Higher-Priced Mortgage

Update on Higher-Priced Mortgage Loans (HPML)

In news for consumers and lenders alike, in 2008 the Bureau of Consumer Financial Protection provided a distinction for a class of higher-priced loans termed Higher-Priced Mortgage Loans (HPMLs) specifically for the protection of consumers. To qualify for the protections and additional regulations afforded to HPMLs, the difference between the loan APR and the Fed’s actual interest rate at the time (as reported on the APOR Index) must exceed 1.5 or more percentage points on First Liens (first mortgage) or 3.5 or more percentage points on Subordinate Liens (subsequent mortgages).

However, starting June 1, 2013, The Bureau of Consumer Financial Protection will be rolling out an additional rule under Escrow Requirements in the Truth in Lending Act (TILA). The rule, which amends Regulation Z of the Truth in Lending Act, will lengthen the required period that mandatory escrow accounts must be maintained, putting extra stringencies on creditors engaging in the financing of HPMLs. The purpose of this rule is to implement provisions of the Dodd-Frank Act to strengthen consumer protection. The requirement of establishing a five-year minimum on escrow accounts for certain mortgage transactions aims at ensuring consumers set aside the appropriate funds necessary to pay property taxes, homeowners insurance premiums, and other required mortgage-related insurances required by the creditor.

While this rule places extra burdens on certain creditors, the new rule exempts some “small servicers” and certain types of transactions from these added escrow requirements. Chief among the transactions shielded from the added regulations are those “…extended by creditors that operate predominantly in rural or underserved areas, have assets below a certain threshold, and do not maintain escrow accounts on mortgage obligations they currently service.” These added exemptions and regulations should be taken seriously and should factor into creditor APR calculations. It is therefore essential to consult your escrow professional on the distinction of your loan and its implications when securing financing for any commercial or residential purchases.



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Underwater Homeowners

News Update for Underwater Homeowners

If you are a homeowner with an upside-down mortgage and have still yet to refinance your home, there is good news. President Obama is extending the highly successful Home Affordable Refinance Program (HARP) through 2015. The program enables underwater homeowners with loans exceeding the current value for their homes to refinance their mortgages despite negative equity. This extension means that homeowners can rest assured for another year, providing ample time to refinance with the current low interest rates.

The decision, made by the Federal Housing Finance Agency (FHFA), announced in early April, was set in place to target underwater homeowners that had yet to benefit from some of the lowest interest rates in recent history. The FHFA intends to bolster support and utilization of the extension of HARP through strategic campaigning throughout the country to encourage homeowners to explore their options within the program’s guidelines.

As reported by national statistics, HARP has already helped more than 2.2 million homeowners to refinance their mortgages since its inception in 2009. According to the Los Angeles Times there are still about “2.7 million underwater homeowners remain eligible for HARP loans, according to online lender Quicken Loans, which said the average savings from a HARP refinance is around $200 a month with an average rate reduction of 1.75 percentage points.” This is a promising figure, as the extension of HARP through 2015 will enable homeowners more time to refinance thereby reducing financial risk for Fannie Mae and Freddie Mac, the governmental finance corporations holding nearly two-thirds of all residential mortgage debt in the U.S. It is the hope of the Federal Government and The Obama Administration that HARP will continue to be a useful tool for government and homeowners in the fight to stabilize the housing market. With the success of the program, it is likely that the extension through 2015 and any subsequent extensions or additions to the program will be met with strong bi-partisan and Federal Reserve support.



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Home Price Index


According to the research firm CoreLogic Inc. (NYSE: CLGX), year-over-year home prices went up for the first three months of tis year by rising 10.5 percent in March compared to the same period one year earlier.

This was the largest monthly increase since March 2006, and came in just slightly higher than a projected 10.2 percent for March, which was equal to the index levels in January and February of this year. The data included sales of distressed properties.

When looking at month-to-month figures, the March price index rose 1.9 percent over February, again this included sales of distressed properties. Eliminating distressed home sales, the price index rose 2.4 percent in in March over February’s numbers. The year-over-year increase for non-distressed sales was 10.7 percent.

CoreLogic states that April housing prices should rise another 9.6% on a year-over-year basis and increase by 1.3% month-over-month from March. Again excluding distressed sales for April, CoreLogic is forecasting a year-over-year increase of 12%, while a month-over-month estimate is forecast to rise by 2.7%.

The company’s CEO stated “Home prices continue to rise at a double-digit rate in March led by strong gains in the western region of the U.S. Looking ahead, the CoreLogic pending index for April indicates that upward price appreciation will continue. Much of the price increases we are seeing are the result of rising demand among investors and homebuyers for a still-limited supply of homes for sale.”

