New Up Dates As Of 05/12/2010

Many underwater homeowners-those who owe more on their home than it is currently worth-feel stuck. They can't sell without taking a major loss, and they often can't refinance because the appraiser's report doesn't past muster. If they want to take advantage of some mortgage modification programs, they're often told they need to be behind in their mortgage first.

But what if they are current on their mortgage? Well, the government has a new plan for these homeowners.

Under a new U.S. Department of Housing and Urban Development (HUD) program, homeowners who are current on their loans can reduce their hefty loan-to-value mortgage debt by 10 percent, if they qualify and if their lender approves. This is big news, especially for homeowners in the five hardest-hit states--Nevada, Arizona, Florida, Michigan and California-where between 35 percent and 70 percent of existing homes have underwater mortgages.

"Negative equity is a significant drag on both the housing market and on economic growth," said Mark Fleming, chief economist with First American CoreLogic. "It is driving foreclosures and decreasing mobility for millions of homeowners." Negative equity and near-negative equity mortgages account for nearly 29 percent of all U.S. residential properties with a mortgage.

First American CoreLogic reported in February that more than 11.3 million of residential mortgages held negative equity in their homes at the end of 2009, up from 10.7 million in third quarter. An additional 2.3 million homes were approaching near-negative equity. "Once negative equity exceeds 25 percent, or the mortgage balance is $70,000 higher than the current property values, owners begin to default," according to the CoreLogic report.

As many as 4 million homeowners could get help by 2012 from expanded FHA programs, with the federal government funding the program for up to $50 billion through the Troubled Asset Relief Program or TARP.

But Jay Dacey, a mortgage planner in Plymouth, Minn., cautions homeowners before they jump into these government-initiated programs. "The programs the government has tried to instill to date have completely failed," he says. "I believe if you do one of these it might adversely affect your credit because it will show that you settled for less. I would tell the consumer to make sure they understand the credit consequences in advance." So do your homework, he cautions.

* The total mortgage amount for the borrower after refinancing cannot be greater than 115 percent of the current value of the home. After all, the goal is to lower a mortgage to be closer to today's actual value.
* The homeowner must occupy the home as their primary residence.
* The homeowners must qualify for a new FHA loan under standard FHA borrower guidelines.
* The homeowners must have a FICO credit score of at least 500-which is a lower than getting a traditional mortgage.
* The existing loan cannot be FHA-insured. That's because FHA guidelines doesn't allow its own loans to be reduced.
* The lender must agree to write down the principal loan balance a minimum of 10 percent and the final loan amount cannot exceed 115 percent of the current value of the home (including any second mortgages).
* The refinanced FHA loan cannot be greater than 97.75 percent of the value of the home. This means if you may have to bring money to the closing table to lower it further. If you don't have cash on hand, you can get the second loan to cover the difference.

This is relief for those who might not otherwise be approved by the Home Affordable Modification Program (HAMP). Under HAMP, more than 1.4 million homeowners received offers for trial modifications and more than 1.1 million borrowers were receiving a median savings of $500 each month as of the end of April. Permanent modifications have been granted to more than 230,000 homeowners, and an additional 108,000 permanent modifications have been approved by servicers and are pending borrower acceptance. But still that is not enough, given the CoreLogic numbers.

"Housing is a long-term investment, and homeowners should just focus on making the next payment," says mortgage planner Dacey. "Don't worry about the market value. You will still owe money next month."

New Up Dates As Of 2/3/2010

About 5.1 million mortgage holders (or roughly 10% of Americans with mortgages) will own homes that are worth 75% or less than what they owe on their mortgages by mid-June. This is the conclusion of a new study by First American CoreLogic given exclusively to The New York Times. One of the firm's senior economists, Sam Khater, told the paper, "People's emotional attachment to their property is melting into the air." The most astonishing number in the study is that it would take $745 billion to get mortgages to the point where no home loans in the U.S. were underwater.

This research is another example of why the housing problems in the U.S. are so intractable. Building permits rose 11% in December, but housing starts were down. RealtyTrac recently forecast that about 3 million homes will go into foreclosure this year, up slightly from the 2009 numbers. A large number of interest-rate only mortgages will reset higher in the next two years, raising monthly payments on those loans.

Despite low mortgage rates, which have in some cases fallen below 5%, and tax credits for some home buyers, people are reluctant to purchase new houses. Some fear that they could become unemployed like 10% of the full-time work force. Others are concerned that home prices will continue to fall and that even a home bought in 2010 could have an underwater mortgage of its own in 2011.

NEW UP DATES AS OF 1/01/2010

You've found your dream house, lined up a mortgage, and you're ready to close. Unfortunately, that final step in the home-buying process can be fraught with unpleasant surprises. Even the most well-prepared home-buyers have found themselves saddled with higher than expected closing costs and fees.

