TALLAHASSEE — Insurance companies can’t cancel your homeowner policy before December or raise your rates for the next 90 days.

Throwing another hard jab at the property-insurance industry, Gov. Charlie Crist persuaded his fellow Florida Cabinet members to pass an emergency order to that effect Tuesday.

The 90-day rate freeze is intended to make sure companies preparing rate-adjustment requests take into account the steep savings they should get under an insurance law Crist signed last week.

The rate freeze most immediately affects more than 250,000 customers of Nationwide. The company has an arbitration hearing pending because state regulators rejected its request for a 71 percent rate hike last year.

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People looking to extract equity from their homes have increasingly been turning to cash-out refinancing, industry observers say.

A big reason that people are tapping their equity through refinancing comes down to dollars and cents, according to Amy Crews Cutts, deputy chief economist with Freddie Mac. Because home-equity loans and lines of credit are most often tied to the prime rate, now at 8.25%, those options have gotten more expensive even as long-term mortgage rates have remained relatively low, with the 30-year loan averaging about 6.2%.

“It’s all about the prime rate,” said Michael Kodsi, chief executive officer of Choice Mortgage Bank in Boca Raton, Fla. A good number of his clients would rather take cash out through refinancing — where their mortgage rate will be fixed — as opposed to taking out a loan tied to the prime rate, which has the potential to fluctuate and thereby “could go higher down the road,” he said.

Freddie Mac said 89% of the loans it owns that were refinanced in the third quarter of 2006 had loan amounts at least 5% higher than the original mortgage balances, the threshold for considering a loan a cash-out refinancing. It’s the highest share of cash-out refinance loans reported since 1990.

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New ‘jumbos’ are giving retirees the cash they need to stay in their houses

From the living room of her Huntington Beach home, Jean Ingram enjoys sweeping views of pristine California wetlands and, off in the distance, Catalina Island. She and her late husband paid $135,000 for the 2,200-square-foot Tudor-style home in 1978, and it’s now valued at about $1.2 million. Yet until late last year, the 69-year-old widow, awash in home equity but light on monthly income, feared she would have to sell.

Ingram was able to hold on to the house by taking out a jumbo reverse mortgage on the property–”jumbo” because the amount was $388,000, and conventional reverse mortgages would not offer as much on a $1.2 million home. Either way, these financial deals allow homeowners 62 and older to take the equity out of their houses without having to make monthly payments to the bank. The balance comes due when the homeowner moves out or dies. Then, the mortgage holder or the heirs have to sell the property or use other funds to pay off the loan if they want to keep it.

Plans can go awry, however. Say you become ill and need to move out and sell the home immediately. If interest rates have skyrocketed and the property value has remained flat, your equity could be wiped out. But at least the amount you owe would never exceed the market value of the home.

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New home sales plunge by largest amount in 16 years

Sales of new homes plunged in 2006 by the largest amount in 16 years as the nation’s housing industry suffered through a sharp contraction after five boom years.

However, there have been some signs that the steep slide in housing may be coming to an end. For December, new home sales were up 4.8 percent, the second strong monthly gain after a 7.4 percent rise in November.

While those increases were better than expected, analysts cautioned that they were influenced by unusually warm weather in those two months.

The Commerce Department reported that sales of new single-family homes totaled 1.06 million units for all of 2006, down 17.3 percent from the all-time high for sales of 1.28 million units set in 2005.

After setting sales records for five straight years, sales of both new and existing homes suffered sharp declines last year, and that has caused ripple effects throughout the whole economy.

Last year’s plunge in new home sales was the biggest drop since a 17.8 percent drop since the recession year of 1990. Sales of existing homes fell by 8.4 percent to an annual rate of 6.48 million units, it was reported Thursday. That was the biggest decline in the sale of previously owned homes since 1989.

The median price of a new home sold in 2006 was up by 1.8 percent from 2005 but that price gain was far lower than the 9 percent jump in new home prices in 2005.

New home sales were up in all parts of the country in December except the West which posted a 4.4 percent drop. Sales rose by 27.3 percent in the Northeast, 26.6 percent in the Midwest and a much smaller 0.3 percent in the South.

Separately, the Commerce Department reported that orders to U.S. factories for big-ticket manufactured goods rose in December by the largest amount in three months, led by a huge jump in demand for commercial aircraft and the biggest increase in orders for cars and trucks in more than two years.

New orders for durable goods rose 3.1 percent last month to a seasonally adjusted total of $221.9 billion. The gain followed a 2.2 percent November increase and was the strongest showing since an 8.7 percent September advance.

