How are you doing so far with those resolutions you made a couple weeks ago?  You know, the ones about getting in shape and eating right and all the others we make every year. 

If it's not going so well, you're not alone. But there's no need to feel bad about it – simply replace those unattainable resolutions with a few that you really can accomplish.  Forget about giving up a favorite food. Think instead of these three resolutions that will help protect what you have and build for the future.

1.  Manage your mortgage. If you have an adjustable rate mortgage, look into converting it to a fixed rate.  30-year mortgage rates are still relatively low, and that ARM could soon start eating you up – if it hasn't already.  Even if you do have a fixed rate mortgage, if it's more than a few years old, look into whether you could save by refinancing at a lower rate.

2.  Improve your home and your tax bill.  If you're thinking about doing some home improvements, consider taking a home equity loan to cover the costs rather than financing them through a credit card or other loan.  Interest on this kind of loan can be deductible just as is mortgage interest when the funds are used for home improvements. Depending on the type of improvement, you may be able to recover most of the cost through the increased value of your home when you sell it someday. 

3. Keep Uncle Sam out of your pocket.  Do you usually get a tax refund because you pay in too much over the year, either through payroll deduction or by estimate payments?  Stop it!  Sure, that refund feels like found money, but all you've really found is money that you might as well have buried in the back yard.  Uncle Sam had your money for months and paid no interest – zip.  Work with your tax professional to adjust your withholding or estimated payments so you come out as close as possible to what you owe each year. The trick then is to not spend the extra you take home, but instead increase your savings either through an IRA, a 401(k) or similar plan, or a well-managed investment plan.

For all of these you'll want to have some expert advice from your tax and financial adviser.  Always consult your professional before making a decision about changing your mortgage, taking a home equity loan, or changing your withholding and/or estimated tax deposits.  It will be time well spent and give you peace of mind. 

And as for those other resolutions?  Well, there's always next year!

The full study is here: http://www.consumerfed.org/pdfs/WomenPrimeTargetsStudy120606.pdf

As professionals in the real estate industry, we know, home buyers without sufficient income, poor or no credit history must often resort to subprime loans. With the growing subprime loan market, which has matured from “…5 percent [of all loans issued] in 1994 to 20 percent in 2004”, mortgage applicants who do not qualify for prime rate loans, will often qualify for subprime rates as they are considered a risk. 

The Consumer Federation of America, study goes on to state that, “Women are more likely to receive subprime mortgages than men…”, however, “These gender disparities exist across mortgage product lines. Women with the highest incomes have the highest disparities relative to men with similar incomes than women at lower income levels.” 

One of many interesting observations of this study, and I encourage my readers to read this in greater detail, is that, “Although lenders attribute subprime lending to borrower credit risk, in general women and men have similar credit profiles. On average, women have slightly higher credit scores than men. Credit-rating company Experian reports that women have slightly higher credit scores than men (682 compared to 675) and have similar credit usage rates (about 24 percent each).”

In 2005, the study found that even though the prime mortgage rate averaged 5.87 percent, one third of women, in their quest for homeownership, signed mortgage papers with interest rates over 7.66 percent as compared with twenty-five percent of men.

Interestingly, 26 percent of all mortgages issued in 2005 were subprime loans.

The subprime gender gap has become is ever more important as women become more active in the mortgage market. A home buying explosion of single, career-minded women during the recent housing boom, prompted by marrying later, divorce, rising rent costs, being head of households and viewing homeownership as an investment in her future, has increased “…the share of single women home buyers [which] has doubled from about one in ten 15 years ago to about one in five homebuyers in 2003.  More than half (53 percent) of women headed households are homeowners up from just below half (48 percent) in the early 1980s.  The number of single women homeowners grew by four million between 1994 and 2002 from 13.9 million to 17.5 million.” 

Additionally, automated underwriting processes have helped women to obtain mortgages (subprime or otherwise) as these processes place them in a lesser non-discriminatory pool of applicants when previous mortgage applications might have been rejected by largely male loan officers.  These “…automated underwriting [methods] used more objective formulas that are less likely to take gender-related factors into account.”

The study goes onto say that, “Over the life of the mortgage, subprime borrowers can pay between $85,000 thousand to $186,000 more in interest than average borrowers. The prevalence of subprime loans among women borrowers diminishes their ability to fully utilize homeownership as a pathway to build wealth.”

Historically, many barriers for female homeownership have existed for decades.  “Women heads of households with one child have one-fifth the wealth ($10,320) of women-headed households.  Women with two children are worth about a tenth ($5,720) of all women, and women with three children earn even less ($3,150).”  Before 1968’s Fair Housing Act, single women were considered poor credit risks. “Until 1974, when the Equal Credit Opportunity Act became law, most women needed a co-signer to become mortgage borrowers, married women often could not obtain credit in their own names, single women couldn’t get loans because they were thought to be somehow less reliable than other applicants, and, divorced or widowed women found it extremely difficult to obtain credit because their previous credit history was obtained in their husbands’ names and was not taken into consideration when they sought credit in their own names.”  It has only been about 15 years since the Federal Housing Administration permitted women to use child support payments as income to qualify for a mortgage.  And still today, older women are often targeted by predatory mortgagors through home improvement scams, which can eat through home equity and life savings. 

The study also reveals interesting data regarding women borrowers within the Latino and African American communities.  For example, “African American women were 8.5 percent more likely to receive high-cost subprime loans than African American men; Latino women were 19.3 percent more likely to receive high cost subprime loans than Latino men; and white women were 30.8 percent more likely to receive high-cost subprime mortgages than white men. African American women were more than four and a half times as likely to receive high-cost subprime purchase mortgages as white men and Latino women were more than two and a half times as likely to receive high-cost subprime mortgages as white men.”

Conclusions:

“CFA’s HMDA (Federal Home Mortgage Disclosure Act) analysis suggests there is significant gender disparity in the pricing of mortgages between borrowers by gender, race and income. However, it should not be assumed that the gender disparities CFA found are solely attributable to higher risk factors. Freddie Mac found that one in five subprime borrowers could have qualified for a prime rate mortgage. Last year’s Federal Reserve analysis and the recent Center for Responsible Lending study provide strong indication that pricing in the subprime market is not simply a function of risk.”

“Unlawful discrimination, the prevalence of predatory lending and opportunistic pricing, differences in borrower knowledge, the existence of broad pricing discretion by loan brokers and loan officers, and the lack of consumer-friendly support systems may also account for at least some of the variation in pricing patterns.”

“There is general agreement among experts who follow homeownership trends that, over the years, HMDA reporting has helped to transform the home loan market. The new pricing data now reported under HMDA can help to make the pricing of subprime loans more transparent for consumers and increase these market efficiencies, which ultimately benefits all borrowers. Regulators, lenders, consumer and community advocates, the news media are encouraged to undertake their own research and analysis to examine local markets using HMDA data.”

This study shows why it’s important to have a Realtor® and mortgage broker who truly understands your individual needs, and who take the time to look out for your interests and not their own; and, who has the experience and knowledge to provide you with appropriate guidance when making such an important purchase and finance decision – possibly the most important one you will ever make.  At Michael Trust Realty, our hallmark is looking out for our clients’ best interests – always, all of the time, and unconditionally. We have no problem advising a client to walk away from a deal that doesn’t make sense. Perhaps that’s why our referral rate is so high. We’d be pleased to assist you with your buying or selling in the Los Angeles area and/or with referrals to trusted mortgage professionals.

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