Tag Archives: mortgage loan

Real Estate

End is Near for Certain Tax Exemptions

Photo credit: www.inspirational-quotes-short-funny-stuff.com
Photo credit: www.inspirational-quotes-short-funny-stuff.com

Currently, any debt forgiven by a lender in a short sale, loan modification, or foreclosure is exempt from federal taxation.  However, that exemption is scheduled to expire Jan. 1, 2013.

Making sense of the story

  • Borrowers will have to count mortgage relief from lenders as income on their federal tax returns, if the exemption is allowed to expire.  That means, for example, a borrower would have to pay taxes on a $100,000 reduction in principal owed on a loan, or a $20,000 write-off in the amount owed after a short sale.
  • An extension of the tax exemption – established under the Mortgage Forgiveness Debt Relief Act of 2007 – is a strong possibility.  But given that Congress will have to grapple with serious fiscal issues after the November elections, there is no guarantee the exemption will emerge from those negotiations intact.
  • The Debt Relief Act exemption applies only to canceled mortgage debt used to buy, build, or improve a primary residence, not a second home.  The maximum exemption is $2 million.
  • Reinstating the tax would undercut the the effect of the National Mortgage Settlement reached earlier this year in the federal government’s investigation into banks’ mishandling of foreclosure documents.
  • Under the terms of the settlement, five of the biggest mortgage lenders must put some $17 billion toward debt relief that enables borrowers to stay in their homes. Smaller portions are reserved for short sales and refinancing.

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Real Estate

FHA Eases Burdensome Condo Financing Rules

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Trailer Trash Condos    Photo credit: www.ebcak.com

 

The biggest source of funding for low-down-payment condo mortgages, the Federal Housing Administration, has revamped controversial rules that caused thousands of building across the country to lose their eligibility for FHA financing.

  • The revised guidelines, which were issued Sept. 13 and took effect immediately, should make it easier for a large number of homeowner associations to seek certification by the FHA.  Without approval of an entire development, no individual unit can be financed or refinanced with an FHA mortgage.
  • The previous rules prohibited FHA insurance of units in buildings where more than 25 percent of the total floor space was used for commercial or nonresidential purposes.  Yet many condominiums in urban areas have lower floors devoted to retail stores and offices that generate revenues that help support the entire project.  The revised rules allow exceptions of up to 35 percent commercial use, and provide for additional case-by-case exceptions to 50 percent or higher.
  • The Community Associations Institute, the condo industry’s largest trade group, is predicting that the relaxed FHA rules will spark home sales and helps tens of thousands of condominium communities begin to recover from the housing slump.
  • The new rules also offer greater flexibility on investor ownership.  In existing developments, one or more investors are now allowed to own up to 50 percent of the total units provided that at least half of the units are owner-occupied.  The previous rule required that no more than 10 percent of units could be owned by a single investor.

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Real Estate

When an Adjustable-rate Mortgage Makes Sense

Photo credit Cleveland Seniors www.http://www.clevelandseniors.com/forever/headlines.htm
Photo credit Cleveland Seniors www.http://www.clevelandseniors.com/

 

When the housing market began declining, many people claimed that adjustable-rate mortgages (ARMs) were the cause.  However, recently they’ve been making a comeback, especially among affluent borrowers

  • An ARM offers an introductory period in which the borrower pays a lower interest rate than with a fixed loan; after that, the rate can fluctuate up or down.
  • With rates near historic lows, the safety of locking in a fixed-rate appeals to many borrowers.  But these borrowers are paying a premium for that security.  The spread between rates on 30-year fixed-rate mortgages and the most-popular ARMs now stand at about one percentage point, more than double the difference just five years ago.
  • That means that homeowners who are planning to either move or pay off their mortgage over the next few years can save big with an ARM.
  • Borrowers can determine if an ARM is the right loan option for them by looking at their financial situation and the terms of the ARM. ARMs carry risks in periods of rising interest rates, but can be cheaper over a longer term if interest rates decline. An ARM may be a good option to consider for borrowers who plan to own the home for only a few years, expect an increase in future earnings, or the prevailing interest rate for a fixed-rate mortgage is too high.
  • Before deciding to apply for an ARM, borrowers should consider if their income is likely to rise enough to cover higher mortgage payments if interest rates increase; whether they will be taking on other sizable debts such as car loans or school tuition in the near future; how long they plan to own the home; and whether their mortgage payments can increase even if interest rates generally do not increase.