Data from the index, including distressed sales, shows home prices increased the most in Nevada (prices up 22.2%), California (17.2%), Arizona (16.8%) Idaho (114.5%) and Oregon (14.3%). Excluding distressed sales, the biggest gains were posted in Nevada (20.8%), California (16.8%), Idaho (16.3%), Arizona (15.1%) and Hawaii (14.3%).”

According to the index “Among the 100 largest U.S. cities, 88 showed a year-over-year increase in home prices. The largest gains (including distressed properties) came in the Phoenix area (up 18.8%), Los Angeles (16.7%), Riverside, Calif. (14.8%), Atlanta (14.2%) and Houston (7.9%).”

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Low Rates Gone?

Low rates gone?

For potential homebuyers and refinances the season for mortgage rates at or below 3.5 percent for 30-year fixed mortgages may be disappearing. In fact the Mortgage Bankers Association (MBA), predicts 30-year mortgage rates to rise to 4.4 percent by the end of 2013.

As if on cue, Freddie Mac states that mortgage rates increased for the first time in six weeks. Their data shows that the average rate for a 30-year fixed mortgage climbed to 3.42 percent in the week ending May 9th from 3.35 percent the previous week. The average 15-year rate increased to 2.61 percent from a record-low 2.56 percent.

Historically economic forces will dictate where mortgage rates go, and currently economic data has been more positive, unemployment is lower and the housing market is improving. U.S. home prices increased 10.5 percent in March from a year earlier the biggest gain in seven years, according to CoreLogic Inc., an Irvine California-based data provider.

The National Association of Realtor’s Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.5 percent to 105.7 in March from a downwardly revised 104.1 in February, and is 7.0 percent above March 2012 when it was 98.8. Pending sales have been above year-ago levels for the past 23 months; the data reflect contracts but not closings. Many mortgage analysts are anticipating rising rates.

Federal involvement in the mortgage-backed securities market has been keeping mortgage rates artificially low for some time now. As recently as September 2012, the Federal Reserve announced that it would buy $40 billion of agency mortgage-backed securities each month until the economy started to show signs of improvement.

According to some analysts one possible indicator for the Fed choosing to stop the purchase program for mortgaged-backed securities would be an unemployment figure of around 6.5 percent, the latest figure shows unemployment a 7.5 percent. Whatever the rationale, more and more analysts are expecting the Fed to back out of the securities purchases which will have an immediate impact on higher rates.

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Check Out Prominent Escrow’s New Look!

Welcome to Prominent Escrow’s new website! As I’m sure you’ve noticed, we not only have an amazing new website, but we have a completely new look from our logo design to our color scheme. When redesigning the look and feel of the Prominent Escrow brand, our team got together to identify the most important aspects of an escrow transaction so we could translate this into our brand imagery.

In our eyes, the most important aspect of a closing is the escrow company’s personal attention and guidance in assisting the buyer, the seller, and their respective real estate professionals through the transaction. This coordination is vital in making sure everyone is well informed and comfortable with the escrow process and that all milestones of the transaction are met with precision and timeliness. Our team translated this concept into our logo by using the symbol of the circle to represent Prominent. As the shepherd for the two inner lines representing the buyer and the seller, Prominent brings the transaction full circle to completion.

We are extremely proud of our new look and we are excited you have come to visit us here on our blog page! Here are our recommendations for exploring the new Prominent Escrow website:

• View our calendar for info on our upcoming Happy Hour event in Mission Viejo, our fantastic training courses, and company participation in local events coming up this year!

• Navigate to our homepage and sign up for our newsletter. You will have awesome content coming your way via email!

• Head to our homepage and get up to date on all the latest real estate news brought to you by Inman News.

• Go to our resources page for all your escrow related questions. We have answers for you!

• Apply to join our team! Go to the About page and apply for our current openings!

• Click on our social media icons and visit us on Facebook, Twitter, and LinkedIn. We appreciate your support!

• Check back on our blog for more fun thoughts, happenings, and updates to come!

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Housing & Labor

We at Prominent Escrow, along with the escrow, mortgage and real estate industries are gladden by the fact that the overall housing industry is seeing sustained positive growth.  But how does this connect with the overall national picture?

According to the Mortgage Bankers Association’s (MBA) Economic and Mortgage Finance Commentary (January 2013), the US housing market is one of “the few bright spots” in the general economic outlook, as home sales continue an upward trend, with home purchase applications showing steady year over year growth, and refinance activity currently holding firm.

