Mortgage rates ease as Bank of England’s bitter medicine shows signs of working
Phillip Inman
Fixed deals edge down as the City predicts that interest rates are nearing their peak and the UK economy cools
Several of the nation’s biggest lenders cut rates on their fixed mortgage deals last week, in a sign of mounting expectations that the Bank of England may be nearing the end of an aggressive cycle of interest rate rises.
Next week, the Bank is expected to push up interest rates for a 14th consecutive time from 5% to 5.25%, with financial markets betting that they will peak at 5.75% by the end of the year. Many analysts expect this will mark the end of a cycle of interest rate rises that began in December 2021, giving the major lenders some confidence that previous fears of a 6.5% peak were overdone.
Nationwide, Barclays, HSBC and TSB have all announced in recent days that they would be cutting rates on fixed-rate mortgage deals, as competition for borrowers helped to drive down the cost of some deals. The average rate on a two-year fixed mortgage deal edged lower on Friday to 6.81% compared with 6.86% on Wednesday, according to Moneyfacts data.
The turning point in expectations for interest rates came earlier this month, when the latest official figures showed inflation fell more than anticipated in June to 7.9% from an unexpectedly sticky rate of 8.7% in May. Core inflation, which strips out food and energy, and is closely watched by the Bank of England, also fell back to 6.9% from a 30-year high of 7.1% in May.
City economists said the likelihood of declining wage growth (which was 7.3% in the three months to May compared with a year earlier) and further sharp falls in inflation later in the year meant a rise in interest rates in September to 5.5% or possibly 5.75% would prove the high-water mark.
Mortgage providers have bet that rates will peak at a lower point than previously expected, and HMRC figures show that homebuyers have returned to the housing market, ending speculation of a collapse in prices.
Lower mortgage costs correlate with an outlook for the economy that comes close to stagnation. Gross domestic product fell in May by 0.1% after growth in April of 0.2%. Consumer spending has started to slip and retailers are feeling the pain.
The Bank of England, when it considers further rate rises in the autumn, is likely to be only concerned about the tightness of the labour market and persistent wage growth, but there is a growing consensus that business sectors willing to increase wages are about to run out of steam.
Paul Dales, chief UK economist at the consultancy Capital Economics, says: “While there is probably enough inflationary pressure to prompt another hike at the following meeting in September, to 5.5%, we think that a mild recession and an easing in both wage growth and core inflation will prevent further hikes.”
George Buckley, chief UK economist at Nomura, says a change in the make-up of the nine-strong monetary policy committee will mean the peak could be 5.75%. One of the committee’s main critics of steep interest rate rises, the LSE professor Silvana Tenreyro, has left and been replaced by the financial expert Megan Greene, probably pushing it in a more hawkish direction, tending towards higher rates.
Dales says a likely recession will make cutting rates irresistible at the back end of next year. “When rates are eventually cut in late 2024 and in 2025, we think they will fall further than investors expect.”
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Financial markets expect the Bank of England will keep rates above 5% into 2025.
Andrew Goodwin, chief UK economist at the consultancy Oxford Economics, says the economy is likely to experience “maximum pain” over the next six months and the first half of 2024. “There is a hump of people on two-year fixed-rate mortgages that they took out in 2021 and 2022. They will see a huge jump in monthly payments, forcing them to cut back on discretionary spending.
“The labour market will suffer, leading to a fall in wages growth and maybe higher unemployment. For the Bank of England, there will be quite a few signs the medicine is working,” he said.
One of the biggest barriers to homeownership is amassing the large down payment necessary to purchase a property.
This is especially true post-housing crisis, with no money down mortgages largely a thing of the past through traditional avenues.
Interestingly, studies have shown that low credit scores are a lot more dangerous than low down payments, though a combination of both could be a recipe for disaster.
And even though there are now conventional loan programs that allow LTVs as high as 97%, along with FHA financing that requires just 3.5% down, many still seem to have trouble coming up with the necessary funds to achieve the American Dream.
But what many prospective home buyers may not realize is that there are scores of down payment assistance programs available to them. And I’m not talking about dodgy private lending companies, I’m referring to legitimate state-run housing agencies.
A new analysis from RealtyTrac and Down Payment Resource revealed that 87% of the properties in the United States qualify for some sort of down payment assistance.
Yes, there are income limits as well, which may prevent some buyers from taking advantage of such financing options, but the limits are often pretty high.
The pair of companies noted that more than 68 million U.S. properties are eligible based on maximum home price limits.
In fact, at least one down payment assistance program is available in every single county nationwide.
And in 2,000 counties nationwide there are more than 10 such programs available to homeowners who actually bother to seek them out.