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Real Estate

Taking Advantage of Low Mortgage Rates

English: Mortgage debt
Mortgage debt (Photo credit: Wikipedia)

 

 

 

 

 

 

Mortgage rates continue to set new record lows, leaving many home buyers and re-financers wondering how low rates can go and how to capture the best rates now.

  • Many economists are forecasting that mortgage rates will rise again later this year as the American economy gradually improves and as more global investors turn to the U.S. as a safe haven for money.
  • The average rate on a 30-year fixed-rate mortgage averaged 3.71 percent the week of June 14.
    The rate had averaged 3.9 percent three months earlier and 4.5 percent a year earlier.
  • According to one economist, rates could possibly fall further, perhaps as much as a quarter of a percentage point, but it is more likely that they would start a “slow drift” upward.
  • Those planning to refinance or buy a home in the next two or three months might want to consider locking in a mortgage rate now.
  • Borrowers with rate locks, with a built-in deadline, often receive priority treatment from lenders, because the borrower is telling the lender that he or she is serious about closing soon.
  • Lock-in costs and policies vary widely, and are based partly on the time frame the borrower wants covered.  Most borrowers will need a 60- to 90-day lock.
  • If interest rates continue to fall during the lock period, borrowers can ask the lender to rewrite the rate lock at an additional cost, or obtain a “float-down” provision in the original agreement.  A lock with a float-down agreement allows the borrower to change the rate, often only once, before closing on the mortgage.  This option is generally more expensive than a standard lock.

 

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Real Estate

FHA Mortgages Are Poised To Get More Expensive

Logo of the Federal Housing Administration.
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The Federal Housing Administration (FHA) plans to impose significant restrictions on the amount of money that sellers can contribute at closing in the near future.  The FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchases across the board.

Making sense of the story

  • One reason for the increase in fees is that over the last six years, the number of FHA loans used by buyers has increased significantly.  The housing program is financing 40 percent or more of all new-home purchases in some areas and is a crucial resource for first-time buyers and moderate-income families.  This is especially because of the low 3.5 percent down payment required for most FHA loans.
  • During this span of rapid growth, the FHA’s insurance fund capital reserves have steadily deteriorated – far below congressionally mandated levels.  And delinquencies have been increasing.  As a result, the FHA is under the gun to get its own house in order, cut insurance claims, and rebuild its reserves.
  • Under the changes, the FHA will lower its seller concession cap to 3 percent of the home price or $6,000, whichever is greater.  Currently, the FHA allows up to 6 percent of the price of the house to go toward buyers’ closing costs.
  • Beyond that change, the FHA also plans significant increases in insurance premiums – upfront premiums will rise to 1.75 percent from 1 percent, effective April 1, and annual premiums will increase by 0.1 percent on all loans under $625,000 and 0.35 percent on mortgage amounts above that, effective June 1.

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Real Estate

Mortgage Settlement Could Lead to More Scams

The recent announcement of the $25 million mortgage settlement between five major banks and state and federal government officials was probably welcome news to many people in the real estate business. But it has at least one downside: It will probably cause a rise in scams targeting borrowers seeking assistance.

Currently, between $4 billion and $6 billion is lost each year due to borrower-assistance swindles, says Joanne Kerstetter, vice president of education and community relations for Money Management International, a credit counseling service based in Sugar Land, Texas. Those numbers could go up over the next few years as scammers take advantage of the mortgage deal in their schemes.

“They’ll use government terms,” Kerstetter says. “They’re going to sound very official, as if they’re part of the settlement.”

Also, some of these scammers will guarantee access to borrower assistance funds. That’s a major red flag, she says. “Generally speaking, the advertisements that say, ‘Call us to get money,’ are not representing organizations officially involved with the settlement,” Kerstetter says.

In general, consumers should be wary of any company that reaches out to them with unsolicited offers of assistance. If they need help, they should contact their lenders or a financial counseling agency certified by HUD, Kerstetter says.

“The important thing is not to release any contact information to anyone who approaches you,” she explains. “Don’t sign anything unless you’re clear about what you’re signing and that your mortgage lender is involved in the process. If you’re making payments, make sure they’re going to the loan servicer or mortgage provider.”

By Brian Summerfield, REALTOR® Magazine

Read More

What You Need to Know About the Mortgage Settlement

4 Ways to ID Borrower-Assistance Scammer

 

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Real Estate

Three Sarcramento Attorneys Arrested For Mortgage Scam

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Attorney General Kamala D. Harris  announced the arrests of  Sacramento  attorneys that took thousands of dollars in up-front loan modification fees for services that were never performed for homeowners, many of whom ended up losing their homes.

