Winter 2015
F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N
Buying and Borrowing Tips
Seven Ideas for Choosing and Managing a Mortgage
Wheels and Deals: Finding an Auto Loan That’s Good to Go
Are You Ready to Pay by Smartphone?
ALSO INSIDE
Buying and Borrowing Tips
How to Save:
Our Latest Tips
More Answers to
Common Questions
Have a Complaint
About Bank?
A Regulator Can Help
Telemarketer Scams:
When Calls Don’t
Ring True
F E D E R A L D E P O S I T I N S U R A N C E C O R P O R A T I O N
Buying and Borrowing Tips
Seven Ideas for Choosing and Managing a Mortgage
Wheels and Deals: Finding an Auto Loan That’s Good to Go
Are You Ready to Pay by Smartphone?
ALSO INSIDE
Buying and Borrowing Tips
How to Save:
Our Latest Tips
More Answers to
Common Questions
Have a Complaint
About Bank?
A Regulator Can Help
Telemarketer Scams:
When Calls Don’t
Ring True
2Winter 2015FDIC Consumer News
BUYING AND BORROWI N G T I P S
Buying or Refinancing a Home?
Seven do-it-yourself tips for choosing and managing a mortgage
Do you have a mortgage loan or are
you in the market for one? With
new disclosures and other consumer
protection rules, and fluctuations in
interest rates, it’s good to review some
key strategies to keep costs down for
your home loan.
“Since a mortgage may be the largest
and most complex financial obligation
you will ever enter into, be sure to
do your homework before and after
you commit to a loan,” said Jonathan
Miller, a Deputy Director in the FDIC’s
Division of Depositor and Consumer
Protection.
Here are tips on keeping borrowing
costs low and thinking ahead about
issues that might arise.
For Anyone Looking for a Mortgage
1. Remember that loan programs
can change and lenders’ policies may
vary, so research new opportunities
before applying for a mortgage. For
example, more lenders are beginning to
offer borrowers the chance to obtain a
mortgage with a smaller down payment.
Why is that happening?
Fannie Mae and Freddie Mac will
now buy mortgages from lenders that
have down payments as low as
3 percent. This change could lead to
more lenders lowering their down
payment requirements for borrowers.
But be careful. Making a smaller down
payment typically means you will pay
higher monthly mortgage payments
and have greater borrowing costs over
the long run.
Also, in January 2015, the U.S.
Department of Housing and Urban
Development (HUD) announced a cut
in Federal Housing Administration
insurance premiums on mortgages with
low down payments. This change will
make the FHA’s low down payment
loans more affordable.
2. Don’t be shy about shopping
around for a home loan. The
Consumer Financial Protection Bureau
(CFPB) and the Federal Housing
Finance Agency recently released the
results of a survey showing that nearly
half of the consumers who took out
a mortgage to buy a home in 2013
did not shop around before applying.
“Failing to shop means money lost
for consumers,” the CFPB said.
“Consumers who consider the product
offerings of multiple lenders or brokers
may save substantial sums.”
As part of the announcement, the
CFPB launched an online toolkit
called “Owning a Home” (www.
consumerfinance.gov/owning-a-home)
to help consumers as they shop for a
mortgage and make smarter decisions
on home loans.
It’s best to compare offers from several
different lenders before making a final
decision. And keep in mind that you do
not have to use a lender suggested by
your real estate agent or anyone else
involved in your home purchase.
3. Understand the pros and cons
of adjustable-rate mortgages. Also
known as ARMs, these mortgage
loans generally start out with low
introductory rates for a certain time
period. A low rate may be appealing,
but be sure you know how much that
rate could rise, when, and under what
circumstances. By law, the lender must
disclose this information to you. When
the lender considers your ability to
repay the loan, it must take into account
possible rate hikes during the first five
years of the loan.
“You also shouldn’t assume that you will
have the option to refinance an ARM
or sell your home to escape higher
payments later on,” said Elizabeth
Khalil, a Senior Policy Analyst at the
FDIC. “Mortgage interest rates have
been low over the past few years, but
they may be higher in the future,
meaning that refinancing your ARM
may not significantly lower your
payments. This is also a reason to think
seriously about a fixed-rate loan, which
may be somewhat more expensive but
has predictable payments.”
Whether it’s a fixed or adjustable rate,
be sure you understand all the terms of
any loan you are considering before you
decide whether to take it. If you have
questions, consider consulting with a
HUD-approved housing counseling
agency (see contact information at the
end of this article) or an attorney.
4. Watch for new mortgage
disclosures. The CFPB has developed
new disclosures that, by law, lenders will
be required to use beginning on August
1, 2015. For most new mortgages and
refinancings, four previously required
disclosures of settlement costs and key
loan terms (including the “Good Faith
Estimate” provided within three days
of applying for a mortgage and the
“HUD-1 Settlement Statement” of
actual costs at closing) will be replaced
by two new forms intended to provide
clearer and more useful information
to consumers. The CFPB has detailed
information about the new disclosures
at www.consumerfinance.gov/
knowbeforeyouowe.
