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Housing Problem Solvers
Housing Problem Solvers
|Posted on April 18, 2014 at 3:47 AM||comments (8)|
Are you thinking about buying or refinancing a home in the near future? If so, chances are you're getting all kinds of advice from well-intentioned friends and family.
Just remember to keep this important piece of advice in mind: Don't listen to everything you hear. According to industry professionals, some words of wisdom are not wise at all.
To help you separate the bad advice from the good, check out five common statements that should cause you to cover your ears immediately.Bad Advice No. 1: "A 30-year fixed-rate mortgage is best for everyone."
The common perception is that a 30-year fixed-rate mortgage is always the best option, because it typically offers lower monthly payments than other shorter-term mortgages. But the kicker is that interest payments over the course of the loan can be quite substantial when compared to mortgages with shorter terms and lower interest rates.
Consider this example based on rates from Freddie Mac, as of March 20, 2014:
A 30-year loan on a $200,000 property with a 4.32 percent interest rate has a monthly payment of $992 and interest payments totaling $157,153 over the life of the loan. On the other hand, a 15-year loan for the same property with a 3.32 percent rate has monthly payments of $1,412 and yields $54,187 in total interest paid. So by opting for the shorter mortgage, you could save more than $100,000 in interest, which is worth it if you can meet those higher monthly payments.
Whether or not a 30-year fixed mortgage is the right choice depends on the borrower's goals and financial situation, says Houtan Hormozian, vice president of Crestico Funding, a Los Angeles-based mortgage brokerage firm.
For example, if you have cash saved up for job, family, or medical emergencies and you already have college and retirement funds set up, then a 15-year mortgage might be a better option. Without money saved up, losing a job or an expensive surgery could deal a hard blow to someone's finances, including their ability to make mortgage payments.
An adjustable-rate mortgage (ARM) is a loan with an interest rate that is fixed for a period of time then adjusts, causing the ARM payments to increase or decrease.
ARMs get a bad rap, because they're seen as risky products that contributed to the housing bubble, easy credit, and ultimately, the subprime mortgage crisis.
"The 30-year fixed-rate mortgage is the most popular type, because everyone is afraid of adjustable [rates]," Hormozian says.
In fact, only 3 percent of homebuyers chose adjustable-rate mortgages in the first half of 2013, reports Freddie Mac. With that low figure it's easy to get scared off, too. But the fear associated with ARMs is somewhat unjustified, according to Hormozian.
"Depending on the consumer, circumstances, and knowledge of their economic situation, there could be an ARM that fits them," says Frank Percival, board president of the Washington Association of Mortgage Professionals.
One major benefit of an ARM is that it typically will have a lower interest rate than fixed-rate mortgages at the outset. For example, a 5/1 ARM will have an initial fixed rate for the first five years then adjusts afterward.
This is a great option for homeowners who plan on moving out of their house before the rate adjusts. However, this does carry some risk, since personal finances and the condition of the housing market may make moving difficult in a set amount of time.
So choosing an ARM may come down to your financial situation and your aversion to risk. Percival explains that if a homebuyer with a 5/1 ARM saves $200 a month in interest compared to a 30-year fixed mortgage, it may make sense to choose that type of loan. However, if someone wants to err on the side of caution, given the risks discussed, a 30-year fixed mortgage might be the more sensible choice.
"When the housing market was bad a year or a year and a half ago and the values of homes were low, people were encouraged from realtors [and] buddies at work to walk away from their home," says Percival. He calls this "one of the worst pieces of advice in recent history."
If desperate homeowners took that advice, they would usually do a short sale on their home. What exactly is that? It's a real estate transaction in which a lender agrees to let the borrower sell his or her property for less than - or "short" of - what is owed on the mortgage.
Even if your home is underwater, it's a bad idea, asserts Percival. If homeowners can still afford to make their mortgage payments, then they shouldn't do a short sale.
