Mary Ny asked:




Fannie Mae was chartered in 1938, as the Federal National Mortgage Association (FNMA), with the responsibility of creating a secondary market for home mortgages. It operated under direct federal control. In 1968, the Federal National Mortgage Association was partitioned into two separate entities- one wholly owned by the government and known as the Government National Mortgage Association (Ginnie Mae), and the other to retain the Federal National Mortgage Association (Fannie Mae) name. It was privatized by legislation enacted in 1968 and became fully private in 1970.

Fannie Mae (along with Freddie Mac) sets the limit each year on the size of a conforming loan based on the October to October changes in mean home price. Mortgages above this limit are considered jumbo and super jumbo loans because Fannie Mae and Freddie Mac only buy conforming loans to repackage into the secondary market, making the demand for non-conforming loans much less. Thus, interest rates for jumbo and super jumbo loans are higher than for conforming loans.

According to the Office of Management and Budget (OMB), borrowers see mortgage rates 25-50 basis points lower because of what Fannie Mae and Freddie Mac do. This is reflected in lowered interest rates of up to a half percentage on each individual homebuyer’s mortgage, which translates to lower payments and increased consumer cash flow for other purposes. Fannie Mae and Freddie Mac also were the agencies that recommended that FICO scores be used in mortgage lending. Now, FICO scores are the mortgage industry standard for originating conventional loans, adjustable rate mortgages (ARMs) based on various prime rate indices, jumbo loans and 2nd home purchases as well as the popular cash out mortgage refinance loans.

Today, Fair Isaac estimates that more than 75% of all mortgage originations in the U.S. involve the FICO credit score. FICO scores are being used in almost every sector of the nation’s economy, and largely determine whether or not you will be approved for credit (including mortgage loans), what interest rates you will pay and what loan terms are available to you. This is why it is important to maintain a high FICO. But, if you’re a homeowner who’s had credit issues in the past, a timely mortgage refinance or home equity loan (second mortgage) for debt consolidation can help raise your score substantially and save you a lot of money.

Vera

John H. Drake asked:




E-trade offers mortgage loans as an alternative to many private loans offered by banks. While E-trade is primarily a holding company to buy and sell different types of securities, it also provides mortgage lending to its customers. In 2003 E-trade introduced an innovative mortgage opportunity known as a portable fixed rate mortgage. This type of mortgage is geared for homeowners who plan on re-locating to another home in the future. While traditionally a new home loan is necessary if a new property is purchased, the E-trade portable mortgage allows you to change homes once with the fixed interest rate from the first property.

However there are disadvantages to this loan. Since you will receive a fixed interest rate, you will be required to pay the same interest regardless of the state of the property market. You will also most likely have a higher fixed interest rate than the one available at the same time to regular borrowers. While home prices are the lowest they have been in a while, it is possible that interest rates will decrease again in the near future.

E-trade loans offer the convenience of not re-submitting another home application if you decide to move but you must be careful to evaluate all costs before making a decision. There will most likely be strict monetary consequences if the terms of the loan are not upheld. It is recommended you consult an experienced lawyer to check whether this type of loan is the best option for you. You can then speak to an E-trade consultant who should explain all preliminary costs and clarify the fine print in the application.

Dawn

Kristin Abouelata – Home Loans asked:


There’s a bunch of important points to review when considering a mortgage. And a ton of paperwork to look over. So much so at times it can be quite overwhelming. A Good Faith Estimate is one document to consider, and many people focus solely on it. But, in 1968, our lawmakers wanted to make sure lenders made it clear to the consumers just exactly what they were paying and that this information was consistently disclosed lender by lender. And for that, we have the Truth in Lending document, created by the Truth In Lending Act and outlined by Regulation Z.

The Truth in Lending document, or TIL as it’s affectionately known in the Biz, tells the consumer a lot about what he/she is getting into. It tells so much so that it can confuse a person, too. Thus, it is important to know and understand what it tells you. It allows one to make an informed decision. A TIL should be part of the beginning of the loan process and the end. When it’s all said and done, a mortgage customer should have reviewed an estimated TIL before closing, and then have also signed his/her final TIL at loan closing. The information found on the estimated TIL shouldn’t be too far off from the final TIL. If it is and you don’t understand the explanation for it, it’s time to put on the brakes.

A TIL will reflect your loan amount, interest rate and the amortization of your loan. A TIL comes in a standard layout, and most TILs will look the same from a distance, though there may be a few variations, like a payment reflection, lender’s logo, etc. But the nuts and the bolts should be identical in format.

The main thing you notice about TILs is they all have four boxes containing numbers stretched across their horizon. These boxes don’t mean much to you until they’re explained. But these are important numbers, which is why they are so blatantly highlighted in these little boxes. They shouldn’t be brushed off. If the TIL is an estimated or intial TIL, you’ll see a little “e” by the numbers in the boxes. Pretty straight forward – “e” means estimate. The final TIL you sign at closing should reflect all the numbers on your HUD-1 settlement papers and the “e” should be gone. That means you’re signing the final, real McCoy that is calculated by your final numbers.

The first box on the TIL reflects the Annual Percentage Rate (APR) or cost of your credit expressed as a yearly rate. Don’t panic, this rate is not your interest rate. It is the rate that the closing costs are actually costing you annualized over a year, and generally it is higher than your interest rate. However, if your mortgage is locked at a 5% interest rate, but your APR rate is 10%, you should reconsider the deal or get a second opinion. You’re paying too much.

The second box is the Finance Charge or the dollar amount the credit will cost you. It is the total amount of interest calculated at the interest rate over the life of the loan, plus Prepaid Finance Charges and the total amount of any required mortgage insurance charged over the life of the loan. The third box reflects the Amount Financed or the total amount credited to you on your behalf, minus Prepaid Finance Charges.

The fourth box is the one that gets most people’s attention – the Total of Payments. It’s the amount that a customer will actually pay back in principal, interest (and mortgage insurance, if applicable) if they keep the loan for the full term and stick to the outlined amortization schedule. Ouch. People find this number a little incredulous. I guess it really sends it home that mortgage lending is a business, and some company is going to make some money from it.

There are three other things on a TIL I like to point out to a customer. One is the late payment penalty. People need to know what it will cost them if their check gets to the Servicer late. It’s usually 4% or 5% of the monthly principal and interest payment, depending on the loan type. Another VERY important feature a lender should point out to a customer is if there is a PRE-PAYMENT penalty on the loan. A pre-payment penalty means that if you pay the loan off before a pre-determined time, you pay for the luxury of doing so. Make sure you know the terms of the pre-payment penalty if you should have one, and that you are certain you can live with it. They can be quite costly. Finally, the TIL tells you that should you pay off your loan early, you won’t be entitled to any of your closing costs or interest being refunded. In other words, don’t expect to get any of the money you have already paid back.

Simple enough, right? To tell you the truth, it is confusing, even for a mortgage lender. Take time to understand this document and ask all the questions you have regarding it. Don’t be shy.



DUNCAN