FHLBank Cincinnati Welcomes New Member
The Western-Southern Life Assurance Company (Western-Southern) has been approved for membership at the Federal Home Loan Bank of Cincinnati (FHLBank). Rated Superior by A.M. Best Co., Western-Southern is the 10th insurance company to join the FHLBank and is among more than 125 insurance companies in the 12-district FHLBank System.
“We are pleased to have such a high-quality insurance company as a member of the Federal Home Loan Bank of Cincinnati,” said FHLBank CEO David Hehman. “This relationship better positions our two companies to expand and support the housing finance market.”
“Western & Southern believes that membership in the FHLBank is important for both organizations,” said WesternSouthern Chairman, President and CEO John F. Barrett. “We are pleased to have joined FHLBank and look forward to a long and productive partnership.”
Personal Finance: Loose Change
mortgage which offers borrowers 6 per cent of the sum they are borrowing in cash, plus free accident sickness and unemployment insurance for six months. Also included is a free valuation. Loans are available up to 80 per cent of a home’s value. Compulsory buildings insurance is required. There is a pounds 250 arrangement fee. Call 01788 578311.
RMIC Named as Oregon Housing Partner in Residential Loan Program
WINSTON-SALEM, N.C.–(BUSINESS WIRE)–Jan. 22, 1998–Republic Mortgage Insurance Company (RMIC) has been selected by the Oregon Housing and Community Services Department to be a partner in the Residential Loan Program. RMIC is providing pool insurance underwriting for the program in addition to their normal primary insurance services. It can be as simple as lenders submitting one package of information to RMIC for both pool and primary insurance.
Merle Sharick, Vice President, Manager of Risk Management for RMIC said, “We are excited to have been selected by Oregon’s Housing Department as their partner in the residential loan program. This partnership allows the approved participating lenders to provide affordable home ownership to first-time borrowers and lower income families that are unable to be served by the conventional lending market.”
Lynn Schoessler, Deputy Director Oregon Housing and Community Services Department, said, “The Oregon Residential Loan Program enables lenders to offer home buyers a 6.125% interest rate on a 30-year fixed rate loan, which they should find very attractive. That interest rate does fluctuate with the market. The initial response we have received from the lenders in Oregon is overwhelmingly supportive of RMIC’s business philosophies. RMIC’s relationship with the lenders is outstanding and we are very impressed with their commitment to customer service. We look forward to a mutually beneficial relationship.”
RMIC is a national, private mortgage insurer based in Winston- Salem, North Carolina. RMIC’s private mortgage insurance coverage allows lenders to approve mortgage loans with smaller down payments making home buying more affordable.
RMIC offers mortgage lenders an array of innovative products including ZIP(SM) Monthlies, OASIS(SM), contract underwriting, Electronic Loan Submission, customer training, quality control services, and affordable housing programs.
Mortgage insurance more affordable with tax breaks
MORTGAGE insurance used to be an ugly stepchild in the housing market, something borrowers had to get when they couldn’t come up with a 20 percent down payment or swing a piggyback loan.
Now, a tougher lending market that has made piggyback loans harder to get, along with a new tax break for mortgage insurance, has made paying those premiums much more attractive.
Paid for by borrowers, mortgage insurance is designed to shelter lenders from financial losses associated with foreclosures.
Consumers whose yearly adjusted gross income is $100,000 or less can deduct their mortgage insurance premiums from their 2007 federal income-tax returns for homes purchased or refinanced this year under a law passed by Congress.
Taxpayers with yearly incomes of between $100,000 and $109,000 are eligible for a reduced tax break under the law. The mortgage insurance deduction does not apply to loans taken out in 2006 or earlier.
Prior to passage of the law last year, homeowners who purchased mortgage insurance could not deduct it from their federal income taxes. That’s not the case with mortgage interest, which consumers have been able to deduct since 1922.
Legislation is pending to extend the mortgage insurance deduction through 2014.
But while mortgage insurance can result in a tax deduction of several hundred dollars, keep in mind that it will be much smaller than the tax deduction from mortgage interest, which can amount to thousands of dollars a year in the Bay Area.
The mortgage-insurance deduction applies to both private and government mortgage insurance, which is used for government-backed loans.
Tax breaks
Observers point to the new tax break for mortgage insurance, along with lenders cutting back on piggyback loans, as factors that are driving an increase in home loans backed with mortgage insurance.
