Mortgage by Randy
monthly update to our clients, colleagues, family & friends
By: Randy Mitchelson, February 2010
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In Issue 23 We Touch On:
New Mortgage Fee Rules
New Credit Card Law
Hug Your Bride Contest
Cold seems to be a theme lately. Our government was shut down due to cold and snow. The President’s goal of health care reform is getting a cold reception from many. The southern United States, including Florida has seen an unprecedented streak of cold temperatures and snow. While we all deal with our own version of cold, there are signs that things are heating up in the economy. More and more people are trying to buy houses. Job losses are still happening but at a slower rate than 2009. Savings rates continue to heat up as Americans have reduced their credit card balances for 15 consecutive months. Regardless of what story the news media focuses on, there are two sides to every coin so just keep it all in perspective.
The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family. You can make your own comments and feedback as well. Time for the news…
Mortgage Market: New Mortgage Fee Disclosure Rules Benefit Consumers
In response to reports about inadequate and difficult to read disclosures about mortgage fees, the U.S. Department of Housing and Urban Development (HUD) implemented new disclosure forms and rules effective Jan 1, 2010. Already, I have personally witnessed some mortgage brokers failing to comply with these new forms. For consumers shopping for a property and mortgage it is critical that you become aware of what to expect from your mortgage provider.
Good Faith Estimate (GFE)
The form required to disclose an initial estimate of fees for a mortgage has become easier to read. It must be provided to you within 3 business days of providing a mortgage professional a loan application or enough information for the loan officer to pull your credit (i.e., social security number). Click here to see what the correct form looks like. Upon locking your interest rate, a revised GFE must be given to you within 3 business days. If a mortgage provider issues you anything other than this form, they are not compliant with the law. Unless there is a material change in your ability to qualify for a loan or if you switch to a new loan program, most of the critical fees on the GFE cannot be changed after the form is issued. This protects consumers from the unpleasant surprise of experiencing major increases in fees at the closing table.
At closing, the final numbers for the mortgage are provided on a statement called a HUD-1. This form has been changed so that it is easier to compare the final fees with those originally disclosed on the Good Faith Estimate. Click here to see for yourself. Certain fees that are impossible to disclose exactly at the beginning are allowed a 10% tolerance to increase by closing. For example, the cost of a title insurance policy is allowed a 10% tolerance. Broker fees and origination fees are not allowed to change.
Personal Credit: Obama Credit Card Law Becomes Effective February 22
In May 2009 President Obama signed a law that regulates credit card companies. A portion of the law is going to become effective this month on February 22. Over the past nine months, banks and other credit card issuers have been scrambling to implement the required technology changes and revise their marketing programs to become compliant. The intent of the law is to protect consumers from devious tactics, but no law is perfect. Consumers must pay attention to mail that arrives from credit card companies announcing changes to account rules.
Key Rule Changes
1) Credit card companies must now give 45 days notice before they can increase your interest rate, start charging you new fees, or make other big changes that affect the terms of your card unless it is a variable rate card.
2) If you do not like those new changes the credit card company must give you the option to cancel your card before they take effect. If you cancel your card they might increase your monthly payment.
3) Credit card companies must display on your statement how long it will take you to pay off your card if you only make minimum payments. Your monthly statements will look different now.
4) When you get a new credit card account, credit card companies cannot increase your rate for the first 12 months unless you have a variable rate, are more than 60 days late paying your bill, or set-up a special repayment plan with your card company and then fail to comply with it.
5) Credit card statements must be mailed 21 days before the payment due date. Also, the due date must be the same day each month, and your payment not classified as late until 5 p.m. on the day it is due.
6) If your credit card company requires you to pay fees (such as an annual fee or application fee), those fees cannot total more than 25% of the initial credit limit.
Economy & Financial Insights: Opa! How the Greece Financial Crisis Might Affect You
Debt and out of control deficits are a problem all over the developed world. In recent weeks Greece has become the poster child for this problem. Their debt needs to be rolled over in the next 2 months and other European countries are struggling to figure out how or if to help. There is a limit to the amount of debt a sovereign country can handle without a crisis developing. Many countries are approaching this threshold including the United States.
Why should you care? Although most of these events are out of our control, we will certainly feel effects. The effects depend on what choices are made by the U.S. and other countries to manage the debt challenges. One outcome is inflation which will devalue our savings and make products more expensive relative to our incomes. Another potential outcome is default. For example, if Greece (or any other country) defaults on their debt, any investments that we hold will be paid at 50 cents on the dollar or worse. If this happens, the mutual funds we own in our retirement plans may have holdings that are affected. The stock market hates uncertainty. When countries have unstable financial predicaments, the stock market will actively reduce exposure to risk. There are no good outcomes – we can only hope that that whatever decisions are made turn out to be the lesser of several evils.
Question of the Month: Can My No Fee Credit Card Begin Imposing New Fees?
Credit card issuers can choose to change the terms and conditions of your account. In the past, there was very little protection in place for consumers as to how quickly and via what kind of communication the credit card company could impose changes. The new credit card law effective February 22, 2010 regulates these changes. It is possible that a no fee credit card could become a fee based credit card. However, the new rules require credit card companies to a) provide 45 days notice of changes to fees and rates and b) give consumers the chance to cancel their card before the new fees and rates take effect. It is important that consumers pay attention to any mail that arrives from credit card issuers which may contain announcements about changes to the terms and conditions.
Giving Back: Supporting Our Communities – 2nd Annual Gentlemen Hug Your Brides Day 3/3/10
On March 3, the Michelle’s Angels Foundation is sponsoring Gentlemen Hug Your Brides Day. Cancer and other deadly illnesses can take away our better halves much too soon. Husbands all over the world will take a few minutes to honor their bride on March 3, even if it is a simple hug. This year, the day is commemorated with a theme song, “You Can Count On Me”, written and performed by Nashville artist Ken Harrell. In addition, there is a contest to submit a verbal hug and win! Submit a verbal hug of 200 words or less describing what your special person means to you and why you love them. Contest details will be posted at www.michellesangels.com. Let the hugging begin!
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
Thanks to the Estero Rotary for inviting me to speak about credit scores. Based on the amount of questions people had after the talk the topic definitely hit home for a lot of the audience. Pitchers and catchers report this week and we are looking forward to spring training baseball throughout March. The parents have finally arrived in Florida to try out the snowbird lifestyle for the first time so we are squeezing in as much fun time with them as possible. Go U.S.A. !
Randy
Mortgage by Randy newsletter, Copyright 2010 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
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You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson, of Estero, Florida, is a business professional, entrepreneur and author with over 15 years experience in financial services. Mitchelson has served in leadership roles for Global & Fortune 500 firms like Bank of America, KeyBank and CIBC.
As a member of National Association of Mortgage Brokers, Randy has earned the Lending Integrity Seal of Approval. He educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy as well as the Daily Dollar newsletter. A licensed mortgage professional, Mitchelson also founded Trinity Home Financing, LLC.
He is owner of Estero, Florida based National Web Leads, LLC, an internet lead generation service matching consumers with lenders for auto, cash advance and other financial products. Through its network of partners, National Web Leads delivers innovative Web 2.0 performance marketing solutions to advertisers and affiliate marketers.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member and Finance Chairman of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.
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