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Tuesday, August 31, 2004
Proposed bank program challenges Freddie Mac, Fannie Mae
Seattle bank seeks broader loan options for home buyers
The Federal Home Loan Bank of Seattle has filed an application with the Federal Housing Finance Board to purchase mortgage securities from cooperative bank members and resell them to bank system members, other federal home loan banks and investors outside the system.
This proposed MortgageChoice program, an extension of the bank's existing Mortgage Purchase Program, would give the bank a greater role in offering a secondary market alternative for mortgages, which would extend more options to home buyers seeking home loans through the bank's member financial institutions, according to an announcement today by the Federal Home Loan Bank of Seattle. The new offering could also enable the Seattle Bank to better manage its financial risk, bank officials announced.
Under its Mortgage Purchase Program, the Seattle Bank can purchase mortgage loans not securities and hold them in portfolio. With approval from the finance board, the bank could purchase mortgage securities from its members and resell them to a broad base of financial institutions and investors.
Monday, August 30, 2004
40-year fixed-rate mortgages appear, Pilot program targets first-time home buyers
A young woman in Minnesota was looking for the lowest possible monthly payment she could get with a fixed-rate mortgage. Instead of opting for the standard 30-year fixed-rate mortgage, she chose to stretch the loan an additional 10 years.
Now thanks to a 40-year fixed-rate mortgage, the woman can afford slightly more house than the first-time home buyer would've been able to purchase without it, said Brad Crandall, president of CU Mortgage Services. Owned by 54 Minnesota credit union organizations, CU Mortgage Services is one of about a dozen credit unions across the country to begin offering 40-year fixed-rate mortgages as part of a pilot program through Fannie Mae.
Interest in the loan has been slow so far, Crandall and others have said, but they expect it to pick up as interest rates increase and price out some first-time home buyers from the ever-appreciating housing market. Fannie Mae rolled out the pilot earlier this year to gauge how popular such a loan would be. The idea behind the extra 10 years is simple: Make houses more affordable to more consumers by extending the loan terms.
Still, the concept has been slow to catch on. Fannie Mae spokeswoman Sandy Cutts believes that's because interest rates are still so low.
"It's not quite the right time, ideal time, for it yet," Cutts said. "It's still building some momentum."
By the end of the year, Fannie Mae hopes to know how popular the 40-year mortgage is within the pilot programs, Cutts said. There is no timeline yet on whether Fannie will expand the pilot program to other lenders or make it a permanent offering.
Lawsuits are seller's worst nightmare , How can I avoid being sued?
Two frequent after-closing problems involve claims regarding square footage misrepresentations and concealment of unfavorable reports. Sellers tend to round up the square footage of their home. For instance, a house that had 1,865 square feet when the sellers bought it suddenly has 1,900 square feet when they sell it.
A far better practice, is to round down, rather than up. This is hard for some sellers to do, because bigger is usually thought to be better. But, it's not better if you're sued later. If you feel you need to reference square footage at all be sure to include the word "approximate." It's also a good idea to reference the source of the square footage information, and include a statement that it might not be accurate and it won't be verified. This way, the buyers are put on notice to research this information, if it's important to them.
As a buyer, you do have a duty to protect yourself. Buying a home is a major investment. So, don't rely solely on a seller's disclosures. Have the property inspected and if you need more information from the seller, ask for it. Don't rely on the fact that the law may be on your side if you get into a dispute. A legal proceeding can exact an emotional toll, not to mention the time it may take out of your busy life.
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