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By Robert Riedl, CPA, CFP, AWMA

Learn more about Robert on NerdWallet’s Ask an Advisor

New Mortgage Rules Scheduled to Take Effect in January

The Consumer Financial Protection Bureau (CFPB) has issued new mortgage rules that are scheduled to take effect on January 10, 2014.

Background

In 2008, the rise in home foreclosures was viewed by many as the result of sub-standard mortgage lending practices. Subsequently, Congress passed the Dodd-Frank Act in 2010, which created the CFPB and set forth a number of financial industry regulations aimed at protecting consumers, including some pertaining to mortgage lending. In January 2013, the CFPB issued mortgage rules that implement the mortgage provisions set forth by Congress under the act.

Highlights of the new mortgage rules

The new rules broaden coverage of existing ability-to-repay rules, which require a lender to make a reasonable, good faith determination that a consumer has the ability to repay a loan. The rules extend coverage of the ability-to-repay rules to the majority of closed-end transactions secured by a dwelling (with certain exceptions). In addition, the rules set forth specific procedures a lender must follow when determining a borrower’s ability to repay a loan, including the consideration and verification of certain consumer information (e.g., income, employment status) and the calculation of the borrower’s monthly mortgage payment. The rules also center on what are referred to as Qualified Mortgages. According to the Dodd-Frank Act, lenders that issue Qualified Mortgages will receive a presumption of compliance with ability-to-repay rules, thereby reducing their risk of challenge from a borrower for failing to satisfy ability-to-repay requirements. The rules specify various requirements that a loan must meet in order for it to be considered a Qualified Mortgage, including:

  • Limits on risky loan features (e.g., negative amortization or interest-only loans)
  • Cap on a lender’s points and fees (3% of the loan amount)
  • Certain underwriting requirements (e.g., 43% monthly debt-to-income ratio loan limit)

What do the new rules mean for consumers?

The new mortgage rules were mainly put into place as a way to end irresponsible mortgage lending and ensure that borrowers will only be able to obtain a mortgage loan that they can afford to pay back.

Proponents view the rules as welcome industry safeguards that simply mirror responsible mortgage lending practices that are already in place. However, some mortgage-industry experts fear that the new rules may end up making obtaining a mortgage loan more difficult than it has been in the past–especially for borrowers who have a high debt-to-income ratio. Borrowers may also find themselves burdened with the task of providing lenders with additional documentation that they may not have had to in the past. For more information on the new mortgage rules, you can visit the CFPB website at www.consumerfinance.gov

 

 

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Link to Original Article:  http://www.nerdwallet.com/blog/finance/2013/new-mortgage-rules-cfpb/

Oct. 18 (Dayton Daily News (OH)) -- The new restrictions on the Homestead Tax Exemption that begin in 2014 for any homeowner who has not turned 65 are unfair and will be a burden on senior citizens of the future, said two local Democrats in a news conference today.

Montgomery County Auditor Karl Keith said the homestead program, which exempts the first $25,000 or property value from taxation, is popular in the county.

"We currently have 48,000 property owners in Montgomery County taking advantage of this program," Keith said at a Thursday afternoon press conference at the county Democratic headquarters on Wilkerson Street in Dayton. "That's roughly 30 percent of the owner-occupied properties in Montgomery County."

"Unfortunately for many Ohioans, Gov. Kasich recently signed the state budget bill that eliminates the Homestead Tax Exemption for many in the future in order to pay for handouts of up to $6,000 for the most wealthy and well-connected among us."

The exemption rules that will go into effect in 2014 will not change for anyone who has turned 65 and is enrolled in the program by the end of the year, said Gary Gudmondson, a spokesman for the Ohio Department of Taxation.

For those who turn 65 after Jan. 1, however, household income must be below $30,500 to be eligible, Gudmondson said. A previous means test, that was tiered based on income was eliminated in 2007. The new means test was added to return to the "originally approved system" according to the Department of Taxation's website.

Keith and Dayton City Commission candidate Jeffrey Mims called on legislators to pass bills introduced in the Ohio House and Senate that would reinstate the exemption for all senior citizens.

