Why Your Bank Wants You to Refinance


By Karen Weise on June 18, 2012

Nearly 80 percent of all mortgage applications are for refinancing now, according to the Mortgage Bankers Association, a near-record level. Why is the figure so high? Two reasons. First, demand for refinancings is up because homeowners want to take advantage of thehistoric low interest rates to reduce their monthly payments. Second, there are still very few new purchases as the housing market tries to recover. “When rates go down, it doesn’t spur homebuying, it spurs refinancing,” says Guy Cecala, publisher of Inside Mortgage Finance.

The Mortgage Bankers Association says nearly 30 percent of refinancings are part of the federal program HARP 2.0, designed to let borrowers who are current on their mortgages refi even if they owe more than their home is worth. Under HARP 2.0, borrowers don’t have to go through a new application process if they refinance with the bank that already services the mortgage, and if the loan is guaranteed by Fannie Mae or Freddie Mac, explains Cecala.

Lenders have an added incentive to offer refinancings to existing customers—Fannie Mae and Freddie Mac don’t require lenders to vouch for the quality of the new mortgages, making it less likely that the lenders will be forced to buy back soured loans. That incentive has lenders scouring the databases of their customers to find borrowers who are eligible for the program, says Frank Donnelly, president of the Mortgage Bankers Association of Metropolitan Washington.

HARP refinances could lower monthly payments by 26 percent, estimate economists at the Federal Reserve Bank of New York. The White House bills refinancing as part of its effort to “heal the housing market.” When HARP 2.0 was announced last fall, the housing data firm CoreLogic explained that the program would have “little direct and immediate benefit” to distressed borrowers and housing markets. Instead, CoreLogic said, the benefit of lowering monthly payments for borrowers is more like an economic stimulus “on the order of several billion dollars.” Of course, the economy can use all the help it can get—whatever form it takes.

Weise is a reporter for Bloomberg Businessweek.


Homeowner Aid Boosts Big Banks


A government program that helps struggling homeowners take advantage of low interest rates to cut monthly mortgage payments is providing an unexpected revenue boost to large banks such as Wells Fargo WFC +0.43% & Co. and J.P. Morgan ChaseJPM -0.91% & Co.

[refinance]European Pressphoto AgencyHUD Secretary Shaun Donovan says there is ‘essentially a monopoly on refinancings’ among the largest banks.

Banks that collect those payments, known as mortgage servicers, could get as much as $12 billion in revenue this year refinancing mortgages under the federal Home Affordable Refinance Program, or HARP, according to data compiled by Nomura Holdings Inc.

A government program that helps struggling homeowners take advantage of low interest rates to cut monthly mortgage payments is providing an unexpected revenue boost to large banks. Christian Berthelsen has details on The News Hub. Photo: Reuters.

Borrowers who refinance mortgages through HARP, on the other hand, stand to save between $2.5 billion and $5 billion this year, according to an analysis by The Wall Street Journal of Nomura’s figures.

The contrast is the latest illustration of the competing demands policy makers must juggle when they devise responses to the housing bust, now in its sixth year. Federal officials last year revised the HARP program in a bid to encourage banks to refinance borrowers who were current on their payments but owed more than their properties were worth.

The revisions have driven a sharp increase in refinancings, following years in which the program fell short of government projections. But some critics, including members of the Obama administration, say the changes risk making HARP a giveaway to big banks.


That is because the new HARP rules make it easier for borrowers to refinance their loans with existing lenders. That, the critics say, allows large lenders to charge a captive customer base above-market interest rates on the refinanced loans. Borrowers refinancing through their existing lender make up about 75% of HARP refinancings, according to government figures.

“There’s essentially a monopoly on refinancing,” Housing and Urban Development Secretary Shaun Donovan said at a Senate hearing last month. For borrowers, Mr. Donovan said, “Whoever holds their current loan, whoever is the servicer, they can charge them—and we’re seeing this—very high fees.”

The Obama administration and some mortgage-industry participants say this arrangement leaves the lion’s share of refinancing activity with giant banks. Among the biggest beneficiaries: Wells Fargo, which held a third of the market as of March, and J.P. Morgan, with more than 10%, according to Inside Mortgage Finance. U.S. BancorpUSB +0.09% Bank of America Corp.BAC -1.22% and Citigroup Inc. C -2.12% rounded out the top five, which together hold 58% of the market.

Banks have been charging HARP borrowers as much as 0.53 percentage point more than the market rate on the refinanced mortgages, according to Amherst Securities. Officials at the Federal Housing Finance Agency, the independent regulator that runs the program, said the premium is far smaller, around 0.1 percentage point on average, for Fannie Mae borrowers.

