Mortgage Newsletter Spring 2025
Mortgage News and Updates – Spring 2025
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- Economy & Mortgages: Tariffs, Inflation, and the Fed: What’s Next for Mortgage Rates
- What is NMLS all about?
- How to Access Equity without Letting Go of a Good Thing.
- What are Involuntary Property Liens?
- What’s an Appraisal Gap? (And How Not to Fall Into It!)
Economy & Mortgages: Tariffs, Inflation, and the Fed: What’s Next for Mortgage Rates
What is NMLS all about?
You likely know the “MLS” is a service listing current homes for sale. What, though, is the NMLS? It's only different by 1 letter, after all! Meet the "Nationwide Multistate Licensing System.” Not a listing of homes for sale, but an important consumer resource -- an online platform used by states to manage licenses for mortgage loan originators and lenders.
Created in response to certain practices that contributed to the financial crisis of 2007-2010, it allows individual mortgage professionals and businesses to apply for, renew, and manage their licenses across multiple states through a single national system.
Consumers can use the NMLS website to check the licensing status of mortgage entities and individuals to verify who they are, their office location, and what states they’re licensed in.
Complaints can be filed there too. Check on us anytime!
How to Access Equity Without Letting Go of a Good Thing
Like many, you may be planning to stay put in your current home and make upgrades which will support various needs or goals.
As homes age, they routinely need renovation, whether to update outdated features (those old tile countertops), or repair/replace features that are losing functionality (that wood-burning fireplace with the cracks showing in the mortar).
Other homeowners want to add an additional dwelling unit (ADU) to their property, for an aging parent or a renter. Still others want to consolidate higher interest loans, like credit card debts, into a more affordable loan.
To get at that equity, there are 3 time-tested approaches.
Cash-Out Refinance: These have long been an option if your home has risen in value: refinance to a lower rate and a larger mortgage, keeping your payment about the same, you can get lump-sum cash out instantly. However, If your current record low rate makes that refinance unattractive, you have company! It’s estimated that over $32 trillion of home equity is “trapped” behind low-rate first-lien mortgages. Read on!
Home Equity Loan: These are second mortgages that are most suitable for dealing with one-time, large expenses like paying off other debts that have higher interest rates (auto, educational, medical, credit card, etc).
All the money is provided up front, and you begin paying interest on that full amount immediately. The rate is fixed, and you repay it in predictable, fixed monthly installments over a set period, just as with your primary mortgage.
Since it's secured by your home, it's usually at a lower rate than many other types of debts. Depending on the exact program, you could borrow a significant amount of the equity in your home (in some cases, up to 90%).
Home Equity Line of Credit (HELOC): These loans are most suitable when you need money periodically for ongoing projects or expenses. You can withdraw funds as needed during a “draw period,” which typically lasts ten years. Borrow only what you need, when needed, not up front.
It can be paid down, and reborrowed while you're in the draw period. It's effectively a revolving line of credit, like a credit card, but secured by your home, so the rates on outstanding balances are much, much lower. Interest is paid only on the amount borrowed.
The rate on the HELOC varies with the market, since you are in control of when the funds are accessed. Some people set up HELOC’s as a “safety net” for a future need, including emergencies. You never know when it could come in handy, and getting a loan during an emergency (i.e., job loss, health crisis) could be difficult.
A Note of Caution: You may also hear about “equity sharing” options, where private companies will provide cash with no payments due, in exchange for a portion of the equity on your home at some point in the future or based on a triggering event (like when you sell or refinance). If that raises a red flag, it probably should.
These are less straightforward than the three traditional options above, can be difficult to evaluate, and in some cases cannibalistic to the equity stake you are left with in the end. Talk to us for a second opinion before pursuing one of these.
We can help you make the right call, and find an equity loan or line of credit that works for you. We help you evaluate the usage of funds, repayment plans, cash flow needs, and time horizons in finding the right options for your needs.
What are Involuntary Property Liens?
A property lien is a legal claim that a creditor asks a county recorder to place against a property to recover debts from a property owner. Liens can apply to houses, cars, boats, and other real estate. There are two types: voluntary and involuntary.
In signing for your mortgage, you (voluntarily) agreed to have a “voluntary lien” applied to your property. When you pay off your mortgage, the lien is cleared, and off you go. If you fail to pay your mortgage, the lien gives that lender the right to repossess your property. Same with cars and boats.
What is an Involuntary Property Lien?
An involuntary lien is one you didn’t agree to up front. Good news: most creditors can’t place an involuntarily lien on your property - - an example being your credit card lender. Credit card debt is “unsecured”, meaning they can’t come after your house if you don’t pay (which is why credit card rates are so high instead).
However, there are other debts where the agency or creditor is legally allowed to place an involuntary lien on your property. Common ones are:
• Property tax lien: Issued by state or local governments for unpaid property taxes.
• Federal tax lien: The IRS places a lien due to unpaid federal taxes.
• Homeowners Association (HOA) lien: HOAs can typically place a lien for unpaid HOA fees.
• Mechanics lien: Contractors can place a lien for unpaid invoices. Contractor disputes can sometimes go unresolved, and later the homeowner discovers a mechanics lien when they try to sell.
• Judgment lien: Plaintiffs in lawsuits and debt collectors can file a judgment lien for the amounts due.
In most states, you can find out if there is a lien on the property by contacting your county recorder or assessor’s office. When selling or buying a home, a title search will check for any outstanding liens, and any “clouding” of the title must be resolved before closing.
You can avoid involuntary liens by staying current on taxes, contractor payments, and judgments. If you can’t stay current, find out if a payment plan is an option.
If you do end up with an involuntary lien, and you get it paid off, be sure to have the lien holder sign a release-of-lien form and submit it to the local government office.
If you are struggling to clear a lien, an attorney can help. We can connect you with the right attorney who can help resolve your situation.
What's an Appraisal Gap? (And How Not to Fall Into It!)
The hyperactive pandemic real estate market, with low interest rates and skyrocketing prices, saw a boom in the occurrence of appraisal gaps, where a house’s appraised value (often based on recent sales only a few weeks old) still falls well short of the agreed-upon sales price. Today, the market is certainly less frothy, but the low inventory situation is still resulting in buyers resorting to escalation-clauses that lead to bidding wars, especially for the most desireable homes (starter homes) -- and thus appraisal gaps are still prevalent.
In order to support the final mortgage amount, an appraisal is typically performed after the sales price is agreed upon. An appraisal gap can result in a higher loan-to-value ratio (if the borrower can qualify), or having to bring extra cash to the table to cover the gap and keep the anticipated mortgage structure the same. The borrower is to some degree “stuck” unless they plan ahead!
One solution in bidding on a house is a contingency clause (or form) where the buyer caps the additional amount they can bring to the table if the appraisal comes in low, and allows an exit if it exceeds the threshold. It’s a great solution but involves some math related to the mortgage.
We can help you determine the right amount to put in this contingency/exit strategy, such that you have a competitive offer, enough cash to cover closing costs, and don’t get caught by a gap you can’t manage through. Lean on our expertise, if you're considering a purchase!
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