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It happens to many Americans, that when they sell their house they still carry a mortgage. Each and every year, the same question is asked ” How can I sell my mortgage note and get the cash I need?” If you are the holder of mortgage notes for sale, this information may be of assistance.
Annually, millions of real estate transaction are done without the involvement of a real estate agent or bank. Often a home owner can make a lot more money, when he decides to do the financing himself. Properties that are normally discounted under normal conditions and properties that are under standard, can now fetch top dollar in the market. But when they do the financing, they sell to people that either don’t want to or can’t get bank financing.
Completing this step, makes a real estate note. The new home owner makes the monthly payments to the person that has the cash flow note, so the seller becomes the bank.
The seller may want to cash out the real estate note after a certain amount of time if he so decides depending on his circumstances. Now when you have a cash flow note for sale you have a couple of options. You don”t have to sell the whole real estate note. You can just sell part of it to raise the cash you need.
A dependable private real estate investor with cash to purchase your real estate note is needed in order to sell real estate notes. The key to finding the value of your mortgage note lies in finding an investor who can determine its worth.
Those who buy notes professionally won’t charge you for speaking about your cash flow note, especially if this first discussion takes place over the phone. But you will find out a lot about how to cash out a real estate note.
Always keep in mind that the note buyers have to buy the notes at a discounted price and that too it should be large enough to cover the inflation and the risk. The real advantage to you of a transaction like this is that you recieve the money immediately.
Discovering the value of your real estate note is fairly simple, and private real estate investors compete for mortgage notes for sale, so peruse real estate investors’ websites if your finances require it. Ask them for information on how to cash out that real estate note you have. We often have a tendency to make things harder than they actually are, just because we lack certain knowledge or do not feel like asking questions. Availability of internet has made the knowledge conveniently accessible in today’’s world.
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Sunday, July 18, 2010
Wednesday, June 23, 2010
More Borrowers Quitting Obama Mortgage Program
It seems that borrowers are not satisfied with the efforts of the government to help homeowners who are on the verge of losing their homes. Reports said more than a third of the 1.24 million borrowers who have enrolled in the Obama administration’s mortgage modification program have dropped out.
Data showed that a total of 436,000 people have dropped out of the $75-billion program since it was launched in March 2009. In May alone, some 155,000 people stopped trying to get loan modifications. The number of borrowers, who have received permanent loan modifications, meanwhile, stood at 340,000.
According to market analysts, the program did little to ease the plight of borrowers. “The foreclosure-prevention program has had minimal impact. It’s sad that they didn’t put the same amount of resources into helping families avoid foreclosure as they did helping banks,” National Community Reinvestment Coalition chief executive officer John Taylor said.
One of the reasons blamed for the high turnaround rate is the documentation of income required for homeowners who want to get loan modifications. To apply for the program, a borrower should submit two recent pay stubs to banks at the start of the process. Because of the new application procedures, the number of borrowers wanting to get loan modifications declined dramatically. According to reports, around 30,000 homeowners started the program in May, down from more than 100,000 people who signed up each month starting last summer.
Industry experts believe that the country’s problems with foreclosed properties could worsen if more people are going to exit the program. They also warned that it could further weaken the housing market and impede with the economic recovery.
Friday, June 18, 2010
Seller financing aids the seller and buyer
Seller financing is one field of the real estate industry that aids more than the house purchaser and the individual house seller. Home mortgages held by sellers are likely customers for investors that purchase seller financed home mortgages. For many people outside the real estate industry, this little observed market is large business for many. In order to understand how this market works, we have to recognize both sides of the business of owner will carry financing.
In a down market such as we are experiencing now, credit freezes up and conventional lenders inside the mortgage industry approve very few new mortgages unless the candidate has higher than average credit. For those people with less-than great credit, acquiring a loan thorough traditional channels is non-existent. Fortunately for these people, there is a large quantity of houses on the market with sellers willing to unload.