A Wells Fargo spokeswoman said the bank’s rates are “competitive with our traditional refinancing loan options.” A J.P. Morgan spokeswoman declined to comment on the rates it is charging borrowers but said “demand from customers has exceeded our expectations.” A Bank of America spokeswoman said, “We offer market-driven pricing for both HARP and traditional refinances.” A spokesman for Citi said the bank is offering market rates. A U.S. Bancorp spokesman couldn’t be reached for comment.

The administration is pressing lawmakers to make it easier for consumers to refinance with different lenders. A senior administration official said the administration tried to get the FHFA to change the policy last year but was unable to do so.

The FHFA, which oversees Fannie Mae and Freddie Mac, which finance the lion’s share of home mortgages, defends the program’s structure. Officials there say that any lack of competition is a problem felt in the overall mortgage market, which has shrunk for years with the collapse of many nonbank lenders and the retreat of large banks such as Bank of America, and not a result of HARP.

“We feel very comfortable that lenders are offering borrowers the HARP product at the going market rate,” said Meg Burns, the FHFA’s senior associate director for housing policy.

Wells Fargo Chief Financial Officer Timothy Sloan told analysts in an April 13 conference call that HARP refinancings made up 15% of new mortgages during the first quarter. At J.P. Morgan, Chief Executive James Dimon told analysts on a conference call April 13 that profit margins “were several hundred million [dollars] higher than what we would call normal for a whole bunch of different reasons, including HARP” and mortgage-industry dynamics such as supply and demand.

Banks also can reap gains as the mortgages are securitized and sold, because of reduced risk that borrowers will repay their mortgages early. Margins on the sale of securitized mortgages averaged 2.1 percentage points higher in the first quarter this year than last year among the top five servicers, an analysis of data from investment bank Keefe, Bruyette & Woods shows.

The original HARP, rolled out in 2009, blocked borrowers from refinancing if they owed more than 125% of their home’s value. Fewer than 900,000 borrowers had used the program when President Barack Obama announced changes last fall. The revamped program removed that loan-to-value cap and made other tweaks.

Mortgage rates have hit the lowest levels on record, sinking to an average of 3.71% for a 30-year fixed rate loan last week, according to Freddie Mac.

Nomura analyst Glenn Schorr said in a research note that most borrowers seeking HARP loans are paying interest rates of 5%-6%. Those borrowers, he said, “would certainly prefer a 3.75% mortgage, but they will happily take a 4%, 4.25% or even a 4.5% loan as well.”


Area Locals Do Well at CIF Track & Field State Meet in Clovis!

HIGH SCHOOLS: South Pasadena’s Kieffer-Wright jumps to state title

By Miguel A. Melendez, SGVN twitter.com/StarNewsPreps
Posted:   06/02/2012 11:27:04 PM PDT

South Pasadena’s Claire Kieffer-Wright wins the high jump at Saturday’s CIF-SS State meet in Clovis. (Scott Varley / Staff Photographer)

CLOVIS – The drought, albeit a short one, is over.

For the first time in two years, South Pasadena High School’s Claire Kieffer-Wright is bringing home a CIF State track and field championship thanks to a gutsy performance in the high jump in front of 7,123 at Buchanan High School.

Kieffer-Wright, a sophomore, made giant strides since narrowly qualifying for the state prelims at the Masters Meet on May 25 as she hit the winning mark of 5 feet, 10 inches. She is the first West Valley state track champion since Sam Pons, now running at Princeton, won the 3,200 meters two years ago for South Pasadena.

In a show of true perseverance, Kieffer-Wright wasn’t deterred despite missing the opening jump of 5-3.

“It was really nerve-wracking missing my first attempt,” she said. “I was a little shaky but I knew I had to compete. That’s the main thing in the high jump besides form and technique, to be able to brush off mistakes and be mentally tough.”

After clearing the winning mark, Kieffer-Wright opted to continue and made an attempt at clearing 6-0 3/4, the qualifying mark for the Olympic trials “B” standard. Kieffer-Wright made two attempts and ended there because of back problems, but the mere fact she had the opportunity to do so showed how much she’s accomplished in just one year.

The East Valley also had a representative sitting atop the podium as Damien’s Jarrett Gonzales won the state title in the 300 hurdles with a mark of 37.30 seconds.

Gonzales made quite a turnaround, from not even reaching the Sierra League finals because of an injury to ending a decorated career as state champion.

Gonzales said a gust of winds right off the blocks worried him a bit, but it wouldn’t be long before he hit his full stride.

“Coming off the last hurdle on the curve and just opening up my stride and sprinting all the way through,” Gonzales said when asked when he felt the race was his.

