Some owners should consider a mortgage ‘recast’

NEW YORK – Aug. 25, 2017 – Mortgage recasting is one way to reduce your monthly mortgage payments. It’s less common than refinancing or modifying a loan, and it’s rarely advertised, but it decreases mortgage payments for those who can apply a lump sum toward their loan’s principal.

What is recasting your mortgage?

When you recast your mortgage, you pay your lender a large sum toward your principal, and your loan is then reamortized – in other words, recalculated based on your new, lower balance. Your interest rate and term stay the same, but because your principal has decreased, your monthly payments will be lower.
It’s a move to make if you want to reduce your interest expense without shortening your loan term, says Eric Gotsch, a sales manager for Wells Fargo Home Mortgage.
The most common reason for recasting is if you’ve bought a home but not yet sold your previous one, says Jim Hettinger, executive vice president of operations at Guaranteed Rate, an online mortgage lender. “Once the sale of the prior home is complete, the consumer may want to put the proceeds of the sale against the new mortgage, have the loan recast, or reamortized, and a new monthly payment set up,” he says.
Recasting is also ideal for people who get a large sum of money and want to reduce their mortgage expenses, Gotsch says. This often happens when someone receives an inheritance, an investment distribution or a large bonus, or has a nontraditional income stream, he says. In most cases, you’ll need at least $5,000 to recast your mortgage.
Recasting is different from refinancing. When you refinance, you take out a new loan, with different terms, to replace the old one. You could get a lower interest rate or switch from an adjustable to a fixed rate or from 15 years to 30 years, for example.

Benefits of recasting

The benefit of a mortgage recast is simple: It lowers your monthly payments, making your housing costs more affordable. If you paid a lump sum toward your mortgage without recasting, you’d reduce your balance, but your monthly payments would stay the same.
You won’t need a credit check or an appraisal to recast, making it a simpler option than refinancing. There’s a good chance that it will be cheaper than refinancing, too, since you won’t face the usual array of closing costs. However, you might need a history of on-time payments to recast.

What you should know before recasting

Not all loans are eligible for recasting, and your servicer isn’t required to offer the service, Hettinger says. Loans bought by Fannie Mae and Freddie Mac can be recast, he says, but Federal Housing Administration and Veterans Affairs loans can’t.
Additionally, jumbo or nonconforming mortgages might be eligible for recasting only on a case-by-case basis, Hettinger says. Some lenders charge a fee for the service, usually a few hundred dollars, so inquire about the cost.
When it comes to the minimum lump sum, lenders have a lot of discretion. “There are also differing policies regarding how much a consumer will have to put down to recast the loan,’ Hettinger says. “Make sure you have your loan officer check with the servicer before going into a closing assuming you can recast a few months down the line.’
Another thing to consider before you recast is whether this lump sum is better spent elsewhere. Paying down credit card debt, creating an emergency fund or investing in the stock market, for example, might be a better financial choice. A financial planner can help you decide which is the best option.

How to recast your mortgage

Lenders who offer recasting typically don’t advertise it. If you’re interested in recasting your loan, contact your mortgage lender or servicer to find out if it’s an option. If it is, ask about fees and the minimum amount you’ll need to apply to your principal.
Copyright © 2017 Newton Press Mentor, Emily Starbuck Crone. All rights reserved. Emily Starbuck Crone is a writer at NerdWallet.