Some of these sellers are ready to offer what is called owner will carry financing which means they will operate as the lending institution. Rather than having to pay a credit business each month the customer will pay his monthly mortgage to the home seller. When financial times are good and lending institutions are offering creditowner carry financing is at a low. More people can obtain credit thorough conventional means.
The seller will carry the note until the note is paid or he sells the cash note to someone else, in this case a mortgage investor. Mortgage note investors are people that specialise in buying and selling money transactions. Notes come in many different varieties. Just about any transaction where a agreement is signed and a repayment plan is the mode of repayment, can be bought and sold.
Seller financed notes are the most widely recognized with the mortgage industry as they are real estate based. The market is built easily enough as sellers many times desire to free up the cash they have tied up in the cash note they are holding on the property. The seller may need the capital for any amount of reasons. He may want to make further investments with superior returns. Crisis conditions might have come up that force him to liquidate his holding. Children might need to go to university. The motives are endless.
Whatever the case may be, there are loads of investors eager to acquire these seller held mortgages. These investors purchase these money transactions largely for investment motives growing their portfolios. Though, income streams are the major purpose. By getting just a few notes the investor can generate a significant monthly income stream that will continue until the contracts are fulfilled or sold to another person.
In come instances, these mortgage notes are defaulted on at which time the investor forecloses on the house, keeps all the funds he has collected on past repayments then sells the property to another buyer. Seller financing aids many individuals involved in a real estate transaction. Individuals that can not acquire a mortgage through established means, single sellers as well as those investors within the notes industry.
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In a down market such as we are experiencing now, credit freezes up and conventional lenders inside the mortgage industry approve very few new mortgages unless the candidate has higher than average credit. For those people with less-than great credit, acquiring a loan thorough traditional channels is non-existent. Fortunately for these people, there is a large quantity of houses on the market with sellers willing to unload.
Some of these sellers are ready to offer what is called owner will carry financing which means they will operate as the lending institution. Rather than having to pay a credit business each month the customer will pay his monthly mortgage to the home seller. When financial times are good and lending institutions are offering creditowner carry financing is at a low. More people can obtain credit thorough conventional means.
The seller will carry the note until the note is paid or he sells the cash note to someone else, in this case a mortgage investor. Mortgage note investors are people that specialise in buying and selling money transactions. Notes come in many different varieties. Just about any transaction where a agreement is signed and a repayment plan is the mode of repayment, can be bought and sold.
Seller financed notes are the most widely recognized with the mortgage industry as they are real estate based. The market is built easily enough as sellers many times desire to free up the cash they have tied up in the cash note they are holding on the property. The seller may need the capital for any amount of reasons. He may want to make further investments with superior returns. Crisis conditions might have come up that force him to liquidate his holding. Children might need to go to university. The motives are endless.
Whatever the case may be, there are loads of investors eager to acquire these seller held mortgages. These investors purchase these money transactions largely for investment motives growing their portfolios. Though, income streams are the major purpose. By getting just a few notes the investor can generate a significant monthly income stream that will continue until the contracts are fulfilled or sold to another person.
In come instances, these mortgage notes are defaulted on at which time the investor forecloses on the house, keeps all the funds he has collected on past repayments then sells the property to another buyer. Seller financing aids many individuals involved in a real estate transaction. Individuals that can not acquire a mortgage through established means, single sellers as well as those investors within the notes industry.
Find out realistic recommendations about the topic of internet marketing – please make sure to read the site. The times have come when concise information is truly only one click away, use this possibility.
Visit our other blog for more info
email for more information
Saturday, June 12, 2010
Q. I own my single-family home with no mortgage outstanding, and I'm gainfully employed in a secure government position. I plan to retire in about five years. I have lived in my home for the past 20 years, but now find it to be more burden than haven. I am planning on selling it and renting a nearby townhouse condominium. I listed my home with we thought was a competitive price. But it has been on the market for nearly six months, and I've received only two low-ball offers. I reduced the price twice.
