Category: News


Home Loan Toolkit

Consumer Financial Protection Bureau has published a valuable guide, Your home loan toolkit: A step-by-step guide, to help homebuyers navigate the complexities of home buying process. We at STEM Lending are committed to help demystify the home buying process for first time mortgage seekers.

A few excerpts from the toolkit (Full Home Loan Toolkit referenced below) follow:

Choosing the best mortgage for you:

1. Define what affordable means to you

Only you can decide how much you are comfortable paying for your housing each month. In most cases, your lender can consider only if you are able to repay your mortgage, not whether you will be comfortable repaying your loan. Based on your whole financial picture, think about whether you want to take on the mortgage payment plus the other costs of homeownership such as appliances, repairs, and maintenance.

2. Understand your credit

Your credit, your credit scores, and how wisely you shop for a loan that best fits your needs have a significant impact on your mortgage interest rate and the fees you pay. To improve your credit and your chances of getting a better mortgage, get current on your payments and stay current. About 35% of your credit scores are based on whether or not you pay your bills on time. About 30% of your credit scores are based on how much debt you owe. That’s why you may want to consider paying down some of your debts.

3. Pick the mortgage type—fixed or adjustable—that works for you

With a fixed-rate mortgage, your principal and interest payment stays the same for as long as you have your loan.

  • Consider a fixed-rate mortgage if you want a predictable payment.
  • You may be able to refinance later if interest rates fall or your credit or financial situation improves.

With an adjustable-rate mortgage (ARM), your payment often starts out lower than with a fixed-rate loan, but your rate and payment could increase quickly. It is important to understand the trade-offs if you decide on an ARM.

  • Your payment could increase a lot, often by hundreds of dollars a month.
  • Make sure you are confident you know what your maximum payment could be and that you can afford it.

Planning to sell your home within a short period of time? That’s one reason some people consider an ARM. But, you probably shouldn’t count on being able to sell or refinance. Your financial situation could change. Home values may go down or interest rates may go up.

4. Choose the right down payment for you

A down payment is the amount you pay toward the home yourself. You put a percentage of the home’s value down and borrow the rest through your mortgage loan.

5. Understand the trade-off between points and interest rate

Points are a percentage of a loan amount. For example, when a loan officer talks about one point on a $100,000 loan, the loan officer is talking about one percent of the loan, which equals $1,000. Lenders offer different interest rates on loans with different points. There are three main choices you can make about points. You can decide you don’t want to pay or receive points at all. This is called a zero point loan. You can pay points at closing to receive a lower interest rate. Or you can choose to have points paid to you (also called lender credits) and use them to cover some of your closing costs. The example below shows the trade-off between points as part of your closing costs and interest rates. In the example, you borrow $180,000 and qualify for a 30-year fixed-rate loan at an interest rate of 5.0% with zero points. Rates currently available may be different than what is shown in this example.

6. Shop with several lenders

You’ve figured out what affordable means for you. You’ve reviewed your credit and the kind of mortgage and down payment that best fits your situation. Now is the time to start shopping seriously for a loan. The work you do here could save you thousands of dollars over the life of your mortgage.

Explore Options

Reference: CFPB Home Loan Toolkit


Technology’s role in getting a mortgage today

Devon Thorsby from US News reports:

If you can manage numerous accounts online without ever having to sit down for a face-to-face conversation with another human, why is the process of getting a mortgage so different?

A potential cause of slow advancements of technology in the mortgage industry is the fallout of housing crisis, however lenders are beginning to embrace more new technology, and new lenders are even entering the game based around an automated platform.

Four things to know about how technology is now playing a part in your mortgage process:

(i) Options go beyond the online form: An important part of the mortgage industry’s evolution is automation – not just allowing you to fill out forms online, but also granting access to financial and employment backgrounds without requiring repetitive work for you.

Rather than having to provide all the same detailed pieces of information you would when filling out a paper form, your communication with the lender is more about borrowing programs that would fit best and not what details you have or haven’t provided yet. The online platforms are also designed to provide detailed updates about your application and the approval process and often allow you to e-sign documents so you avoid adding new meetings to your existing list of sit-downs throughout the homebuying process.

(ii) Face-to-face options remain. Of course, there’s no way every consumer looking to purchase a home is going to feel comfortable getting a mortgage online, whether it’s a tech-literacy issue or simply because you may enjoy an in-person conversation.

(iii) Security and protection is a major focus. We hear almost every day about a new data hack in a retailer, firm or even hospital that has compromised consumers’ private information. Knowing how much valuable information is compiled during the mortgage approval process, companies are taking measure to reduce the chances of that happening.

(iv) The industry is poised for tech growth. Even with the progress of the last year and a half, the mortgage industry is likely in just the beginning stages of its evolution to catch up with the travel, banking and other tech-transformed industries.

Homebuyers and other borrowers can reasonably expect for automation in verification of employment and financial history to expand to cover more people as technologies develop and a larger portion of the industry gets on board.