"We've seen income tax cuts at the state level," Keith said. "We've seen cuts to the local government fund. We're funding those income tax cuts on the backs of property owners, on the backs of senior citizens and on the back of local government, and it needs to stop."

But Kasich spokesman Rob Nichols emphasized that everyone who gets the exemption now will continue to get it, and in the future "only those who truly need it will get it."

"What we did with the Homestead Tax Exemption was so we could cut taxes across the state for virtually every small business and every Ohioan to the tune of $3 billion over three years," Nichols said.

By comparison, he said, the Homestead tax amounted to $36 million over three years.

"We cut $3 billion in taxes," Nichols said. "That is a shot of adrenaline into the state to get people working, to create jobs, and to get the economy back on track."

 

By Ken McCall

Dayton Daily News

Staff Writer

Link to Original Article:  http://www.mydaytondailynews.com/news/news/democrats-decry-changes-to-homestead-tax-exemption/nbQ33/

The government shutdown is here. Whether it’s not being able to get a new Social Security card or visit a national park, Americans will immediately feel the effects. But there’s one bright spot of the economy that stands to be affected as well: housing.

One of the biggest questions regarding the shutdown and how it will affect housing has revolved around the mortgage market, specifically prospective buyers’ access to new home loans. After all, more than 90% of all loan activity is underwritten, insured, or owned by the government and its affiliated entities.

Initially at least, the mortgage market is likely to be only minimally impacted. New loans will continue to push through most government agency pipelines. What will change is how long the process takes, as many agencies expect to experience delays.

Mortgages purchased and securitized by Fannie Mae and Freddie Mac will be unaffected because their operations are paid for by fees charged to lenders. And the Department of Veterans Affairs will continue to guarantee mortgages for Americans that have served in the military since these loans are funded by user fees as well.

But if the government shutdown of 1995-1996 is any indicator, the process will take longer than usual. “Loan Guaranty certificates of eligibility and certificates of reasonable value were delayed,” the VA warned in its September 25th contingency plan.

Where there has been mounting concern is the Federal Housing Administration, which currently endorses about 15% of the entire single-family mortgage market. Several media outlets recently reported that the FHA would be unable to endorse any single-family loans and that no staff would be available underwrite and approve new loans.

That prospect would be somewhat worrisome – if it were actually true. The FHA’s Office of Single Family Housing will indeed remain open for business, albeit with a smaller staff. “FHA will be able to endorse single family loans during the shutdown. A limited number of FHA staff will be available to underwrite and approve new loans,” thereport now states. In other words, other lenders’ loans will continue to be insured and some in-house lending will continue to take place at a reduced rate.

The reason for that mix-up: the initial draft of the U.S. Department of Housing and Urban Development’s contingency plan mistakenly stated that single-family loan operations would cease. The report was amended over the weekend.

The FHA’s single-family loan operations are funded through multi-year appropriations, meaning their budget is not tied to the government’s standoff over funding for the new fiscal year that starts in October. On the other hand, what will be more affected is the agency’s Multifamily Housing Office, which is funded through yearly appropriations.

“Because we are able to endorse loans, we don’t expect the impact on the housing market to be significant, as long as the shutdown is brief,” continues the HUD report. “If the shutdown lasts and our commitment authority runs out, we do expect that potential homeowners will be impacted, as well as home sellers and the entire housing market.”

One government lender that will indeed suspend its home loan activity, however, is the Department of Agriculture. The USDA says that no new housing loans or guarantees will be issued through its Rural Development programs in a shutdown. The department also warns that such a scenario could cause “a setback in construction start-up,” and if the shutdown lasts for an extended period, “a substantial reduction in housing available in rural areas relative to population.”

“The government doesn’t generally approve loans, they basically just insure them,” says Don Frommeyer, president of the National Association of Mortgage Brokers and a vice president at Amtrust Mortgage Funding. “For the most part you aren’t going to see much of a hit in the mortgage market unless it goes for a long period of time.”

