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Millennials: ARMed and Ready

Posted on July 19, 2017 Posted in Florida real estate by Roy Oppenheim

Millennials Are Interested in Adjustable Rate Mortgages

Adjustable-rate Mortgages: The New Millennial Trend?

In a previous video blog, we discussed crucial differences and considerations when it comes to choosing an Adjustable-Rate-Mortgage (ARM) versus a fixed-rate mortgage. A recent article from The Wall Street Journal shed some light on how Millennials are progressively opting for ARMs as opposed to the standard fixed-rate mortgages. While ARMs account for less than 5% of new mortgages, this market share is expected to grow due to its practicality among Millennials. As highlighted in a prior blog post, Millennials still believe owning a home is part of the “American Dream” despite facing a higher debt burden, higher credit standards, and lower starting salaries as compared to baby boomers.

A Risk Millennials Are Willing to Take

ARMs can cost you an arm, as they usually come with considerable risks. They often feature lower initial rates and monthly payments as compared to fixed-rate mortgages. However, ARMs allow for rate increases depending on the respective index rate, which could lead to a higher monthly payment for the borrower should the rate go up. This is important given the possibility of rate hikes in our near future, as we previously discussed. However, rates may also decrease, which could result in a lower monthly payment without the need to refinance. This is not a feature of fixed-rate mortgages, where the rate does not change. By the same token, the fixed rate tends to be higher than the initial ARM rate.

The Mobility Factor

Although they are associated with rate fluctuations, ARMs are beneficial to millennial homeowners who expect to be on the move as they pursue different career opportunities. For these folks, the initial cost-savings of ARMs enable them to reap the rate savings without running the risk of rate increases in the following years. While fixed-rate mortgages would prevent such a risk in the first place, borrowers can strategically plan an ARM and secure their interests by finding their “sweet spot.” A borrower has multiple options in their arsenal, namely fixed-rate provisions ranging from three to ten years, which can be chosen depending on how soon the borrower plans to sell the property.

From the trenches,

Roy Oppenheim

Amazon Stirs Controversy With “Hire a Realtor” Feature

Amazon Stirs Controversy With “Hire a Realtor” Feature

Fresh off Amazon’s “biggest day ever” for their third annual Prime Day event, shoppers may have seen a peek of a “Hire a Realtor” page on Amazon’s website. While Amazon has since removed the page for unknown reasons, it has caused a rattling in the real estate world as many try to figure out the implications of the world’s fourth largest company now entering the housing market. According to a report on Amazon’s planned endeavor, the company would allow for the hiring of real estate agents through its growing professional services marketplace.

(Source: Amazon.com)

A Consumer-Friendly Approach

Already a staple for review-driven consumers looking for products and services, Amazon could be a welcomed place to read reviews on local real estate agents. Similar to how the company works with its service professionals, it is speculated that Amazon would receive real estate referral fees from the agents or firms in exchange for the service.

From the trenches,

Roy Oppenheim

Another Wells Fargo Scandal?

Posted on June 28, 2017 Posted in Florida Law News by Roy Oppenheim

Wells Fargo is at it again… A scandal-plagued Wells Fargo has found itself in the midst of a new controversy involving “stealth” modifications of consumers’ mortgages while they are in bankruptcy.

According to The New York Times, a class action and other lawsuits have been filed against Wells Fargo alleging that since 2015, Wells Fargo has been making unauthorized charges to the loans of borrowers who are in bankruptcy. The changes involve shadowing a lengthier loan term (extensions as high as several decades) behind an enticing lower monthly payment. According to the lawsuits, the changes were made without the approval of the bankruptcy courts, which is a major no-no, and also without consent of the borrowers.

Wells Fargo’s (substantial) Financial Motive

Why would Wells Fargo want to do this? The extensions were hardly an act of kindness toward borrowers. By extending the terms of a mortgage by such an extensive period, (as in the case of the lead plaintiffs from North Carolina that had an extension of 26 years) Wells Fargo would be due substantially more in interest payments than under the original loan. In addition, the adjustments would enable Wells Fargo to receive as much as $1,600.00 for each loan that was adjusted, based upon a federal program setup with the intention of encouraging lenders to help struggling borrowers through modifications.

Ramifications in Bankruptcy Court

The filed lawsuits allege that Wells Fargo would implement these unauthorized changes by using documentation routinely filed with bankruptcy court to track new real estate taxes or homeowners’ insurance costs. Wells Fargo’s conduct is a problem for borrowers who may have been placed in danger of default and foreclosure because of the meddling with their payment plans as ordered by the bankruptcy court. Its conduct is also a huge problem for Wells Fargo itself, which is at risk of bankruptcy court sanctions and further federal investigation.

From the trenches,

Roy Oppenheim

Federal Reserve Interest Rates Take a Hike

Posted on June 21, 2017 Posted in Florida Law News by Roy Oppenheim

The Federal Reserve has put on its hiking boots. Last week, the Federal Reserve hiked its benchmark interest rates. Homeowners and prospective buyers alike are rightfully alarmed about what the increased interest rates could signal for the housing market. Since the great recession back in 2007, homeowners enjoyed relatively lower interest rates as the federal government attempted to rebuild the economy. A recent article from Housing Wire suggests that as a result of the Federal Reserve interest rate hike, the period of uncertainty has only just begun.

More Interest Could Mean More Money?

Typically, higher interest rates tighten the housing market as prospective buyers may not qualify for mortgages and homeowners may face higher monthly mortgage payments. As such, people may be less likely to purchase homes and/or commit to increased mortgages. However, a recent Freddie Mac mortgage report shows that interest rates are actually at the lowest level in nearly seven months. As the Housing Wire article puts it, “[T]his hike was largely priced in to markets already, so mortgage rates should remain flat or even fall slightly.”

Additionally, many economists have said that the increased Federal Reserve interest rates may actually be a positive thing for prospective homeowners. How could that be? For starters, prospective purchasers may be inclined to purchase sooner rather than later when the interest rates increase. Also, because the increased interest rate provides an additional safety cushion to creditors, the increased rate could potentially incentivize creditors to relax stringent requirements for loans. This, in turn, will allow millions of credit-worthy borrowers previously prevented from obtaining a mortgage, to have better chances to obtain home loans, as indicated in a recent CNBC article. Both factors are expected drive up demand in the housing market for the next few months.

Not All That Glitters Is Gold

Despite certain potentially positive outcomes of the Federal Reserve rate hikes, a further peak into things shows that there is a possibility that they will wreak havoc. When combined with a low rate of inflation and low interest rates on long-term bonds, increases in the interest rate may cause our economy to once again fall into a recession.

As of now, there is still a widespread lack of knowledge as to whether the Federal Reserve will continue to increase interest rates, and if so, by how much. Another four Federal Open Market Committee meetings are expected in the coming year, meaning that there are several more opportunities for rate hikes. Amid the uncertainty of the Federal Reserve’s future decisions, homeowners need to put on their hiking boots and prepare to navigate the rough terrain that may lie ahead.

From the trenches,

Roy Oppenheim.