment, but it wants a stake in your new home

Consumer / Home and Consumer News /

CHULA VISTA, Calif. -- When Ricardo and Catherine Soto were looking to buy a home in Chula Vista, they knew that even after selling their old house they would be able to afford a down payment of only about 10 percent.

But when buying a home, 20 percent is the magic number. It means not only borrowing less but also avoiding mortgage insurance, ...Read more

The Mortgage Professor: Keep Fannie Mae and Freddie Mac until they are no longer needed

Consumer / Home and Consumer News /

In September 2008, Fannie Mae and Freddie Mac were placed in a federal governmental conservatorship. The crisis-induced rise in mortgage defaults had eroded their capital and made it impossible for them to continue operations without support from the U.S. Treasury.

Since then, the conservatorship has eroded the agencies' political support. ...Read more

The Mortgage Professor: When does it make sense for a house purchaser to pay all cash?

Consumer / Home and Consumer News /

Maria aims to purchase a house for $200,000. Because she has financial assets of $300,000, one of her options is to buy the house for all cash. Alternatively, she can obtain a mortgage of $180,000 for 15 years at 4 percent and zero fees. Maria has excess disposable income of $2,000 a month, which would more than cover the payment on a mortgage. ...Read more

The Mortgage Professor: Reverse mortgage foreclosures are not what you think

Consumer / Home and Consumer News /

A recent headline caught my eye. It read "Mnuchin's Reverse-Mortgage Woes Blemish Record of Treasury Pick."

As I read on, I realized that reverse mortgage bashing by the media, which had almost disappeared in recent years, was now being revived to tarnish a Cabinet pick of President-elect Donald Trump. The article quoted a researcher describing...Read more

The Mortgage Professor: Housing market will be a good test of Trump's ability to deregulate

Consumer / Home and Consumer News /

The incoming Trump administration has made very clear that eliminating regulations of all types is a top priority. The question is whether or not they can do that effectively, and the home mortgage market will be a good test case.

New home construction today is running well below what would ordinarily be expected at the current phase of the ...Read more

Mortgage applications jump, possibly from fear of a bump in interest rates

Consumer / Home and Consumer News /

The fear of rising mortgage interest rates may have nudged people into action on homebuying in November.

Mortgage applications are down 0.7 percent from a week ago, the Mortgage Bankers Association reported Wednesday. But over the last month, mortgage applications for buying new and existing homes jumped 12 percent. The surge came as interest ...Read more

The Mortgage Professor: Preventing mortgages from going underwater

Consumer / Home and Consumer News /

One weakness of the standard mortgage in the U.S., discussed last week, is the extreme rigidity of the payment obligation, which makes it very difficult to manage the repayment process efficiently. In last week's article, I suggested that this problem could best be fixed by defining the borrower's contractual obligation in terms of a maximum ...Read more

The Mortgage Professor: Improving the standard mortgage

Consumer / Home and Consumer News /

The standard mortgage in the U.S. has two major weaknesses.

First, because the payment obligation is rigid, it is very difficult to manage the repayment process efficiently. Second, because the loan balance that the borrower pledges to repay is not affected by any changes that occur in the economy, the borrower is forced to assume a risk that ...Read more