While these programs appear to be plentiful nationwide, the most can be found in the South, with the West not far behind.
The states with the most down payment assistance programs include California, Florida, Texas, Maryland, and New York.
Homeowners Can Get $12,000 on Average in Down Payment Assistance
The analysis found that the average amount of down payment assistance is around $11,565 across all counties. Obviously it can be substantially more in places where home prices are higher.
Typically, it comes in the form of a Community Second, which is a second mortgage with a very low interest rate or no interest rate at all. And in some cases, it is forgiven as the homeowner makes on-time payments.
These subordinate loans can reduce closing costs from as much as $20,000 to just a couple hundred bucks.
And they can often be combined with a first mortgage from the same housing agency to lower the total mortgage payment even more and/or push the out-of-pocket down payment to zero. Or with FHA/VA financing.
Borrowers can also take advantage of Mortgage Credit Certificates (MCCs), which are federal tax credits that can increase household income by offsetting taxes.
There are also housing grants and other special programs geared toward teachers, firefighters, police, military, and other public servants that make homeownership more accessible.
Just keep in mind that these programs do have many restrictions in place to ensure the assistance falls in the right hands.
That means you often need to be a first-time home buyer who doesn’t make more than the median income for the area in which you’d like to buy.
Additionally, the home should be your primary residence, not an investment property or second home.
You’re also most likely looking at a 30-year fixed-rate mortgage as opposed to anything exotic like an ARM. And a decent credit score may also be a requirement.
Down Payment Resource claims that 24% of mortgage borrowers are denied loans due to insufficient funds. At the same time, these borrowers are eligible for an average of seven down payment assistance programs.
The takeaway here is there are tons of financing options for would-be homeowners that are often never even explored, and many could be missing out simply because they’re not doing the research.
If you’re setting out to buy a home, it might not hurt to look up your state’s housing finance agency (HFA) to see what it offers.
Tracking housing inventory this summer is like watching a zombie slowly walking on the beach. Last week inventory growth dropped and new listing data declined again. Strong labor data pushed up mortgage rates and purchase applications fell week to week.
Weekly active listings rose by only 4,988
Mortgage rates rose from 6.99% to 7.12% before ending the week at 7.04%
Purchase apps were down 3% from week to week
Weekly housing inventory
For spring and summer, I wanted to see at least a few weeks where active listing grew by 11,000-17,000, which hasn’t happened recently. Two weeks ago we had some good movement with active listings growing almost 9,000, but last week that fell to just 4,988, and new listings data also fell.
Same week last year (July 22-July 29): Inventory rose from 525,548 to 538,908
The inventory bottom for 2022 was 240,194
The inventory peak for 2023 so far is 484,599
For context, active listings for this week in 2015 were 1,207,493
As we can see below, housing inventory is growing at a slower pace this year, and active listings are now negative year over year versus 2022 levels.
More people tend to list their homes in the spring and summer months, which is why we need inventory to gain some traction before it hits a natural seasonal decline. Instead, new listings data had a small decline last week. As the chart below shows, new listing data has been trending below 2021 and 2022 levels for some time now and is trending at the lowest levels ever.
Here’s how new listings compares to the past few years:
2023: 62,478
2022: 74,076
2021: 81,053
The 10-year yield and mortgage rates
Last week we got another strong jobless claims report, which sent bond yields and mortgage rates higher (it wasn’t about the Fed raising rates). Also, the Bank of Japan raised the target for a line in the sand with their 10-year yield from 0.50% to 1.00, sending bond yields rising overnight. However, even with all that drama last week, we ended below 4% on the 10-year yield, and mortgage rates ranged from 6.99% to 7.12%.
In my 2023 forecast, I said that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating to mortgage rates between 5.75% and 7.25%. I believe the only way we get below 3.21% on the 10-year yield is for the labor market to break, and that would require jobless claims to get over 323,000 on the four-week moving average, which hasn’t happened. The economy has stayed firm, and jobless claims have been falling, not rising lately.
From the St. Louis Fed: Initial claims for unemployment insurance benefits declined by 7,000 in the week ended July 22 to 221,000. The four-week moving average also fell to 233,750.
Seeing the jobless claims data, you can understand why the 10-year yield is in the upper portion of the forecast range for 2023 and why mortgage rates are still above 7%.
Purchase application data
Purchase application data was down 3% weekly, making the count year-to-date at 14 positive and 14 negative prints. If we start from Nov. 9, 2022, it’s been 21 positive prints versus 14 negative prints. However, since the middle of May, as mortgage rates have been near or above 7%, we have had more negative purchase application data prints than positive.
