Dear President Biden:
I was delighted to read your recent executive order promoting competition across America to reduce consumer prices.
When it comes to real estate, reducing purchase and refinancing transaction costs as well as improving the accessibility of current payments may be easier than you might think. First, policymakers, regulators, and Congress need to update an outdated batch of dinosaur rules, regulations, and laws. Here are the top 10:
1. Create competition in the title insurance industry by allowing bundled settlement services starting with title insurance. Here we are in 2021. Consumers still cannot negotiate title insurance.
How is it that something as expensive as the settlement fee can only be obtained through pay-per-view pricing? Costco and Amazon were able to sell bundled packages. If title insurance did this, the closing costs would be cut by at least half.
2. Update the Federal Housing Administration’s mortgage insurance rule by eliminating mortgage insurance once certain capital levels and deadlines are met. This is already available for private mortgage insurance.
Why should low-income, low-family, low-income FHA borrowers pay almost a percentage point higher interest rate over the life of the loan? Leave me alone.
3. Asking the Consumer Financial Protection Bureau to create undercover operations to stop the endemic criminal bribes solicited and offered in exchange for setting up real estate settlement services from various vendors.
I guess unsuspecting borrowers get 0.25% top rates to cover overhead costs. Before the pandemic, I took an executive from the mortgage industry for the weekend.
We have knocked the doors open for resale and builders. The executive was amazed at the boldness of some complete strangers’ requests for payola if they expected me to receive their referrals from mortgage clients.
Operation Varsity Blues (college cheating scandal) will look like a drop in the ocean compared to the names you might find on the criminal list if the CFPB implemented this.
4. Require Fannie and Freddie to recognize apartment rents for roommates, boarders and grandmothers reported on a borrower’s 1040 tax returns. It is incredibly insulting and undermining for honest taxpayers to report their income and pay income taxes, but not be allowed to use them for loan qualifying purposes.
5. Demand that Fannie and Freddie end their prohibitive second home and rental mortgage policies. These recent policies leave borrowers with no choice but to opt for significantly more expensive mortgages.
Plus, it helps large investment firms and hedge funds buying single-family homes across America as moms and dads no longer have access to the previously affordable Fannie-Freddie supply.
6. Reduce the high cost of real estate appraisals by allowing mortgage originators to choose the appraiser, thereby eliminating appraisal management companies. Who better than your local loan officer would know the best appraisers with the fastest turnaround times?
We are in a much better position today with automated appraisal quality control than we were during the mortgage collapse, when too many loan officers conditioned an assignment to achieve the target value of the property.
With tools like Fannie Mae’s fully accurate collateral underwriting system, an appraiser would struggle to supplement the value and get away with it.
7. Facilitate 50-year interest-only mortgages to improve affordability. It can become a lifetime mortgage for the most part. Housing is so expensive. Why do we have to pay off our mortgages?
Think about the car rental contracts that work well for so many people. And think no further than the Surfside condo collapse. Or forest fires. Or tornadoes. It is not always safe to invest your savings in the four corners of your home.
8. Extend negative amortization mortgages beyond reverse mortgages. Why would you have to be 62 or older to never have to pay for a house again?
Add the accrued interest to the back of the loan. It looks like reverse age discrimination. It would be easy for actuaries to calculate the amount of a reverse mortgage that those under 62 would be allowed based on the down payment or existing refinancing equity.
9. Bring the finality to property taxes. Property taxes never stop. And there is no annual tax cap in many states that do not have the protections provided by Proposition 13 in California. Some people across the country face the prospect of having to sell their homes because their property taxes are unaffordable.
10. Maintain the relationship between mortgage originators and consumers by exempting them from state licensing requirements. Why should a long-term relationship of trust between, say, a California resident moving to Texas or Tennessee end because the loan officer cannot afford to get a license across America?
The National Mortgage Licensing System closely monitors every loan officer for every transaction approved, declined or withdrawn. And consider the hypocrisy of exempting principals registered by banks and credit unions from state licensing laws. There are no tests, licenses or standards for them.
Consumers should stick to their trusted advisor.
Freddie Mac Rate News: The 30-year fixed rate averaged 2.88%, 8 basis points lower than last week. The 15-year fixed rate averaged 2.22%, 2 basis points higher than last week.
The Mortgage Bankers Association reported a 16% increase in mortgage application volume from the previous week after adjusting for the July 4th vacation.
At the end of the line : Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 548,250, last year’s payment was $ 30 more than this week’s payment of $ 2,276.
What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages with a cost of 1 point: a 30-year FHA at 2.25%, a 15-year conventional at 1.875%, a 30-year conventional at 2, 5%, a conventional one-year high balance ($ 548,251 to $ 822,375) at 1.99, a 30-year conventional high balance at 2.69% and a 30-year jumbo set at 2.75%.
Eye-catcher loan of the week: A 15-year fixed mortgage at 2.375% with no closing costs.