Orders for commercial aircraft surged by 26.5 percent, reflecting the sizable 212 plane orders that Boeing Co. booked during the month. There also were gains in a number of other industries, providing evidence that manufacturing is working its way through last year’s economic slowdown.

The auto sector, which struggled last year with rising gasoline prices and stiff foreign competition, saw a 6.8 percent rise in orders for vehicles and parts, the biggest one-month gain since August 2004.

Excluding transportation, orders for durable goods posted a solid 2.3 percent increase, the best showing in this category since last March and much better than analysts had been expecting.

For all of 2006, new orders rose by 7 percent, a slight slowdown from an 8.6 percent increase in 2005. Orders had risen by 6.9 percent in 2004 after having fallen in 2002 and 2003 as the country was struggling to emerge from the 2001 recession. Manufacturing was the hardest hit sector in the last downturn.

Economic growth slowed to a lackluster 2 percent in the July-September quarter, raising concerns that the steep slump in housing could trigger an outright recession.

However, in recent weeks a number of reports have shown the year ended with stronger-than-expected activity, easing worries about such a general slowdown.

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Buying a home is the best investment you can do in your entire life. Not only that it gives you the pride of becoming a homeowner, it also gives you the security that you have a place to stay at the end of the day. This is why many people apply for home mortgage. The mortgage opens the opportunity to everyone to have a place they can call their own even if these people cannot pay the house in full. Mortgage allows ordinary people to own a home that they promise to pay in definite period and amount.

But what if somewhere along the payment period, the original fixed interest rate has considerably declined?

Since the primary objective of those who avail home mortgage is to own a home, the interest rate can be set aside. While this is just normal, there are people who opt to be more conscious in every single penny they pay. And when the original fixed interest rate has considerably declined, most of them go for a mortgage refinance.

Here are the benefits these people can get when they choose to refinance their homes:

Lower monthly payments

It is true that the house is the biggest asset a person can have. But it is also true that the monthly payment for mortgage is the biggest eater of monthly budget. So, would it be better if homeowners have the choice of lowering down the monthly payment? Refinancing is the best way to do it, since refinance will adopt the current interest rate. Every borrower knows that he or she is paying big on interest rate especially during the first half of the term. If refinanced, the old rate with higher monthly payment is replaced by new and lower rate that equates to lower monthly payment.

Changing from fixed-rate to adjustable rate

Interest rates influence the fees homeowners pay monthly. There are two kinds of interest rates used in mortgages: fixed-rate and adjustable rate. When the rates are low, the adjustable rate mortgages are the most desirable. Meanwhile, if the interest rates are high, fixed-rates can be more ideal option. So if the homeowner has applied for fixed-rate loan and the interest rate have suddenly went down, changing from mortgage fixed-rate to adjustable rate is the best option. This will give him the freedom to use the lower interest rate as an advantage that would result to lower monthly fees.

Option to shorten the length of mortgage

Mortgage refinance would allow homeowners to change the length of mortgage. For instance: A homeowner is on the 7th year of payment on a 30-year term, with mortgage refinance, he can switch to shorter terms and opt either for 10, 15, or 20 years. This will give him thousands of dollars of savings on the interest rate. He can also increase the value of his equity as he pays more on the principal rather than the interest.

Extra cash

Using refinancing, a homeowner can access extra cash through the equity he has built. This is helpful in remodeling the house or paying for other things.

With the proper knowledge on how to use the house as a source of money, any homeowner can benefit with the mortgage they once thought to be “buying a home now and think of the monthly payments later.

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Reverse mortgages are gaining in popularity, but if you are considering getting one, you might want to wait a little while. Better deals may soon be available as competition between companies entering the market heats up.

A reverse mortgage is exactly what it sounds like—instead of paying the bank money to build up equity, you use the equity in your home to take out a loan. You must be 62 years or older to qualify for a reverse mortgage, and the loan does not have to be paid back until you sell the house or die. The loan can be used for anything, including providing money for retirement or to paying for nursing home expenses.

Costs for reverse mortgages have traditionally been high, but more companies are beginning to offer reverse mortgages, and the competition is driving down costs, according to an article in the Chicago Tribune. In addition, companies are offering more options, such as flexibility in payment and higher loan amounts. All the changes mean that soon there will be more options for consumers. If possible, experts suggest waiting until late 2007 or early 2008 before getting a reverse mortgage.

Also, keep in mind that while reverse mortgages may look like no-lose propositions on the surface, they also have some significant downsides. For more information on reverse mortgages, click here.

For the Chicago Tribune article about the new options, click here.

