First Quarter Mortgage Industry Update

As we reflect on first quarter, 2013 we find a real estate market which after many years appears to be gaining some stability and strength.  As a result, in many markets there seems to be more home purchase demand than supply as evidenced by lower inventory, increasing values as well as multiple contracts on properties for sale.   This a positive sign.

Looking further into the first quarter and specifically at interest rates, the markets experienced some volatility which in the opinion of this writer will continue throughout the remainder of the year.  You might remember as we entered 2013 rates were near their historic low and throughout the first quarter rates trended up.   Then toward the end of the quarter, they trended back down once again teetering on their low levels.  Mortgage volume, and in particular the amount of refinance business, directly trends these interest rate gyrations so it too dropped accordingly.  Lenders and investors both built staffing to accommodate the high volume of business in the last half of 2012 to increase capacity and controlled volume by margin management.  And when rates rise and volumes slow, adjustments are made.  And so the cycle of the business continues.  Low rates mean less origination capacity and higher profit margins.  Higher rates mean more origination capacity and lower profit margins.

During the first quarter additional industry information circulated around how the GSE’s (Government Sponsored Entities aka Fannie and Freddie) would be utilized going forward.  The main topic of conversation has been on continued increases in the G Fees (guarantee fees) associated with mortgage backed securities which not only drive higher rates to the consumer and additional income to the GSE’s, but further would make private placement mortgage backed securities more attractive to private investors (purpose is to drive more private capital into the mortgage business allowing for less industry reliance on the GSE’s).  Another area of discussion around reducing the industry’s reliance on the GSE’s is the reduction of the maximum conforming loan size eligible for purchase.  In essence, more loans to the jumbo market which seems in itself to have revived over the first quarter.   And all of this is happening at a time when the GSE’s are now reporting a return to profitability. Stay tuned as the outcome of these and many other policies will impact our industry.

In the end the changes mentioned above are good for our industry as it must change in order to become a more productive and profitable contributor to our economic recovery and expansion.  AmeriSave is well positioned to move with these changes as they occur.

Here’s to continued expansion of the real estate business and expansion of the mortgage origination business.

AmeriSave Mortgage Corporation Presents The First Annual AmeriCup Employee Putt Putt Tournament

ack in February, AmeriSave’s Executive Vice President Ed Abufaris sent an email to 7 associates from different departments and asked them to meet in the conference room where he wanted to share an idea.  Ed began, “We are a large group of people here at AmeriSave.  We are separated by departments, by floors and by the process in general.  The bottom line is that we don’t really know each other except for our close friends and departmental co-workers and it’s time that changed!”  Ed’s idea was for the team he had assembled to produce the first annual AmeriSave Putt Putt Golf Tournament; with one catch.  The tournament was going to take place during the work day AND in the office.  What?

Here’s how we began, we assigned each of our 16 functional departments a hole to design, the two largest departments were tasked with building two holes.  We sent out guidelines to each department, assigned them a space in their area for their hole and gave them suggestions on items they could use to build their hole.  We encouraged them to use items from around the office, like reams of paper, file boxes, folders, plants, etc.  A big thanks to our friends at Porsche Cars North America, headquartered near us in Atlanta, for sending us photos of their past tournaments to jump-start our creative engines!

We encouraged people to sign up via email to the Marketing department and had posters made promoting the event and placed them around the office.  One Friday afternoon two of our awesome marketing associates visited each department with a putter, a handful of golf balls and a hole and encouraged people to putt for prizes consisting of awesome AmeriSave marketing swag.  With a sign up sheet in hand, this really drove registration and by the end of the day we had 140 participants!  We assigned teams of four golfers, making sure that all four players represented different departments.

As the date of the tournament neared, we promoted the prizes and contests.  The prizes to be awarded were:

–        Individual Tournament Champion with the Lowest Score ($100 gift card)

–        Tournament Champion Team – (awarded a gift card for a team lunch)

–        Most Challenging Hole Design (awarded a departmental lunch)

–        Most Creative Hole Design (awarded a departmental lunch)

–        Team Trivia Winners – (awarded $25 movie gift cards)

–        Best Costume ($25 gift cards)

The week before the tournament the lobby was cleared out and the Executive team’s completed hole was setup to encourage other departments to finish theirs up (or in some cases, start on them!)  A team registration list was posted in the lobby assigning tee-off hole and tee time every 15 minutes.  Team members email addresses were posted and they were encouraged to introduce themselves to each other before the day of the tournament.