He didn’t break a personal mark, but the UCLA-bound Gonzales said it was an amazing accomplishment. He pulled a left hamstring and rolled his left ankle in a meet before the start of league his junior season.

“I had an opportunity to run at the world youth trials,” Gonzales said. “I asked my coach and he said I should recover and rehabilitate.”

The move paid dividends.

In the same race, Diamond Ranch’s Andrew Fischer finished ninth with a time of 38.35.

Maranatha’s Ebony Crear accomplished her goal of reaching the state finals in the 100 hurdles. She finished seventh in 14.18.

Crear, the sophomore daughter of two-time Olympic medalist Mark Crear, almost didn’t finish the race.

“The third hurdle I hit it with my right leg and buckled,” she said.

“But I’m just happy I was able to recuperate and keep going. Just do my best because I hit the hurdle.”

In the 400, Arcadia’s Alex McElwee finished seventh with a time of 48.86 while San Marino’s Kyle Ezold, in his first year running track, came in eighth at 49.50.

Bonita sophomore Nikki Wheatley finished eighth in the triple jump with a mark of 37-8 3/4.

La Salle’s Daniel De La Torre got off to a strong start in the 1,600, but it all went wrong 800 meters into the race.

“My muscles started tightening up,” he said.

De La Torre was visibly disappointed with the result, a ninth-place finish in 4:16.38, but he bounced back strong in the 3,200, the final event of the night. He finished fourth with a time of 9:06.60. Arcadia’s Sergio Gonzalez, who scratched from the 1,600 preliminaries, finished fifth at 9:10.46.

De La Torre was about a minute off his personal mark, and though he earned a medal and a spot at the podium it wasn’t enough to bring a smile to his face.

“Whoever aspired to be fourth … not very satisfying for me,” he said. “I never aspire to be that. I use my failures to succeed and help me next year. I plan on winning state next year for cross country and track I want it more than I want to breathe.”

De La Torre, in his first real year of track after several injuries his sophomore year, finished third at the state cross country meet last year.

“I just have a lot more to prove,” he said. “I’ll prove myself next year.”


Read more:http://www.pasadenastarnews.com/sports/ci_20771484/high-schools-south-pasadenas-kieffer-wright-jumps-state#ixzz1wqf1L6ha

What’s on Tuesday’s Election Ballot

The primary election ballot includes local, state, and national candidates, as well as two statewide ballot and two local initiatives. See what candidates Arcadia residents are choosing between.

Los Angeles County voters will go to the polls Tuesday to cast ballots in local, state and national political races, as well as on two statewide ballot initiatives and several local initiatives.

Without a high-stakes presidential primary — Republican Mitt Romney has already earned the delegates he needs to claim the GOP nomination — voter turnout is expected to be low.

The county’s 4.5 million registered voters will have the chance to select a presidential candidate, a U.S. Senate candidate and whether to approve two state ballot measures — one to add a $1 tax on cigarettes to fund cancer research and another to reduce the amount of time politicians can serve in the
state Legislature from 14 years to 12 years.

Six candidates are vying to become Los Angeles County’s top prosecutor. Voters across the county will also weigh in on a total of 18 U.S. House, seven
state Senate, 24 state Assembly and three Los Angeles County supervisorial

The election will mark the first major test of the state’s “top two” primary system approved by California voters in 2010. Under the system, only the top two vote-getters, regardless of political party, will advance to a Nov. 6 runoff. The system does not apply to local, presidential or central committee races.

The system was intended to produce more moderate candidates, said Fernando Guerra, a Loyola Marymount politics professor and director of the Thomas and Dorothy Leavey Center for the Study of Los Angeles.

The intention, however, is likely to be counteracted by low voter turnout.

“Voters that are motivated by ideology are still going to dominate this election,” Guerra said.

Guerra said the “top two” runoff system is also likely to devastate third parties.

“I predict there will not be a single third-party candidate on the (runoff) ballot in November for the first time in decades, in almost 50 years,” Guerra said.

In some cases that could leave as much as 10 percent of the electorate up for grabs during a runoff election.

Dan Schnur, director of the Jesse M. Unruh Institute of Politics at USC, said it could force candidates to communicate more with voters.

“It’s not just a quantity of voter communication. It’s the nature of that communication as well,” Schnur said. “Candidates will find that they can no longer rely solely on the most ideologically intense members of their own party. They will be forced to reach out to a broader range of voters.”

The results of the every-10-year redistricting process also affected the makeup of candidates on Tuesday’s ballot. The 2010-11 redistricting, the practice of redrawing political district boundaries to reflect changing demographics, was conducted by a non-partisan citizens commission, rather than lawmakers. In some cases the process forced incumbents of the same party into the same district.