I've been told the banks are causing a problem. There are a lot of self-employed folks with cash who cannot get mortgages. I am thinking about offering my house for sale with 70 percent seller financing. My hope is to get it sold for full price, earn 5.5 percent interest on my money and, if the buyer defaults, get my house back down the road. I can do a 5-, 10- or even 15-year balloon mortgage based on a 30-year payoff schedule. I have been told that I am not obligated to accept any buyer; if I don't like their credit, I say no.
I believe offering seller financing will give my listing an edge and might get some action. I am thinking of insisting that the buyers prepay the first year of homeowners' association dues and an estimated water bill because I understand that these items can become liens against the property. I am also planning to ask the buyers to pay into an escrow account each month to cover the semiannual real property taxes and the annual hazard insurance premium when they become due. That way, I can ensure that these critical bills are paid because I will be paying them from the escrow account.
What's your opinion?
A. I strongly endorse this seller-financing approach, as long as you get a substantial down payment. And, since you indicated you will be getting 30 percent down, that should be sufficient. This plan will also provide you a regular monthly source of funds for many years, depending on how long you are willing to wait to get all your money, plus interest. Although the principal portion may or may not be taxable (because you are selling your principal residence, you are entitled to exclude the first $250,000 of capital gain from your taxable income), the interest portion of each payment will be taxable to you.
I recommend preparing an amortization table to show you and your buyer how much of each payment is principal and how much is interest. Amortization tables are available at sites such as Bankrate.com.
Seller financing is an excellent means of obtaining the best price for your home, but it is not without risk. One concern is that a 5.5 percent interest rate might look fine now, but rates can fluctuate wildly. Ideally, you wouldn't want to hold that 5.5 percent note for more than a few years. If you think interests rates will fall, you should consider imposing a prepayment penalty in your promissory note. Prepayment penalties are governed by state laws.
If you think interest rates will rise, consider offering to take back an adjustable rate mortgage. An ARM is a mortgage that has a fixed interest rate for a certain period of time, after which the rate changes at set intervals. In your case, assume that the 5.5 percent interest rate would be fixed for five years. At the end of the first five-year period, the interest rate would adjust annually. This adjustment feature protects you should interest rates rise five years down the road.
The adjusted interest rate is a function of an index (assume the prime rate as reported by The Washington Post) plus a margin of one to three percentage points, for example. On the adjustment date specified in your loan contract, you would add the margin to the index to get the adjusted interest rate. You might want to consult a financial planner or stockbroker to assist you in determining which index and margin to use.
Make sure the promissory note that the buyer signs is fully negotiable, that is, transferable to another party. There is a fairly brisk market in these types of seller-financing notes. Once the note is seasoned, with the buyer having made regular payments for six to 12 months, you will be able to sell it (albeit at a discount) if you ever want the pile of cash. You will also want to make sure the loan is secured by having your buyer sign a deed of trust. Have that deed of trust recorded in the land records office as a lien against the home. That way, if the buyer defaults, you can foreclose and get the house back.
I'd recommend insisting on an automatic debiting feature so monthly payments are taken from the buyer's checking account and deposited into your separate "My Old House Note Account." That way, you can go online every month and monitor the payments.
You should do a credit check with all three credit-reporting bureaus and obtain your buyer's FICO score from Myfico.com. Prior to the closing you should insist that the attorney conducting the closing provide you with a closing-protection letter from his title insurance underwriter. The letter protects you against any problems with the settlement attorney.
At settlement, make sure you obtain a lender's policy of title insurance at your buyer's expense. Finally, have the buyer pay all credit report and closing costs, including the expense of having the promissory note and deed of trust prepared and the deed of trust recorded.
This is not legal advice and should not be acted upon without obtaining your own legal counsel.
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List Your Note
I believe offering seller financing will give my listing an edge and might get some action. I am thinking of insisting that the buyers prepay the first year of homeowners' association dues and an estimated water bill because I understand that these items can become liens against the property. I am also planning to ask the buyers to pay into an escrow account each month to cover the semiannual real property taxes and the annual hazard insurance premium when they become due. That way, I can ensure that these critical bills are paid because I will be paying them from the escrow account.
