Despite the recent spate of far-reaching federal regulations hammering the mortgage business, innovation is far from dead.
For example, one of the nation's largest credit unions now allows borrowers to reset their rate at no cost up to five times over the life of the loan. A Beverly Hills company has created a way for small investors to put their money in commercial real estate deals that are usually reserved for wealthy individuals. There's also a new online search tool that allows homebuyers to identify and compare houses for sale based on drive times to work and other places, night and day.
The rate protection feature is offered by the Pentagon Federal Credit Union, a 1.2 million-member institution headquartered in Alexandria, Va. It is available on the credit union's 5/5 adjustable rate mortgage, which adjusts to the then-market rate every five years over the 30-year term.
Beginning with the loan's second year, borrowers can choose to change their rate to PenFed's current rate plus 0.25 percent at any time. So, say in the third year, you don't like which way rates are heading and you want to nip an increase in the bud. Or you'd simply like to take advantage of lower rates. You can simply "click" to reset the loan on PenFed's website.
You can exercise the reset option anytime after the first year, up to five different times. But once you do, you have to wait another 12 months to do so again.
The feature gives borrowers five shots at the brass ring, says PenFed executive James Schenck. It "puts borrowers in control of their mortgage," he says, and is a cheaper, less cumbersome way for them to refinance and take advantage of current rates.
The new investment vehicle comes from Realty Mogul, which calls it "crowdfunding for real estate." The Southern California company creates an online marketplace for accredited investors to pool their money and buy shares of office and apartment buildings and retail centers, and gives developers access to a broader pool of capital.
The concept is another form of syndication, but it is done solely online, and "you don't need to be a Rockefeller" to participate, says Realty Mogul co-founder and CEO Jilliene Helman.
Typically, deals the size of those put together by the company -- the latest is a group of five multifamily buildings in Los Angeles -- are the province of people who can invest $100,000 or more. But with Realty Mogul, investors with as little as $10,000 can participate.
The investments are fully vetted, and Realty Mogul over-raises to cover future repairs or improvements. Consequently, says Helman, there are no calls for investors to put up more money later.
Another key feature: monthly or quarterly distributions to investors. "We focus on cash flow," says Helman. "We are looking to be a source of income for our investors."
The new drive-time search tool, which has already been scooped up by the RE/MAX real estate network, gives buyers an easy, visual way to find houses within a specific drive-time from work, schools or other important locations. Drive times can be calculated at rush hour and at other times of the day or night.
"Drive time is a quality-of-life issue to buyers. For many, it's as important as the neighborhood and good schools," said RE/MAX Technology Strategy Officer John Smiley. "We're taking the guesswork out of one of consumers' most important purchase criteria: their commute."
RE/MAX plans to bring the app to its customers in all 50 states, beginning with New Jersey sometime in this year's first quarter.
To determine drive times using the new feature, which was developed by INRIX, buyers will enter the addresses of the locations most important to them as part of their search criteria on the RE/MAX website. The tool then automatically shows neighborhoods and properties that meet their desired travel time.
"In a world measured in miles, we measure it in minutes," said INRIX General Manager of GeoAnalytics Kevin Foreman in a news release.
According to the release, the program gets its traffic information "from a variety of public and private sources ranging from government road sensors, official accident and incident reports to real-time traffic speeds crowd-sourced from a community of approximately 100 million drivers."
Factors such as the day of the week, the season, local holidays, forecasted and actual weather, accidents and construction are also considered.
INRIX says its program has been found accurate to within 3 mph of actual traffic speeds under all driving conditions 24/7.