"People who didn't have medical emergencies or lose their jobs were dropping their keys and leaving their homes," Percival says. This is a dumb choice, he adds, since it's possible that their home value could go have gone up.
Plus, if you do a short sale, you may have to wait several years to qualify for a home again, says Percival. The reason? Because a short sale usually lowers your credit score just as a foreclosure would, according to myFICO, the consumer division of FICO. Shortsellers may be able to qualify for a mortgage in as little as two years, but this may depend on a variety of factors, like how much you are able to put down.
Beyond your own finances, short sales have a far-reaching effect, according to Percival.
"Every short sale or foreclosure reduces the value of every home in the neighborhood," he says. "If folks would have waited for the recovery to kick in and housing prices to go up, they could have sold it at a profit. People just wanted to walk away from debt."Bad Advice No. 4: "An FHA loan is your only option."
First-time homebuyers are particularly susceptible to bad advice. For example, homeowners who can't afford a large down payment may hear that a government-backed FHA loan is their only option, since the down payment requirement can be as low as 3.5 percent of a house's purchase price. But that's not necessarily the case.
Some homeowners might be surprised that getting a conventional loan might be better suited - and easier - for them than an FHA loan, says Aaron Vantrojen, president of the Arizona Association of Mortgage Professionals, says.
The standards to qualify for an FHA loan have tightened, says Vantrojen. Plus, the FHA loan has become more expensive in recent years due to its rising mortgage insurance premium (MIP).
According to the U.S. Department of Housing and Urban Development, the mortgage insurance on an FHA loan must be carried for the life of the loan. On the other hand, the private mortgage insurance (PMI) on conventional home loans can be dropped when equity in the home reaches 20 percent, Vantrojen says.
As a result of dropping the insurance premium, homeowners can save thousands of dollars in the long run. "The annual mortgage insurance for FHA loans is so high, we are trying to get people into conventional loans if they qualify," Vantrojen says.
The biggest advantage FHA loans have over conventional loans is the low down payment requirement. But conventional loans, with a 5 percent down-payment required, might be a better deal when you factor in the mortgage insurance payments, says Vantrojen.
"I will always look at options for conventional loans [for homebuyers]," says Vantrojen, president of Geneva Financial, a mortgage banking firm based in Tempe, Arizona. "The guidelines for conventional loans are changing, and a person who couldn't qualify for one a month ago might be able to qualify now."
If you're in the market for purchasing a home loan and in need of a little guidance, you might want to think twice about listening to someone who tells you: "Trust me, I know what I'm talking about."
"One of the most common mistakes is not getting advice from a mortgage investment advisor," says Hormozian. "Any time you don't seek advice from a professional, you could be in trouble."
But not all mortgage professionals are created equal, which is why Hormozian says homebuyers should make an effort to consult and get the opinions of established mortgage advisors, licensed mortgage companies, and reputable professionals when they are ready to purchase a loan.
"At the end of the day, my job is to make sure my client will have a comfortable life and a sound investment," Hormozian says. "If I feel they are going to have a hard time making a payment or living up to that liability, I have to advise against it."
For example, if someone tells you it's a great idea to buy investment property as a source of instant income, you better consider the source. Instead of talking to real estate agents, homebuyers should talk to unbiased resources, who could help them avoid potential mortgage heartaches, says Vantrojen.
"Do your due diligence, talk to industry professionals - people who have been real estate investors and [who] can tell you the highs and lows of owning real estate," he explains.
If owning a new home for you and your family is a main objective, Percival says it might be a good idea to check whether you are dealing with licensed mortgage professionals. He suggests verifying mortgage loan originators (MLOs) and their MLO license numbers through the National Mortgage Licensing System (NMLS), which performs this service for free.
|Posted on March 23, 2014 at 10:18 PM||comments (0)|
NeighborWorks America announced on Tuesday that $63.1 million had been awarded by the National Foreclosure Mitigation Counseling (NFMC) program for assistance and counseling for families and individuals facing foreclosure. The funds were awarded to 29 state housing finance agencies, 18 HUD-approved housing counseling intermediaries, and 67 community-based NeighborWorks organizations. More than 167,800 families who face foreclosure are expected to be assisted by the funds. The organization notes that even though the number of households facing foreclosure has dropped below the peak from a few years ago, “many hundreds of thousands of homeowners will still face trouble with their mortgages this year.”
