Mortgage-Related Counseling Can Be Productive by Jim Woodard on Creators.com

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Mortgage-Related Counseling Can Be Productive

Does homebuyer counseling really lead to significantly lower mortgage default rates? The answer is yes, according to several recent studies.

One such study by NeighborWorks America found that borrowers who went through a prepurchase counseling program were nearly one-third less likely than non-counseled borrowers to fall behind on their mortgage payments by 90 days or more in the first two years following closing.

NeighborWorks evaluated 75,000 mortgages, it was noted in an article published by the National Association of Realtors.

"Before you kind of tie somebody into a loan, you should be encouraging them to go to prepurchase education and counseling," Eileen Fitzgerald, NeighborWorks chief executive, said about the study's findings for lenders. "You will make more money off of that person."

But counseling programs differ in how they're delivered and there's been no research on which model works best, says David Stevens, the chief executive of the Mortgage Bankers Association, about the study's findings as quoted in the NAR report. "My own subjective view is that face-to-face is probably the best," Stevens said.

Bottom line: Mortgage-related counseling can be very productive. But as a first step, it's best to have a personal face-to-face discussion with your lender.

Q: Why are so many young couples and individuals so eager to buy a home?

A: Nearly two-thirds of millennials expressed an increased interest in buying, and it's not because they are tired of apartment living, according to a survey from Pulte Group, Inc., a national homebuilder.

The PulteGroup Home Index Survey showed 65 percent of renters between ages 18 to 34 with an annual income of at least $50,000 said their intention to buy has increased significantly or somewhat over the past year. The majority of millennials, or 52 percent, is interested in buying because they view a home as an investment and has a desire to own and build equity.

Q: To what extent are home prices rising?

A: CoreLogic's Home Price Index posted its largest annual increase in nearly seven years in February. When including distressed sales (short sales and REO transactions), home prices in February increased by 10.2 percent from February 2012, it was reported.

The annual gain marks the largest increase since March 2006.

From January to February, prices still moved in a positive direction, but rose by just 0.5 percent.

Q: Do most people now believe the housing crisis is over?

A: Apparently not. One recent survey, conducted by Hart Research Associates, revealed that 58 percent of Americans believe we are still in the middle of the housing crisis, while another 19 percent said the worst is yet to come. `

That leaves 77 percent that belief the crisis is still here. Just one in five, or 20 percent, believes the crisis is "pretty much over."

Q: Do real estate brokers sometimes lower their commission fee?

A: Real estate commissions are strictly negotiable. Brokers will often accept a fee less than the old customary 6 percent commission, particularly when the property is exceptionally attractive and salable.

The 6 percent commission became the standard rate many years ago when home values were a small fraction of what they are today.

Q: Are sales of homes purchased as investments on the increase?

A: According to one credible study, investment-home sales in 2012 were down slightly from the year before, while the median price increased, according to a survey from National Association of Realtors.

Sales for investment homes fell 1.6 percent to 1.21 million, down from 1.23 million in 2011. Overall, investment sales accounted for 24 percent of sales in 2012, the second highest share since 2005, NAR data revealed. The median price paid for investment homes increased 15 percent to $115,000 in 2012 compared to $100,000 in 2011, NAR reported.

Q: Is it legal for a mortgage insurance company to pay a lender for referring business to them?

A: That's definitely illegal. In fact, the Consumer Financial Protection Bureau (CFPB) recently took action against four mortgage insurance companies who gave kickbacks to lenders in exchange for business.

The CFPB filed complaints and proposed consent orders against the insurance firms for their alleged roles in kickback arrangements. "The orders put an end to these types of arrangements and require these insurers to pay more than $15 million in penalties for violating the law," said CFPB director Richard Cordray, as reported by DS News.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.