Even so, we aren’t seeing the big year-over-year declines we saw last year, primarily because we are working from historically low levels today. The fact that purchase application data isn’t collapsing like last year is why inventory is growing slower in 2023.
The week ahead: It’s jobs week!
We have a big week with labor data, job openings, the ADP report, jobless claims and the big one on Friday: the BLS jobs report! With the 10-year yield close to 4%, it will be a critical week for the bond market. If the labor data shows wage growth cooling down and being less tight, that can be very helpful for the bond market to head lower and drive down mortgage rates.
The housing market doesn’t need a week of hotter-than-expected labor data that might spook the Fed. Also, since we are getting closer toward the end of summer, it will be key to see at what point active housing inventory starts its seasonal decline.
From a few of our recent discussions, I get the sense that some people are uncomfortable with the notion of frugality. These are some actual comments:
“Frugality should not be about a total excision of quality of life. Unfortunately, this is how it seems most personal finance writers talk about it.”
“I dislike this philosophy of ‘work hard all your life so you can retire and live a modest but comfortable life’. That’s an awful way to lead a life”
“All this discussion of living modestly is crap.”
I don’t mean to pick on individual commenters — these statements are representative of many that I’ve read lately. While I understand these sentiments, I think it’s important to understand that frugality is not a dirty word. In fact, frugality is a valuable skill for building wealth.
Frugality Is NOT a Dirty Word
In The Millionaire Next Door, Thomas Stanley and William Danko collected and analyzed data from surveys of more than 1,000 millionaire households. They concluded:
What are three words that profile the affluent? Frugal frugal frugal.Webster’s defines frugal as “behavior characterized by or reflecting economy in the use of resources.” The opposite of frugal is wasteful. We define wasteful as a lifestyle marked by lavish spending and hyper-consumption. Being frugal is the cornerstone of wealth-building. … [Millionaires] become millionaires by budgeting and controlling expenses, and they maintain their affluent status the same way.
Frugality means choosing to make the most of your money, to focus on everyday costs, to recognize that small amounts matter. It’s nothing to be ashamed of. It’s a skill that nearly anyone can practice, and it lays the groundwork for sound financial habits that can be used throughout your life. Frugality keeps you focused on goals.
A New Way to See the World
All the same, it’s important not to confuse frugality with depriving yourself. Frugality doesn’t mean living like a pauper. If you read an article someplace (even at Get Rich Slowly) that says, “Give up your daily latte and you can save big bucks,” but the concept makes you feel like you’d be cheating yourself, then don’t do it. Frugality is about making smart choices to reach your goals; it’s not about living a life devoid of pleasure.
But always keep the larger goals in mind. If you’ve adopted a lifestyle of thrift or frugality, you are not being cheap when you buy generic food at the grocery store. You are not being cheap when you don’t purchase an iPhone or a Nintendo Wii. You are not being cheap — you are choosing a different set of values. You are working toward a greater goal. You are not depriving yourself — you have elected to live debt-free, or to follow a spiritual ideal, or to save for a trip around the world.
When you adopt a frugal lifestyle, you change your value system. You may acquire less Stuff, but you could gain more time, more freedom, more peace-of-mind. Making any lifestyle change — acquiring a frugal mentality, beginning an IRA, starting a diet — requires that you remain focused on the Big Picture. If you lose track of why you’re making sacrifices, the sacrifices become a burden.
Thrift is not an all-or-nothing proposition. There are different degrees. It’s important to discover what works best for your budget and your situation. Focus on your financial goals and make conscious choices that make you happy. Don’t bankrupt your future for gratification today, but don’t live so parsimoniously that you cannot enjoy the present.
Embrace the Get Rich Slowly mantra: Do what works for you.
Frugality in Practice
Over the past eighteen months, I’ve published an irregular series exploring my own adventures in frugal living. Here are some highlights:
Zillow is replacing its Chief Executive Officer Spencer Rascoff with its cofounder and former CEO Rich Barton, who takes over the top job with immediate effect, the company said last week.
Rascoff, who is also a cofounder, had served as Zillow’s CEO for almost a decade. He helped the company grow to become the most recognizable home search portal in the US, and in recent times expanded its business to include buying and selling homes, and providing mortgage lending services.
Zillow said that Rascoff will remain on its board of directors, but will no longer be involved in the day-to-day running of the company.
Barton (pictured, above), who quit the CEO role in 2010, never actually left the company and had instead served as its executive chairman during the intervening years.
Zillow’s leadership reshuffle took some industry watchers by surprise, as many had viewed the company as going from strength to strength as it began buying and selling homes in multiple US markets, and entered the mortgage industry with its acquisition of Mortgage Lenders of America last year.