The MBA says that housing starts in December reached the highest level in four years.   Their data shows that both single-family and multi-family housing starts finished 2012 with significant increases. Single-family starts saw a 23 percent increase in 2012 while multi-family housing starts increased 38 percent for the year. This trend is likely to continue into 2013, says the MBA, as housing permits should continue in a positive growth direction.
A key ingredient for a healthy economy is the labor market.  The MBA report states that non-farm payroll employment in December grew by only 155,000 jobs.  This figure falls short of the 200,000 jobs per month employment growth that would clearly indicate sustained labor market improvement, this according to Fed officials.

December saw no improvement in the official unemployment rate, which remained unchanged at 7.8 percent, and has been in that range for over four months. The unemployment rate remains at its lowest levels since 2009.  Another telling figure relative to the labor market is that the labor force participation rate is at the lowest levels since 1983, and has shown little sign of improvement for some time.  The labor force participation rate is only 63.6 percent and remained below 64 percent for all of 2012.
Additionally the MBA report says that the U6 measure of underemployment was unchanged at 14.4 percent.  Data within the U6 measure show workers who have sought temporary work for economic reasons dropped in December, the third straight monthly decline.  On the other hand, “workers who are marginally attached to the labor force or who are discouraged in their job search have increased significantly for two months.”
The MBA says, “The unemployment rate will decrease slowly, moving to 7.6 percent in 2013 and 7.0 percent in 2014, as labor force participation remains low and job growth remains in the 150,000 jobs per month range.”
Clearly what is needed is for government policies and business enterprise to work on solutions that will put Americans back to work, and with jobs that can sustain the great American Dream.  See below for the full commentary.


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Origins of Escrow

The beginnings of our modern term for “escrow” date as far back as the Middle Ages of the eleventh and twelfth centuries when the Middle English term “escrowl” was in use denoting a “scroll” as translated into Modern English.  Originating during the same period, and carrying the same modern translation, are the Anglo-Norman term “escrowe” and the Old-French term “escroue.” All three terms for “scroll” imply a checklist, not at all unlike the modern day escrow instructions.

The usage for escrows in modern America goes back to the Great Depression of the 1930’s.  The impact of the Depression on homeowners made it difficult to save money for the annual payment of property taxes, and as a consequence many homeowners were losing their homes.

The forerunners of modern day mortgage escrow accounts were started as many lenders agreed to collect 1/12th of the annual property taxes as part of the monthly mortgage payment.  Many homeowners were able to save their homes by having the “forced savings” escrow account, thus spreading the larger tax burden into smaller payments over a twelve month period.

In 1934 the Federal Housing Administration (FHA) made escrow accounts mandatory for loans it insured.  In due course this became the standard procedure for every real estate transaction.

Today, escrow accounts are structured so most lenders will collect both taxes and any necessary insurance by requiring a small monthly escrow payment along with the mortgage payment. Lenders are then responsible for paying required tax and insurance bills when they come due, thus protecting homeowners from lapsed insurance or past due taxes.

The US Department of Housing and Urban Development (HUD) regulates escrow accounts through the Real Estate Settlement Procedures Act (RESPA) of 1974. Through RESPA lenders must meet certain requirements for handling your escrow fund.

Anyone wishing to become an escrow officer in the state of California must have five years of escrow experience.  In addition they must undergo investigation, post bond, have assets that comply with state escrow laws and carry insurance to fulfill the role of Trusted Third Party and be awarded a license to practice Escrow or obtain an Escrow Agent or Escrow Officer certification.

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Choosing An Ideal Orange County Escrow Company

Buyers as well as sellers may require the services of an Orange County escrow company throughout the transaction. It is always better to entrust a professional Orange County escrow company to ensure that everything is in place and the deal goes through as smoothly as realistically possible.

Whether you seek referrals from your friends, choose a few Orange County escrow companies from online directories or simply follow up on an advertisement you have seen somewhere, it is necessary for you to make an informed choice. To make an informed decision, you must look at the following factors.

First, you should choose a local Orange County escrow company. Not everything can be done online or from remote locations and thus you would benefit if you can quickly drive over to their offices or if the staff of the company can come over to your home or office for the signing of paperwork.

Second, you must look at the specialization of the Orange County escrow company. Not many are aware that these companies do have specializations. Some would specialize in short sales or refinances and some may not be experienced in bank owned properties. You must decide upon the specialization based on what you are looking for and what kind of property you have at hand. If you are dealing with short sales then an Orange County escrow company having extensive experience with short sales will be a better choice.