What's your opinion?
A. I strongly endorse this seller-financing approach, as long as you get a substantial down payment. And, since you indicated you will be getting 30 percent down, that should be sufficient. This plan will also provide you a regular monthly source of funds for many years, depending on how long you are willing to wait to get all your money, plus interest. Although the principal portion may or may not be taxable (because you are selling your principal residence, you are entitled to exclude the first $250,000 of capital gain from your taxable income), the interest portion of each payment will be taxable to you.
I recommend preparing an amortization table to show you and your buyer how much of each payment is principal and how much is interest. Amortization tables are available at sites such as Bankrate.com.
Seller financing is an excellent means of obtaining the best price for your home, but it is not without risk. One concern is that a 5.5 percent interest rate might look fine now, but rates can fluctuate wildly. Ideally, you wouldn't want to hold that 5.5 percent note for more than a few years. If you think interests rates will fall, you should consider imposing a prepayment penalty in your promissory note. Prepayment penalties are governed by state laws.
If you think interest rates will rise, consider offering to take back an adjustable rate mortgage. An ARM is a mortgage that has a fixed interest rate for a certain period of time, after which the rate changes at set intervals. In your case, assume that the 5.5 percent interest rate would be fixed for five years. At the end of the first five-year period, the interest rate would adjust annually. This adjustment feature protects you should interest rates rise five years down the road.
The adjusted interest rate is a function of an index (assume the prime rate as reported by The Washington Post) plus a margin of one to three percentage points, for example. On the adjustment date specified in your loan contract, you would add the margin to the index to get the adjusted interest rate. You might want to consult a financial planner or stockbroker to assist you in determining which index and margin to use.
Make sure the promissory note that the buyer signs is fully negotiable, that is, transferable to another party. There is a fairly brisk market in these types of seller-financing notes. Once the note is seasoned, with the buyer having made regular payments for six to 12 months, you will be able to sell it (albeit at a discount) if you ever want the pile of cash. You will also want to make sure the loan is secured by having your buyer sign a deed of trust. Have that deed of trust recorded in the land records office as a lien against the home. That way, if the buyer defaults, you can foreclose and get the house back.
I'd recommend insisting on an automatic debiting feature so monthly payments are taken from the buyer's checking account and deposited into your separate "My Old House Note Account." That way, you can go online every month and monitor the payments.
You should do a credit check with all three credit-reporting bureaus and obtain your buyer's FICO score from Myfico.com. Prior to the closing you should insist that the attorney conducting the closing provide you with a closing-protection letter from his title insurance underwriter. The letter protects you against any problems with the settlement attorney.
At settlement, make sure you obtain a lender's policy of title insurance at your buyer's expense. Finally, have the buyer pay all credit report and closing costs, including the expense of having the promissory note and deed of trust prepared and the deed of trust recorded.
This is not legal advice and should not be acted upon without obtaining your own legal counsel.
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We BUY Mortgage Notes
List Your Note
Wednesday, June 9, 2010
Importance of Mortgage Calculator in Real Estate Business
Mortgage calculator solutions can enable best in class debt management solutions in no time. One of the much aspired benefits of mortgage calculator based solutions is their intrinsic ability to provide prevalent interest rates to debtors in a unified and fair manner. As a result debtors can easily make smarter decisions based on mortgage calculator solutions on the go. Online solutions should also be explored while trying to explore mortgage calculator based solutions in a seamless manner. Real estate market across the globe is picking up. The prices of plots, apartments and condos are expected to head northwards. Home loan financing can be better addressed through mortgage calculator based solutions over shorter span of time on the go in a seamless manner.