However, Zillow’s most recent fourth quarter earnings report showed that the company is facing headwinds as it struggles to turn a profit with its nascent home selling business, which is basically a home flipping model on steroids.
While Zillow is first and foremost a homes for sale listings portal, it’s recently been trying to branch out into other parts of the real estate market. In April 2018 it launched a new service called Zillow Offers, in which homeowners can request a bid from Zillow on their home, and sell it immediately if they accept that offer. Zillow then takes those properties, renovates them, and tries to sell them on for a profit, all within 90 days. Zillow Offers is currently available in seven U.S. markets, and will expand to include 7 more by the end of the year.
But a look at Zillow’s fourth quarter numbers suggests that the new business model isn’t going so well. Through December, Zillow purchased a total of 686 homes and sold just 177 of them, which suggests it may be struggling to find willing buyers. Even worse, the earnings call highlighted the razor-thin margins Zillow has been dealing with. Of the 141 homes Zillow managed to sell in the fourth quarter, it made a profit of just $1,723 per home after buying, renovation, selling and interest costs.
The company spent an average of $264,134 on its home purchases in the last quarter, before spending just north of $20,000 on each home for renovation. Once interest and holding costs were taken into account, Zillow’s cost per home was $291,518 per home, meaning the $293,241 in revenue it generated per sale amounted to a 0.5% profit margin.
Earlier in the year however, when housing activity was stronger, Zillow appeared to have generated more than twice that margin, which suggests there is still some merit to the new business model. Indeed, Zillow still insists that the new business will achieve an annual revenue of $20 billion by 2024.
“In the past year, Zillow Group has become a very different company. We’re making strategic investments to broaden the Zillow Group portfolio to move further down the home-shopping funnel, giving today’s ‘uberized,’ on-demand consumers a full spectrum of options to buy, sell, borrow and rent on their terms,” Barton said in a statement. “Adding real estate transactions and eventually seamless mortgages to the Zillow Group portfolio positions us well for the next generation of online real estate and dramatically increases our addressable market.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
Geek Estate is about celebrating entrepreneurship, focused on the real estate tech (residential and commercial). The REACH program, backed by the National Association of Realtors and Second Century Ventures, is a big part of the broader ecosystem. Today, they announced their entire 2020 class.
The eight companies selected for the REACH Class of 2020:
Earnnest: secure, electronic escrow fund transfer platform
Kangaroo: affordable, DIY smart home and small business security solutions
RealX: America’s first online property rights exchange
Ylopo: end-to-end, cross platform, digital marketing
PunchList: all-in-one closing repair solution
Transactly: simple, streamlined platform for real estate professionals and transaction coordinators
CartoFront: software-as-service (Saas) based flood insurance tool for Realtors®
Modus: secure, modernized title and escrow platform
The eight companies selected for the REACH Commercial Class of 2020:
Obie: insurance and portfolio management for small-to-medium CRE investors and owners
EPR2: clean energy solutions for commercial property owners
Pear Chef: private chef and culinary services for the multi-family housing market
The growth of megamansions in Bel-Air and other hillside L.A. neighborhoods sparked new city rules over the last decade aimed at stopping overdevelopment.
Now, the city is poised to crack down again on home-building in the hills, this time in the name of preserving wildlife habitats.
A proposed ordinance targets the Santa Monica Mountains between the 405 and 101 freeways, an iconic area crowded with celebrity compounds, modest ranches, public parks and curving roads.
The rules would make it harder to build mansions and additions, as well as bigger homes on steep hillsides. It would add regulations to limit development near open space, protect soil and trees, and consider the pathways of wildlife, such as deer, bobcats or mountain lions.
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Supporters include Councilmembers Nithya Raman and Katy Yaroslavsky, who represent hillside areas; several neighborhood groups and environmental advocates.
Backers cite changing climate, the loss of animal species and the degradation of the hillsides. Wildfires and the recent landslide in Rolling Hills Estates are examples of why the city needs more scrutiny of hillside development, supporters say.
Opponents, who include real estate agents and some homeowners, predict the rules will hurt property values and argue that the hillsides are already built out. Actor and wellness executive Gwyneth Paltrow signed a form letter to the planning department last fall that said the ordinance “burdens homeowners with unnecessary development regulations.”
At the same time, some environmental advocates say the final version of the ordinance was watered down. An earlier requirement for wildlife-friendly fencing so deer could move between lots was scrapped, for instance, after homeowners complained about security.
The proposed law —called the wildlife ordinance — would apply to new homes, additions and major remodels. It passed a key City Hall committee last month and could be taken up by the full City Council before the end of the year.