Third, you should understand all the fees and charges that an Orange County escrow company would levy on you for their services. Additionally, you should also have a lucid knowhow of what the company is expected to do. An Orange County escrow company will prepare all the instructions for buyers as well as sellers, it would assimilate all the documents, prepare the necessary paperwork, address problems with titles and albeit hold the monies. However, an Orange County escrow company will not be entitled or responsible to conduct any inspections or evaluations of a property, take anyone’s side or offer consultation on financing or anything else. Knowing what to expect is important because that will aid proper correspondence and avoid miscommunications.

Finally, you should find out if the Orange County escrow company is resourceful and experienced enough to offer you a quick turnaround time. A small company may not be ideal always because they may have less staff to quicken the procedures and a large company is no guarantee that they have sufficient free staffs to wholeheartedly work on your case.

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Consumer Confidence Increases

According to the most recent Conference Board report, February saw an increase in consumer confidence nationwide. The Conference Board’s Consumer Confidence Index® (CCI) rebounded in February by 11.2 points after experiencing a decline in January.  The CCI for February increased to 69.6 up from 58.4 in January a 19.2% increase.

Related to the CCI is The Present Situation Index (PSI), which reflects prevailing business conditions, and The Expectations Index (EI) anticipates likely developments for the months ahead.  In February the PSI increased to 63.3 from 56.2 in January, and in the same period the EI improved to 73.8 from 59.9.

Director of Economic Indicators at The Conference Board, Lynn Franco, says, “Consumer Confidence rebounded in February as the shock effect caused by the fiscal cliff uncertainty and payroll tax cuts appears to have abated.”

Relative to current conditions, attitudes of U.S. consumers improved in February with those consumers believing that business conditions are “good” rising to 18.1 percent from 16.1 percent the previous month.  Consumers stating that business conditions are “bad” decreased slightly to 27.8 percent in February from 28.4 percent in January.

In considering the labor market consumers that believe jobs are “plentiful” rose to 10.5 percent in February, up from 8.5 percent the previous month.  At the same time 37.0 percent of consumers say jobs are “hard to get,” a slight increase from 36.6 percent in January.

Looking to the near future for business conditions 18.9 percent of consumers in February expect improvements in the next six months; this up from 15.6 percent in January.  Those expecting business conditions to worsen declined to 16.5 percent from 20.4 percent.

As to the labor outlook over the next six months, consumers anticipating more jobs improved to 16.7 percent from 14.4 percent, while those anticipating fewer jobs decreased to 21.5 percent from 26.7 percent.

Any improvement in the CCI can always be looked upon as a positive indicator for the escrow, mortgage and real estate industries; however, though market conditions are improving, there is still a ways to go for full consumer confidence.  Compare this February’s 69.6 CCI with February 2007 when it was 111.2.

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Foreclosure Starts Drop

According to the Mortgage Bankers Association’s (MBA) National Delinquency Survey, foreclosure starts decreased by the largest amount ever since the survey began, is are now at half the peak level seen in 2009.

The percentage of loans in which foreclosure actions were started fell to 0.70 percent during the fourth quarter of 2012; this was the lowest level since the second quarter of 2007.    Fourth quarter foreclosure starts were down 20 basis points from the third quarter, and were down 29 basis points from one year earlier.

This decline in the foreclosure starts rate marked the largest quarter-to-quarter drop ever recorded for the MBA’s survey.  Forty-Four states saw the foreclosure starts rate fall or remain unchanged in the fourth quarter as compared to the previous quarter, and only three had a foreclosure starts rate at or above the reading from the fourth quarter of 2011.
In terms of foreclosures started during the fourth quarter, Florida experienced the highest start rate among the states at 1.34 percent, followed by Nevada at 1.18% percent.  New Jersey has posted some of the highest overall foreclosure rates in the nation, but the foreclosure starts rate for New Jersey declined more than 1.2 percentage points between the third and fourth quarters.  This was attributed to the diminishing effects of previous legislative efforts imposed to delay the foreclosure process.

Additionally, mortgage delinquency rates also fell during the fourth quarter of last year.  Delinquency rates dropped 7.09 percent falling to the lowest level in more than four years.  All three delinquency segments (30, 60, 90+ days) registered lower delinquency rates than the third quarter, these on a seasonally adjusted basis.  Of the three delinquency segments, mortgage loans just 30 days overdue saw the greatest decline with a 21 basis point fall to 3.04 percent.   As of the end of the fourth quarter of 2012 the total foreclosure inventory rate is 3.74 percent; the lowest reading since the end of 2008.

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