As a result of these awards, more than 1,100 nonprofit counseling agencies and local NeighborWorks organizations all over the country are expected to be engaged in the NFMC program. These organizations provide families at risk of losing their homes with free assistance, help them determine eligibility for the various state and federal foreclosure prevention assistance programs, help them understand the complexities of the foreclosure process, and identify courses of action so these homeowners can make informed decisions, and take action when possible. Although the funds will go a long way to help, demand for NFMC grant funds was in excess of $100 million, meaning that some families who request help will not be getting it.
Research conducted for NeighborWorks America found a 33-percent decline in serious mortgage delinquency for homeowners who received pre-purchase guidance from NeighborWorks compared to similar homeowners who did not receive the same help. Not all the work the organization does involves counseling, however. One example other home-advocacy works is a move to purchase two historic homes in Deadwood, South Dakota, move them to make way for a casino parking lot, and rehab and renovate them so families can move into them by summer. NeighborWorks Dakota Executive Director Joy McCracken said that the board of the organization voted to accept a donation of the two houses and use grant funds to fix them up “after determining that it fits within our mission of providing decent, safe and affordable housing.”
|Posted on March 19, 2014 at 10:19 PM||comments (20)|
It’s not just fraudsters and criminals who warrant mention in our scam of the day features; sometimes, state governments and their officials make the cut as well. In California, governor Jerry Brown and other government officials are being sued by three nonprofit home owner counseling organizations, claiming that $369 million of funds meant to help struggling homeowners was instead diverted to pay down the state’s debt. California was awarded a portion of the $25 billion national mortgage servicing settlement in 2012, with the funds to be used for home loan counseling and other educational services to help home owners avoid foreclosure.
The National Asian American Coalition (NAAC), along with the COR Community Development Corp. and the National Hispanic Christian Leadership Council (NHCLC) were all plaintiffs in the suit. Robert Gnaizda, general counsel to the NAAC said “We made it clear to the governor at that time that we did not agree with his decision.” Gnaizda further explained the delay in filing the suit: “But we didn’t want to bring a case when the state was in such an enormous fiscal crisis. With the governor now talking about possible surpluses of up to $10 billion before he finishes his second term, we decided to proceed with our case.” California does not appear to be the only state guilty of diverting funds, as half of the 49 states in the settlement have used around $1 million of money earmarked for home owner counseling for other purposes.
The plaintiffs are making their displeasure with the lack of refunding the diverted funds known. Faith Bautista, chief executive of the NAAC said, “The state attorneys general and banks finally put money aside to help homeowners and where did the money go? Somewhere else. They always have other priorities for their money.” According to California law, funds can be transferred to the state’s general fund only “if the transfer does not interfere with the object for which the special fund was created and the transferred amount is repaid when feasible.” It is not clear how California will respond to the suit, or how other states in the same position may try to make changes to avoid further suits.
What do you think? Did distressed homeowners get the short end of the stick again with states diverting funds in this manner? Or was the state justified? You know how we feel about this already: sad to say, not a big surprised.
|Posted on February 13, 2014 at 10:00 PM||comments (14)|
Federal prosecutors announced that seven people, including a Fannie Mae employee, have been charged in a North Texas identity theft ring that illegally gained access to the personal information of 1,100 Fannie Mae customers. Charges against the seven included bank fraud and aggravated identification theft, and was based on alleged involvement from 2009 through last year.
Among the defendants is 40-year old Katrina Thomas of Garland, Texas, who worked as an underwriter for Fannie Mae. She is accused of forwarding customer information to others who then used it to illegally access bank accounts. It was not clear exactly how much money had been illegally seized in the scheme. Authorities say Bank of America and JP Morgan Chase customers were also targeted.
