Marc's Mortgage Matter's

Ever heard of Metro Dream Homes? I hadn’t, until now – and it is rare when I pass up a chance to lose money. Federal authorities say the company, based in Washington DC, bilked $70 million from home owners by promising to pay off their mortgages. ”Metro Dream Homes was founded by Andrew Hamilton Williams Jr., who used some of the $50,000 minimum payments provided by home owners to cover the losses of an automated-teller-machine scheme he was ordered to shut down in 2001, according to the indictment unsealed Monday. Investors in Metro Dream Homes who forked over the $50,000 were told the company would pay off their mortgages…but the cash was used to pay off the mortgages of the original investors and cover other losses.” Some of the original investors, whose mortgages were actually being paid by later investors, would tout the program’s success during the seminars. Investors were encouraged to invest $150,000 or more through incentives offering cash rewards and positions on Metro Dream Homes’ board of directors.


Refinancing typically soars when long-term mortgage rates drop, and recent history is no exception — except in New York.

There was a 92 percent rise in mortgage-refinancing transactions nationwide in the first three months of this year over the corresponding period last year. But New York State had just a 6 percent bump.

In a state filled with expensive homes and big mortgages, the below-5-percent interest rates being dangled in front of borrowers are not available to many New York homeowners, for various reasons. Others may be deterred by the high mortgage tax.

“It’s shocking to see that New York fared so badly,” said Guy Cecala, publisher of Inside Mortgage Finance Publications, a provider of data and analysis in Bethesda, Md., which provided the state and national statistics.

Analysts at Inside Mortgage Finance recently looked at mortgages refinanced with loans backed by Fannie Mae and Freddie Mac, the government-sponsored businesses that buy mortgages from lenders. Those loans make up a vast majority of the nation’s mortgages, but have strings attached.

One is that the lowest rates are only for mortgages of up to $417,000 — rarer in New York than elsewhere, because of high house prices — made to applicants with stellar credit, plenty of equity in the home and a steady, documentable income. Mortgages of up to $417,000 are known as “conforming” or "conventional" loans.

Fannie and Freddie also accept bigger mortgages — known as agency-jumbo loans — in costlier areas like Manhattan and some New York City suburbs. In Manhattan and Hudson County, N.J., for instance, the loan limit is $729,750, and in Fairfield County, Conn., the limit is $708,750. The limits earlier this year were lower.

But even those who can refinance a home with a loan of $417,001 to $729,750 cannot get the best deals, because lenders view such borrowers as riskier than those below the $417,000 threshold. Lenders charge as much as a half of a percentage point more for such loans.

And that’s just a starting point. Fannie and Freddie will add other fees for borrowers who, for instance, have credit scores of less than 720, or for co-op owners with less than 25 percent equity, to name just two factors. Lenders typically build those fees into a loan’s interest rate — which is how an advertised rate of 4.5 percent can quickly turn into an actual rate of 5.50 percent or more.

But Connecticut and New Jersey also have substantial areas of high-cost housing, where agency-jumbo loans would come into play, and refinancing there has risen sharply. Connecticut’s refinance rate has jumped 73 percent from last year, according to Inside Mortgage Finance, and New Jersey’s 72 percent.

One explanation is New York State’s mortgage tax, which generally has to be paid each time there is a new mortgage, even to the same owner. That makes the cost of refinancing higher than it is in most other states. The tax varies by county; in New York City, it is 2.05 percent on loans under $500,000. Borrowers who refinance can sometimes avoid the tax if the lender agrees to treat the new loan as essentially an extension of the old one. These so-called “consolidation and extension” arrangements have been harder to arrange recently, however. Without one, a borrower refinancing a mortgage just under $500,000 in Manhattan would face about $10,000 in taxes.

One year, a husband decided to buy his mother-in-law a cemetery plot as a Christmas gift.

The next year, he didn't buy her a gift.
When she asked him why, he replied, "Well, you still haven't used the gift I bought you last year!"

And that's when the fight started.