Federal Reserve Chairman Ben Bernanke Tuesday signaled he is finished cutting interest rates for now and has turned his attention to concerns about inflation in the world's foreign exchange markets in the wake of the U.S. dollar's 16 percent decline against the Euro over the past year.
Speaking to the International Monetary Conference, Bernanke stated that, "For now, policy seems well positioned to promote moderate growth and price stability over time. We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate."
Observers called Bernanke’s statement a "strong defense of the dollar"
and a sign that the Fed believes a weaker U.S. dollar would be detrimental. Declines over the past year against the Euro and more recent oil price surges have increased fears of inflation. These fears are one reason the Fed is not expected to pare interest rates further at least through October.
Bernanke called financial market conditions "strained" and reiterated that U.S. consumers face challenges from declining home prices and stricter mortgage and other lending standards, a weaker job market and higher energy costs. He added that economic growth will remain limited until home prices and the housing market show clearer signs of stabilization.
Showing posts with label Mortgage Updates. Show all posts
Showing posts with label Mortgage Updates. Show all posts
Friday, June 13, 2008
Thursday, March 6, 2008
FED CALLS FOR MORE AGGRESSIVE PLAN TO AID DISTRESSED HOMEOWNERS
Fed Chairman Ben S. Bernanke yesterday called for a more aggressive response to the nation's housing and foreclosure crisis, suggesting that lenders do more to help struggling homeowners avoid foreclosure and, in turn, help stave off further erosion of home prices in distressed areas and the broader economy.
"This situation calls for a vigorous response," Bernanke said. "Measures to reduce preventable foreclosures could help not only stressed borrowers but also their communities and, indeed, the broader economy. At the level of the individual community, increases in foreclosed-upon and vacant properties tend to reduce house prices in the local area, affecting other homeowners and municipal tax bases."
"This situation calls for a vigorous response," Bernanke said. "Measures to reduce preventable foreclosures could help not only stressed borrowers but also their communities and, indeed, the broader economy. At the level of the individual community, increases in foreclosed-upon and vacant properties tend to reduce house prices in the local area, affecting other homeowners and municipal tax bases."
Sunday, February 24, 2008
Banks Freeze Homeowners Credit Lines
AS REAL ESTATE VALUES DROP, LIMITS PUT ON EQUITY LOANS
Bay Area residents accustomed to treating their homes like piggy banks could be in for unpleasant surprises as home prices decline in many areas. Not only are banks less willing to issue popular home-equity lines of credit, but some of the nation's biggest lenders are freezing existing loans.
Countrywide Home Loans, for example, has sent letters to at least 122,000 homeowners nationwide informing them they can no longer draw on their home-equity lines of credit. Many homeowners rely on these pay-as-you-use-them loans to finance things like remodeling or college tuition, or to use for emergency expenses.
Morgan Hill homeowner Kelly Urbina received a letter from Countrywide two weeks ago telling her she can no longer access the credit line that she says the lender encouraged her to get when she bought her three-bedroom home in 2006.
"I still have a substantial amount of equity in my property, so I was surprised to get a letter that just said, 'We're going to suspend your line,' " said Urbina, who works as an underwriter for Opes Advisors, a mortgage banking and wealth management firm in Palo Alto. She knows the value of her property has dropped somewhat, but not "significantly," as Countrywide claimed in the letter.
She and her husband used some of the equity line to remodel their kitchen two years ago, but otherwise have reserved it for emergency use. Urbina said she was surprised the lender didn't simply lower the amount of her line of credit, rather than suspend it. "I would have felt that was a very fair thing to do," she said.
Beginning of freeze
Chase and Washington Mutual also have frozen the home-equity lines of a much smaller number of customers in response to falling home values, said officials with the two banks. Wells Fargo said it "has not made large-scale decisions to restrict line-of-credit access for all customers in markets with declining real estate," but is reviewing its home-equity customers' accounts more frequently than in past years.
"Everybody's going to have to do it," said Guy Cecala, publisher of Inside Mortgage Finance. "We're just at the beginning of this trend of lenders freezing home-equity lines of credit."
Countrywide, which is being acquired by Bank of America after incurring huge losses because of its subprime lending, would not specify in which states or areas homeowners were most likely to have received the letters.