The defendants used the ill-gotten funds to buy luxury goods and rent hotel rooms. When one of the other defendants was taken into custody from a luxury Dallas hotel room he had rented with another person’s personal information, he had in his possession several fake IDs, counterfeit checks, and a computer containing a template for Texas Department of Public Safety Temporary Driver’s License, presumably to create the fake IDs. Unfortunately, stories like this show just how many different ways a person’s identity can be stolen. Have you been the victim of identity theft?
|Posted on January 2, 2014 at 5:28 PM||comments (2)|
Mortgage giants Fannie Mae and Freddie Mac announced an extension of their “first look” programs, granting buyers seeking a primary residence a full 20 days to submit offers on REO properties ahead of investor competition.
Previously, the First Look period was 15 days long. Freddie Mac’s program operates under HomeSteps First Look initiative and Fannie Mae’s version operates under the HomePath system. The expanded 20-day program took effect for HomeStep listings on or after Dec. 17. Fannie Mae’s First Look HomePath program is effective for properties listed on or after Jan. 2, 2014.
The programs are designed to promote owner-occupancy in communities, which the mortgage giants believe contributes to neighborhood stabilization. Some second home purchases are also eligible for HomeSteps First Look program. However, purchases of investments or rental properties are not eligible.
“This is especially important for buyers competing for opportunities in markets where home inventories are shrinking,” says Chris Bowden, senior vice president of HomeSteps. “Expanding the HomeSteps First Look Initiative underscores our commitment to managing HomeSteps' REO inventory in a way that's good for taxpayers, homebuyers, neighborhoods, and Freddie Mac."
Freddie Mac and Fannie Mae offer a 30-day bidding window for buyers in Nevada, a state that has one of the highest foreclosure rates in the country.
Real Estate Crystal Ball: Economists Predict Job Growth will be Deciding Factor in 2014 Housing Market
|Posted on December 31, 2013 at 7:57 AM||comments (21)|
The National Association of Realtors (NAR) is feeling good about the jobs market in 2014, and that means good news for housing. According to NAR chief economist Lawrence Yun, “2 million or more jobs will be created in 2014.” This surge will create a demand for existing homes and create a leap in homebuilding activity. Moody’s Analytics analyst, Celia Chen, said that this original surge will likely be the key to a full economic recovery – assuming it happens – since a rise in homebuilding will “spark even more jobs from construction workers to manufacturers and bring about a greater demand for housing overall.” Although housing demand is likely to rise in 2014 according to these economists, the housing price recovery is likely to slow in the coming year, said both Lawrence and Chen. Most analysts predict that housing prices will rise over the course of 2014 by about five percent, compared to this year’s 11 percent.
Of course, a great deal of this theoretical continued recovery hinges on the actual creation of those 2 million jobs. Most business economists surveyed by the National Association of Business Economists (NABE) are feeling just as sunny as Yun, responding that they predict that the economy will add about 200,000 jobs a month in the coming year (2.4 million total if that estimate holds). They also predict wage increases of about 2.4 percent for hourly-wage-earners in 2014, compared to a 1.8 percent increase in 2013. “Lower unemployment [will] put pressure on employers to spend more to recruit and keep the best workers,” said the NABE. Although consumer spending will likely remain modest in accord with modest wage gains, a gradual rise should, said the economists, “help keep the U.S. on a slow but steady path of recovery.” Ultimately, all of this should contribute, if predictions hold, to a similarly slow but steady housing recovery.
Of course, interest rate changes could change everything in 2014 if the Federal Reserve actually starts a serious taper of the existing economic stimulus program that currently involves spending billions of dollars a month on Treasuries and keeping mortgage interest rates artificially low. Given that most would-be homebuyers in today’s market consider five percent interest prohibitively high when it comes to making a home purchase using a conventional mortgage, even a small rise in interest rates could hurt the recovery. Yun predicted that rising interest rates in 2014 could slow the recovery but were unlikely to derail it despite “going above five percent by the second half of 2014.”
