Of all the confusing and expensive things about buying a house or [tag]refinancing a mortgage[/tag] — and there are plenty — title insurance just might take the prize. “A lot of customers don’t understand [tag]title insurance[/tag],” said Samuel Ingram, president and CEO of myclosingspace.com, a Wall company that offers title insurance and other house-closing services. “It’s the largest component of your closing costs, and yet people don’t know anything about it.”

They should start learning about it, because title insurance, which protects homeowners’ property ownership rights, is drawing scrutiny from state regulators and other critics. They charge that: title insurance prices — and profits — have unfairly soared, because they’re based on house prices, which skyrocketed from 2000 to 2005. “The real estate boom has been very profitable for title insurers,” said J. Robert Hunter, director of insurance for the Consumer Federation of America. (more…)

[tag]Trump-Style Negotiation[/tag] by George Ross (John Wiley and Sons, $24.95). This book offers insights into Donald J. Trump’s big-thinking negotiation style, which leaves the contract details to his trusted adviser, George Ross. Only serious real-estate buyers, sellers, real-estate agents and investors will study this well-written book that reveals negotiation tactics not found elsewhere, illustrated with many actual examples from Trump acquisitions.

The Automatic Millionaire Homeowner by David Bach (Broadway Books, $19.95). If you could read only one real-estate book, whether you are a renter considering a home purchase, a current homeowner, a seasoned realty investor or a real-estate agent, this is the book for you because it shows how homeownership can lead to wealth. The book’s two themes are a) renters can become millionaires by investing in their first house or condo and b) that residence can become the foundation for a better home or more investment property in future years. (more…)

Mortgage giant [tag]Fannie Mae[/tag] has taken a significant stride in its march out of a accounting scandal by completing a restatement of past earnings but still faces tough work to make its financial reporting current. The restatement for 2001 through June 30, 2004, made public on Wednesday, wiped out $6.3 billion in profit for the government-sponsored company, which finances one of every five home loans in the United States.

OFHEO is the federal agency that regulates Fannie Mae and Freddie Mac, its smaller sibling in the $8 trillion home-mortgage market. Last May, it issued a blistering report alleging a six-year accounting fraud at Fannie Mae, the second-largest U.S. financial institution after Citigroup Inc. Regulators said the scheme included manipulations to reach quarterly earnings targets so that company executives could pocket hundreds of millions in bonuses from 1998 to 2004. Fannie Mae paid a record $400 million civil fine in a settlement with OFHEO and the Securities and Exchange Commission. It also agreed to limit the growth of its multibillion-dollar mortgage holdings, capping them at $727 billion, and to make top-to-bottom changes in its corporate culture, accounting procedures and ways of managing risk. (more…)

Years in the making, a federal tax deduction for [tag]mortgage insurance[/tag] is all but assured after bills which include the provision were passed last week by both the House of Representatives and the U.S. Senate. Only borrowers who close loans during and after 2007 and make less than $100,000 a year will be eligible to deduct all the private or government mortgage insurance paid for the year.

The growth in the use of piggy-back loans, down-payment assistance programs, other creative financing and rapid home price appreciation that allows home owners to refinance have all contributed to the declining number of policies. Maligned years ago when two in five new loans were saddled with the coverage, and before laws mandated full annual disclosures and the right to cancellation, mortgage insurance has its pluses and minuses. Because buyers with down payments of less than 20 percent have higher default rates, the insurance is typically mandated on low down payment loans or first loans that don’t also come with a second or “[tag]piggy-back[/tag]” loan to bring the down payment to 20 percent. (more…)

In the first national study on the study on the subject, the Consumer Federation of America has documented that women — no matter whether their incomes and credit scores are higher than men’s in the same market — are more likely to be put into [tag]higher-cost subprime mortgages[/tag] when they buy or refinance a home.

After examining case files on 4.4 million randomly selected mortgages originated in 2005 and available through the federal [tag]Home Mortgage Disclosure Act[/tag] (HMDA) database, CFA researchers found that: Women earning double the median income for their area nonetheless are 50 percent more likely to be charged [tag]subprime mortgage rates[/tag] than men with comparably high incomes. One third of all women in the 2005 sample took out mortgages with rates higher than 7.66 percent — far above the 5.87 average prime rate for that year — compared with one of four men. (more…)

[tag]Subprime mortgages[/tag] are loans made to borrowers who are considered to be higher credit risks because of past payment problems. Since these loans are so profitable, the market has grown at a 39% annual rate from $120 billion in 2001 to $625 billion in 2005. But if a borrower can’t pay back the loan, the costs of this rapid growth become apparent. Up until 2005, if a borrower could not pay back the mortgage, the borrower could sell the house and use the proceeds to pay the mortgage company.

In October, borrowers were 60 days or more behind in payments on 3.9% of the subprime home loans packaged into mortgage securities this year — nearly twice the delinquency rate on new subprime loans recorded in 2005. And UBS expects 2006 to be “one of the worst ever for subprime loans” with 80,000 subprime borrowers behind on their payments. The way this happened with subprime mortgages is similar to what is going on now in lending to private equity buyouts. In subprime mortgages, the initial success during the real estate boom caused lenders to relax their standards and loosen their requirements for documentation. In 2003 and 2004, defaults were unusually low and investors who bought the mortgages did well and wanted more. (more…)

Democrats plan to use their new majority status in Congress to expand the [tag]mortgage market[/tag] for tens of thousands of home buyers in Massachusetts and other states where high housing prices are limiting use of federally regulated mortgage programs, according to Capitol Hill lawmakers. [tag]Representative Barney Frank[/tag], a Newton Democrat set to become the chairman of the [tag]House Financial Services Committee[/tag] in January, said he will aggressively push legislation to ease current restrictions on the amount of a mortgage that can be held by Fannie Mae and Freddie Mac, two private mortgage companies chartered by the federal government.

Current law sets a limit — currently at $417,000 — on the maximum amount of a housing loan held by Fannie Mae and Freddie Mac. But because home prices in Massachusetts are comparatively high, relatively few buyers can benefit from the programs, housing advocates said. Frank said he will use his power as chairman to seek a change in the law to correlate the mortgage cap to the price of housing in an area, instead of a flat limit that now applies to all areas of the country. The current rules “keep them from doing luxury housing in Nebraska,” but severely limit opportunities for what would be considered middle-income homebuyers in Massachusetts, Frank said. (more…)

When you write a personal-finance column, being hit up for advice by friends and colleagues comes with the territory. Recently, a colleague asked whether the time was right for his wife and him to refinance their mortgage. [tag]Mortgage rates[/tag] have fallen since they purchased their first home and they wondered whether they might save some money — and worry — by refinancing. Normally, I would have simply directed him to WSJ.com’s “[tag]Should you refinance?[/tag]” tool, which calculates whether refinancing to a lower-rate loan makes financial sense once all the closing costs necessary to obtain the new loan are taken into account. But his situation is a bit more complicated. When he and his wife bought their home, they took out a so-called [tag]piggyback mortgage[/tag].

Piggyback mortgages, which stack a smaller home-equity loan or line of credit on top of a primary mortgage, became popular in the late 1990s. These mortgages were the first in a “creative financing” wave that made homes more affordable for homebuyers and helped to fuel the recent boom in the housing market. A piggyback loan is commonly designed as a primary mortgage that covers 80% of the home’s cost, paired with a second loan that usually covers 10% to 20% of the remaining cost. (Anything left over is accounted for by the down payment.) Lenders have gotten much more creative with financing options so there are many varieties of piggybacks — such as 75%/15%/10%, for instance. (more…)