Housing Finance Reform

 

Housing Finance Reform: What's Next?

By Michele Lerner

Published July 29, 2013

Bankrate.com

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The days of "liar loans" and loan approvals based on not much more than a heartbeat are long gone, but the fallout from the housing crisis is far from over. While homebuyers and homeowners may be focused most on their own ability to finance a home, the federal government and real estate policy experts continue to discuss reforming the nation's home financing system.

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Though not every proposed reform will have a direct impact on consumers, initiatives in five key areas are likely to change mortgage financing in the future. These areas are the unfinished business of mortgage reform.

   Winding down Fannie Mae and Freddie Mac.
    Creation of a common securitization platform.
    Reform of the compensation system for mortgage servicers.
    Revision of key documents for borrowers.
    Improvements to the mortgage recordation and securitization systems.

Winding down Fannie Mae and Freddie Mac

On June 25, Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., introduced the "Housing Finance Reform and Taxpayer Protection Act" to reform the secondary mortgage market and replace the current reliance on Fannie Mae and Freddie Mac with a private system.

"While this bill may not go through as written, eventually I think we'll see something like it that essentially turns the government role in mortgage financing into something more like (Federal Housing Administration) financing, which is just insurance and not actually ownership of loans," says Richard K. Green, director of the University of Southern California Lusk Center for Real Estate in Los Angeles.

Nicolas Retsinas, director emeritus of Harvard University's Joint Center for Housing Studies, expects it will take five to 10 years after legislation is passed before Fannie Mae and Freddie Mac are wound down.

Right now, Fannie Mae and Freddie Mac are profitable, says Rick Sharga, executive vice president at Carrington Mortgage Holdings in Santa Ana, Calif., so that creates pressure on the government to keep them around a little longer.

Creation of a common securitization platform

Green says the current system, in which Freddie Mac, Fannie Mae, the FHA and private lenders each have different platforms to determine fees and interest rates, will eventually be switched to a single system, "like the Good Housekeeping Seal of Approval" for loans.

Retsinas says he thinks the transition will take a few years, but that eventually, getting clarity will help consumers get more access to capital and potentially lower interest rates. Green thinks conforming loan limits are likely to be a little lower once the transition is made and that some loan fees could be a little higher.

Reform of the compensation system for mortgage servicers

"Right now, there's no great incentive for the resolution of problem loans," Green says. "The idea is that mortgage servicers need to be compensated in some way to get them interested in doing a loan modification, but that hasn't happened yet."

If you're in trouble on your loan, this eventual reform may make a difference, but so far the issue hasn't been resolved, Green says.
Revision of key documents for borrowers

Mortgage disclosure documents for borrowers have been revised in the past, but few people are satisfied that the "good faith estimate" and the Truth in Lending Act, or TILA, disclosures are easy to understand.

"The objective is to have a standardized set of documents regardless of who you're getting your loan from and to have it easy to understand for borrowers," Sharga says. "The (Consumer Financial Protection Bureau) has been pilot-testing documents with lenders, and the plan is to have final revisions in place by early 2014."

Improvements to the mortgage recordation and securitization systems

"The real estate and mortgage industries are throwbacks to times when all transactions were paperwork-intensive," Sharga says. "There's probably been the least concrete action to date in the area of improvements to recordation and securitization systems."

Eventually, Sharga believes a technical solution will be developed, but for now, individual mortgage companies are pursuing this themselves.

"The good news in housing finance reform is that there are proposals out there, and people are getting stirred up about these ideas, but that's not the same as action," says Retsinas. "I think there's a 90% chance that the next president will inherit the same situation we're in now."

Read more: http://www.foxbusiness.com/personal-finance/2013/07/26/housing-finance-reform-what-next/#ixzz2aSwInRPA

When to start taking Social Security Benefits

The thought of retirement can be a scary thing.  There can be so many major financial decisions.  The most import thing one can do is get all the information available to make the best possible decision.  Unfortunately, when it come to retirement benefits a wrong decision can cost you thousands of dollars.  I found this article helpful and I hope you do as well.           Best of Wishes,   Christopher Mesunas

 

By Donna Fuscaldo

 

Published May 31, 2013

FOXBusiness

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When it comes to maximizing Social Security benefits, it’s all about timing.

 “If you look at a married couple, there are 81 different strategies on how to claim Social Security,” says David Richmond, founder of Richmond Brothers. “A lot of times people don’t know their options.”

Filing too early for Social Security can mean getting a smaller check and potentially leaving thousands of dollars on the table, while waiting until Full Retirement Age (FRA) can maximize monthly payments.

Social Security benefits are designed to supplement retirement income, but too often people rely on these benefits as their only cash flow in retirement.

“Most clients assume they should take it right away at 62 and many times that’s not the best way to do it,” says Richmond. “Social Security went from a safety net to a primary source of income, and that’s not what the program was designed for.”

To determine when to start collecting benefits, financial experts say you must identify your FRA, which is when you can collect Social Security benefits without penalties. The Social Security website can help calculate this number.

Workers can start collecting at age 62, but doing that could result in as much of a 30% reduction in benefits.

David Hefty, chief executive of Hefty Wealth Partners, says people also need to determine their primary insurance amount (PIA)—the monthly payout from Social Security.

“Your PIA is based on 35 years of your highest earnings. If the end of your career has the highest years, you are doing a good job of increasing your Social Security check,” he says.

Knowing how much to can expect each month can help determine when to start collecting.

If the benefits aren’t crucial to making ends meet, experts suggest waiting until age 70 to start drawing benefits to maximize check size. Every year past FRA until 70 earns a delayed retirement credit. For example, those born in 1943 or later will get an 8% credit each year collection is delayed, according to the government.

Some people start drawing their benefits as soon as possible and invest it in hopes of making a greater return, but experts caution against this.

“If you wait to 70 you’re guaranteed a roughly 8% rate of return,” says Richmond. “In today’s world, what’s growing at 8% guaranteed?”

The decision for single senior citizens on when to collect boils down to whether they need the funds to make ends meet, but for married people, it’s a little more complicated.

According to Hefty, two common strategies for married people to get the most from Social Security is the “file and suspend” and “double dip” strategies. Both strategies are only for couples that have other financial means outside Social Security.

The file and suspend strategy helps spouses with a large difference in the size of their benefits, and involves having the person with less benefits filing at 62 while the other spouse can file for benefits and then suspend them. This allows the person who started collecting at age 62 to also get 50% of the spouse’s Social Security benefit.

The spouse who delayed gets to maximize the amount he or she will get because each year Social Security isn’t collected earns the delayed retirement credit. This strategy enables the couple to start getting some Social Security at age 62 while still getting the most out of the other person’s benefits.

The double dip strategy, which is ideal for couples set to get similar benefits, includes taking the spousal benefit and regular benefit at different times. Even if one person’s benefit is less, if a couple can live off that, they will end up getting more the longer they wait to collect.

“If you don’t need your social security then ideally you should delay it,” says Hefty.