Finally, with distressed housing finally beginning to work its way through the market, the 2014 housing sector will have some real potential for lasting growth, said RealtyTrac vice president Daren Blomquist. He believes that “2014 will likely be the year we transition back to normal. He predicted that by the end of 2014, foreclosure filings will be down to about 85,000 a month nationwide. In 2005, there were an average of 73,750 foreclosure filings a month. This past November, there were 113,454 foreclosure filings on U.S. properties, a 37-percent decrease year-over-year.
|Posted on December 14, 2013 at 5:35 PM||comments (20)|
Huge, beautiful homes are a great asset to those who own and live in them, but when tough times hit they are hard to maintain. Although many luxury home owners held on through the housing crisis and kept their mortgages afloat, now an increasing number of luxury homes are going into foreclosure at an increasingly rapid rate. Although overall U.S. foreclosure activity is down 23 percent year-over-year, foreclosure activity on homes $5 million and up is up 61 percent year-over-year, reported RealtyTrac this month.
Of course, this dramatic jump in foreclosure activity affects a far smaller volume of homes than the overall declining number. There are about 200 homes in the U.S. worth more than $5 million that are in foreclosure, compared to 1.2 million total properties presently somewhere in the foreclosure system. However, noted RealtyTrac, “each of these high-value homes represents a much bigger potential loss for the foreclosing lender compared to a median-priced home.” Analysts say that early numbers indicating that these homes were not in foreclosure were likely misleading since lenders probably opted not to begin the foreclosure process on high-dollar homes until they were relatively certain that they could “weather these big-ticket losses.” Laffey Fine Home International CEO Emmett Laffey explained: “Any foreclosure properties in this type of ultra-luxury market usually get purchased very quickly since there is one thing all super-rich buyers want – an outstanding deal on a real estate transaction.” Laffey noted that in today’s market, an ultra-high-end foreclosure usually “comes with several million more dollars of built-in value.”
California and Florida alone account for more than 60 percent of all high-end foreclosure activity so far in 2013. Many analysts speculate that a large number of these homeowners in foreclosure have entered this position deliberately as part of a strategic plan to exit a property no longer worth what is owed on it. While this may be troubling to lenders, their willingness to begin the foreclosure process actually is a good sign for the housing market since it likely indicates that they believe they will be able to recoup their losses on these luxury homes. About a year ago, HousingPredictor published the results of a poll that indicated nearly half of all homeowners would consider walking away from their mortgages if real estate prices continued to slide downward. With high-end home values taking such a beating in many states, it could be the case that these homeowners either have let their mortgages go too long to catch them up or simply do not have the confidence that the banks have that the homes will sell for adequate profit. “Back in 2008, people were very emotion, very scared, in disbelief of denial,” said one analyst, adding that “now they are simply fed up” and may feel “very relieved” after making the decision to default. These sentiments are likely magnified in high-end homes in many cases because of the huge monthly payment commitments and an even higher likelihood that the homeowner considered the home an investment as well as a place to live.
Does this trend in high-end foreclosures surprise you? Have you walked away from any of your loans?
|Posted on December 14, 2013 at 4:50 PM||comments (0)|
Because of tight inventory, states in the West and South are expected to see home prices jump by 4 to 8 percent over the next 12 months, according to the latest data from the REALTORS® Confidence Index Survey.
The highest price growth in the next year is expected in California, Nevada, Arizona, Texas, Utah, Florida, Louisiana, Georgia and South Carolina, according to the survey of about 3,000 REALTORS®.
Nationally, prices are expected to increase by about 4 percent in the next 12 months, according to the data gathered in November.
A few states in colder climes are also expected to see larger price jumps as the housing markets are expected to warm up in places such as North Dakota, Minnesota, Michigan and Massachusetts.