Further behind-the-scenes automation means the loan approval process can be streamlined and made more accurate. Already, Fannie Mae’s Automated Property Service uses its extensive information to provide a predicted property value and a confidence score to be used as a factor when considering eligibility for the Home Affordable Modification Program. As more major industry players support a more transparent process, small and large lenders nationwide will be able to automate more as well.

For more insights into mortgage, FinTech and online lending, sign up with STEM Lending:

Join STEM Lending



Avoiding costly refinancing mistakes: Knowing when to wait

Serafin Grundl and You Kim recently published a research article in Federal Reserve System’s Finance and Economics Discussion Series on “Consumer Mistakes and Advertising: The Case of Mortgage Refinancing”. The authors estimate the effect of advertising on consumer mistakes and quantify the resulting net effect on consumers in the market for mortgage refinancing. They demonstrated that a policy that redirects all advertising to borrowers who should refinance would appreciably increase the gain in borrower welfare.

Specifically, authors note that mortgage refinance (refi) advertising can help inattentive borrowers who should refinance but fail to take advantage of lower interest rates by informing them. However, refi ads can also be deceptive. Lenders commonly advertise the projected reduction in monthly mortgage payments without pointing out that this reduction is partly achieved through an extension of the loan term, rather than through a reduction of the interest rate. Such ads have the potential to convince borrowers who should wait to refinance prematurely.

The article truly reverberated with the STEM Lending team: we at STEM Lending are committed to helping our clients make rational financial decisions and be a trusted advisor to them, striving to help them make the right decisions concerning their mortgage at the right time.

In coming months, we will continue to publish a series of STEM Perspectives, helping demystify the mortgage landscape. Stay tuned and feel free to reach us on Facebook (, Twitter ( or via email at if you have anything to share!

Reference: Consumer Mistakes and Advertising – The Case of Mortgage Refinancing


The State of The Nation’s Housing 2017

Harvard University’s Joint Center for Housing Studies reports: A decade after the onset of the Great Recession, the national housing market is finally returning to normal. With incomes rising and household growth strengthening, the housing sector is poised to become an important engine of economic growth. But not all households and not all markets are thriving, and affordability pressures remain near record levels. Addressing the scale and complexity of need requires a renewed national commitment to expand the range of housing options available for an increasingly diverse society.

Housing markets continued to strengthen in 2016, with new and existing home sales, prices, and construction levels all on the rise. Still, single-family construction, traditionally the largest source of residential investment, remains well below historical levels. As a result, low inventories of homes for sale are driving nominal prices above pre-recession peaks in many metros. In rental markets, low vacancy rates are pushing up rents and keeping multifamily construction relatively strong. Easing these tight conditions is especially difficult where labor shortages and limited land availability constrain new housing supply.

Household growth, the primary driver of housing demand, has picked up and is likely to remain strong as members of the millennial generation increasingly move into their 20s and early 30s over the coming decade. But immigration, typically a large source of household growth, could be in for a slowdown. Worsening income inequality, along with the increasing concentration of poverty and affluence, are also concerns. Still, the growing diversity and overall aging of the US population ensure that demand for a variety of housing types and locations is set to increase.

Although still on the decline, the national homeownership rate showed signs of stabilizing in 2016. The foreclosure inventory is approaching its pre-crisis volume and home purchase activity is slowly increasing. While high costs pose a challenge in certain markets, homeownership remains affordable in many metro areas of the country. Meanwhile, with conventional mortgage credit still tight, FHA continues to play a central role in serving first-time homebuyers. While the strengthening economy and the aging of the millennial generation may lift demand for homeownership, much uncertainty surrounds future economic, credit, and housing market conditions.

After more than a decade of soaring demand and five years of real rent increases, rental markets across the nation remain extremely tight in 2016. Rapid growth in both renters and rents continued in most markets, although the pace moderated somewhat in certain high-cost markets. Meanwhile, multifamily construction took up the lead from single-family conversions in adding supply, but most of these new apartments are concentrated at the high end. As a result, the diminishing supply of lowcost rental housing remains in high demand, fueling ongoing concerns about the market’s ability to meet the housing needs of lower-income households.

Nearly 39 million US households live in housing they cannot afford. The shrinking supply of low-cost rentals, along with potential losses of subsidized units and declines in the value of tax credits, could widen the already substantial gap between the demand for and supply of affordable housing. Meanwhile, the retrenchment in federal funding has put increased pressure on state and local governments to address the housing needs of the most vulnerable individuals. The aging of the US population adds to the nation’s challenges by driving up demand for housing that is both accessible and affordable.

Reference: Joint Center for Housing Studies of Harvard University 2017

For more insights on mortgage, housing and renting, join STEM Lending:

Join STEM Lending



Credit Report Changes That Could Raise Your Credit Score

Negative Marks to Fall Off of Credit Report in July

Up to 14 million Americans could see a positive change in their credit score very soon. Why?

