Tag Archives: mortgage payments

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

Troubled Homeowners Get A Lifeline

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The government is changing its Home Affordable Refinance Program (HARP), making it easier for homeowners to refinance their underwater, high-interest mortgages.

Making sense of the story

  • Although HARP has helped more than 890,000 homeowners nationwide by reducing their monthly mortgage payments, there are still millions of homeowners who are too far underwater to participate.
  • Under the new rules, homeowners who owe more than 125 percent of the market value of their homes will be allowed to refinance into new loans.
  • The program also streamlines the refinancing process for homeowners who are current on their mortgage payments and reduces or removes fees that previously hindered them from refinancing.
  • Fannie Mae and Freddie Mac also will reduce the fees they charged in the past to enable borrowers to better afford the new loans.  Among the fees that will be reduced or eliminated are those for appraisals, title insurance, and closing costs.
  • Fees also will be waived for some underwater borrowers who are refinancing into 20-year or shorter-term loans.
  • HARP is only open to borrowers who are current on their payments for the past six months with no more than one missed payment in the past 12 months.  The loans must have been originally issued before May 31, 2009, and purchased by Fannie Mae or Freddie Mac.

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Real Estate

Looking To Buy A Home? Triggers For Rejection Of Your Loan


Last year, more than two million people were turned down for homes, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic.  With lenders’ underwriting criteria becoming more rigorous in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.

  • Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments.  Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
  • Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income.  Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
  • Poor credit: Lenders typically reject applicants with FICO scores below 620.
  • Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low.  A buyer may think he or she is purchasing a house worth $800,000, but if the appraisal comes in less than that, the lender will not loan the borrower the money.
  • Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
  • Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

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Real Estate

Foreclosures Reach Lowest Level Since 2007

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Foreclosure filings dropped again in July, marking the 10th straight month for year-over-year declines and reaching their lowest level since November 2007, RealtyTrac reports. But analysts are still mostly attributing the drop to banks’ processing delays as they take more time to take action against delinquent home owners.

For July, about 212,764 homes received a foreclosure filing — which is a notice of default or auction sale or completed foreclosure — that’s down 4 percent compared to June. Filings were 35 percent lower than July 2010, according to RealtyTrac, and bank repossessions were down 33.6 percent from its peak in September 2010. Also, initial notices of default dropped 39 percent year-over-year to fewer than 60,000, which could be an indication that fewer borrowers are falling behind on their mortgage payments or that lenders are not filing notices as promptly in the past.

“The downward trend in foreclosure activity has now taken on a life of its own,” says RealtyTrac CEO James Saccacio. “It appears that processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts, may be allowing more distressed home owners to stave off foreclosure.”

Las Vegas continued to have the highest rate of foreclosures in the country — a filing for every 99 homes. Overall, for states, Nevada had the highest foreclosure rate of any state (one filing for every 115 homes), followed by California (one in every 239 homes), and Arizona (one in every 273 homes).

Source: “Foreclosure Filings Fall for 10th Straight Month,” CNNMoney (Aug. 11, 2011)

 
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Real Estate

Facing Foreclosure? Here’s Some Myths, Debunked

Although there are a number of programs available to help homeowners who have defaulted on their mortgages keep their home, the large amount of misinformation tends to result in troubled homeowners failing to contact their lender until it is too late.

  • Some homeowners believe, incorrectly, that contacting their lender early in the process will draw attention to their situation and result in a quicker foreclosure.  In reality, contacting the lender or servicer is an important first step, and the sooner, the better.  Contacting the lender provides the homeowner with an opportunity to explain their situation and the steps necessary to deal with it.
  • It is a common misconception that missing one mortgage payment will lead to foreclosure.  However, the foreclosure process doesn’t begin until payments are 90 days delinquent.  Lenders generally have a financial interest in keeping homeowners in their homes, so making contact as early as possible could help lenders modify terms of the mortgage or devise a repayment plan.
  • Once homeowners are behind on their mortgage payments, it becomes challenging to dig out of the hole.  Some homeowners try to solve this by depleting their savings or dipping into their retirement accounts to become current on the loan.  Most financial experts advise against this.
  • Delinquent homeowners may think they should stop making mortgage payments to get their lender’s attention, which often isn’t the case.  When possible, homeowners should stay current on their mortgage payments and continue to contact their lender on a regular basis.
  • Homeowners who have applied for assistance or loan modification programs in the past and were turned down are advised to reapply.  Program parameters are constantly changing, so the rules might have been liberalized since the last time the borrower sought help.
  • A number of free, government-sponsored housing services are available through the Dept. of Housing and Urban Development (HUD).  A list of HUD-approved agencies can be found at http://www.hud.gov.

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Real Estate

Old Mortgage Scam Aims to Hijack a Payment or Two

Image courtesy of True Blue Realtor.com
Image courtesy of True Blue Realtor.com


A mortgage scam in which con artists send letters telling borrowers they should begin sending their mortgage payments to a fictitious company that has begun servicing their loan, is making the rounds again.  Unfortunately, by the time borrowers figure out their loan has not changed servicer’s, they’ve already sent one or two mortgage payments to the fictitious company.’

Making sense of the story

  • According to those familiar with the scam, it typically works because most borrowers are unaware of the rules when it comes to the transfer of mortgage-servicing rights.  Under the law, the current servicer is required to send a “goodbye” letter notifying the borrower that payments should be sent to a new company as of a certain date.
  • A week or two later, the law says the borrower should receive a second letter, which, by law, should include a welcome missive from the new servicer with the details of the mortgage payment – a breakdown among principal, interest, and escrow.  The package also is likely to include a few payment coupons, if not a brand-new coupon book, and self-addressed printed envelopes for borrowers to make payments.
  • Both the goodbye and welcome letter should include the mortgage loan number.  If either letter does not, or if the information included in one doesn’t match what’s in the other, borrowers should call their original servicers to inquire.
  • Borrowers only receiving one letter should be extra cautious.  Even if everything appears to be standard procedure, borrowers are still advised to call the first company’s toll-free number just to be sure.

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Real Estate

Missed Mortgage Payments Rate Falling

The number of U.S. households that missed consecutive mortgage payments or were in foreclosure fell more in the second quarter than any time since the mortgage crisis began four years ago, a survey found.

But the data, released Thursday by the Mortgage Bankers Association, showed the crisis is far from ending. One worrisome sign: The number of newly distressed borrowers increased, raising the prospect that foreclosures and delinquencies could resume their rise.

Overall, some 14.4% of borrowers had missed at least one payment or were in foreclosure at the end of June. That was down from 14.7% at the end of March, but up from 13.5% a year ago. The improvement came because fewer borrowers fell 60 days or more delinquent on their mortgages. The number of households that had missed just one payment increased.

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