Arcadia residents will vote for new representatives for Congress and state Assembly. Arcadia is in the 27th Congressional district and 49th Assembly District.

While Arcadia falls in the newly-created state Senate District 22, that district won’t be included in this year’s election cycle; however, a committee will appoint a representative for the district. That representative will remain responsible for the district until the next election cycle in 2014.

The Arcadia representative races and the candidates include:

United States Representative – 27th District (Includes Arcadia, Sierra Madre, Glendora, Altadena, San Marino, and La Cañada Flintridge)

Judy Chu – Democratic
1531 Purdue Ave. Los Angeles, CA 90025
(626) 320-4835


Bob Duran  – Republican
P O BOX 1067, Pasadena, CA 91102

Jack Orswell - Republican
316 W Foothill Blvd., Monrovia, CA 91016
626-629-VOTE (8683)

State Assembly – 49th District (Includes Arcadia, San Marino, Temple City, Alhambra, San Gabriel, Rosemead and Monterey Park)

Edwin Chau - Democrat
1401 Mission St., Ste C1,  South Pasadena, Ca. 91030

Mitchell Ing - Democrat
1432 Arriba Drive,  Monterey Park, Ca. 91754

Matthew Lin - Republican

For more information on the candidates or the June 5 primary election visit the Los Angeles County Clerk website.

Mortgage rates keep plunging: 15-year dips below 3%

By Jessica Dickler @CNNMoney May 31, 2012: 12:45 PM ET

NEW YORK (CNNMoney) — Mortgage rates continued to plunge to new lows this week, with interest rates on the 15-year fixed rate mortgage dipping below 3% for the first time on record.

The 30-year fixed mortgage, the most popular mortgage product, fell by 0.03 percentage points to 3.75%, setting yet another record for the fifth week in a row, according to a weekly survey by Freddie Mac. Last year, 30-year loans averaged 4.55%. The new low can save borrowers about $47 a month for every $100,000 borrowed. Over a 30-year term, that comes to $16,756.

Rates on the 15-year fixed mortgage, which is popular among those looking to refinance, fell to 2.97% — the first time it has dropped below 3% since Freddie Mac began tracking the weekly data. Down from 3.74% a year ago, the new 15-year rate would lower borrowing costs to $689 a month for every $100,000 borrowed, a $37 savings compared to last year.

The continued slide in mortgage rates is, in part, due to ongoingeconomic turmoil in Europe, according to Freddie Mac’s chief economist, Frank Nothaft.

“Market concerns over tensions in the Eurozone led to a decline in long-term Treasury bond yields helping to bring fixed mortgage rates to new record lows this week,” he said.

Rates are almost half what they were at the peak of the housing bubble in mid-2006. At the time, the average interest rate was about 6.75% for a 30-year loan.

Meanwhile, home prices have hit new post-bubble lows, according to the most recent S&P/Case-Shiller home price index of 20 major markets. Home prices have not been this low since mid-2002.

Much lower home prices, along with affordable mortgages, should help to bolster the housing market, but don’t expect a vigorous recovery to follow, said Mike Larson, a housing market analyst for Weiss Research.

“The less you have to pay for a house the better that is but it’s not a cure all,” he said. “Despite lower interest rates, there is still a weak economy and weak job market. That’s not good for underlying housing demand.”

How to Find Low-Cost Investing Help

Want assistance but only have a small nest egg? You’ve got a number of options.

Getting high-quality investment advice at a reasonable cost might seem like a challenge, particularly for anyone with a modest nest egg.

But if you’re a mutual-fund investor with a smaller portfolio, take heart. Advisory fees have fallen significantly because of competition, changes in the way financial advisers package services and the arrival of low-cost Internet-based money-management services.

Individuals have a much larger range of advisory choices than ever before, says Matt Matrisian, an expert on advisory services at the wealth-management arm of Genworth Financial Inc., GNW -1.91% based in Richmond, Va.


David Pohl

Some advisers will craft a basic financial plan and suggest portfolio allocations for a flat fee of less than $1,000 in an effort to build a relationship with a client. Others might do it free, although you will pay continuing money-management fees.

There are some caveats. If you opt for a low-cost service, you may not have the option of calling someone for reassurance if stocks take a tumble. And as your portfolio grows and your life circumstances change, you probably would benefit from spending more on additional services such as educational, tax or estate planning.