The morning of the tournament the office was alive with the AmeriCup spirit, everyone was working together to finish setting up their holes before the 9am tee time.  As the teams met in the lobby to have their team photo taken and head off to their first hole, it was truly great to see so many people who have worked under the same roof for many years introducing themselves to someone for the first time.  We heard countless phrases like, “We email back and forth all the time, it’s great to finally meet you!” and “We’re always leaving the building at the same time, I never knew you worked at AmeriSave also.”

The creativity of our associates really came out in the designs of their holes.  Our Sales team had the longest green in the office at almost 30 feet and included water, sand and wind hazards.  Post Closing built an awesome Las Vegas themed hole complete with a real house of cards.  The AmeriSave IT department stuck to what they know, building their hole out of old servers and network cable.  Quality Control/Customer Service (who incidentally won the award for Most Creative) reconstructed buildings on our block of Atlanta’s famous Peachtree Road out of cardboard and you had to putt your way through the buildings.  For the team trivia, two types of photos were posted on the walls.  We posted scenes from well-known movies with the main character digitally removed from the scene and, being a mortgage lender, we posted photos of homes that were prominently featured in movies and the teams had to name the movies.  At the 18th hole, the teams turned in their scorecard and went back to their desks, having hopefully made a couple new friends.

At the end of the day, all employees were treated to a cookout in the courtyard with an assortment of food brought in by The Varsity, an Atlanta institution.  The prizes were awarded and everyone enjoyed the company of co-workers and friends, both old and new.  Employees raved about the day and insisted that this become an annual tournament.  We think it will be!

The two goals of the event were to encourage departments to work together towards a common goal and to foster relationships between employees of different departments.  The end result of both of these goals being better internal communication which will allow AmeriSave to better serve the needs of our borrowers, which is the real reason we’re here.


The Battle Of Homeownership Vs. Renting

With today’s mortgage rates still very low, the cost of homeownership may rival that of renting in many markets.  Real estate blog Trulia states, despite asking price increases of 7% outpacing rental increases of 3.2%, the gap between buying and renting has narrowed only slightly.  Today, it is still 44% cheaper to buy a home versus renting in the 100 largest metro areas in the United States.

The top ten markets where buying is significantly less than renting are:

10. Indianapolis, IN – 58%

9. Birmingham, AL – 59%

8. Kansas City, MO – 60%

7. Memphis, TN – 62%

6. Toledo, OH – 62%

5. Warren, MI – 63%

4. Cleveland, OH – 63%

3. Gary, IN – 63%

2. Dayton, OH – 63%

1. Detroit, MI – 70%

Mortgage rates, tax deductions and the length of time you plan to stay in the home are the three factors that have the largest impact on the rent vs. own argument.

– With today’s average mortgage rate at 3.5%, buying is 44% cheaper.  But if mortgage rates were to rise, to say 4.5% it would only be 39% cheaper.

– Most taxpayers who are homeowners file an itemized tax return and mortgage interest and property tax payments are typically deductible.  If you itemize at the 25% tax bracket, buying is 44% cheaper.

– It’s a no-brainer that the longer you stay in the home, the more cost effective it is.  Spreading out the costs of buying and selling a home (closing costs, improvements, realtor commissions) over a number of years is will save you the most money.

Use this calculator to determine whether owning or renting is better for you.

Prefab Isn’t What It Used To Be

The history of prefabricated homes in the United States dates back to the early 1900s when companies like Sears, Roebuck and Co. sold more than 100,000 homes out of its catalog.  Prefabricated houses were inexpensive because the panels were constructed in an assembly line fashion, with the skilled carpenters, plumbers and electricians all in one factory rather than on site.  The lower cost of these homes, around $2500, meant that more middle-class Americans could afford to build a home.  Eventually prefab homes fell out of favor, partially due to the government imposing stronger building codes for design, construction, fire safety and energy efficiency.  However, in the past couple decades innovations have allowed manufactured home designers to cater to an increasingly upscale market with modern, “green” prefabricated homes.