Not anymore. Thanks to new federal rules that went into effect on January 1, the mortgage process has never been more transparent and easy to understand.

The centerpiece of the Department of Housing and Urban Development effort is a standardized Good Faith Estimate that all lenders must provide to borrowers. The 3-page form is written in plain English and clearly discloses to borrowers the actual costs of their mortgages, including interest rates, fees and penalties. it also explains which fees are subject to change, and which are not. In addition, closing agents must provide borrowers with a new HUD-1 settlement statement that compares borrowers' final and estimated closing costs.

The new standardized forms are intended to help borrowers shop around for the best mortgage deals on an apples-to-apples basis, whether they are refinancing or buying a new home. "Shopping for your loan is probably the most important step in your home-buying process," HUD points out in a settlement cost booklet it published that explains the changes and that lenders must provide to borrowers. "The type of loan product and your interest rate will not only influence your total settlement costs, but will determine the amount of your monthly mortgage payment," the agency notes.

Closing costs can account for between 3 and 5 percent of a sale price, so those surprises can pack a punch to the wallet. And at that point in the process, borrowers have little leverage to negotiate. The agency figures that the disclosures and ability to comparison shop could save consumers, on average, $700 in mortgage costs.

The changes to the the Federal Real Estate Settlement Procedures Act address a longstanding issue that came to a head during the housing crisis. Good Faith Estimates have long been required under RESPA, but in the past, they weren't very helpful. For one, they estimates were not legally binding, and often bore little resemblance to final costs. Secondly, the estimates varied widely, with lenders using different terminology for fees, or sometimes omitting fees altogether, making it difficult to compare mortgage offers.

"If we learned anything from the current crisis it's that it is hard for borrowers to make responsible decisions if they don't have all the necessary information," said HUD Commissioner David Stevens. "I believe these changes will take away much of the uncertainty borrowers have about the accuracy of disclosures."

Clearer disclosure should help prevent borrowers from taking on mortgages they can't afford, as many did during the during the housing bubble. The new Good Faith Estimate requires lenders to disclose features that could drive up costs down the road -- for example, if your interest rate will rise and, if so, by how much. Lenders must also now disclose whether the loan includes balloon payments, yield spread premiums, or imposes penalties for paying the loan off early.

The forms also make clear which charges cannot increase at settlement, and which can. Charges that cannot increase are generally those controlled by the lender, including the origination charge and processing fees. Fees for third-party services, such as appraisals and title insurance, can increase no more than 10% from the estimate, as long as the borrowers use lender-approved providers.

 VA LOANS

The VA loan was designed to offer long-term financing to American veterans or
their surviving spouses (provided they do not remarry). The basic intention of
the VA direct home loan program is to supply home financing to eligible veterans
in areas where private financing is not generally available and to help veterans
purchase properties with no down payment. Eligible areas are designated by the
VA as housing credit shortage areas and are generally rural areas and small
cities and towns not near metropolitan or commuting areas of large cities.

Visit the site below for more info.

As you grow older there are chances that you will be requiring more cash to meet your health expenses. So, will it be a good decision to take out a traditional mortgage and continue paying for it even after your retirement? Certainly not, you can opt for a reverse mortgage instead. The U.S. Department of Housing and Urban Development together with FHA or Federal Housing Authority introduced the Home Equity Conversion Mortgage (HECM) program. It is commonly known as reverse mortgage.

When can you opt for reverse mortgage?

You will be eligible for reverse mortgage in case you are 62 years and above. Your home should be your principal residence and you must be the owner of the same. There should be enough equity in your home that can help you qualify for the mortgage.

How does it work?

You take out a reverse mortgage against the equity that is trapped in your home. So, when you take out a reverse mortgage, you free up a part of the equity. You do not have to make payments as long as you are staying in your house. The reverse mortgage has to be paid back after your death. Payments should also be made if you move out of the primary residence.

The proceeds of reverse mortgage can be availed in the following manner –

• You can avail the proceeds in form of a lump sum

• In form of monthly payments
• As line of credit
• A combination of the above 3

How will you use the proceeds of reverse mortgage?

The proceeds of reverse mortgage can be used for paying taxes, for renovating your home, funding a vacation, paying for a family member's education or paying for medical expenses. You can use the cash for just about anything.

Recently, the HECM reverse mortgage home purchase program was introduced that allows a senior to take out a mortgage for the purchase of a new home. The new home is used as security. The reverse mortgage purchase program has just started and is yet to kick off in many states.

Although reverse mortgage has been there for more than 25 years, it has always been a consumer’s favorite. The main difference between a traditional mortgage and a reverse mortgage is while in traditional mortgage, equity in your property increases and debt decreases, it is different in reverse mortgage. In case of reverse mortgage, the equity decreases, debt increases.