FHA mortgage insurance: What buyers should know

WASHINGTON – Aug. 22, 2017 – When deciding between an FHA mortgage and a conventional mortgage, the most important difference is arguably the mortgage insurance that the Federal Housing Administration requires. This insurance typically can’t be canceled and comes with both an annual premium and an upfront premium that you’ll need to factor into your home buying budget.
Despite these insurance-related drawbacks, an FHA loan may be the only option for borrowers who can’t qualify for a conventional loan due to a low credit score or a lack of savings especially since down payments as low as 3.5 percent are permitted.
If you’re considering an FHA loan, here’s what you should know about FHA mortgage insurance.
What is FHA mortgage insurance?
“Mortgage insurance is essentially a policy that protects lenders and servicers against losses resulting from defaults,” says Jim Hettinger, executive vice president of operations at Guaranteed Rate, an online mortgage lender. Most mortgage loans require mortgage insurance only if the borrower is putting down less than 20 percent of the purchase price, he says, but the FHA requires it for all loans.
If an FHA loan is ideal for your financial situation, the mortgage insurance premium is something you’re likely just going to have to live with, says Keith Gumbinger, vice president of, a mortgage information website. ‘If you want a low-down-payment mortgage that doesn’t penalize you for having a lower credit score, the mortgage insurance premium is a fact of life,’ he says.
How much does it cost?
When you take out an FHA mortgage, you must pay an upfront premium of 1.75 percent of the loan amount, according to the FHA. You can pay that premium at closing, or you can roll it into your loan amount. The latter will result in a more expensive loan.
In addition to this upfront premium, you’ll also pay an annual premium that is added to your monthly mortgage payments. Depending on your loan’s size and term, this expense ranges from 0.45 percent to 1.05 percent of the loan amount.
Take, for example, a $200,000 home. Say you put down $7,000, which is 3.5 percent, the lowest permitted for an FHA loan. The 1.75 percent upfront premium on your $193,000 loan would cost $3,377.50. If your annual premium was the highest amount, 1.05 percent, you’d pay $2,026.50 per year, or roughly $169 per month.
How to cancel FHA mortgage insurance
If you put 10 percent or more down on your FHA loan, your mortgage insurance premium will end after 11 years. If your FHA loan was made before June 2013, you may be able to cancel your mortgage insurance depending on your loan’s original term or loan-to-value ratio. Contact your lender to see if you qualify.
If you don’t fall into either of these categories, there’s something else you can do: refinance into a conventional loan once your LTV ratio is lower or you’ve bolstered your credit score, Hettinger says. The loan-to-value ratio represents the amount of the loan compared with the value of the asset. For example, if you put 20 percent down on a home that costs $100,000, your LTV is 80 percent.
If refinancing isn’t an option, there’s still reason to keep hope alive, Gumbinger says. “The FHA commissioner has wide discretion to change premiums and has a number of times in the past 10 years,” he explains. He says that borrowers might be able to cancel FHA mortgage insurance in the future or that annual premiums might be reduced. A quarter-percentage-point reduction of the premium was scheduled to take place in late January 2017, but it was suspended by the incoming Trump administration before it took effect.
Paying FHA mortgage insurance can be a pain, especially if you’re stuck with it for the life of the loan. But this ongoing expense could be worthwhile for those who want to own a home and can’t qualify for a conventional mortgage.
Copyright © 2017 The Grove Sun, Emily Starbuck Crone. All rights reserved. The article FHA Mortgage Insurance: What You Need to Know originally appeared on NerdWallet.


Email closing scam dupes D.C. buyers out of $1.3M

WASHINGTON – Aug. 14, 2017 – A couple lost $1.5 million in the purchase of their dream home in Washington, D.C., because of a real estate scam that is nabbing more victims across the country.
The couple put down $200,000 on the home and waited for closing. They then received an email that appeared to be from their title company with directions to wire the remaining funds for the purchase. The couple replied to the email to double-check the instructions. When they received a reply, they proceeded to wire the remaining $1.3 million to what they thought was a legitimate bank. But when they went to sign the papers at settlement, they realized they had been scammed.
“When you have a young child, and you move into your house for the first time, and you close on that house – that should be a really special moment. Not a moment when a massive amount of money is stolen from you,” Michael Nadel, the couple’s attorney, told NBC News 4 in Washington. “So the whole experience has been marred.”
The couple was still able to purchase the home thanks to inheritance money, but they’re suing the title company and others in hopes to recover the stolen funds.
The FBI is investigating the incident and says the computer servers of the title company, Federal Title and Escrow, were likely hacked. “Federal Title’s internal review has determined that no other customers were affected by this attack,” a company spokesperson told the television station.
Such scams are becoming more common. The National Association of Realtors® has been issuing warnings to members about scams where hackers are breaking into the email of real estate professionals in order to provide clients with fraudulent wiring instructions for their downpayment or closing funds. Emails containing “new” wiring instructions may appear to come from the customers’ agent, title representative or attorney.
Urge your clients to call first if they receive such an email. Also, they should not go by the phone number on the email but look up the number to make sure it’s the correct one.
Source: “D.C. Homebuyers Lose $1.5M in Title Scam,” NBC-4 (Washington, D.C.) (Aug. 9, 2017)