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Brian and Lisa Wilcock looked at mortgage interest rates four years ago, did the math and came up with a plan: Because they intended to move in three years, they’d refinance their 30-year fixed-rate mortgage into a three-year adjustable-rate mortgage (ARM) at a lower interest rate and save hundreds of dollars a month.It worked-for a while.

The lower rate shaved $375 off the mortgage payment on their Rochester Hills home. But four years later, they’re still in their three-bedroom, split-level house and have no plans to move. Their introductory rate of 4.37% reset last year, with a 1.25% cap that spared them the full brunt of the interest rate increase. But that’s set to expire in April when the ARM resets to a rate that will likely be above 6%.

“It’s pretty much no-holds-barred and it gets painful from there,” said Brian Wilcock, 38, of his mortgage’s interest rate, which will climb yearly if he doesn’t refinance. Wilcock thought the family might have to relocate due to his sales job.

For the Wilcocks and thousands of other Michigan homeowners, those low three- or five-year teaser rates on ARMs are adjusting higher this year, and homeowners will feel the difference in their wallets. Mortgage experts estimate that approximately $1.5 trillion worth of adjustable mortgages will reset by the end of 2007. Forecasts call for $600 billion to $700 billion of those loans to be refinanced into new loans, including fixed-rate mortgages.
Locally, lenders report an anecdotal upswing in clients refinancing into 30-year fixed-rate mortgages. Last year, ARMs represented 30% of all mortgages, according to the national Mortgage Brokers Association. By 2008, the group estimates, the number will drop to 18%

“We definitely want to get into something more secure,” said Lisa Wilcock, 35, a part-time nurse and mother of two. The couple is mortgage shopping for 30-year fixed rates. “We don’t want it to keep rising and rising and rising.”

Monthly jolt

Just five years ago, adjustable-rate mortgages carried interest rates so low they allowed homeowners like the Wilcocks to lower their monthly mortgage payments by hundreds of dollars. First-time home buyers flocked to the loans as well, since they allowed often cash-strapped first timers to afford a larger house.

“There are more people now than ever with adjustable-rate mortgages,” said Greg McBride, senior financial analyst at Bankrate.com. “The problem — and you could see this coming a mile away — is that interest rates have increased and those same borrowers are coming up for a rate increase.”

If a homeowner in 2004 got a three-year ARM at 4% on a $250,000 loan, the monthly mortgage payment was $1,150. That payment today would increase to $1,500 monthly, lenders said. And figured at an interest rate of 7.5%, the payment would increase $509 more per month.

“That’s called payment shock,” said Ron Cockle, who manages Michigan, Wisconsin and Iowa as a regional manager for Wells Fargo Home Mortgage.

Still affordable

The good news is that the shock may be bearable for many. The MBA estimates that up to $800 billion of the loans will simply reset, with owners making their new payments. Interest rates are currently hovering around 6.25% and most experts expect them to stay under 7% this year.

If a homeowner decides not to refinance, the interest rate will rise at a capped percentage determined by the lender at closing. Typically the cap is 2% to 5%. And since an ARM can’t adjust above the current market rate, “Nobody’s going to 9%, no matter what your cap is,” said Ken Mascia, president of the Oxford Financial Corporation in Birmingham.
Mortgage experts said ARMs still work for some buyers, especially those who expect their incomes to rise or those planning to live in their homes for fewer than five years.

In January, Christopher Dooley Sr. refinanced his second home in northern Michigan into a 7-year ARM at 5.8% interest. Dooley had a 30-year fixed-rate mortgage at 6.75%.

The operations manager at the DeWitt Products Co. in Detroit plans to sock away the $200 he saves monthly toward his retirement in five years. Then he plans to sell his primary residence in White Lake Township and use the profit to pay off his second home and live there during retirement.

“It frees up a little money here and there,” Dooley, 50, said of his ARM.

The Wilcocks will miss the extra money their ARM freed up monthly, but said they welcome the security a fixed-rate mortgage will bring.

“We feel like we’ve lived with” the ARM “for a year after it adjusted,” said Lisa Wilcock. “It did its job and it’s time to move on.”

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They help sell, lend, buy in 1 stop 

Some Valley real estate agents are on the cusp of a new trend to simplify the process of buying a home, selling one, securing loans and setting up mortgages.

They are becoming “hybrid agents,” people who double as agents and loan officers.

Jim Decker, an associate broker and agent at West USA Realty in Peoria, decided to venture into lending as a way to become more versatile and better inform his clients.

“I was tired of some of my clients getting bad deals from mortgage companies,” Decker said. “It’s a huge step in buying a home, and if I can give them the answers they need, the whole transaction goes smoother.”