But especially for people who have just started accumulating assets, a basic advisory service may be all you need. Here’s what you need to know about finding advisory services at a cost you can afford:


A full-service adviser will try to gauge your tolerance for risk and gather many details about your assets, debts and objectives before designing a portfolio. A really comprehensive financial plan—one that might include estate planning, for example—can cost $2,000 or a lot more.

On top of that, advisers traditionally have charged annual fees of around 1% to 2% of the amount in your portfolio to oversee it. Others get paid by steering investors toward funds that require an upfront sales commission, or “load.”

If you invest in funds—as most people with smaller portfolios do—you also will have to pay the funds’ expenses, which range from less than 0.25% for some index mutual funds and exchange-traded funds to 1% to 2% for some actively managed funds.

All in all, annual money-management fees could cost you around 2% to 3%, a good-sized bite in an era of low interest rates and uncertain equity returns.


Some individual planners and advisers may agree to work at lower fees if they think it will help them forge a long-term relationship with you.

Some may agree to work on an hourly fee basis—$300 an hour is a typical rate—or on a flat-fee-per-project basis.

You can find a financial adviser who might suit your personal needs through websites operated by trade groups such as the Financial Planning Association (fpanet.org), the National Association of Personal Financial Advisors (Napfa.org) or the Alliance of Cambridge Advisors (ACAplanners.org). Another option is Garrett Planning Network (Garrettplanningnetwork.com), a network of fee-only advisers who charge by the hour.

Do some homework before calling a prospective adviser. Pull together your financial data and do some online research to learn about the services advisers offer and what they charge, says Lynn Ballou, a certified financial planner and managing partner of Ballou Plum Wealth Advisors LLC in Lafayette, Calif.

Be straightforward about what you believe you can afford, and don’t apologize for asking for a basic level of service, Ms. Ballou says. “You need to make sure you have the right fit” when hiring an adviser, she says.


Some mutual-fund firms provide no-frill advisory services to people who invest in their products, although there often is a minimum asset requirement.

For example, investors with portfolios of less than $50,000 can get a basic financial plan and allocation recommendations for a flat fee of $1,000 from fund giant Vanguard Group. That fee falls to $250 for people with at least $50,000 to invest.

USAA, a diversified financial-services firm in San Antonio that focuses mainly on U.S. military families, offers free financial planning and investment advice to anyone via telephone, without any minimum asset requirement, says Mary Stork, an executive in its financial-advice and financial-services group. However, USAA advisers will tailor a portfolio only with the firm’s own mutual funds, and you’ll need to have $250,000 to invest if you want a face-to-face meeting.


Discount brokerage firms, which have long served do-it-yourself investors, have started to provide advice and portfolio-management services, too.

People who open an account at discount brokerage Charles Schwab Corp.,SCHW -2.89% for example, can receive a free personal consultation, in person or via phone, and get a financial plan and recommended investment allocations, says Brennan Miller, a Schwab financial consultant based in suburban Chicago.

If you have at least $50,000 to invest, Schwab will create and manage a mutual-fund portfolio for you. The firm charges an annual management fee of 0.50% on the first $250,000 in assets, which covers all transactions and any rebalancing, but not management expenses charged by funds. Schwab also will create and manage a portfolio of ETFs for clients with at least $100,000, for an annual fee that starts at 0.75% of assets.



If you already bank and shop on the Internet, managing your money there might be a natural next step.

Wealthfront.com automates the process of creating a risk profile, recommends a portfolio of ETFs and periodically rebalances it. It requires a minimum of $5,000. Other than expenses charged by the ETFs it uses, it charges no advisory fee on the first $25,000. If you invest more, the fee rises to 0.25% a year.

Wealthfront users won’t speak with a human at the firm unless they encounter a problem that requires technical support.

The service mainly targets young professionals in the tech industry because those “who live their lives on the Web” are likely to be most receptive, says Andy Rachleff, president and chief executive officer. But the service is open to anyone and has attracted others who want to be like those in Silicon Valley, says Mr. Rachleff.

Another online service, Betterment.com, offer personal consultations to people who invest at least $100,000. Those take place with its chief executive officer, Jon Stein, who also is a chartered financial analyst.

Annual fees range from 0.35% for those with less than $10,000 to 0.15% for a portfolio of at least $100,000. There is no required minimum, but the service does ask users, at the least, to commit to arranging a $100 monthly transfer into their Betterment accounts.

Betterment relies on a total of only eight equity and bond ETFs, all from Vanguard orBlackRock Inc.’s BLK -3.07% iShares unit, for varied allocations of its clients.

“By simplifying the solution set, we believe we help people make better decisions,” says Mr. Stein.

Mr. Pollock is a writer in Ridgewood, N.J. Email him at reports@wsj.com.