Because median home prices in Silicon Valley have held up better than in many parts of California, it's unlikely that a large chunk of the letters went to local homeowners. But mortgage experts say plenty of Bay Area homeowners potentially could get the same kind of news from their lenders if their equity lines of credit were generous and they did not have much equity in their homes to begin with - or if home values in the valley drop more steeply.
"It very much could hit people up here - whether it be Countrywide or another lender - where values have come down," said John Conover, president of Borel Private Bank in San Mateo. "This is a significant issue for people who expect to be able to borrow on their loans."
How equity works
Nationwide, homeowners borrowed $355 billion worth of home-equity loans and lines of credit in 2007, down from $430 billion in 2006, according to Inside Mortgage Finance. California borrowers make up 20 percent to 25 percent of the market.
Equity is a property's market value minus the owner's mortgage debt. So, for a home worth $700,000, if the owner has a $500,000 mortgage, he or she has equity of $200,000, or about 29 percent.
Until recently, some lenders were willing to make a combination of mortgages and equity lines of credit up to 100 percent of the home's value. So the homeowner in the example above could have gotten a home-equity line of $200,000 in addition to the $500,000 mortgage, bringing the debt obligation up to $700,000.
But with home values falling and credit markets still crunched, lenders have narrowed their lending criteria. Few will extend credit past 80 percent of a home's value now. That would cut that homeowner's equity line to $60,000, resulting in a total of $560,000 in mortgage debt.
Lower values
Lenders' changes amount to a sort of hedge against the possibility of further price declines. "Across the board, every lender has been tightening up their guideline with regard to home-equity lines," said Mike Gallagher, president of mortgage broker Avantis Capital in Morgan Hill.
Countrywide cited falling property values as the reason for shutting off so many customers' access to their equity, though lenders also can restrict borrowers' access to their credit lines for other reasons, such as deteriorating credit scores.
Experts called Countrywide's mass mailing to freeze home-equity lines unusual, but noted that in a declining market, lenders need to protect themselves from avoidable losses.
Susan McHan, president of Opes Advisors and homeowner Kelly Urbina's employer, said her company has at least two clients in the East Bay who have received the letters from Countrywide. In both cases, she said, the homeowners dispute that their home values have fallen sharply, and they are working with Countrywide to try to reopen their credit lines. "They had plans that they were going to be using the loans for," McHan said. Her company has notified other clients of the new climate in home-equity lending.
"Anybody who had an equity line of 90 percent or above, we definitely sent letters warning them" that their lenders might suspend their credit lines in the future.
As for Urbina, she was not counting on using her equity line soon, but she likes having one. "What if I did have an emergency and I needed the line?" she said.
________________________________________
Contact Sue McAllister at smcallister@mercurynews.com or (408) 920-5833.
Bay Area residents accustomed to treating their homes like piggy banks could be in for unpleasant surprises as home prices decline in many areas. Not only are banks less willing to issue popular home-equity lines of credit, but some of the nation's biggest lenders are freezing existing loans.
Countrywide Home Loans, for example, has sent letters to at least 122,000 homeowners nationwide informing them they can no longer draw on their home-equity lines of credit. Many homeowners rely on these pay-as-you-use-them loans to finance things like remodeling or college tuition, or to use for emergency expenses.
Morgan Hill homeowner Kelly Urbina received a letter from Countrywide two weeks ago telling her she can no longer access the credit line that she says the lender encouraged her to get when she bought her three-bedroom home in 2006.
"I still have a substantial amount of equity in my property, so I was surprised to get a letter that just said, 'We're going to suspend your line,' " said Urbina, who works as an underwriter for Opes Advisors, a mortgage banking and wealth management firm in Palo Alto. She knows the value of her property has dropped somewhat, but not "significantly," as Countrywide claimed in the letter.
She and her husband used some of the equity line to remodel their kitchen two years ago, but otherwise have reserved it for emergency use. Urbina said she was surprised the lender didn't simply lower the amount of her line of credit, rather than suspend it. "I would have felt that was a very fair thing to do," she said.
Beginning of freeze
Chase and Washington Mutual also have frozen the home-equity lines of a much smaller number of customers in response to falling home values, said officials with the two banks. Wells Fargo said it "has not made large-scale decisions to restrict line-of-credit access for all customers in markets with declining real estate," but is reviewing its home-equity customers' accounts more frequently than in past years.
"Everybody's going to have to do it," said Guy Cecala, publisher of Inside Mortgage Finance. "We're just at the beginning of this trend of lenders freezing home-equity lines of credit."