If it does stretch on, he adds, the worry will be what mortgage rates do in a market shrouded in fiscal uncertainty and how that will affect the home buying, especially in light of recent rate spikes.

 

Original Article Link:  http://www.forbes.com/sites/morganbrennan/2013/10/01/heres-how-the-government-shutdown-will-affect-housing/

By: Morgan Brennan, 10/01/2013 @ 7:00am

Posted by on in Uncategorized

Dayton landed on a list of the top 25 residential real estate investment markets.

The city ranked No. 22 on the list, compiled by OwnAmerica using an algorithm that examines demand, price, net yield and economic development trends in the city.

Dayton’s appearance on the list solidifies it as a strong city to invest in for long-term returns with low risk.

The study gave the best rankings to cities whose performance was most sustainable and predictable in the last few decades for drawing buyers to the market, home price appreciation, strong rent yield, and ability to capture opportunities in economic development.

Other Ohio cities also made the list including Cincinnati at No. 7 and Cleveland, which squeaked on at No. 25.

Charleston, W.Va. ranked No. 1 on the list.

Click here for the full list.

 

Article Link:  http://www.bizjournals.com/dayton/news/2013/09/10/dayton-among-top-25-housing-investment.html?iana=ind_rre

By:  Olivia Barrow, Staff Reporter, Dayton Business Journal

Sept. 10, 2013

Original Article By Cory Hopkins | Zillow – Thu, Aug 8, 2013 1:42 PM EDT

More than 100 real estate and economic experts predict home values will end 2013 up 6.7 percent from the end of 2012, as the housing market recovery continues to widen and accelerate, according to the latest Zillow Home Price Expectations Survey. A majority of the panel also said that while rising mortgage rates don’t pose a threat if they stay within the 4 to 5 percent range, they could derail the recovery if they reach 6 percent or higher.

The survey of 106 economists, real estate experts and investment and market strategists was sponsored by leading real estate information marketplace Zillow, Inc. and is conducted quarterly by Pulsenomics LLC. Panelists said they expected median U.S. home values to rise to $167,490 by the end of this year, up from $156,900 at the end of 2012 and $161,100 currently. Based on current expectations for home value appreciation over the next five years, the panelists on average predicted that U.S. home values could approach new record highs by the end of 2017, coming very close to the previous peak level of $194,600 set in May 2007.

The expectations for a 6.7 percent year-over-year increase in home values was up significantly from expectations of a 5.4 percent bump predicted the last time the survey was conducted.

Panelists expect annual home value appreciation rates this year to end on a strong note, before slowing considerably from 2014 through 2017. Panelists said they expected appreciation rates to slow to roughly 4.4 percent in 2014, on average, unchanged from the previous survey. This rate is expected to slow further to 3.6 percent, 3.5 percent and 3.4 percent in 2015, 2016 and 2017, respectively. Cumulatively, survey respondents predicted home values to rise 23.7 percent through 2017, on average, up from 22.3 percent in the last survey.

“Short-term expectations for home value appreciation through the end of this year are consistent with a nationwide housing market recovery that is both strengthening and widening, but still coping with high levels of negative equity, high demand and low inventory. Combined, these factors will continue putting upward pressure on home values for the next few months,” said Zillow Senior Economist Dr. Svenja Gudell. “But the days are numbered for these kinds of market dynamics, as investors begin to pull out of some markets, mortgage interest rates rise and more inventory becomes available. Over the next few years, these trends will help the market stabilize and will bring home value appreciation more in line with historic norms. As long as mortgage interest rates don’t rise too far and too fast, most markets should be able to absorb these changing dynamics while still remaining healthy.”

Panelists were also asked if recent increases in mortgage rates presented a significant threat to the ongoing housing market recovery. Among those expressing an opinion, 88 percent said no. Those panelists who responded “no” or “not sure” were then asked what minimummortgage interest rate (on a 30-year, fixed-rate mortgage) would pose a significant threat to the housing recovery. Among these respondents, 61 percent said interest rates would have to rise to at least 6 percent to create a significant threat.

For full survey results and graphics, please visit Zillow Real Estate Research orwww.pulsenomics.com.