This 4,500 square foot home in beautiful Oregon features one side made entirely out of translucent and transparent panels to take advantage of the views.  The other side is surfaced with recycled metal panels that provide privacy from a road and decreased construction costs.  The metal panels will eventually rust and the red color will resemble the red rock mountains nearby.  The interior is finished with renewable bamboo cabinets and bamboo and stained concrete floors.  The construction cost was $130 per square foot.

This custom modular home was erected on a lot in an existing urban neighborhood.  Three story homes from Method Homes range from 1592-2335 square feet and have a base price of $211,736.

Another Oregon home, this prefabricated home evokes a 1950s look but it’s anything but inside.  This 2300 square foot home has 12 ½” pitched ceilings and no interior supporting walls.  The rear of the home features 13” windows in every room.

Factory built homes aren’t just available for single family homes.  LivingHomes, based in Santa Monica, CA, has “installed” a multifamily property in San Francisco, CA featuring six townhomes with 2 bedroom floor plans.

This green home on the border of Joshua Tree National Park was manufactured by Blu Homes for Time Disney.  The home was “unfolded” on site and reportedly uses 50% less energy than a typical home.  Interesting fact: this home is actually two of the company’s “Origin” model joined together.

How To Save Money On Mortgage Payments

Financial advisors generally recommend spending in the range of 30% of a household’s monthly income on a mortgage payment.  Some homeowners have seen their incomes decline in the last few years and others may have budgeted more than 30% for their mortgage payments to begin with.  If you’ve found yourself in one of these positions, consider employing one or more of the following tips to get your monthly budget back on track.

Shop Around for a Better Rate

If your rate is above 4%, you may want to shop around for a better rate.  You can talk to your existing lender about refinancing or you can shop an online lender like AmeriSave.  Online lenders will often have very competitive rates because of the low overhead and operating costs associated with operating a brick and mortar brokerage.  Shopping for a rate and locking it in at is simple and fast.

Check current interest rates at AmeriSave here.

Kick Your Private Mortgage Insurance to the Curb

If your original loan was more than 80% of the home’s appraised value when you signed the agreement, then you are paying private mortgage insurance.  If you purchase a home for $200,000 with an $8,000 down payment and signed a 30 year fixed loan at 3.25%, then your payment would be approximately $835 per month plus an estimated $180 for PMI.  If you’ve lived in your home for a number of years or you feel that the value has increased to a point that the balance of the mortgage falls below 80% it may be wise to try to have your lender cancel out the PMI premium.  Most of the time, the homeowner will have to pay for an independent appraisal to determine the current value, but with the average appraisal cost between $400-$600, you would see big savings in just 2-3 months.

Check Into Government Sponsored Assistance Plans

If your current financial situation is making it difficult for you to make your mortgage payments or if you owe more than your home is worth, check into the following programs.

Home Affordable Modification Program (HAMP) – For borrowers who are employed, but are having financial difficulty making payments.  You must have obtained your mortgage before January 1, 2009, owe less than $729,750 and have sufficient income to support a modified payment.  Read more on HAMP here.

Principal Reduction Alternative (PRA) – For homeowner’s whose homes are worth significantly less than they owe, the program seeks to encourage mortgage investors to reduce the principal amount owed.  To be eligible, the same criteria listed above for the HAMP program apply, additionally, the mortgage must not be held by Fannie Mae or Freddie Mac, you must occupy the home as your permanent residence and your mortgage payment must be more than 31% of your pre-tax monthly income. Read more on PRA here.

Appeal Your Property Taxes

If you’re one of the millions of homeowners whose home value has decreased dramatically, check your property tax records to see if your home is over-valued by the county you live in.  If you feel the value is over-stated, you can appeal the value to the board of assessors and possibly receive a reduction in assessed value.  We can’t speak for every county, but generally you can back up your claims by obtaining a market analysis for comparable properties recently sold in your neighborhood.  Backing up these claims with a recent independent property appraisal will make your case stronger.  While you’re at it, check the property information card the county has on file.  This writer once found that the square footage had been incorrectly recorded by over 1000 sq ft. resulting in a refund of overpaid property taxes for two years!