Countrywide, which is being acquired by Bank of America after incurring huge losses because of its subprime lending, would not specify in which states or areas homeowners were most likely to have received the letters.
Because median home prices in Silicon Valley have held up better than in many parts of California, it's unlikely that a large chunk of the letters went to local homeowners. But mortgage experts say plenty of Bay Area homeowners potentially could get the same kind of news from their lenders if their equity lines of credit were generous and they did not have much equity in their homes to begin with - or if home values in the valley drop more steeply.
"It very much could hit people up here - whether it be Countrywide or another lender - where values have come down," said John Conover, president of Borel Private Bank in San Mateo. "This is a significant issue for people who expect to be able to borrow on their loans."
How equity works
Nationwide, homeowners borrowed $355 billion worth of home-equity loans and lines of credit in 2007, down from $430 billion in 2006, according to Inside Mortgage Finance. California borrowers make up 20 percent to 25 percent of the market.
Equity is a property's market value minus the owner's mortgage debt. So, for a home worth $700,000, if the owner has a $500,000 mortgage, he or she has equity of $200,000, or about 29 percent.
Until recently, some lenders were willing to make a combination of mortgages and equity lines of credit up to 100 percent of the home's value. So the homeowner in the example above could have gotten a home-equity line of $200,000 in addition to the $500,000 mortgage, bringing the debt obligation up to $700,000.
But with home values falling and credit markets still crunched, lenders have narrowed their lending criteria. Few will extend credit past 80 percent of a home's value now. That would cut that homeowner's equity line to $60,000, resulting in a total of $560,000 in mortgage debt.
Lower values
Lenders' changes amount to a sort of hedge against the possibility of further price declines. "Across the board, every lender has been tightening up their guideline with regard to home-equity lines," said Mike Gallagher, president of mortgage broker Avantis Capital in Morgan Hill.
Countrywide cited falling property values as the reason for shutting off so many customers' access to their equity, though lenders also can restrict borrowers' access to their credit lines for other reasons, such as deteriorating credit scores.
Experts called Countrywide's mass mailing to freeze home-equity lines unusual, but noted that in a declining market, lenders need to protect themselves from avoidable losses.
Susan McHan, president of Opes Advisors and homeowner Kelly Urbina's employer, said her company has at least two clients in the East Bay who have received the letters from Countrywide. In both cases, she said, the homeowners dispute that their home values have fallen sharply, and they are working with Countrywide to try to reopen their credit lines. "They had plans that they were going to be using the loans for," McHan said. Her company has notified other clients of the new climate in home-equity lending.
"Anybody who had an equity line of 90 percent or above, we definitely sent letters warning them" that their lenders might suspend their credit lines in the future.
As for Urbina, she was not counting on using her equity line soon, but she likes having one. "What if I did have an emergency and I needed the line?" she said.
________________________________________
Contact Sue McAllister at smcallister@mercurynews.com or (408) 920-5833.
Friday, February 15, 2008
How the economic stimulus package addressess the mortgage crisis
President Bush Wednesday signed off on the $168 billion stimulus packaged approved by Congress last week, which, in addition to tax rebates for millions of working Americans and business owners, includes a vital, but temporary increase in the conforming loan limit. The economic stimulus package will allow the Federal Housing Administration, as well as Fannie Mae and Freddie Mac, to offer mortgages above the current conforming loan limit of $417,000 to as much as $729,750 in high-cost areas using a formula that considers an area’s median home price. The increase would only apply to loans originated between July 1, 2007 and Dec. 31, 2008. A host of details remain to be worked out, including how the median home price is established.
MAKING SENSE OF THE STORY FOR CONSUMERS
· It could be several months before the impact is felt in the mortgage markets. Wall Street is still working out whether investors will want to bundle securitized loans above $417,000 with loans below that level, or if they will invest in them separately.
· Rates for such loans might be higher because banks fear larger loans are riskier, but they’d still likely be lower than current jumbo rates.
· Even though the proposal does not apply to loans made before July 1, borrowers with older mortgages could refinance into new loans that would be sold to Fannie and Freddie, because those loans would be considered new loans.
MAKING SENSE OF THE STORY FOR CONSUMERS
· It could be several months before the impact is felt in the mortgage markets. Wall Street is still working out whether investors will want to bundle securitized loans above $417,000 with loans below that level, or if they will invest in them separately.