Borrowers use piggyback loans, which are tacked on the primary loan, to avoid paying mortgage insurance.
“(Mortgage insurance) was definitely a second choice when the piggybacks were so much more available,” said Tammy Cryer, a mortgage broker with The Home Loan Group, which has offices in Orinda and Lafayette.
In the event of a foreclosure sale, a piggyback lender is second in line to get paid. The rising foreclosure rates in today’s housing market are prompting piggyback lenders to be more conservative when making these loans, said Cryer.
While a piggyback loan can help a borrower avoid paying mortgage insurance, such loans tend to have higher interest rates than the primary loan. However, an advantage of taking out a piggyback loan is that the interest payments are tax deductible, just like on the primary loan.
Until now, that wasn’t the case for mortgage insurance premiums.
“(The mortgage insurance deduction) certainly takes away one of the objections of mortgage insurance,” said Cryer. “It’s a nice benefit to have.”
Generally, payments on a piggyback loan can be lower compared to mortgage insurance premiums, said Cryer. The drawback of a piggyback loan is that the monthly payments don’t go away until the piggyback loan is paid off or refinanced.
That’s not the case with mortgage insurance.
“Down the road the mortgage insurance will go away” when there is sufficient equity in the home, said Cryer. “And then the mortgage payments will be less than having the piggyback payment.”
To that end, borrowers who expect to be in a home for several years might want to consider mortgage insurance on a primary loan as opposed to taking out a piggyback loan.
“I tell my clients, mortgage insurance is not a forever thing,” said Cryer.
In the first 10 months of the year, about 1.7 million new private mortgage insurance policies were issued, a 41 percent increase from the same time period a year ago, according to the Mortgage Insurance Companies of America, or MICA, which represents private mortgage insurers.
“The deductibility feature for both government and private mortgage insurance has made insured loans more attractive,” said MICA spokesman Jeff Lubar. “It’s a lot harder to get those more exotic loans given the nature of the market.”
The deduction is more likely to help moderate-income borrowers save on their taxes when buying lower-priced homes, said Cryer, the mortgage broker.
For example, a married couple in the 25 percent federal income tax bracket who obtained a no-money down
$417,000 loan, the maximum amount under the conforming loan limit, would see a $615 federal income tax deduction, according to Cryer. The deduction is based on a couple making less than $100,000 a year filing a joint tax return and taking out a 30-year fixed loan with a 6.125 percent interest rate. Their mortgage insurance premiums would be $205 a month, or $2,460 a year.
Backed by government
Conforming loans are backed by mortgage giants Fannie Mae and Freddie Mac. Loans above $417,000, known as non-conforming jumbo loans, have interest rates that are slightly higher than conforming loans.
Understanding Home Loan Refinancing Costs
Because of declining mortgage rates, many homeowners are choosing to refinance their home loan. If your home was purchased when rates were much higher, you may benefit from a new mortgage. Although refinancing is an attractive mortgage feature, it is not always the best option. Before refinancing, it is important that you understand the process.
Mortgage Refinance Information
A mortgage refinance creates an entirely new mortgage. This mortgage replaces the old. Therefore the process is very similar to acquiring the original loan. Getting a mortgage loan is an extensive process. You have to review your credit, compare lenders, and pay fees associated with mortgages. Common mortgage fees also apply to refinancing your home.
Why Refinance Home Mortgage Interest Rate?
Some mortgage experts suggest that the time to refinance is when your current mortgage rate is about two percentage points above the market trend. If you refinance with a one point different, the savings are small and not worth the refinancing costs. This is a great option for those who purchased their homes when mortgage rates were at 8 or 9 percent. An interest rate drop will cause a reduction in your monthly mortgage payment.
An additional reason for refinancing your present mortgage is to get a fixed rate mortgage. Today, there is a variety of loan programs. These include adjustable rate mortgages, interest-only mortgages, etc. Initially, these loans carry low interest rates. However, because the rates are not fixed, they may increase. As mortgage rates increase, so does your mortgage.
Home Mortgage Refinance Costs
If you are hoping to get a fixed rate mortgage or a lower interest rate, be prepared to pay closing costs and mortgage fees. The fees for mortgages vary. On average, you can expect to pay 3 to 6 percent of the total loan amount. This does not include down payments.