Paul Edelman of the Santa Monica Mountains Conservancy points out critical wildlife corridors on a map of the Hollywood Hills.
(Brian van der Brug / Los Angeles Times)
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Paul Edelman, deputy director of natural resources and planning at the Santa Monica Mountains Conservancy, described the ordinance as a compromise between the competing interests of homeowners, environmentalists and politicians. The conservancy consulted on the law.
It’s significant that wildlife and habitat would be considered by the planning department, Edelman said. “Before, the city had a blind eye to all of this,” he said.
Then-Councilmember Paul Koretz proposed the ordinance in 2014, envisioning rules that would allow a stretch of land on the side of a home for animals to pass.
The number of deer, in particular, has diminished in some hillside areas, pushed out by construction and traffic, according to environmental groups. A video showing L.A. firefighters helping a deer wedged in a fence illustrates the hazards faced by wildlife.
Other recent high-profile wildlife initiatives include a bridge for animals on the 101 Freeway in Agoura Hills and wildlife corridor rules in Ventura County that seek to concentrate development away from the habitat areas.
As Koretz’s ordinance evolved — it is now in its third version — the proposal incorporated other hillside construction elements being debated at the city’s planning department.
Under the proposed law, a new residence that is 6,000 square feet or larger would require additional review by the city’s planning department. Today, homes that are 17,500 square feet or larger spark such a review.
Planned development within 25 of open space would also need additional review.
The goal is for builders to work with city planners to site their homes, pools and garages in a way that is less harmful to the environment and animals.
The ordinance would also close loopholes in existing hillside construction regulations for single-family homes passed in recent years. It would no longer exempt, for instance, basement space toward the square footage of a property as part of an effort to limit hillside grading. The exemption prompted some homeowners to build massive basements, according to the city.
The proposed ordinance also states that no more than 50% of a lot can be covered by a building or other type of structure. The law counts tennis courts, pools and patios towards lot coverage. Exempt from that rule are R1- or R2-zoned lots.
A statue of a mountain lion outside a home in the Hollywood Hills, where a critical wildlife corridor is threatened by development.
(Brian van der Brug / Los Angeles Times)
In Laurel Canyon, the noise of machinery scraping the earth could be heard on a recent afternoon near Woodstock Road, where nightclub mogul and film producer Victor Drai is putting up a mansion.
Larger homes are now commonplace: The median new primary structure size in 2020 in the proposed wildlife ordinance area was 8,854 square feet, according to the city.
“We’re getting gigantic homes that displace habitat for wildlife,” said Jamie Hall, president of the Laurel Canyon Land Trust, who supports the ordinance. “There is really no regulation on the books that comprehensibly addresses wildlife and habitat.”
The area targeted for the wildlife ordinance totals about 23,000 acres. About 98% of the land parcels in the area are zoned for low-density residential uses, making up 21,000 acres of residential land, according to the planning department.
Environmentalists failed to win some protections for habitat in the ordinance. They wanted smaller homes — of 3,000 square foot or more — to trigger the planning review. Also, a provision to ban development near rivers, streams, lakes and wetlands was scrapped in the final version.
At a hearing last year on the ordinance, city environmental affairs officer Amanda Amaral urged city planning commissioners to add back in some of the wildlife-friendly provisions.
She told the commissioners that scientists estimate that 1 million species will go extinct in the next few decades.
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The city’s “biodiversity team believes that the revised ordinance has been diluted from its original draft as a result of the weakened requirements,” Amaral said.
At another hearing, an opponent of the proposal called council members “communists” and accused them of penalizing taxpayers. “Go work in Russia!” he said.
Alison MacCracken, a real estate agent, said the ordinance would hurt the property values of even modest-sized homes. She owns such a home in upper Bel-Air, she said, but the ordinance would limit how big an addition she could add because her lot is on a slope.
“These are very constrictive regulations on top of other development regulations,” said MacCracken.
Attorney Ben Reznik, who represents some opponents, including MacCracken, sent a letter last month to Planning, Land Use and Management Committee chair Councilmember Marqueece Harris-Dawson and other city representatives that asked for a formal environmental analysis of the wildlife ordinance.
“The reality is, the city has been using wildlife as a mascot for a stricter hillside regulation ordinance, doing so by making it seem as if the ordinance regulates wildlife, when it does not,” Reznik wrote. “This is both misleading to the public, and a clear due process violation.”
Meanwhile, the ordinance is being closely watched in other parts of the city by those who see it as a tool to regulate hillside development.
Elva Yañez,board president of the preservation group Save Elephant Hill on the city’s Eastside, wants the ordinance expanded to all wildlife-rich areas.
