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October 29, 2019

Is Prepaid Interest A Closing Cost

Answer: No! The regulators are not doing you any favors by grouping daily interest that we all pay weather we refinance or not, into the closing cost section. They are just adding more confusion to an already confusing choice.

You pay interest for every day that you are borrowing the funds for your home. When you refinance your home, you skip a payment every time. However you cannot skip the interest portion of that payment. So pre paid interest is not a cost, its something you pay daily already, its just switching to a new lender, and since you wont be making a payment to them that you would normally pay your old lender, you will pay it in closing, but only the interest portion of it.

If you make a payment on the first of November, that pays for the interest from Oct 1st to Oct 31st because mortgages are paid in arrears. If your new loan funds on the 20th of Oct, you will have 11 days of pre paid interest. This money will go to the new lender, and your first payment wont be due until December 1st. You will also pay interest from the first of Oct to the 20th of Oct in addition to your principle balance on your most recent statement to your old lender.

Skip Nov, pay interest to your old and new lender for Oct and double interest for one day, the day it funds.


If you let the lender pay your taxes and insurance installments for you, you will have to deposit funds into your new escrow/impound account. We cannot transfer your existing escrow/impound account balance from your old lender so you will get that money refunded to you by your old lender after we pay them off. 

The amount is determined by a formula used to collect enough funds from you so the lender will have sufficient funds to pay your home owners insurance premium and property tax bills when due + one extra month. After you make 12 payments, the servicer will reconcile your escrow account and send you back any overage, so we will no longer have one moth extra after sending you the overage. 

We also pay the bills in the month before we get your payment, so it seems like two extra months. For example Oct 1st tax bill, we are going to pay it before you make your Oct payment. If you fund in Oct, we are going to collect 4 months of taxes + Oct 1st tax installment and here is why. The next payment is due March 1st, your first payment will be due by Dec 15th. You pay Dec, Jan, Feb, we make the payment to the tax collector. That is 7 months you put in and 6 months we are sending out, leaving us with the one month overage. 

If you have further questions about this, you can email me questions anytime at or call me directly at 714-684-6903. 

Alan Greenspan says it’s ‘only a matter of time’ before negative rates spread to the US

It will not be long before the spread of negative interest rates reaches the U.S., former Federal Reserve Chairman Alan Greenspan said.

“You’re seeing it pretty much throughout the world. It’s only a matter of time before it’s more in the United States,” Greenspan told CNBC’s “Squawk on the Street” on Wednesday, adding investors should watch the 30-year Treasury yield.

The 30-year U.S. rate traded at 1.95% midday Wednesday. It reached an all-time low last week.

There are currently more than $16 trillion in negative-yielding debt instruments around the world as central banks try to ease monetary conditions to sustain the global economy. The 10-year sovereign bonds in Belgium, Germany, France and Japan — among others — are trading with a negative rate.

U.S. Treasury yields are still well within positive territory, but the Fed has already cut rates once this year and is expected to ease later this month. Market expectations for a rate cut in September are at 92.7%, according to the CME Group’s FedWatch tool.

What the ‘Predictably Irrational’ author says not to do when the stock market tanks
An aging population is driving demand for bonds, pushing their yields lower, Greenspan said.

“We’re so used to the idea that we don’t have negative
interest rates, but if you get a significant change in the attitude of the population, they look for coupon,” Greenspan said. “As a result of that, there’s a tendency to disregard the fact that that has an effect in the net interest rate that they receive.”

He added that gold prices have been surging recently because people are looking for “hard” assets they know are going to have value down the road as the population ages. Gold futures are up more than 21% in 2019 and are trading around levels not seen since 2013.

Greenspan’s comments come after New York Fed President John Williams called low inflation the “problem of this era” in a speech earlier in the day.

Optimum First Mortgage Partner, Flagstar Bank, Disposes of Live Well Financial Exposure

Flagstar Bank is a wholesale mortgage partner with Optimum First Mortgage. After disclosing that it had endured a $74 million financial exposure in the wake of Live Well Financial’s abrupt closure this past May, Flagstar Bancorp has announced that it has now shed all of the securities that served as collateral for its loan to the now-defunct reverse mortgage lender.

Flagstar detailed that the burden of the exposure has been overcome while Flagstar itself continues cooperating with authorities seeking fraud charges against both Live Well at-large and its former CEO, Michael Hild, specifically. The announcement was made in a press release issued last week, which announced the sale of the affected assets.

“I am very pleased to have put this situation behind us,” said Alessandro DiNello, Flagstar president and chief executive officer in the press release. “Criminal and civil legal proceedings are progressing as expected against Live Well and its principals. We continue to cooperate with prosecutors and the SEC, and will otherwise actively pursue all legal remedies available to us.”

Flagstar first publicly disclosed that it endured the financial exposure just over a week after Live Well abruptly closed its doors, stating its plan to “pursue all available sources of collection including other assets of the company, a personal guarantee and other legal remedies to minimize our credit exposure related to this loan,” according to a 10-Q filing with the Securities and Exchange Commission (SEC)
in May.

Later that month, Flagstar filed suit against Live Well, seeking direct repayment. Shortly before federal authorities arrested former Live Well CEO Hild on charges of securities fraud in August, Flagstar won approval in bankruptcy court to take control of a $37 million bond account that Live Well had owned. That bond account comprised over half of what Flagstar was owed by the reverse mortgage lender, culminating in the sale of the remainder of the collateral last week.

This is the latest development in the ongoing story related to the abrupt closure of Live Well Financial. In addition to arresting Hild, federal authorities also charged two other former Live Well executives with similar charges, and they are reportedly cooperating with investigators. Hild was released from custody shortly after his arrest on an unsecured $500,000 bond.

After a subsequent court appearance, Hild has pleaded ‘not guilty’ to the charges against him, and a federal judge has set a trial date for October, 2020.

Due to its origination volume prior to closing, Live Well Financial is still technically a top 10 reverse mortgage originator for 2019 based on August endorsement data compiled by Reverse Market Insight (RMI). It was ranked at number 8 as of August with 892 endorsements over the prior 12 months.