No Money Down Home Loan
Are you in the market to purchase a home but are concerned about not having enough money for the down payment? No down payment home loans or 100% financing for your mortgage loan used to be only advertised during late night infomercials and in obscure real estate publications. The good news is that if you want to buy a house but have little or no money available for the down payment, there are mortgage lenders who are offering no money down home loans in your area. Currently, less than half of all homebuyers put down the standard twenty percent. Among first time homebuyers, less than half put ten percent down, and nearly thirty percent of homebuyers financed the total purchase price of their new home.
Generally speaking, the better your credit the better your chances of getting a zero down payment home loan. Fortunately, mortgage lenders are now offering no money down home loans to homebuyers who have less than perfect credit. You may pay a slightly higher interest rate than those who put down ten percent or more, but you can still get a great interest rate and easy payments when you apply for a no money down home loan. You can expect to pay private mortgage insurance if your pay little or no money down on your new home, but the cost is relatively low and you will be able to drop the private mortgage insurance after you have built a certain amount of equity on your home.
If you do not have the resources to pay a twenty percent down payment, you could opt for a piggyback loan. A piggyback loan is basically a home equity loan that funds part of your down payment. There are several options in obtaining a piggyback loan. Mortgage lenders have a variety of programs and loan products that will help you accomplish your dream of home ownership, even if you have little or no money for a down payment. Your lender can also inform you of various government programs that assist those who qualify with their down payment. Most of these programs consist of basically a low interest loan that you repay along with your mortgage payments. There are some government programs that will not require you to repay any down payment assistance you may receive.
Owning a home is the dream of most people. If you want to purchase a home but are concerned about a lack of money to go towards the down payment, contact a mortgage professional today who can help you in obtaining a no money down home loan.
Construction Loan Insurance
So, you’ve decided to build your own home. You’ve picked out a plot of land, found a house design that you like, and have secured your bank loans. Did you know that you also need three types of insurance in order to get started?
Never fear, your bank requires two of those types before the building process begins! The three types of insurance you will need are:
• Course of Construction
• General Liability
• Workers’ Compensation
The first two types of insurance are required by the bank, while the third type, workers’ compensation, is required only if the builder has employees. Let’s go over the first two types of insurance in a little more detail, so you’ll understand exactly how you are protected.
Course of Construction. Course of Construction is an all risk policy that includes fire, extended coverage, builder’s risk, replacement cost, vandalism, and malicious mischief. If you are wondering what builder’s risk covers, this provision all buildings and structures as well as all equipment used in the building of the home, whether it is on the job site, on route, or in storage.
General Liability. This type of insurance can be provided either by your or your builder. It is a comprehensive general policy or broad form liability endorsement. If you provide the policy there is a minimum of $300,000 for each occurrence required. If the builder provides it, a general policy of $1,000,000 or broad form liability endorsement is required.
You can usually roll the cost of your insurance into your construction loan. Insurance is considered a soft cost, which means it is something non-physical in nature. Hard costs, by comparison, would include things like the materials needed to build the home. This type of insurance can be provided either by your or your builder.
The many risks of construction mean that choosing the right policy is of utmost importance. Finding an insurance agent who is familiar with the construction industry will help ensure that you are properly covered.
Important Things to Know About Government Home Loans
Government home loans do exist, but they’re not that easy to obtain. More often than not, the requirements of government home loans tend to be too stringent, discouraging individuals from continuing their transactions. Secondly, people usually have to wait a very long time before they can benefit from government home loans.
What’s the next best thing to do then? Simple. Borrow from an FHA-approved mortgage company.
Who the FHA is
FHA is an acronym for Federal Housing Administration. The FHA provides aid as well as insurance on loans taken out by individuals from FHA-approved mortgage lenders all over the country. The FHA provides insurance for almost all types of homes and is actually the largest mortgage insurer in the whole world.
What is the Point of Obtaining FHA Mortgage Insurance?
The mortgage insurance is actually for the benefit of lenders. If the homeowner end up defaulting on a future payment for whatever reason, the FHA will shoulder part or the total loss suffered by the mortgage company.
How Would I Benefit from a FHA-Approved Home Loan?
FHA mortgage insurance is actually designed to provide financial aid for lower- to middle-class families. FHA-approved loans are in fact the best way for these people to achieve their dreams to own a home because FHA-approved home loans tend to have lower rates compared to other loans in the market.
And naturally, since the FHA provides mortgage companies with protection against losses, lenders are more encouraged to approve loan applications of even those with bad credit or low income.