Florida Realtors kicks off ‘Amendment 2 is for Everybody’ campaign

TALLAHASSEE, Fla. – Aug. 15, 2017 – Florida Realtors, the state’s largest professional trade association, officially kicked off its campaign to pass Amendment 2, which gives voters the chance to make a 10 percent cap on annual non-homestead property tax increases permanent. It will appear on the 2018 general election ballot.
Prior to the 10 percent cap, if the value of a business owner’s property increased significantly compared to the previous year, they could see their property tax bill skyrocket. Owners of investment homes also faced steep property tax hikes, which could be passed along to tenants in the form of higher rents.
“Amendment 2 really is good for everybody because if the non-homestead tax cap expires in 2019, every Floridian will be negatively impacted in some way,” says Florida Realtors President Maria Wells. “Whether it’s a business having to increase the cost of their goods and services or tenants having their rent go up a significant amount, communities across the state will suffer.”
Florida Realtors, along with its coalition partners, is planning a comprehensive, direct-to-voter campaign over the next 14 months. The campaign theme, “Everybody is for Amendment 2, because Amendment 2 is for Everybody” signifies the importance the measure holds for every citizen of the state.
“In the current age of partisanship, it’s often difficult to find an issue that people with different viewpoints can agree on, but with Amendment 2 we did just that,” says Carrie O’Rourke, vice president of public policy for Florida Realtors. “The Florida Senate passed it unanimously, and the House was right behind them with 97 percent voting in favor of the referendum. That level of bipartisanship speaks volumes for the widespread benefits Amendment 2 offers.”
The 10 percent cap on non-homestead properties was part of the Save Our Homes portability constitutional amendment voters approved in 2008. The 10 percent cap portion of the amendment sunsets on Jan. 1, 2019.
The kick-off includes the launch of the campaign’s website,, which features a video outlining the benefits of the amendment.

‘Agrihoods’ a possible use for dying Fla. golf courses?

CHICAGO – Aug. 11, 2017 – More people want to experience farm life without buying an entire farm. As a result, an emerging type of community catching on from coast to coast is centered around food production and called an “agrihood.”
Suburban agrihoods began appearing in the U.S. in the 1990s. At first, developers offered them as an alternative to golf-centered communities.
“What we learned over time was the majority of buyers in golf course developments did not play golf,” says Ed McMahon, senior resident fellow at the Urban Land Institute.
At first, developers started putting farms at the centers of communities because it was a lower-cost form of green space that also helped differentiate neighborhoods, but they then discovered that homebuyers were drawn to the tranquility of farming and the fresh organic food produced by a backyard farm.
Many agrihoods also offer other benefits for community residents, such as farm stands and community-supported agriculture programs where residents can pay up front for weekly shares of the produce. Adults and children can also volunteer to work on the farm and get a hands-on education about food.
“People are interested in living with like-minded people who are interested in knowing where their food comes from,” says Bill Maines, director of sustainability and leadership at the Leavey School of Business at Santa Clara University in Silicon Valley. “This provides a way for people to connect to nature without having to pull up roots and buy a farm.”
Living in an agrihood doesn’t come cheap, however. In Willowsford, Va., a 4,000-acre agrihood about 45 minutes outside of Washington, D.C., has single-family homes starting at $599,000 and stretching up to $1.3 million or more. As comparison, in the D.C. metro area, the median home price is lower at $463,300.
Agrihoods are also developing within cities, and one is credited for revitalizing a struggling neighborhood in Detroit’s Lower North End. The three-acre farm known as the Michigan Urban Farming Initiative is volunteer-staffed. It’s housed on a vacant site where an apartment complex burned down a long time ago and had never been replaced. Skyscrapers are just a few blocks away, and the farm is surrounded by older single-family rental homes.
“It started as a simple initiative to increase access to healthy food options for residents,” says Tyson Gersh, who founded the initiative. About 20,000 pounds of produce are donated to community members each year.
Soon after he started the farm, he discovered a big demand from people who wanted to live next to it. “People were buying homes [in the neighborhood] because we were here,” he says. “We’ve seen property values increase very fast, and a lot of that is driven by our farm.”
The neighborhood has become a mix of seniors and millennials. Eventually, Gersh’s group plans to purchase surrounding homes, rehab them and sell them to locals at cost using interest-free loans.
“We’re redefining what life in the urban environment looks like, and that involves some sort of integrated agriculture,” says Gersh, who lives a block away from the farm. “People love to be around plants, growing food.”
Source: “Seeds of a New Community: Farm Living Takes Root in the Suburbs,”® (Aug. 9, 2017)