“Given where we are at with the climate emergency,” Yañez said, “we should expand these types of policies when we can.”
A power of attorney (POA) — which is a legal document that names a person to act on someone else’s behalf in certain legal, medical or financial cases can be overridden by the creator (or principal) at any time, as long as they are of sound mind. If the principal cannot override their POA agent, or the person appointed to act on their behalf, loved ones may attempt to do so
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Reasons to override a power of attorney
A POA may need to be removed if the agent is:
Abusing their position. This could include taking advantage of their role by using the principal’s assets to make a profit for themselves or not upholding their fiduciary responsibilities to follow the principal’s instructions and make financial decisions based on the principal’s best interests.
Combining assets with the principal. Unless the POA agreement allows it, the POA should not create joint accounts or connections between themselves and the principal.
Unable or unwilling to keep and/or share the proper records. This includes things such as investments, receipts, disbursements and transactions.
Overstepping their authority. POAs shouldn’t take any actions that the POA document prohibits
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What are the steps to overriding your power of attorney?
Steps to override your power of attorney vary by state. For example, the formal way to end a power of attorney in Illinois includes filling out a revocation form, getting it notarized and sending it to the agent
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Check with a lawyer or local court to ensure that any method you take is legal. In general, though, you should make the change in writing, typically through one of the following methods:
Mail. Provide written documentation of removal to the current agent through the mail. When removing a power of attorney this way, you should select a type of mail delivery that requires signed certification of receipt by the agent.
Electronically. In some states, written notification through email that you are revoking your agent’s authority is enough to remove them from the position.
In person. There are also approved methods of personal delivery that vary by state. An estate lawyer can help ensure the proper removal of a power of attorney through this method.
If there are additional rules regarding agent removal listed within the power of attorney document, you should follow those guidelines.
After removing your agent, you should notify any third parties that may have been in contact with the current agent — like your bank or doctor — to alert them of the change.
What are the steps to overriding someone else’s power of attorney?
In some cases, loved ones may become concerned about the ability of an agent to fulfill their duties. When that happens, there are a few options.
Discuss issues with the principal. In a case where the principal is of sound mind, an individual can address their concerns directly to them. If their concerns are founded (perhaps through the request of an accounting of actions taken by the agent) and the principal agrees, the principal can go about removing the agent through the steps listed above.
Talk to an attorney. If the principal has an estate planning lawyer, anyone concerned about an agent’s actions can speak with that attorney for advice. In some cases, the lawyer can revoke the power of attorney.
Go to the court in the county where the principal resides. If the principal isn’t able to physically request the removal of an agent and consulting a lawyer isn’t an option, visit the county court where the principal lives and create a petition to request a replacement.
What happens after you override a power of attorney?
If you haven’t already, consider appointing a successor agent in your POA. This person would take over the responsibilities of the agent if you decide to override your original agent, or if something were to happen to the original agent and they could no longer perform their duties.
🤓Nerdy Tip
A successor agent is different from naming a co-agent who would serve at the same time as your original agent. Naming more than one person to act as an agent together isn’t usually necessary and may lead to disagreements or other legal issues.
If you don’t have someone listed as a successor and you remove the current agent, pick a new agent as soon as possible. If something happens to you before doing so, a court may be required to appoint someone for you.
Frequently asked questions
What happens if my power of attorney wants to quit?
A person can decline agent responsibilities or quit whenever they like. The rules for an agent to resign from their power of attorney duties are usually laid out in the power of attorney document. That often includes the agent notifying the principal in writing of their decision. If the principal isn’t in a position to receive notification, the agent may resign through a notice to the person in charge of caring for the principal. If you’ve named a successor within your power of attorney document, that person becomes the agent when your original agent resigns. If you didn’t, you’ll need to name someone new.
What happens if I don’t have a power of attorney?
State law dictates what happens to someone if they are incapacitated and unable to handle their business or personal affairs and don’t have a power of attorney. In most cases, a court may appoint a guardian or conservator to take over for you.
Can I have more than one power of attorney?
There are two types of POAs: financial and health. A financial POA handles your money and any legal needs. A health care POA (or “proxy”) makes medical decisions for you when you cannot do so. You can name the same person to be both your financial and health care POA, or you can have different people for each.
Car insurance-check. Health insurance-check. Life insurance-check. Mortgage protection life insurance–wait.. what? With so many different types of insurance you can purchase nowadays, it’s very easy to get insurance poor. Buying coverage on your home with mortgage life insurance teeters on the fence of being a bit too much. Before I get ahead of myself, let’s look exactly what mortgage life insurance really is, then we’ll look to see if it’s worth buying. Finally, we’ll look at what other alternatives you can consider instead– such as buying a term life insurance policy.