Real estate business has taken an altogether new meaning with mortgage calculator based solutions. With an increased competition in the market, home financing solutions can be availed across various service providers at competitive rates in no time at all. A mortgage calculator solution will enable one and all in calculating mortgage financing quote based on their risk factors and assumptions in a seamless manner. Simple inputs such as current liabilities, assets and income sources can enable one and all in customizing mortgage calculator based quotations.
Prospective home owners can consult reality agents, realtors or bankers for enabling mortgage calculator based solution for powering their home loan needs. A competitive home loan can provide longer term solutions in no time at all. However, risk factors and assumptions should be properly understood and assessed while calculating liabilities with the help of mortgage calculator based solutions.
Service providers generally assign different weight structures to the assumed risk factors on the go. As a result, each service provider may provide their set of unique mortgage calculator based quotes in no time at all. Real estate solutions are being powered by mortgage calculators. Service providers and debtors can get to benefit from the endless potential that is being offered by mortgage calculator solutions in a seamless manner. Get going and benefit from mortgage calculator based solutions from day one in no time at all.
Real estate business has taken an altogether new meaning with mortgage calculator based solutions. With an increased competition in the market, home financing solutions can be availed across various service providers at competitive rates in no time at all. A mortgage calculator solution will enable one and all in calculating mortgage financing quote based on their risk factors and assumptions in a seamless manner. Simple inputs such as current liabilities, assets and income sources can enable one and all in customizing mortgage calculator based quotations.
Prospective home owners can consult reality agents, realtors or bankers for enabling mortgage calculator based solution for powering their home loan needs. A competitive home loan can provide longer term solutions in no time at all. However, risk factors and assumptions should be properly understood and assessed while calculating liabilities with the help of mortgage calculator based solutions.
Service providers generally assign different weight structures to the assumed risk factors on the go. As a result, each service provider may provide their set of unique mortgage calculator based quotes in no time at all. Real estate solutions are being powered by mortgage calculators. Service providers and debtors can get to benefit from the endless potential that is being offered by mortgage calculator solutions in a seamless manner. Get going and benefit from mortgage calculator based solutions from day one in no time at all.
Friday, May 7, 2010
Refinancing Mortgage With Bad Credit
Refinancing mortgage with bad credit
You might be surprised to know that you can get a mortgage refinance even if you have a poor credit history. Even though banks have tightened up their lending standards considerably, you can still attempt to refinance mortgage with bad credit. There are many lenders such as specialty bad credit mortgage brokers and bad credit mortgage lenders that offer you loans under such circumstances. Though these loans carry a higher interest rate and have higher closing fees, it can help you to improve your credit score in the long run.
Tips to help you get a bad credit mortgage refinance loan
Make sure that you follow these steps while you are looking to get mortgage refinance with bad credit:
• When you attempt to refinance mortgage with bad credit, it is better to apply to only those companies who offer mortgages to borrowers with poor credit score. So, find out those companies who offer assistance to individuals with financial difficulty.
• Always does your research before you apply for refinance. Shop around extensively to get the best deal. Make sure that you consider all the factors like interest rates, loan term and other hidden costs before you choose one.
• Do not appear desperate to get a mortgage refinance. Remember that there are many unscrupulous companies and lenders ready to take advantage of your situation. So, beware of such companies that make you believe that you have no other options to look into.
Benefits of a bad credit mortgage refinance loan
There are many advantages of taking out a bad credit mortgage refinance:
1. Refinance can lower your monthly payments by extending the mortgage repayment period making your payments affordable.
2. As the monthly payments become affordable, you'll be able to repay the loan sooner and this will help you to improve your credit score.
3. You can lock in more favorable mortgage interest rates which will also make your payments easier.
Remember that a larger down payment can help you get to refinance mortgage with bad credit more easily. So, when you have a low credit score, you need more cash on hand to compensate on home loan.
You might be surprised to know that you can get a mortgage refinance even if you have a poor credit history. Even though banks have tightened up their lending standards considerably, you can still attempt to refinance mortgage with bad credit. There are many lenders such as specialty bad credit mortgage brokers and bad credit mortgage lenders that offer you loans under such circumstances. Though these loans carry a higher interest rate and have higher closing fees, it can help you to improve your credit score in the long run.