Different Ways FHA Mortgage Insurance Can Help You
FHA mortgage insurance let you enjoy lower interest rates. Plus, with FHA backing you up, your down payment requirements can be greatly reduced. What’s more, closing costs of home loans may be provided by an FHA-approved lender.
Banking agencies issue host state loan-to-deposit ratios
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency issued on July 7, 2005, the host state loan-to-deposit ratios that the banking agencies will use to determine compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on August 26, 2004.
In general, section 109 prohibits a bank from establishing or acquiring a branch or branches outside of its home state primarily for the purpose of deposit production. Section 109 also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production.
Section 109 provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank’s statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.
A second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. The second step requires the appropriate banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.
A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.
Home Loan Bank membership active in Des Moines district
Pat Conway, president of the Federal Home Loan Bank of Des Moines, told Minnesota bankers Feb. 14 that banks using Home Loan Bank advances are lending more than other banks. Banks that are members of the Federal Home Loan Bank have an average loan to deposit ratio of 95 percent, he said, compared to non-members who average 76 percent.
Most of the banks in the Des Moines district are members. Conway said the Des Moines bank now has more members than any of the other 11 Home Loan Banks. Membership is now at 1,225 banks, leaving only about 500 banks that are not members. “One of the really exciting things is that about 75 percent of our members actually borrow from us,” Conway said. In other districts, only about 60 percent of the Home Loan Bank members use their lines of credit. With 75 percent of its members borrowing, the Des Moines district has the most active membership in the country.
The membership increase cannot be attributed to any marketing efforts by the Des Moines bank, Conway said. Word of mouth is really the key, he said, as “new members are selling the system to other bankers.” In 2000, membership grew by 100 banks and Conway expects another 100 banks to join in 2001.
Conway, who joined the Des Moines bank as president last year after serving for many years with the San Francisco Home Loan Bank, said he likes the Midwest. “On the West Coast, things are dominated by large institutions,” he said. “The branching laws are much different. In the Midwest most communities actually have their own community bank. I like that.”
Wisconsin bankers are likely to face many of the same issues during the 2001-2002 legislative session that they faced during the 1999-2000 session, according to Martin Frank, president-elect of the Wisconsin Bankers Association and president of Waukesha State Bank. Speaking at the WBA Group One Meeting Feb. 17 in Minneapolis, Frank said the following issues are likely to surface: ATM surcharge ban, removing ATMs from the computer tax exemption, giving wage liens “super” priority, and various new privacy-related regulatory requirements.
Frank told bankers that WBA is one of the best lobbying organizations in Madison. He cited statistics from the State Ethics Board which show WBA to rank 19th out of 592 lobbying organizations in total lobbying hours.
WBA immediate past president Willard Ogren of Security State Bank in Iron River, told bankers the association raised $148,230 for its state political action committee. The money came from 1,530 individuals. Of those, 844 gave $75 or more. Last year, the PAC disbursed $203,327 to candidates, while a record $288,720 was raised for the 1999-2000 election cycle. WBA’s PAC fundraising goal for 2001 is $150,000.
WBA is embarking on a unique educational effort to better prepare bankers to comply with fair lending laws. The association worked out a deal with the Federal Deposit Insurance Corp. to have the same experts who train their examiners to offer a fair lending compliance seminar to bankers. The FDIC first baulked at the idea when contacted by the WBA, Frank told colleagues at the Group One meeting. “When we asked them why they couldn’t provide us with the same training they were giving their examiners, they said they didn’t know and would get back to us,” Frank explained. “Ultimately they decided to work with us on this. We’ll be getting the exact same training that their own examiners get.” The seminar, which is set for May 2-4 in Wisconsin Dells, is designed to help bankers plan for their next fair lending examination, and help bankers conduct their own audits for fair lending compliance in their banks.
WBA also took the opportunity at the Group One meeting to clarify the schedule for its two most significant meetings. The WBA annual meeting will take place June 25-27 at the Madison Hilton Hotel and Monona Terrace Convention Center. It is the first time in WBA’s 109-year history the convention will be in Madison. In 2002, the annual meeting and the association’s executive seminar will be combined and held Feb. 6-8 at the Concourse Hotel in Madison. In 2000, the association skipped its annual convention for the first time in its history, scheduling it into its executive seminar. In 1999, the WBA conducted a joint convention with the Minnesota Bankers Association in Minneapolis.