What Mortgage Protection Life Insurance Is Not
First, I wanted to clarify what mortgage life insuranceis not. Don’t get this confused with PMI (Private Mortgage Life Insurance). PMI is what is required by your bank or lender if you aren’t able to make a downpayment (typically 20%) when purchasing or building new home. I know in our case of the home we’re building, are bank is requiring the 20% to avoid the PMI insurance. For a more official definition, let’s look at what Wikipedia says:
Private mortgage insurance (PMI) in the US, is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property. Typical rates are $55/mo. per $100,000 financed, or as high as $1,500/yr. for a typical $200,000 loan.
What is Mortgage Protection Life Insurance
Mortgage protection life insurance is an insurance plan that will not be offered by your insurance agent- most likely it will be offered by your bank. If you have recently bought a new home or refinanced, chances are your mailbox has been flooded with offers to insure your home. Before you decide to buy it or not, let’s find out what it exactly is.
Mortgage life insurance is insurance that is typically bought through the financial institution that has your mortgage (like your bank).
The amount of coverage that is purchased is the amount of your loan where if something happened to you the bank would be the beneficiary and pay off the loan. In most cases, the policy is a decreasing term where as the years go by the amount reduces as you’re paying your home loan down although the premium you pay stays the same. Curious to find more information, I set out to the web to see what I could find. After Googling “Mortgage Life Insurance“, I came across the website below . I really was hoping to get a true cost comparison between Mortgage Life Insurance and level term life insurance (since that’s what I see it compared to), and this site seemed to have the answer. The website had notified me that if I entered some basic information and agreed that I was okay with 3 insurance agents calling me, then I could get the quote I desired. In the name of research, I went ahead with it.
Immediately after filling out the form and hitting “enter” on my keyboard, my office phone rang and it was a rep calling me from the online company. Wow, that’s was quick. I explained to them that I was a licensed financial advisor and that I was just doing research trying to compare mortgage life insurance. She was fine with it, but to give me a comparison using me as the example; I had to give some information about my medical history. Sure, no problem. After answering a series of questions, she started rattling me off quotes for term insurance. Wait a minute…I know term insurance. I’m trying to find out about mortgage life insurance. I then inquired how what she was quoting me compared to term life insurance? Her response,
“Oh. Well, we don’t recommend mortgage life insurance. We think it’s overpriced and feel that term is much more suitable for most folks”.
Doh! That’s fine, but didn’t answer my question. Turns out even though the site clear reads, “FREE Mortgage Protection Life Insurance Quote“, they don’t even offer it. I have to sheepishly admit that I was duped. And now for the past few weeks my phone has been ringing with insurance agents trying to sell me something I can buy off myself.
When In Doubt Ask Your Banker
One minor roadblock wasn’t going to prevent me from finding the answer I was seeking. Since I’m currently in the process of building a home, I thought what not a better way to get some more information that go directly to my banker. I emailed him inquiring if they do offer mortgage life insurance and how it compares to term life. Here was his response:
“We do offer it with our mortgage loans. Premiums vary on a wide range based on loan amount, age of borrowers, and use of tobacco products. One advantage is obtaining life insurance with few questions to answer and almost no underwriting. Disadvantage is the cost is marginally higher than level term, but mortgage life is decreasing term and pays no benefits to the borrower. It pays the benefit to the borrower and the bank to pay off the mortgage. I recommend to borrowers to look into level term before deciding on either one to compare the cost and benefits. I would prefer to have the benefits paid to the beneficiary and then they can decide how to use those funds. A good example is within the rate environment we have right now. If I have a interest rate below 5%, it may be in my spouse’s interest to take the life insurance funds and pay them out in a monthly benefit or invest the whole amount, rather than paying off a low interest mortgage. With mortgage life you don’t have that option.”
Finally, something more concrete. It was good to hear my banker say that he preferred term life insurance but he did bring up some good points on when buying mortgage life insurance insurance might make sense.
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When Buying Mortgage Life Insurance Makes Sense (Maybe)
Mortgage Life Insurance is considered to be a simplified issue product meaning that you don’t have to go through a series of medical screens and blood work to get approved. For somebody that has pre-existing conditions, it could make sense. Also, if somebody doesn’t want to go through the hassle of filling additional tons of forms and having a nurse come to your home, it could make sense.
Please note: There are term insurance products that are called “No Exam Life Insurance” that might be a suitable option compared to mortgage life insurance.