As Of 10/15/2009

LOOK AT THIS AS OF 10/15/2009

Is The FDIC Killing Short Sales?
> As some of you already know, I blogged recently about being
> interviewed recently by our local NBC news affiliate. 
> To read the blog, click here.  Basically, IndyMac Bank
> (now OneWest Bank), is holding one of my clients hostage,
> demanding a $75k promissory note, or they will proceed to
> foreclosure.  For the life of me, I couldn't figure
> out why they were doing
>  this.  The BPO came in at the contract price of
> $275k, with a net to IndyMac of $241k.  What advantage
> could there possibly be for them to proceed to foreclosure?
> Yesterday, I figured it out.  You see, IndyMac was
> taken over by the FDIC and sold to OneWest Bank in
> March/2009.  Guess who the investors are behind
> OneWest?  George Soros, Michael Dell, Steve Mnuchin
> (former Goldman Sachs executive), and John Paulson
> (hedge-fund billionaire).
> Now, listen to the deal they got from the FDIC....
> Basically, they purchased all current residential mortgages
> at 70% of par value (70% of the outstanding loan
> amounts).  They purchased all current HELOCS at 58% of
> Par Value!!!
> Next, in order to "sweeten the pot", the FDIC
> stepped in and guaranteed the following:  For any
> residential mortgages where OneWest experiences a loss, the
> FDIC will step in and cover anywhere from 80%-95% of the
> loss.  The loss is calculated
>  using the ORIGINAL LOAN BALANCE, not the amount that
> OneWest paid for the loan.  Let's use my clients
> situation as an example:
> Loan Amount is $478,000, plus 6 months of missed payments,
> for a grand total of $485,200
> OneWest pays $334,600 for the loan
> We have an all cash offer of $241,000, net to OneWest.
> So, let's do the math, shall we?  The net loss,
> according to the FDIC formula is the ORIGINAL LOAN AMOUNT
> minus the amount of the offer.  In this case,
> $485,200-$241,000, or $244,200.  Next, the FDIC,
> according to their Loss Share Agreement, writes a check to
> OneWest for 80% of the so-called "net loss". 
> So, in this case, OneWest gets a check from Uncle Sam for
> $195,360 (.80 X $244,200).
> Add the $195,360 to the sales price of $241,000, and you
> get a grand total of $436,360.  Remember, OneWest paid
> $334,600 for the loan.  So, OneWest puts $101,760 in
> their pocket, thanks to the FDIC.  Folks, that is
>  over $100k of our hard-earned tax dollars!
> So, you ask...Why does this program hurt short sales? 
> Because, our brilliant government offers this SAME PROGRAM
> FOR FORECLOSURES!  The only difference is, the
> government picks up 80% of the tab on all of the extra costs
> associated with a foreclosure (BPO's, upkeep,
> utilities/maintenance, legal fees, etc.)
> So, If I'm OneWest, why would I want to waste my time
> negotiating through a Short Sale, when I can make the same
> amount of money (if not more) by just letting it go to
> foreclosure?  And we wonder why nobody can get a Loan
> Modification?  Why would OneWest approve a loan
> modification for this guy, when they can foreclose and make
> over $100k?  And, to add injury to insult, they have
> held this loan for 6 months!  Not a bad ROI, huh?
> What infuriates me the most is that in my particular case
> mentioned above, they have the guts to hold my client
> hostage for a $75k promissory
>  note, after they are already making more than $100k on the
> sale!!! This is his primary residence, 1st Position loan,
> and OneWest has NO RECOURSE!  Imagine if they could
> make $100k, then get a deficiency judgement!  Talk
> about making some big bucks!
> Can you say "GREED"?
> The scary thing is that over 50 banks have Shared Loss
> Agreements in place with the FDIC.  Some of them
> include:  Bank of America (go figure), CitiMortgage,
> Wells Fargo, etc.
> This entire agreement between the FDIC and OneWest can be
> found here, on the FDIC website.  It's all there,
> for the world to see!  They have it all layed
> out.  All of the formulas, worksheets, etc.
> Now, it's up to us to bring it to the attention of our
> elected officials and the media.  Enough is Enough!
> UPDATE 9/18/09:  I JUST READ AN AWESOME ARTICLE ON
> THIS, THAT GOES INTO WAY MORE DETAIL THAN MY BLOG
> ABOVE.  TAKE THE TIME TO READ IT WHEN YOU GET A
>  CHANCE! CLICK HERE TO READ IT.
> Wait, it gets better...The FDIC just announced that it
> needs to start borrowing money from the U.S. Treasure in
> order to replenish it's deposit insurance fund (the same
> fund being used to pay all of these banks in the Loss Share
> Agreements).  Go Figure!