5. Consider how a mortgage could
affect you in retirement. Carrying
significant mortgage debt can create
payment problems for retirees living on
a fixed income. Some consumers may
even delay retirement due to mortgage
debt. “Even if you’re many years from
retirement, consider now how long
you intend to carry a mortgage, have a
plan for paying it off, and be sure that
timeframe lines up with your goals for
career and retirement,” said Kathleen
Keest, also an FDIC Senior Policy
Analyst.
BUYING AND BORROWI N G T I P S
Buying or Refinancing a Home?
Seven do-it-yourself tips for choosing and managing a mortgage
Do you have a mortgage loan or are
you in the market for one? With
new disclosures and other consumer
protection rules, and fluctuations in
interest rates, it’s good to review some
key strategies to keep costs down for
your home loan.
“Since a mortgage may be the largest
and most complex financial obligation
you will ever enter into, be sure to
do your homework before and after
you commit to a loan,” said Jonathan
Miller, a Deputy Director in the FDIC’s
Division of Depositor and Consumer
Protection.
Here are tips on keeping borrowing
costs low and thinking ahead about
issues that might arise.
For Anyone Looking for a Mortgage
1. Remember that loan programs
can change and lenders’ policies may
vary, so research new opportunities
before applying for a mortgage. For
example, more lenders are beginning to
offer borrowers the chance to obtain a
mortgage with a smaller down payment.
Why is that happening?
Fannie Mae and Freddie Mac will
now buy mortgages from lenders that
have down payments as low as
3 percent. This change could lead to
more lenders lowering their down
payment requirements for borrowers.
But be careful. Making a smaller down
payment typically means you will pay
higher monthly mortgage payments
and have greater borrowing costs over
the long run.
Also, in January 2015, the U.S.
Department of Housing and Urban
Development (HUD) announced a cut
in Federal Housing Administration
insurance premiums on mortgages with
low down payments. This change will
make the FHA’s low down payment
loans more affordable.
2. Don’t be shy about shopping
around for a home loan. The
Consumer Financial Protection Bureau
(CFPB) and the Federal Housing
Finance Agency recently released the
results of a survey showing that nearly
half of the consumers who took out
a mortgage to buy a home in 2013
did not shop around before applying.
“Failing to shop means money lost
for consumers,” the CFPB said.
“Consumers who consider the product
offerings of multiple lenders or brokers
may save substantial sums.”
As part of the announcement, the
CFPB launched an online toolkit
called “Owning a Home” (www.
consumerfinance.gov/owning-a-home)
to help consumers as they shop for a
mortgage and make smarter decisions
on home loans.
It’s best to compare offers from several
different lenders before making a final
decision. And keep in mind that you do
not have to use a lender suggested by
your real estate agent or anyone else
involved in your home purchase.
3. Understand the pros and cons
of adjustable-rate mortgages. Also
known as ARMs, these mortgage
loans generally start out with low
introductory rates for a certain time
period. A low rate may be appealing,
but be sure you know how much that
rate could rise, when, and under what
circumstances. By law, the lender must
disclose this information to you. When
the lender considers your ability to
repay the loan, it must take into account
possible rate hikes during the first five
years of the loan.
“You also shouldn’t assume that you will
have the option to refinance an ARM
or sell your home to escape higher
payments later on,” said Elizabeth
Khalil, a Senior Policy Analyst at the
FDIC. “Mortgage interest rates have
been low over the past few years, but
they may be higher in the future,
meaning that refinancing your ARM
may not significantly lower your
payments. This is also a reason to think
seriously about a fixed-rate loan, which
may be somewhat more expensive but
has predictable payments.”
Whether it’s a fixed or adjustable rate,
be sure you understand all the terms of
any loan you are considering before you
decide whether to take it. If you have
questions, consider consulting with a
HUD-approved housing counseling
agency (see contact information at the
end of this article) or an attorney.
4. Watch for new mortgage
disclosures. The CFPB has developed
new disclosures that, by law, lenders will
be required to use beginning on August
1, 2015. For most new mortgages and
refinancings, four previously required
disclosures of settlement costs and key
loan terms (including the “Good Faith
Estimate” provided within three days
of applying for a mortgage and the
“HUD-1 Settlement Statement” of
actual costs at closing) will be replaced
by two new forms intended to provide
clearer and more useful information
to consumers. The CFPB has detailed
information about the new disclosures
at www.consumerfinance.gov/
knowbeforeyouowe.
5. Consider how a mortgage could
affect you in retirement. Carrying
significant mortgage debt can create
payment problems for retirees living on
a fixed income. Some consumers may
even delay retirement due to mortgage
debt. “Even if you’re many years from
retirement, consider now how long
you intend to carry a mortgage, have a
plan for paying it off, and be sure that
timeframe lines up with your goals for
career and retirement,” said Kathleen
Keest, also an FDIC Senior Policy
Analyst.