HARP Hits 2 Million, Mortgage Interest Tax Deduction Under Spotlight, And Home Ownership Trends

2 Million HARP Refinances

Government sponsored housing agencies Fannie Mae and Freddie Mac have reached a major milestone, 2 million refinances have been closed since inception of HARP (Home Affordable Refinance Program) in March of 2009.  HARP is setup to assist homeowners who are current on mortgage payments, but unable to refinance due to declining housing values.  The program has been credited with pumping millions back into the economy, as reduced mortgage payments lessen the squeeze on monthly budgets.  The ability to refinance keeps a frustrated homeowner from throwing in the towel, walking away from a property and adding another foreclosure to a saturated market.

Mortgage lenders like AmeriSave are following HARP legislation carefully in 2013.  In his 2013 State of the Union, President Obama spoke of supporting legislation changes to HARP that would open up HARP to an estimated 12 million eligible homeowners.  The bill, S. 249, was introduced by U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) and states that under the bill borrowers would see reduced refi fees, no cost appraisals and extension of HARP for one year past its current expiration.  HARP is currently scheduled to expire on December 31, 2013.  Source: Housing Wire

Government Overstates Cost of Mortgage Interest Tax Deduction

As the federal government tries desperately to reduce the deficit in the federal budget, nearly every loophole and deduction are fair game for the chopping block.  Did you know that prior to the Tax Reform Act of 1986, interest on all personal loans (including credit cards) was deductible?  TRA86 changed that, but did keep the mortgage interest deduction to encourage more homeownership in middle-class Americans.  Homeownership has exploded since 1986, fueled by an abundance of inventory and ease of obtaining a mortgage.  In 2010, when the deduction came up for elimination, the Joint Committee on Taxation projected that the popular write-off would cost the government $137.7 billion dollars in lost tax revenue in 2013.  The good news is that the Committee recently published revised estimates that peg the figure closer to $69.7 billion for 2013.  The change in the figure is due to changes in the economy and tax legislation.  The deduction isn’t off the chopping block yet, but the revised report may have bought it some time.

Home Ownership Trends

The quintessential American Dream: Homeownership.  Since 1960’s the national rate of homeownership has remained in the 67% range.  US Census data shows that 52% of foreign-born US residents own their home, compared to 67% of native-born Americans.  At nearly 75%, owner-occupied homes are most common in suburbs and rural areas.  Just over 84% of married couples own their home, compared to 50-60% of single males and females.  Some numbers suggest that the importance of homeownership to young adults (born after 1980) has declined.  Only 39% of young adults are homeowners compared to the national rate of 65%.  Possible factors for a lack of interest in homeownership in this age group include a trend in marrying and starting a family later to the age group simply preferring the flexibility and short-term commitments involved in renting.

This Week In Celebrity Real Estate

Jessica Simpson Buys Ozzy and Sharon Osbourne’s Former Home

Jessica Simpson and husband-to-be Eric Johnson have gone into escrow on the home The Prince of Darkness, Ozzy Osbourne, shared with his wife Sharon.  The 11,000 square foot home is located in Hidden Hills, California and was listed at $13 million.  Before you go thinking that it’s going to take months of work and gallons of primer to cover the black painted interior walls, know that the home was decorated by Sharon Osbourne, who is known to have impeccable taste and enjoys things to be light and airy.  However, the first renovation on the books is to convert Ozzy and Sharon’s former walk in closet to a nursery for baby number 2.  The closet is said to be MASSIVE.  The Cape Cod inspired house features a sweeping grand staircase, large windows, a large back yard with an expansive view of Los Angeles and naturally, a pool.

Dave Matthews Picks Up Malibu Pad

Singer/Songwriter Dave Matthews, who owns real estate in Seattle and his hometown of Charlottesville, VA, has plunked down $6.5 million for a beach house in sunny Malibu, CA.  The home is reminiscent of a European country estate, sitting on nearly two acres.  He’ll have plenty of room for the rest of the band with the homes 6 bedrooms and plans to add a 900 sq. ft. guest house.  Hmmm? Could it double as a recording studio?  Finally, the property comes with private beach access rights.  Our take, this home is The Best of What’s Around.