The recent confidence index survey is the latest evidence that the U.S. housing market is in a completely different position than at this time in 2012. This fall saw solid price increases, steady inventory and strong demand, according to realtor.com® monthly data.
Real Estate Scam of the Day: Lawyer Promises Foreclosure Assistance, Keeps Mortgage Payments for Himself
|Posted on December 10, 2013 at 4:02 PM||comments (40)|
After charging homeowners thousands of dollars in upfront fees for help avoiding their foreclosures, a Chicago lawyer is accused of taking those fees and thousands more in mortgage payments from struggling homeowners for his personal use and not helping them avoid foreclosure at all. Philip Igoe allegedly offered to help his victims stall their foreclosures or avoid them all together by filing for bankruptcy protections or loan modifications. Part of the process is alleged to have involved the homeowners sending Igoe their monthly mortgage payments with the understanding that he would forward that money to the banks with which he was purportedly working. Igoe is accused of never sending the money on at all, however, and instead keeping it for himself. Postal inspectors say that 15 homeowners were caught in the scam and lost thousands of dollars.
Igoe is accused of working with his wife, who is also an attorney, to bring the homeowners into the scheme and then later to cover up the tracks pointing to the Igoes as the culprits behind the foreclosures. According to the indictment filed in Chicago, Igoe “solicited clients who were facing foreclosures” and then “collected funds from clients promising to make payments for mortgages or Chapter 13 bankruptcy plans.” He then used “all or most of the funds for his own benefit,” the indictment continues, adding that Igoe “concealed important events in bankruptcy cases from clients, provided false reasons for the dismissal of bankruptcy cases, and then filed additional bankruptcy plans and charged additional fees.” Igoe’s wife is accused of lying under oath at bankruptcy proceedings and filing false documents regarding credit counseling taken by clients.
Between the two of them, the Igoes face charges of mail fraud, bankruptcy fraud, obstruction of justice, and perjury. One family lost their home after turning to Igoe for help after the main breadwinner fell delinquent after being in a coma after a work-related injury. Another individual turned to him for help keeping a home she inherited, but none of the money she allegedly sent to Igoe ever made it to her mortgage company. “I don’t know what he did,” she said, reporting that she paid Igoe on three separate occasions. “He scammed me not once but three times,” she added.
If you are approached by an individual offering foreclosure rescue services, check out their record and ask for reviews. Also, remember that most states prohibit the collection of upfront fees for foreclosure assistance or loan modification assistance, and always check with your mortgage company to verify that your loan is being paid if you are not paying directly. How do you think that the Igoes, if guilty, should pay for their crimes? Do you think that foreclosure rescue and loan modification assistance programs should be allowed to charge fees before performing their services?
|Posted on November 21, 2013 at 1:35 PM||comments (1)|
If you lied, fudged, or blurred the truth on your mortgage loan application during the boom years of easy, easy credit, then Alberto Solaroli’s recent indictment may have you concerned. Solaroli was recently indicted on charges that he borrowed “on false pretenses” from OneBanc in April 2007. He claimed to be the owner of energy patents that placed his net worth around $170 million and also claimed additional assets in excess of a million dollars. Solaroli used these purported assets to obtain a loan for $1.5 million from One Bank & Trust. He used to money to finance a $900,000 payment to Porche Motorsport and never made a single payment on the loan; One Bank sued him in 2008 and obtained a civil judgment for the entire bulk of the loan. He was sued for bank fraud this year.
Solaroli is a Canadian citizen and was approved for the loan on the sole basis of a sworn financial statement. Some sources have suggested that Solaroli’s indictment may be related to the indictment of Daniel Sweet, former vice president and controller at One Bank, on 30 counts of bank fraud and 30 counts of money laundering.
Of course, most borrowers who obtained stated-income loans did not borrow more than $1 million, but if Solaroli could be indicted for his borrowing on false pretenses, does it concern you that other, “smaller-time” borrowers could be next?