To learn the lending side of the industry, Decker teamed up with JSSmith Mortgage, a Scottsdale-based company that offers a training program to help an agent like Decker make the transition to a hybrid agent.

Once accepted into training, an agent is paired with seasoned loan officer at JSSmith Mortgage.

The trainer helps the agent work through several loan transactions with clients.

Jeffrey Smith, president of JSSmith Mortgage, created the program as a way to help agents streamline the sales process, whether customers are looking to buy, sell or refinance.

“All of the clients I’ve talked to want that simplification,” said Smith, who has worked in the mortgage industry for 25 years. “With hybrid agents, the transaction becomes a seamless process.”

For the past 15 years, Smith has set up more than 100 in-house mortgage companies for real estate brokerages and builders around the western United States.

“The challenge in making those work is the Realtors are independent contractors and not necessarily motivated to use the in-house lender,” Smith said. “The hybrid agent takes it one step further.”

Of about 70,000 licensed agents in the state, a few hundred double as loan officers, Smith said.

“This seems like a brand new idea, but in a decade, it will be everyday practice,” he said. “Some people in the industry are fighting this change, but it makes sense if you can simplify the process.”

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BATON ROUGE, La. (AP) - A business organization has fired the first salvo in what is shaping to be the biggest battle for lawmakers in the coming year. How to reform the way property insurance is bought and sold in this state.

Officials of the Coalition to Insure Louisiana say the coming debate over insurance reform should be framed to make the state more attractive to more insurance companies.

They argue that more companies mean more competition and that competition drives down prices.

To those ends the group of 31 trade associations linked to the real estate development industry proposed 15 changes to the state’s regulatory scheme.

The coalition’s package is the first — but is not expected to be the last — proposal addressing the problems of property insurance.

Those policies protect property investments, such as homes, from damage caused by events, such as storms. Without the property insurance, banks can’t loan money to buy houses and businesses.

Reacting to widespread post-hurricanes anger, several lawmakers are putting together proposals to fix the high cost and low availability of property insurance.

Senator Julie Quinn is convening a task force at the State Capitol tomorrow to take testimony from consumers and businessmen who sell, buy and underwrite policies that protect property. Her goal also is to develop reform legislation.

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For all the complexity of the Legislature’s special session on insurance, one point is clear: Floridians will get better legislation if insurance agents don’t write all of it.

In the House, the Job and Entrepreneurship Council oversees several legislative committees, including the Insurance Committee. The council chairman is Rep. Don Brown, R-Defuniak Springs. The council vice chairman is Rep. Ron Reagan, R-Bradenton. Both are insurance agents. Rep. Reagan also is chairman of the Insurance Committee. A member of that committee is Rep. Priscilla Taylor, D-West Palm Beach. She’s an insurance agent. Last year, Rep. Brown led the effort in the House to pass a bill that did much for the insurance industry but comparatively little for consumers.

It’s hardly new for lawmakers to serve on committees that make laws affecting their own businesses. In the Florida Senate, for example, a citrus grower is chairman of the Agriculture Committee. The same is true with the House Agribusiness Committee. But while such legislators may bring expertise, they also bring an inherent conflict of interest. With insurance, the biggest issue facing Florida, there is no bigger conflict than the wish of insurance agents to keep the price of policies high and the wish of Floridians to have them come down.

What happens when insurance agents set state laws on insurance? Last year, the Legislature required Citizens Property Insurance Corp., the state-run insurer of last resort, to set rates that are “actuarially sound” and would enable Citizens to cover a one-in-75-year storm - basically, a worst-case scenario. That meant much higher rates for the company into which private insurers have dumped many higher-risk policies. That meant many unaffordable rates for captive policyholders in Southeast Florida.

But as The Post reported Monday, those higher premiums have meant higher commissions for the 8,500 private insurance agents whom the state allows to write those Citizens policies. From $132 million statewide in 2005, commissions are projected to be $237.7 million for 2006 when all the numbers are in and $357.5 million for this year. Since state law requires Citizens to have the highest rates in the state, premiums for private policies also have increased, along with commissions for agents writing private policies.

Yet this year, six different House Republicans are sponsoring the six insurance-related bills. They would revamp Citizens, increase the amount of reinsurance for private companies with the idea of lowering their premiums from the savings, expand the state program for hardening homes, prevent private companies from doing business selectively (”cherry-picking”), toughen the building code and call for a national disaster fund. Each bill has a Democrat as prime co-sponsor.

The sponsor of the rate reduction bill is Rep. Dick Kravitz, R-Jacksonville. He’s an insurance agent. House leaders, however, say that the industry will not control the outcome. If that’s the new policy, policyholders will be grateful.

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