Tips to help you get a bad credit mortgage refinance loan
Make sure that you follow these steps while you are looking to get mortgage refinance with bad credit:
• When you attempt to refinance mortgage with bad credit, it is better to apply to only those companies who offer mortgages to borrowers with poor credit score. So, find out those companies who offer assistance to individuals with financial difficulty.
• Always does your research before you apply for refinance. Shop around extensively to get the best deal. Make sure that you consider all the factors like interest rates, loan term and other hidden costs before you choose one.
• Do not appear desperate to get a mortgage refinance. Remember that there are many unscrupulous companies and lenders ready to take advantage of your situation. So, beware of such companies that make you believe that you have no other options to look into.
Benefits of a bad credit mortgage refinance loan
There are many advantages of taking out a bad credit mortgage refinance:
1. Refinance can lower your monthly payments by extending the mortgage repayment period making your payments affordable.
2. As the monthly payments become affordable, you'll be able to repay the loan sooner and this will help you to improve your credit score.
3. You can lock in more favorable mortgage interest rates which will also make your payments easier.
Remember that a larger down payment can help you get to refinance mortgage with bad credit more easily. So, when you have a low credit score, you need more cash on hand to compensate on home loan.
Monday, April 19, 2010
Government offers Home Affordable Modification Program
New alternatives to foreclosure unveiled
Government offers Home Affordable Modification Program
Homeowners who can't afford their mortgage payments may want to take a look at the federal government's new alternative to foreclosure: the Home Affordable Foreclosure Alternative program, or HAFA, which intended to encourage lenders to facilitate short sales and deeds-in-lieu, or DIL, as alternatives to foreclosure.
The program, which is a part of the Home Affordable Modification Program, or HAMP, may help some homeowners escape a bad situation, but the rules are complicated and they won't be able to keep their homes.
U.S. Treasury Assistant Secretary Herbert Allison explained the concept in congressional testimony.
"HAMP does not, nor was it ever intended to, address every delinquent loan," he said. "In these instances, the borrower may benefit from an alternative that helps the borrower transition to more affordable housing and avoid the substantial costs of foreclosure."
Here are some details from the government's 43-page directive for loan servicers:
A short sale allows the homeowner to sell the home and use the proceeds to satisfy the first mortgage even if the sale price is less than the loan balance.
A DIL allows the homeowner to voluntarily give up the home to satisfy the first mortgage even if the home is worth less than the loan balance.
The homeowner can get pre-approval for a short sale at a specific minimum price or net proceeds before the home is put on the market.
The homeowner can receive $1,500 for relocation expenses at closing. This sum may be reported to the Internal Revenue Service as income.
The home must be the homeowners principal residence.
The mortgage must be delinquent, or default must be reasonably foreseeable.
The unpaid loan balance must be less than $729,750 for a single house or condominium. Higher limits are allowed for two- to four-unit residential properties.
The homeowners monthly mortgage payment must be more than 31 percent of his or her gross income.
The homeowner must transfer clear title. The lender will allow up to three percent of each second loan or lien, up to $3,000 in total, to help the homeowner satisfy these obligations.
The government's directive excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac. However, the two government-run mortgage corporations are expected to release their own guidelines.
Homeowners can use the Loan Look Up Tool on the Making Home Affordable Web site to find out whether they have a Fannie Mae or Freddie Mac loan.
The lender cannot require a cash contribution or promissory note, cannot pursue a deficiency judgment and must release the homeowner from all future liability for the debt.
The loan servicer can use the financial information and hardship letter that the homeowner submitted for a loan modification, or request updated information to evaluate the homeowners eligibility.
The loan servicer must assess the current value of the home. If the short sale or DIL isn't completed, the servicer can add the cost of this assessment (e.g., an appraisal) to the loan balance.
The homeowner must sign a Short Sale Agreement or DIL Agreement on or before Dec. 31, 2012.