· Rates for such loans might be higher because banks fear larger loans are riskier, but they’d still likely be lower than current jumbo rates.
· Even though the proposal does not apply to loans made before July 1, borrowers with older mortgages could refinance into new loans that would be sold to Fannie and Freddie, because those loans would be considered new loans.
Thursday, November 29, 2007
No change for conforming loan limits in 2008
The Office of Federal Housing Enterprise Oversight (OFHEO) announced Tuesday it will keep conforming loan limits at current levels of $417,000 for single-family mortgages in 2008, and also hinted it could lower the limits in 2009 if home prices continue to decline.
The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
"At more than $568,000, the median price of a home in California is more than 2.5 times the U.S. median of $221,000, yet California is not recognized by OFHEO as a high-cost state," said C.A.R. President William E. Brown. "California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam, and the U.S. Virgin Islands are recognized by OFHEO as high-cost areas."
"Now is the time for the U.S. Senate to pass legislation allowing regional adjustments to Fannie Mae and Freddie Mac loan limits and to modernize FHA loan programs," Brown said. "This critical legislation is a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder."
The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan, increasing the monthly payment and negatively impacting affordability for households in California.
"At more than $568,000, the median price of a home in California is more than 2.5 times the U.S. median of $221,000, yet California is not recognized by OFHEO as a high-cost state," said C.A.R. President William E. Brown. "California still has the third highest home price in the nation, compared with Hawaii at seventh, and Alaska, which ranks 39th in terms of median home price. Yet Alaska, Hawaii, Guam, and the U.S. Virgin Islands are recognized by OFHEO as high-cost areas."
"Now is the time for the U.S. Senate to pass legislation allowing regional adjustments to Fannie Mae and Freddie Mac loan limits and to modernize FHA loan programs," Brown said. "This critical legislation is a key step to allowing families in California an opportunity to climb the first rung of the homeownership ladder."
Tuesday, September 18, 2007
FED Lowers Federal Funds Rate
The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.
Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.
Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.
In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.
Monday, September 17, 2007
Financial Tips for Home Owners in Santa Cruz
There is no better time than the present for homeowners to examine the situation that they are in today. Whether you are selling your home or not you should review the details of your present mortgage(s). I have found that many homeowners do not have a clear idea of the specifics of their own mortgages.
Here are some of the questions you should be asking yourself: What is my rate and when will it be changing? What will my payments increase to when my rate changes? If your loan has an ‘interest-only’ minimum payment period, when will that period come to an end and what will my payments increase to at that point? Do I have a pre-payment penalty and, if so, how much is it and when does it phase out?
Those who have an adjustable rate mortgage with the potential for negative amortization need to have a clear understanding of its terms and pay special attention to upcoming payment changes. If your mortgage balance has been increasing because you have just been making the minimum payment, when will your loan recast and what will your payments increase to at that point? If in doubt of exactly what your note says, seek the advice of a seasoned mortgage professional to help you understand your current mortgage.
Today, more than ever, homeowners who are planning on selling their homes need to be realistic about their timeframe for moving. The combination of a record number of homes listed for sale and a tightening of lender’s underwriting guidelines is slowing home sales and forcing sellers to make some tough decisions.
Sellers must clearly understand the fine print in their mortgages. Those who need to sell because their payments are going to be adjusting beyond the affordability range cannot afford the luxury of waiting until a buyer comes along to give them the price that their home was worth last year or the year before, when property values were stronger. Sellers are well advised to put the importance of protecting their credit over protecting their equity because if they fail to sell their homes in time both their credit and equity could suffer. The government is not likely to come up with a bail-out program in time for homeowners who are in trouble now.
Besides being practical about the asking price (and ‘staging’ their home), sellers can help themselves by offering to pay up to 6 percent of the sales price in buyer’s closing costs. This can be an effective way of permanently lowering the buyers’ interest rate and their payments. Sellers can also offer to loan their buyers money by providing a second mortgage. For example, a buyer with 10 percent down may obtain an 80 percent conventional mortgage and combine it with a 10 percent mortgage from the seller. This kind of arrangement will work in certain situations and can make it easier for buyers to buy their home.
The good news is that rates are good, homes are selling and there are plenty of qualified buyers who want to live in Santa Cruz County who are looking for good
deals.