Starting July 1, Equifax, Experian and TransUnion—the three major U.S. credit bureaus—will begin enforcing strict standards on the public records they collect. After July 1, these credit bureaus will require each citation to include the individual’s name, address and either Social Security number of Date of Birth. Today, nearly 50% of all civil judgments and at least 50% of tax lien records do not meet these new standards. Anything not meeting these standards will be removed from consumer credit reports.

The change will benefit thin-file borrowers and others with negative public records. The deletion of this information will also help thousands of individuals who have found it very difficult to have incorrect information removed from their personal credit files.

An estimated 7% of the 220 million people in the U.S. with credit reports will have a judgment or lien stripped from their credit file according to experts.

Join STEM Lending


US Mortgage Demand Cools and Competition Heats Up –…

Fannie Mae’s Research reports: Mortgage lenders say they have eased credit standards recently and expect further easing in the coming months, according to Fannie Mae’s second quarter 2017 Mortgage Lender Sentiment Survey®. On net, the share of lenders reporting they have eased mortgage credit standards over the prior three months has ticked up gradually since the fourth quarter of 2016. Additionally, when anticipating the next three months, the net share of lenders saying they plan to ease credit standards for GSE eligible, non-GSE eligible, and government loans reached or surpassed survey highs this quarter.

Concerns regarding economic conditions were a top driver for changes in lending standards. Across the three loan types, the share of lenders who reported growth in purchase mortgage demand dropped to the lowest net reading in years for the second-quarter period. The drop in purchase mortgage demand also reflects the latest findings in the Fannie Mae National Housing Survey®, in which the net share of consumers who reported that now is a good time to buy a home dropped to a record low. The results of both surveys mirror the ongoing narrative for housing: Tight inventory has pushed up home prices, which is weighing on affordability and constraining sales.

“Expectations to ease credit standards climbed to survey highpoints in the second quarter as more lenders reported slowing mortgage demand and increasing concerns about competition from other lenders,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Lenders cited additional contributing factors such as diminishing compliance concerns and more support from the GSEs, including clarification on representations and warranties and tools that provide greater certainty during the loan underwriting process. Easing credit standards might also be due in part to increased pressure to compete for declining mortgage volume. For the third consecutive quarter, the share of lenders expecting a decrease in profit margin over the next three months exceeded the share with a positive profit margin outlook. For the former, the percentage citing competition from other lenders as a reason for their negative outlook reached a survey high.”

Source: Fannie Mae

Join STEM Lending


Hassles of refinance causing 4 million homeowners leave over…

Despite falling mortgage rates and rising home values, millions of home owners are not refinancing because of the hassle of a refinance. According to a new report by Black Knight Financial Services, close to 4.5 million borrowers are eligible and have financial incentive to refinance. Refinance applications, however, remain 30 percent below year-ago levels.

Lynn Fisher, Mortgage Bankers Association’s Vice President of Research and Economics noted: “The recent pause in the upward movement of interest rates continues to encourage late-to-the-game borrowers to refinance”

Mortgage rates do not directly follow interest rate hikes by the Federal Reserve but are linked to the yield on the 10-year Treasury, which can move on other economic factors both in the U.S. and overseas.

Ben Graboske, Senior Vice President of Data and Analytics at Black Knight Financial Services noted “There are enough pressures in the market — lenders getting more efficient — that we’re going to have competitive rates around for a while.”

Source: CNBC.

Join STEM Lending


Housing Market Faces Growing Millennial Demand

Lack of Inventory and Lack of Homebuilder Activity Poses Challenges for Millennial Homebuyers.

As more and more young families get married, have children, and leave the city, the U.S. housing market faces a dilemma it hasn’t seen before – growing demand for homes from Millennials.

The oldest millennials are now 30 or already in their early 30s, and are now hitting those life milestones of marriage, homebuying, car purchasing, etc…

We’ve spoken to many Millennials who’ve sold their homes in cities like San Francisco or New York. They sold their homes for well over asking price, but immediately had trouble finding another home within their new price range.

The problem? Lack of inventory. Housing inventory has dropped for 24 straight months on a year-on-year basis.

Meanwhile, U.S. home-building fell for a third straight month in May to its lowest level in eight months, the U.S. Commerce Department reported last week.

So what are Millennials to do? We think it’s still a great time to buy a house, but you will need to understand the details of your local market.

Mortgage rates rose after last year’s presidential election but have edged down in recent months, even as Federal Reserve President Yellen raised interest rates to a range now between 1 – 1.25%. The average interest rate on a 30-year fixed-rate mortgage was 4.01% in May, down from 4.05% in April, according to Freddie Mac.

Source: Reuters Business News 


Lower mortgage rates yielding steady mortgage applications

Total mortgage application volume rose 0.6% on a seasonally adjusted basis from the previous week. Volume was nearly 14 percent lower compared with the same week one year ago, according to the Mortgage Bankers Association, when lower interest rates sparked a refinance boom.

Low rates are giving refinances another slight boost. Refinance volume for the week was 2 percent higher than the previous week but still about 30 percent lower than a year ago.

Join STEM Lending

Source: CNBC Real Estate