The home must be listed for sale with a licensed local-area real estate professional. (This requirement doesn't apply to DIL.)
The homeowner must cooperate with the real estate professionals efforts to sell the home and maintain the interior and exterior of the home.
The servicer and homeowner must meet a number of time frames.
The lender may require the homeowner to make full or partial payments on the mortgage, up to 31 percent of the homeowners income, subject to the lender's written policies.
The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes.
The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
Homeowners should discuss the income tax consequences of debt forgiveness with a qualified tax professional.
The servicer will report the short sale or DIL to the credit bureaus. That will hurt the homeowners credit score, although not as severely as a foreclosure.
The buyer in a short sale can't resell the home within 90 days of the purchase.
The program launched April 5 and is scheduled to sunset on Dec. 31, 2012. Servicers may elect to implement the program sooner than the official effective date.
Homeowners are encouraged to contact their loan servicers to find out whether they are eligible for the program or call the HOPE hot line at (888) 995-4673 to speak to a government-certified mortgage counselor. More than 100 servicers have signed up for the program.
These servicers are required to participate and write their own policies subject to investor guidelines.
Going up
Mortgage rates jumped for the second straight week.
The average 30-year fixed-rate mortgage rose 12 basis points, to 5.35 percent. A basis point is one-hundredth of a percentage point. Rates have risen 24 basis points in two weeks and are now at their highest point since Nov. 4, 2009.
Meanwhile, this week's average 15-year fixed-rate — a popular option for refinancing — leapt 16 basis points, to 4.69 percent.
The average jumbo 30-year fixed rose 6 basis points, to 5.98 percent.
Adjustable-rate mortgages split this week. The one-year adjustable-rate mortgage remained unchanged, at 4.74 percent. Meanwhile, the popular 5/1 ARM rose 4 basis points, to 4.55 percent.
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Government offers Home Affordable Modification Program
Homeowners who can't afford their mortgage payments may want to take a look at the federal government's new alternative to foreclosure: the Home Affordable Foreclosure Alternative program, or HAFA, which intended to encourage lenders to facilitate short sales and deeds-in-lieu, or DIL, as alternatives to foreclosure.
The program, which is a part of the Home Affordable Modification Program, or HAMP, may help some homeowners escape a bad situation, but the rules are complicated and they won't be able to keep their homes.
U.S. Treasury Assistant Secretary Herbert Allison explained the concept in congressional testimony.
"HAMP does not, nor was it ever intended to, address every delinquent loan," he said. "In these instances, the borrower may benefit from an alternative that helps the borrower transition to more affordable housing and avoid the substantial costs of foreclosure."
Here are some details from the government's 43-page directive for loan servicers:
A short sale allows the homeowner to sell the home and use the proceeds to satisfy the first mortgage even if the sale price is less than the loan balance.
A DIL allows the homeowner to voluntarily give up the home to satisfy the first mortgage even if the home is worth less than the loan balance.
The homeowner can get pre-approval for a short sale at a specific minimum price or net proceeds before the home is put on the market.
The homeowner can receive $1,500 for relocation expenses at closing. This sum may be reported to the Internal Revenue Service as income.
The home must be the homeowners principal residence.
The mortgage must be delinquent, or default must be reasonably foreseeable.
The unpaid loan balance must be less than $729,750 for a single house or condominium. Higher limits are allowed for two- to four-unit residential properties.
The homeowners monthly mortgage payment must be more than 31 percent of his or her gross income.
The homeowner must transfer clear title. The lender will allow up to three percent of each second loan or lien, up to $3,000 in total, to help the homeowner satisfy these obligations.
The government's directive excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac. However, the two government-run mortgage corporations are expected to release their own guidelines.
Homeowners can use the Loan Look Up Tool on the Making Home Affordable Web site to find out whether they have a Fannie Mae or Freddie Mac loan.