------------------
Presented on behalf of Brent Dunton
Certified Mortgage Planner, Santa Cruz Home Finance
Here are some of the questions you should be asking yourself: What is my rate and when will it be changing? What will my payments increase to when my rate changes? If your loan has an ‘interest-only’ minimum payment period, when will that period come to an end and what will my payments increase to at that point? Do I have a pre-payment penalty and, if so, how much is it and when does it phase out?
Those who have an adjustable rate mortgage with the potential for negative amortization need to have a clear understanding of its terms and pay special attention to upcoming payment changes. If your mortgage balance has been increasing because you have just been making the minimum payment, when will your loan recast and what will your payments increase to at that point? If in doubt of exactly what your note says, seek the advice of a seasoned mortgage professional to help you understand your current mortgage.
Today, more than ever, homeowners who are planning on selling their homes need to be realistic about their timeframe for moving. The combination of a record number of homes listed for sale and a tightening of lender’s underwriting guidelines is slowing home sales and forcing sellers to make some tough decisions.
Sellers must clearly understand the fine print in their mortgages. Those who need to sell because their payments are going to be adjusting beyond the affordability range cannot afford the luxury of waiting until a buyer comes along to give them the price that their home was worth last year or the year before, when property values were stronger. Sellers are well advised to put the importance of protecting their credit over protecting their equity because if they fail to sell their homes in time both their credit and equity could suffer. The government is not likely to come up with a bail-out program in time for homeowners who are in trouble now.
Besides being practical about the asking price (and ‘staging’ their home), sellers can help themselves by offering to pay up to 6 percent of the sales price in buyer’s closing costs. This can be an effective way of permanently lowering the buyers’ interest rate and their payments. Sellers can also offer to loan their buyers money by providing a second mortgage. For example, a buyer with 10 percent down may obtain an 80 percent conventional mortgage and combine it with a 10 percent mortgage from the seller. This kind of arrangement will work in certain situations and can make it easier for buyers to buy their home.
The good news is that rates are good, homes are selling and there are plenty of qualified buyers who want to live in Santa Cruz County who are looking for good
deals.
------------------
Presented on behalf of Brent Dunton
Certified Mortgage Planner, Santa Cruz Home Finance
Friday, September 7, 2007
Payroll report suggests FED to begin easing monetary policy
This morning’s payroll report gives the Fed the cover it needs to begin easing monetary policy in a serious way, using the biggest guns in its arsenal. Any lingering fears on inflation are now firmly in the rearview mirror and the Fed’s objective to maintain economic growth is paramount. The bad news is the Fed now appears somewhat behind the curve as often happens in times of economic transition. There is now a real danger of recession, and some analysts will worry that one is now unavoidable, or even that we are in one already. We do not yet go that far. A recession is still avoidable in my opinion, but the Fed will need to act promptly and with authority to right this sinking ship.
Bulls may latch on to the fact that the unemployment rate held steady at 4.6 percent, but the household survey showed an even bigger drop in employment in August, down 316,000 jobs, so that shred of comfort is a statistical myth.
In the near-term expect economic and financial volatility is going to get ugly. A major slowdown in growth is not yet priced into equities; expect major cuts in analyst earnings estimates for the third and fourth quarters of this year. The Fed now has the evidence it needs to cut the Fed funds target rate at least 25 basis points in September. The Fed funds futures market is now placing higher odds on a 50 basis point cut. While the payroll data is just one data point for the Fed to consider, it is one that carries the most weight in the Fed’s eyes.
Scott Anderson, Ph.D., Senior Economist, Wells Fargo Bank
Bulls may latch on to the fact that the unemployment rate held steady at 4.6 percent, but the household survey showed an even bigger drop in employment in August, down 316,000 jobs, so that shred of comfort is a statistical myth.
In the near-term expect economic and financial volatility is going to get ugly. A major slowdown in growth is not yet priced into equities; expect major cuts in analyst earnings estimates for the third and fourth quarters of this year. The Fed now has the evidence it needs to cut the Fed funds target rate at least 25 basis points in September. The Fed funds futures market is now placing higher odds on a 50 basis point cut. While the payroll data is just one data point for the Fed to consider, it is one that carries the most weight in the Fed’s eyes.
Scott Anderson, Ph.D., Senior Economist, Wells Fargo Bank
Thursday, September 6, 2007
Avoiding Foreclosure
Few things are as devastating as losing your home. Sadly, it's not always inevitable. In many cases the foreclosure could've been avoided with some outside help. Be aware of some of the hidden difficulties that will arise if foreclosure occurs.
