The Veridian Blog

Has it been that long?  Anyhow, when this blog isn't alive, it only means one thing - RATES ARE DOWN!  In a big way...

In particular, rates on the 5/1, 7/1 for both conforming and high-balance conforming have seen spectacular drops during the past month.  Rates are hitting the low 4.0% range and have even gone below 4.0% for the 5/1 conforming. 

In addition, traditional JUMBO loan rates have fallen back into the realm of reason.  Although still not at historical lows, the 5/1 Jumbo recently touched just below 5.0% - a far cry from the 8.0% days we saw as little as one year ago. 

What this all means is that credit is loosening up in the secondary markets.  Investors have waited on the sidelines for a few years and after realizing that there are some good bargains out there and still some responsible homeowners who still care about their credit, they have decided to jump back into the mortgage market.

Again, sorry for the blog-disappearance... we will stay in touch.  Call us for the latest and greatest - thanks! 

Impounds are a portion of the borrower’s monthly payment held by the lender or servicer to pay for property tax and/or hazard insurance. These are amounts that are collected in addition to the principal and interest payments required by the terms of the promissory note.  In addition, the lender collects impound reserves at the start of the loan term that can be an amount up to 9 months of pro rata tax and insurance payments.

The service for impounds are always free because the lender takes the reserves and invests/lends them elsewhere to earn a margin.  This is why we seldom recommend impounds because we do not feel the convenience factor should be worth the opportunity cost of having the bank make a return on investment that you could be making yourself!  Impounds also lower the borrower’s default risk when these funds are “deposited” every month thereby giving the lender assurance that they won’t default on tax payments. The additional cash outflow also helps motivate borrowers to continue making all their payments on time. Because of these advantages, lenders offer discounts (in fee) for selecting impounds during application, or conversely, they penalize applicants who choose to waive impounds.

If you currently have impounds and wish to cancel them, you won't likely find an obligatory word that will bind you to continue paying impounds for any length of time.  That's because when you signed, in California there is legislation prohibiting lenders to require impounds in most situations.  

Buyer beware, however, as this loophole will soon be closed for certain loans if the loan-to-value ratio exceeds 90% LTV.  Under a revision to the Truth-in-Lending Act (Regulation Z) in July, 2008, “high-cost” loans must have Impound accounts for taxes and insurance.  Opting out of impound accounts are no longer an option in such cases, but only for the first 12 months.  Based on our research, this does not go into effect until next year, but it is a clear indication that legislation is continuing to be passed in favor of banks and lenders.

For more explanation and details about impounds, feel free to contact us - have a safe and fun Halloween!