Still Wanting More
Still not completely satisfied with the information I had found thus far, I sought counsel from insurance expert Aaron Pinkston. I asked Aaron the following questions hoping to shed some light more on mortgage life insurance and how it compares to term.
How Does the Premiums on Mortgage Life Protection Insurance Compare to Level Term? (Assuming good health)
Mortgage protection life insurance is sold out of convenience. That extra convenience means the cost tends to be higher because the underwriting process can’t be as precise. With a more precise underwriting process, most level term life policies will tend to be less expensive than a comparable mortgage life policy.
Can you clarify the notion that anytime you refinance, you have to reapply for new a mortgage life policy?
Life insurance is designed to protect your family from financial catastrophe in the event of your untimely death (this is different than PMI). Even if you apply for a life insurance policy that requires your mortgage documents as part of the financial underwriting process, once you accept the life policy, it’s yours. As long as you don’t get your life insurance policy through false pretenses (aka. lying), the issuing life insurance companies can’t take it away from you. They also can’t require you to re-qualify for coverage just because of a financial or health change. I think that’s great news.
What would you suggest on someone shopping between the two?
If convenience and speed is your number one priority, consider mortgage life insurance policies along with other simplified issue policies. If other things like price, company quality, and so on are more important to you, another life insurance option might work better. We’re all different – there’s no one right answer for everyone.
Should You Buy Mortgage Life Insurance or Term Life Insurance?
To truly answer that questions depends on many questions:
What’s your age?
How is your health?
Are you a smoker?
How much insurance do you need?
Is your primary conern paying off the mortgage? or
Providing an income stream for your family after your passing?
I think it’s safe to say that in most situations purchasing term life insurance makes more sense than purchasing life insurance. In case you missed it, I had wrote a post that talked about how much term life insurance I bought. The purpose for my life insurance coverage was to pay off our mortgage and to take care of my family if I wasn’t here. If you have a similar desire, then take a serious look at term life insurance. When you do go to get quotes, be sure to shop around. Your age and health, among other factors, will determine which insurance carrier will have the best rate for you.
City National Bank has agreed to pay $31 million to settle a U.S. Justice Department lawsuit alleging racial bias in its home mortgage lending in Los Angeles County.
The government’s complaint, filed Thursday in Los Angeles, accused the bank of violating federal housing and banking discrimination laws by avoiding loans to buyers of homes in neighborhoods that are majority Black or Latino.
City National Bank is the largest bank headquartered in L.A., but just one of the 11 branches it has opened in the county over the last 20 years is in a predominantly Black or Latino neighborhood. The county’s population of nearly 10 million is 49% Latino and 9% Black.
From 2017 to 2020, City National Bank maintained just three of its 37 branches in majority Black and Latino neighborhoods, the complaint said.
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The bank relied on “relationship managers” to generate home loan applications from existing customers, who were predominantly white, the government alleged, and it failed to act on internal reports showing it risked running afoul of fair lending laws.
Other banks serving L.A. County received more than six times as many loan applications in Black and Latino areas, the government found.
City National Bank denied breaking discrimination laws, but said it agreed to settle the case to avoid prolonged litigation.
Under the proposed settlement, which was filed simultaneously with the complaint and requires court approval, the bank would provide $29.5 million in home loan subsidies to borrowers in Black and Latino areas, including interest-rate cuts and down-payment assistance.
Assistant Atty. Gen. Kristen Clarke and U.S. Atty. Martin Estrada announced the agreement at Second Baptist Church Los Angeles in Historic South Central, one of the city’s oldest Black churches. Nobody from the bank participated in the event.
“Through this agreement, we’re sending a strong message to the financial industry that we will not stand for unlawful barriers when it comes to residential mortgage lending,” Clarke said. “We will not stand for unlawful modern-day redlining.”
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City National Bank released a statement saying it supports the Justice Department’s efforts to ensure equal access to loans regardless of race.
“At City National, we are committed to ensuring that all consumers have an equal opportunity to apply for and obtain credit,” it said.
Founded in Beverly Hills in 1953, City National Bank has deep ties to the entertainment industry. It was acquired in 2015 by the Royal Bank of Canada.
As part of the settlement agreement, City National Bank has agreed to spend $500,000 on advertising targeting residents of Black and Latino neighborhoods and $500,000 on a consumer financial education program to enhance their access to credit.
The bank also said it planned to open a new branch in a majority Black or Latino neighborhood and ensure that at least four loan officers are dedicated to serving those areas.
Atty. Gen. Merrick Garland launched a program in 2021 to step up enforcement of housing discrimination laws. It has yielded $75 million in relief to borrowers in Houston, Memphis, Philadelphia, Newark and Los Angeles.