Finding a new home. Don't believe that it will be better to let the foreclosure happen, because after you lose the home, you will still need to find a new place to live. All too often, the price paid in rent will be almost as high if not higher than the current mortgage payment. Remember: The owner of the property needs to make his mortgage payment, too, so he's going to charge a rental payment that's higher than his mortgage costs.
Deficiency judgment. It's not uncommon that the sale of the home is insufficient to cover the remainder of the mortgage. When the property has been damaged, or market values have dropped, you may end up with a bill in the tens of thousands for the difference.
Despite what many people think, most lending institutions are not anxious to foreclose. It's a last-ditch effort to recover their money and minimize their losses, and it's an incredible hassle. Most lenders would rather avoid it, if possible. There are multiple sources for help that you should be aware of, and most lenders will be happy to hear that you are going to try to keep the home rather than just await a foreclosure.
Housing Counseling Agency. The US Department of Housing and Urban Development maintains a list of HUD-approved counseling agencies. Call (800) 569-4287 to find the agency nearest them.
FHA-Insurance fund. FHA borrowers may qualify to have HUD make a one-time payment to bring the mortgage current. See www.hud.gov/foreclosure for more information on the requirements to qualify.
Different mortgage program. Talk to a loan officer about the possibility of refinancing the mortgage to a more affordable program.
Special Forbearance. Many borrowers can qualify for a new payment structure if you've had an increase in the cost-of-living, such as unexpected medical expenses, or a decrease in wages. This payment structure will allow you to repay the lender in a given time frame.
-----------------
Compliments of the Business Booster Collection and
Wendy Taylor, Financial Stragegies, Capitola
Finding a new home. Don't believe that it will be better to let the foreclosure happen, because after you lose the home, you will still need to find a new place to live. All too often, the price paid in rent will be almost as high if not higher than the current mortgage payment. Remember: The owner of the property needs to make his mortgage payment, too, so he's going to charge a rental payment that's higher than his mortgage costs.
Deficiency judgment. It's not uncommon that the sale of the home is insufficient to cover the remainder of the mortgage. When the property has been damaged, or market values have dropped, you may end up with a bill in the tens of thousands for the difference.
Despite what many people think, most lending institutions are not anxious to foreclose. It's a last-ditch effort to recover their money and minimize their losses, and it's an incredible hassle. Most lenders would rather avoid it, if possible. There are multiple sources for help that you should be aware of, and most lenders will be happy to hear that you are going to try to keep the home rather than just await a foreclosure.
Housing Counseling Agency. The US Department of Housing and Urban Development maintains a list of HUD-approved counseling agencies. Call (800) 569-4287 to find the agency nearest them.
FHA-Insurance fund. FHA borrowers may qualify to have HUD make a one-time payment to bring the mortgage current. See www.hud.gov/foreclosure for more information on the requirements to qualify.
Different mortgage program. Talk to a loan officer about the possibility of refinancing the mortgage to a more affordable program.
Special Forbearance. Many borrowers can qualify for a new payment structure if you've had an increase in the cost-of-living, such as unexpected medical expenses, or a decrease in wages. This payment structure will allow you to repay the lender in a given time frame.
-----------------
Compliments of the Business Booster Collection and
Wendy Taylor, Financial Stragegies, Capitola
Sunday, September 2, 2007
Don't put all the blame on mortgage brokers
There has been a lot of finger pointing at the mortgage broker community during the past few months. Everyone from borrowers to members of Congress seem to be trying to pin the blame for the nation's current mortgage mess on mortgage brokers.
The boom years of 2001-2005 saw unprecedented growth in mortgage volume. This growth created a huge demand for employment in the mortgage industry and this environment allowed and even encouraged widespread unprofessional behavior by some in the mortgage industry.
Some of this behavior was the result of neophytes flooding into the industry, but I believe that most of it was due to greed, which resulted in fraudulent transactions. There are numerous examples that have come to my attention where borrowers paid tens of thousands of dollars in unwarranted closing costs to mortgage originators, who took outrageous advantage of unsuspecting consumers just to fatten their own wallets.
Sure, one can shake fingers at those mortgage originators but most of us cannot and should not be grouped into that category. We have all heard stories about unscrupulous attorneys, accountants and doctors, too. There are bad apples in every batch. Given the fact that the majority of loans are originated by mortgage companies makes mortgage brokers an easy target for finger pointers.