Allen Iverson’s Former Atlanta Home is a Slam Dunk

If you’re looking to score a deal on a well-built home in the Buckhead area, sometimes called the “Beverly Hills of the South”, of Atlanta then look no further.  Former Philadelphia 76ers point guard Allen Iverson built this home in 2009 for $4.5 million but is currently selling it for $2.8 million after finalizing his divorce.  The home manages to squeeze in 6 bedrooms and 6 bathrooms into 10,000 sq. ft.  Neighbors on West Paces Ferry Road include Arthur Blank, owner of the Atlanta Falcons (and co-founder of Home Depot) and the Georgia Governor’s Mansion, currently home to Governor Nathan Deal.  Not too shabby.

President Obama Considering Further Expansion Of HARP Refinance Program

President Obama is considering announcing a major expansion of the HARP 2.1 refinancing program in his upcoming State of the Union speech that would make it possible for underwater borrowers whose loans are not held by Fannie Mae or Freddie Mac to refinance at today’s low rates. The Washington Post, citing Treasury Department sources reported this morning that the President is weighing whether to use his executive powers to expand the program to include non-agency loans in the successful refinancing program. Congress refused to approve such an expansion of the program last year.

HARP has helped about 1.8 million homeowners refinance since April 2009. Some 81,600 borrowers used the HARP program to refinance last month alone, according to HUD. Some 11 million homeowners have been unable to refinance under HARP. The HARP program, which has been modified a number of times since its launch four years ago, is limited by that fact that borrowers’ loans must be held by one of the government sponsored enterprises, Fannie Mae or Freddie Mac. As a result, it has not been able to help millions of homeowners.

The plan, if adopted, would likely be aimed at homeowners who have otherwise kept up with their mortgage payments but have been unable to refinance because the loan against their home exceeds its depressed value. Many Republicans in Congress have balked at the idea amid concerns over the cost to taxpayer, according to the Post. In his State of the Union Speech last year the President proposed an expansion of the HARP program that would provide access to refinancing for all non-GSE borrowers who are current on their payments and meet a set of simple criteria. However, the plan required action by Congress, which failed to materialize. The Post reported that Michael A. Stegman, a senior Treasury Department official, said late last month that the administration would “consider non-legislative means at our disposal to help responsible . . . homeowners access these low rates.”

Check today’s mortgage rates now.

Read more at The Niche Report

Saving Your Tax Refund Wisely

Last week we gave you some tips on ways to spend your tax refund more wisely.  Most of these tips involved reducing debt, improving your financial life and planning for retirement.  This week we have a few more tips that will help you improve your lifestyle and relieve some stress.

Saving for Education

College tuition is expensive, even for in-state students.  Some states offer scholarships for outstanding high school students, but as the number of college-bound seniors increases year after year, many states have been forced to make cuts in the amount of assistance provided.  As we discussed last week, student loans are an option, but the job market has been fairly bleak for those fresh out of college and taking out a loan with uncertainty of how it’s going to be repaid is a daunting decision.  A parent’s gift of college tuition to their child is one that won’t be fully appreciated for many years to come, when they’re surrounded by friends with student loan debts.  Clark Howardrecommends saving for college with a 529 plan.  A 529 plan will allow you to save money tax-free and spend it tax-free on a child’s college education.

Read Clark Howard’s 529 guide here.

Save for a Down Payment on a Home

With changes in mortgage regulations and lender’s tightening their belts, it’s more difficult than before to purchase a home with zero money down.  FHA loans require a minimum down payment of 3.5% for new purchase loans.  The required down payment may increase based on credit worthiness.  When shopping for conventional loans, you’ll get a better interest rate with a larger down payment.  If you can save up enough to put a 20% down payment on your home, you’ll have enough equity to avoid having to pay a monthly private mortgage insurance (PMI) premium.  Saving for a down payment in a traditional bank savings account earning less than 1% interest won’t do much for you.  If you plan on purchasing a home within the next few years, consider a money market account or CD with upwards of 5% APY.

Check current mortgage rates from AmeriSave here.

Invest In Your Home

If you’re already a homeowner and plan on staying a while, put the money back into your home to make it more enjoyable.  A $3,000 tax refund will go a long way towards refreshing a powder room or guest bathroom with a new vanity, toilet, paint and lighting.  Even installing new tile can be done by the relatively inexperienced and save a boatload, consider practicing by installing a new tile backsplash in your kitchen first.  If you enjoy spending a lot of time outdoors in the spring and summer, spend that cash on a new deck or patio with brick pavers.  Don’t forget to add some landscaping, outdoor lighting and a new grill!

