Archive for the ‘Mortgage Info’ Category

Walking Away From Mortgages

Friday, November 6th, 2009

Recently I’ve encountered a fascinating article by Stephanie Armour of USA Today called, More Walk Away From Homes, Mortgages. Here are some quotes from the article:

“[Voluntary foreclosure is] fast becoming a major challenge to the government’s $75 billion effort to keep distressed borrowers in their homes.” “…About 588,000 borrowers walked away from homes last year, double the number in 2007.”

“People are going to determine it doesn’t make financial sense to hold on to their homes. …Strategic defaults mean foreclosures could be high for a long time.”

“The mortgage unit of Citigroup says one in five borrowers who defaults does so willingly, even though they’re able to pay the mortgage.”

“An unprecedented 16 million homewoners currently are underwater, according to Moody’s Economy.com. That’s about a third of all homeowners with a first mortgage.” “An even higher estimate comes from Deutsche Bank, which predicted in an August study that the number of homesowners underwater will grow… …[to] 48% of all those with a mortgage, by the time home prices stablilize.”

“The most disturbing aspect of this is that it’s becoming acceptable to do, ’says Joel Naroff, an economist with Naroff Economich Advisors, ‘What does that mean down the road for housing and the economy if people are happy to walk away and destroy thier credit? They’re saying, ‘Why pay a high amount if they can get something, even a rental, for less?’”

Posted in Mortgage Info, Real Estate | 1 Comment

Purchasing A Home With Small Down Payment? Better Buy Sooner Than Later

Wednesday, October 7th, 2009

FHA has announced that it is considering raising the minimum down payment requirement for the Federally insured loan program from 3.5% to 5%. The reason for the possible increase is that the agency’s reserve funds, which are normally kept at around 2%, are extremely low right now, due to the money they have lost because of foreclosures. Along with the possible increase in down payment, they are also considering not allowing borrowers to finance any of their closing costs into the loan amount. On a purchase transaction, this is done by getting a slightly higher interest rate than the market rate, and using the rebate given for that rate, to pay the closing costs.

Bottom line is that it may soon take more cash out of pocket for homebuyers to purchase a home. If you are considering purchasing a home in the near or distant future, the window of opportunity to take advantage of a small down payment and 50 year low interest rates may be closing. Better to buy sooner than later.

Posted in Mortgage Info | No Comments

One is the loneliest number…

Tuesday, April 14th, 2009

With all of the different bailout programs and rescue plans, it’s hard to keep it all straight – TARP, HLPR, TALF, H4H…. programs totalling trillions of dollars, with the intent of helping keep businesses and people afloat during this difficult economic time.  So have you wondered if any of these programs are actually working? If our hard earned tax dollars are being put to good use?

Remember last July when the “Hope for Homeowners” program was unveiled? It sounded so good – so hopeful.  The plan was designed to help people who found themselves “upside down” in their mortgages due to falling home values; people who were at risk of default and foreclosure.  The plan was that the government would modify the current mortgage, insure it through the FHA (Federal Housing Authority) and in turn, if and when the home was sold, the government would get half of the profit.

According to HUD (Housing of Urban Development), there were a total of 865 homeowners who applied to be a part of this program. Out of that number, 51 mortgages were modified (but not by using the Hope for Homeowners program) and 1 mortgage was completed. One.  Just one.  One very lonely mortgage.

The astonishing part of this is the other numbers in the story -
$300 Billion has been set aside for FHA to use for this program
An additional $20 Billion credit subsidy was made available to help fund the plan
400,000 was the  number of mortgages the plan was estimated to benefit
865 applications were received out of 66,000 phone inquiries (since last September)

We can only hope that the one homeowner who modified their mortgage with the H4H program got a really, really good deal.

In contrast, Hope Now, a private sector group is the alliance of mortgage market participants, mortgage servicers, and counselors that is working to help as many homeowners as possible avoid foreclosure and stay in their homes. They help facilitate either a repayment plan that allows the borrower to become current and catch up on missed payments that are appropriate to the borrower’s circumstances, or a modification which occurs any time the term of the original loan contract is permanently altered.  This can involve a reduction in the interest rate, or forgiveness of a portion of principal or extension of the maturity date of the loan.  This program has been in effect since July 2007 and has to date helped 3,675,971 homeowners stay in their homes. What has this program cost taxpayers?  Zero. That’s right – zero.  Amazing what can be accomplished by organizations and businesses when the government stays out of the way.

In it’s defense, the government’s latest program – Making Home Affordable program, which was available as of April 6th, does seem to be on the right path. It allows homeowners to refinance their first mortgages, up to 105% of the current value of their home, without having to pay mortgage insurance.  So far, I’m finding it very easy to get people approved – quite often with no appraisals required, and only a pay stub and verification of employment needed for income documentation. The rates are quite good, especially if you have a 720 credit score and are only refinancing up to 95% of the value of your home. The government has committed another $75 billion dollars for this program which is designed to help seven 7-9 million homeowners.

We’ll have to wait and see if it fares better than their first attempt. I’ve been able to help a few people already with this program, so I know for sure, that only one week into it, they’re already ahead of the previous score of one.

Posted in Mortgage Info | 3 Comments