Real estate literally going to the dogs

ATLANTA – Aug. 4, 2017 – A third of millennial-aged Americans (ages 18 to 36) who purchased their first home (33 percent) say the desire to have a better space or yard for a dog influenced their decision to purchase, according to a survey conducted online by Harris Poll on behalf of SunTrust Mortgage.
Dogs ranked as one of the top three motivators for first-time home purchasers, and more millennials cited canine companions as a motivator than those who bought a home due to marriage (25 percent) or the birth of a child (19 percent). Historically, the latter two – both major life changes – tended to push young adults into homeownership.
Only the desire for more living space (66 percent) and the opportunity to build equity (36 percent) were identified by more millennials as reasons for purchasing their first home.
Real estate agents seeking millennial clients might boost their efforts by appealing to young adults’ canine-loving attitudes.
“Millennials have strong bonds with their dogs, so it makes sense that their furry family members are driving home-buying decisions,” says Dorinda Smith, SunTrust Mortgage president and CEO. “For those with dogs, renting can be more expensive and a hassle; homeownership takes some of the stress off by providing a better living situation.”
Among millennials who have never purchased a home, 42 percent say that their dog – or the desire to have one – is a key factor in their desire to buy a home in the future, suggesting dogs will also influence purchase decisions of potential first-time homebuyers.
“Millennials are trending toward homeownership,” Smith adds. “Demand among millennial-aged, first-time homebuyers is robust, and we expect them to continue adding strength to the housing market.”
© 2017 Florida Realtors

Sustainable energy will soon be the new normal

WASHINGTON – July 31, 2017 – The United States is going through an energy revolution, experts said at the National Association of Realtors®’ (NAR) 2017 Sustainability Summit in Washington, D.C., last week. Within 20 years, this revolution will reshape people’s homes and communities.
However, most people aren’t aware of the revolution yet, but it will become more obvious as the cost of alternative sources of energy – such as solar panels, plummets and the use of smart technologies, particularly LED lighting – goes mainstream.
“Smart cities are already here, but they’re unevenly distributed right now,” said Geoffrey Kasselman, executive managing director of commercial real estate advisory firm Newmark Knight Frank. Kasselman and other experts attended the summit to give real estate professionals a better understanding of the ways sweeping changes in energy use and technology will impact what people want in their homes and communities.
“Consumers are already telling us they want sustainable features in their home,” NAR President-elect Elizabeth Mendenhall said at the meeting. “What consumers don’t know is how to make their home more energy-efficient and what to ask for– and that’s where Realtors can help.”
Among developments speakers talked about at the summit:
Innovation districts. These are already in place in some parts of the country. They use alternative energy sources and digital technologies to manage energy use in homes, commercial properties and infrastructure to create sustainable live, work and play clusters.
Micro homes. These are typically between 250 and 450 square feet, and help make housing affordable in high-cost urban areas so people in modest-paying jobs can live where they work.
LED street lighting. These are more than lights. They double as digital sensors so cities can manage traffic, parking and infrastructure needs more efficiently.
“We’re transitioning from a petroleum- to a solar-based global economy,” Kasselman said. “We might never see a barrel of oil over $50 again. A new world order is emerging.”
Source: Robert Freedman, Realtor® Magazine