Attorneys Gregory Flahive of El Dorado Hills, 39, Cynthia Flahive of Folsom, 41, and Mike Johnson of Elk Grove, 42, were arrested on 19 felony counts, including grand theft by false pretense, conspiracy and false advertising. They were booked at the Sacramento County Jail with bail set at $50,000 bail each.

“Homeowners facing foreclosure are being targeted by predators, including those who use their law license to gain credibility and scam innocent Californians,” Attorney General Harris said. “My office’s Mortgage Fraud Strike Force is dedicated full-time to cracking down on these deceptive practices and protecting homeowners from fraud like this.”

Gregory and Cynthia Flahive, ex-spouses and owners of Flahive Law Corporation, and Johnson, the firm’s managing attorney, took up-front fees of up to $2,500 from homeowners in Placer, Sacramento, Butte and Yuba counties for loan modification services that were never performed. In California, it is illegal for foreclosure consultants to collect money for services before they are performed.

The Folsom-based law firm advertised their services on flyers, radio and televised infomercials, offering to provide loan modification services and help clients with bankruptcy, IRS tax relief and credit card modification.

In a 2010 infomercial, the Flahives said that, as a law firm, they had “extra leverage” with the banks. They described one of their unique services as a “mortgage violation audit” in which they reviewed a client’s loan documents to find bank violations that could be used as leverage to modify a client’s home loan.

In fact, the investigation revealed that, in some instances, the client’s lender had no record of contact with the Flahive Law Corporation.

Former clients of the Flahive Law Corporation filed complaints with the Attorney General’s office, as well as with the Better Business Bureau and the State Bar of California.

The State Bar of California launched an investigation, which was turned over to the Attorney General’s Mortgage Fraud Strike Force in summer 2011.

In one example of the firm’s deceptive practices, a victim who sought to lower his mortgage payments was told by Gregory Flahive to reject his lender’s offer of modification. The homeowner was told the Flahive Law Corporation could secure a better interest rate, reduce his principal, and possibly get his second mortgage eliminated. Four months later, the victim lost his home to foreclosure.

 

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Real Estate

Home Owners Beware A New Twist on Foreclosure Rescue Fraud

Forensic Mortgage Loan Audit Scams:

Fraudulent foreclosure “rescue” professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.

In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

Nothing could be further from the truth. According to the FTC and its law enforcement partners:

  • there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.
  • some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.
  • if you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

If you are in default on your mortgage or facing foreclosure, you may be targeted by a foreclosure rescue scam. The FTC wants you to know how to recognize the telltale signs and report them. If you are faced with foreclosure, the FTC says legitimate options are available to help you save your home.

Spotting a Scam

If you’re looking for foreclosure prevention help, avoid any business that:

  • guarantees to stop the foreclosure process – no matter what your circumstances are
  • instructs you not to contact your lender, lawyer or credit or housing counselor
  • collects a fee before providing any services accepts payment only by cashier’s check or wire transfer
  • encourages you to lease your home so you can buy it back over time
  • recommends that you make your mortgage payments directly to it, rather than your lender
  • urges you to transfer your property deed or title to it
  • offers to buy your house for cash at a fixed price that is inappropriate for the housing market
  • pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.

Source: Federal Trade Commission

 

 

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Real Estate

Getting A Real Estate Loan If You Are Freelancing


After the financial market downturn in 2008, getting approved for a mortgage loan became even more difficult.  Combine that with the fledgling economy, which left many people turning to freelance work, and the challenges involved in qualifying for a home mortgage increase exponentially.  However, with a little extra work, home buyers using freelance work as proof of income still can qualify for a new lo

  • Borrowers who earn most of their income on 1099s should be prepared for extra preparation, paperwork, and discussion of their financial standing when applying for a mortgage.
  • It’s important that independent contractors show that their income is stable and increasing. For some, that may mean declaring all their income on their tax returns, and not, say, carrying anything over to the next year, even if it means paying more taxes.
  • Consistency in income is key, so those applying for a mortgage this fall or winter should be prepared to provide proof for year-to-date income.
  • To increase the chances of getting a mortgage approval, borrowers should pay off other debts, including balances on credit cards.
  • Pinpointing the source of the down payment also is helpful.  If the down payment will be a gift from a relative, borrowers are advised to submit an account statement showing the funds are available and awaiting the home purchase.  Same goes for borrowing from a 401(k).
  • Freelancers also should be prepared for a more in-depth analysis of their ability to repay the debt.  Submitting tax returns from the last three years and explaining any significant differences in income is advised.

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