Preventative Services

If you’re relatively secure in all the other areas mentioned, think about which expenses always leave you pulling out your credit card unexpectedly.  Preventative maintenance on expensive items like HVAC systems can save you money down the road and keep you from losing air conditioning suddenly at the height of summer.  Having your car inspected by a reputable mechanic can also prevent you from being stranded by a broken belt or water pump.

Rebuild Your Emergency Fund

If you’re recovering from a financial disaster, you’re not alone.  Job losses and real estate losses have been rampant the past few years.  If you’ve depleted your emergency fund, you know the value of having one, which may make the sacrifices you’ll go through rebuilding one easier to swallow.  Don’t delay in the rebuilding process, lest you get tempted to splurge on those luxuries you’ve denied yourself.  Set an initial goal and contribute to it monthly.  Setting up an automatic draft the day following payday can mentally make it seem like you aren’t loosing anything at all.

Make Your Tax Refund Work For You

It’s the time of the year where the most eager tax filers are starting to find their tax refund has been delivered to their mailbox or directly deposited to their checking account.  The average federal refund has been about $3000 for the last two years, according to TurboTax.  That amount of money is sure to leave a lot of people with scorched pockets across the country and retailers like Best Buy are sure to reap the benefits as people upgrade to the newest, thinnest LCD television available.  Guess what folks, by Christmas that new television will be replaced by one that will actually make you breakfast and clean up the mess. Let’s examine some smarter uses for your tax refund shall we?

Adjust Your Tax Withholding

Some taxpayers like the idea of a tax refund, if they make enough to live comfortably during the year; a tax refund is a welcome surprise.  Others don’t like the idea of giving the US government what is essentially an interest free loan for 12 months.  If you’re the latter of the two types, use this calculator to adjust your tax withholding to increase your take-home pay.  If you received the average refund of $3,000, you could increase your monthly take-home pay by about $250!

Tax Withholding Calculator

Prepay Your Mortgage

Applying your refund to your mortgage principal won’t reduce your monthly payment, but doing this consistently over time can drastically reduce the number of years you have to pay on it. Take this scenario for example:  You have a balance of $150,000 on a 30 year fixed mortgage at an interest rate of 3.25%.  If you applied an extra $250.00 per month to your mortgage principal, you would pay your loan off in just 18.5 years (222 months), instead of 30 years (360 months).  This move would save you over $35,000 in interest over the life of your loan.

Try the AmeriSave mortgage payment calculator.

Pay Off a Credit Card

A recent survey by the Federal Reserve Bank revealed there are 609.8 million credit cards held by US consumers.  71% of the population reports that they have one, and the average person has between three and four.  The average household has $15,956 in credit card debt, sometimes spread over multiple cards.  One popular and wise use of a tax refund is to eliminate the balance on one of your credit cards, freeing yourself of the burden of that payment.  Tip: To make this strategy really work for you, put your refund towards the card with the highest interest rate, then apply the monthly payment you’d normally make on that card to another credit card.

Pay Down Student Loans

Did you know that nearly 60% of the 20 million Americans who attend college every year borrow annually to help cover the costs?  There are currently approximately 37 million student loan borrowers with outstanding loans, and the under 30 age group has the most borrowers at 14 million.  The average income for someone in the under 30 age group with a bachelor’s degree is $45,000.  If you’re in this age group, or even if you’re not, and you have student loan debt consider applying your tax refund to your student loans.  The sooner you’re free and clear of student loans, the better.  This outstanding debt can affect your ability to take on other types of consumer debt such as auto loans or mortgages.

Check today’s mortgage rates.

Contribute (up to $5000) to an IRA

You can contribute up to $5,000 to an IRA (or $6,000 if you’re age 50 and up).  If you’re single and your modified adjusted gross income is less than $125,000 (or $183,000 or less if you’re married and filing jointly), then you can contribute to a Roth IRA, which lets you withdraw the money tax-free upon retirement.  If you earn too much for a Roth, contribute it to a traditional IRA, and convert it to a Roth later.

Enjoy these tips? Check back next week for more!