When a borrower goes to a bank to inquire about financing, he only will have access to that bank's loan programs at that bank's rates. For a borrower to satisfy himself that he is getting the best loan for his needs, he will have to go from bank to bank and compare all of the options. It may be that the bank's loan officer can function as a broker also but he sure is not going to be able to refer the borrower to a loan program that is available at another bank.
Mortgage brokers have access to hundreds of loan programs through their relationships with dozens of banks and mortgage companies. As a result, a professional and ethical mortgage broker should be able to arrange a mortgage for his client that is right for his needs and one that is competitively priced. With that in mind, it is no surprise that mortgage companies are doing the bulk of the business.
On a more global scale, as I wrote in this column at the beginning of the summer, it is not fair to single out the mortgage industry as the fall guy in trying to explain the subprime crises and the fall in home prices across the nation [although Santa Cruz has escaped most of this]. As I mentioned in that column, the consumer has to accept some of the blame for not being responsible about spending and saving money and reading the loan disclosures and documents.
Peter Boutell is a mortgage consultant with Santa Cruz Home Finance, 1535 Seabright Ave., Santa Cruz, CA 95062. Archived columns are available at www.peterboutell.com.
The boom years of 2001-2005 saw unprecedented growth in mortgage volume. This growth created a huge demand for employment in the mortgage industry and this environment allowed and even encouraged widespread unprofessional behavior by some in the mortgage industry.
Some of this behavior was the result of neophytes flooding into the industry, but I believe that most of it was due to greed, which resulted in fraudulent transactions. There are numerous examples that have come to my attention where borrowers paid tens of thousands of dollars in unwarranted closing costs to mortgage originators, who took outrageous advantage of unsuspecting consumers just to fatten their own wallets.
Sure, one can shake fingers at those mortgage originators but most of us cannot and should not be grouped into that category. We have all heard stories about unscrupulous attorneys, accountants and doctors, too. There are bad apples in every batch. Given the fact that the majority of loans are originated by mortgage companies makes mortgage brokers an easy target for finger pointers.
When a borrower goes to a bank to inquire about financing, he only will have access to that bank's loan programs at that bank's rates. For a borrower to satisfy himself that he is getting the best loan for his needs, he will have to go from bank to bank and compare all of the options. It may be that the bank's loan officer can function as a broker also but he sure is not going to be able to refer the borrower to a loan program that is available at another bank.
Mortgage brokers have access to hundreds of loan programs through their relationships with dozens of banks and mortgage companies. As a result, a professional and ethical mortgage broker should be able to arrange a mortgage for his client that is right for his needs and one that is competitively priced. With that in mind, it is no surprise that mortgage companies are doing the bulk of the business.
On a more global scale, as I wrote in this column at the beginning of the summer, it is not fair to single out the mortgage industry as the fall guy in trying to explain the subprime crises and the fall in home prices across the nation [although Santa Cruz has escaped most of this]. As I mentioned in that column, the consumer has to accept some of the blame for not being responsible about spending and saving money and reading the loan disclosures and documents.
Peter Boutell is a mortgage consultant with Santa Cruz Home Finance, 1535 Seabright Ave., Santa Cruz, CA 95062. Archived columns are available at www.peterboutell.com.
Saturday, September 1, 2007
FED to weigh markets turmoil
The Federal Reserve won't bail investors out of their bad decisions but will act if recent market turmoil threatens economic growth, Chairman Ben Bernanke said Friday.
Mr. Bernanke's much-anticipated speech solidified investor expectations the Fed will cut its target for the federal-funds rate -- charged on overnight loans between banks -- from 5.25% when policy makers meet Sept. 18. Markets see some probability the rate will drop to 4.75% but several economists said a drop to 5% is more likely, accompanied by a statement suggesting more cuts could come. Those expectations helped boost stocks. Read the full speech at this link
Excerpted from Greg at IP
Mr. Bernanke's much-anticipated speech solidified investor expectations the Fed will cut its target for the federal-funds rate -- charged on overnight loans between banks -- from 5.25% when policy makers meet Sept. 18. Markets see some probability the rate will drop to 4.75% but several economists said a drop to 5% is more likely, accompanied by a statement suggesting more cuts could come. Those expectations helped boost stocks. Read the full speech at this link
Excerpted from Greg at IP
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