The lender cannot require a cash contribution or promissory note, cannot pursue a deficiency judgment and must release the homeowner from all future liability for the debt.
The loan servicer can use the financial information and hardship letter that the homeowner submitted for a loan modification, or request updated information to evaluate the homeowners eligibility.
The loan servicer must assess the current value of the home. If the short sale or DIL isn't completed, the servicer can add the cost of this assessment (e.g., an appraisal) to the loan balance.
The homeowner must sign a Short Sale Agreement or DIL Agreement on or before Dec. 31, 2012.
The home must be listed for sale with a licensed local-area real estate professional. (This requirement doesn't apply to DIL.)
The homeowner must cooperate with the real estate professionals efforts to sell the home and maintain the interior and exterior of the home.
The servicer and homeowner must meet a number of time frames.
The lender may require the homeowner to make full or partial payments on the mortgage, up to 31 percent of the homeowners income, subject to the lender's written policies.
The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes.
The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
Homeowners should discuss the income tax consequences of debt forgiveness with a qualified tax professional.
The servicer will report the short sale or DIL to the credit bureaus. That will hurt the homeowners credit score, although not as severely as a foreclosure.
The buyer in a short sale can't resell the home within 90 days of the purchase.
The program launched April 5 and is scheduled to sunset on Dec. 31, 2012. Servicers may elect to implement the program sooner than the official effective date.
Homeowners are encouraged to contact their loan servicers to find out whether they are eligible for the program or call the HOPE hot line at (888) 995-4673 to speak to a government-certified mortgage counselor. More than 100 servicers have signed up for the program.
These servicers are required to participate and write their own policies subject to investor guidelines.
Going up
Mortgage rates jumped for the second straight week.
The average 30-year fixed-rate mortgage rose 12 basis points, to 5.35 percent. A basis point is one-hundredth of a percentage point. Rates have risen 24 basis points in two weeks and are now at their highest point since Nov. 4, 2009.
Meanwhile, this week's average 15-year fixed-rate — a popular option for refinancing — leapt 16 basis points, to 4.69 percent.
The average jumbo 30-year fixed rose 6 basis points, to 5.98 percent.
Adjustable-rate mortgages split this week. The one-year adjustable-rate mortgage remained unchanged, at 4.74 percent. Meanwhile, the popular 5/1 ARM rose 4 basis points, to 4.55 percent.
Our dog blog
Sunday, April 18, 2010
Second mortgages may haunt borrowers in foreclosure
Just when owners think their mortgage nightmare has ended with the loss of their home through foreclosure, the next round of bad news knocks at the door: the bank holding their second trust deed demands repayment of the loan.
Despite heavy political pressure to write off so-called "junior"- or second-lien, mortgages to help struggling owners keep their homes, banks aren't always willing to follow that script. Why? Because those loans amounted to $1 trillion in the U.S. at the end of last year, according to the Federal Reserve, and many banks hold a lot of that paper. A second trust deed is a loan in a subordinate position to a first trust deed loan secured by the same collateral.
Although owners and many banks are trying to strike deals to reduce the payments on homeowners' first mortgages, the main sticking point to consummating those transactions is that lenders holding the first liens often will not accept a deal unless the banks holding the second mortgages take a hit too. But those banks, which are trying to get their assets back in the positive column, don't always want to write off the junior liens.
It's not unusual for second liens -- typically loans taken out after the house was purchased -- to lack collateral backing today because of the steep drop in home values; sometimes a second mortgage is below the amount owed on the first mortgage alone. That's why some politicians are urging banks to write off those "worthless" second liens. Many homeowners who are in default on their first mortgages, however, still are making monthly payments on the second liens, so banks don't want to kiss those loans off. The ability for banks to collect on second liens varies by state.
How pervasive is the problem?
"I see it all the time," says accountant Earl Salter, an enrolled agent with Norwalk Business Service in Norwalk, Calif. Financially shaky owners who have lost their homes to foreclosure and face second-lien lenders demanding repayment "have two choices: file bankruptcy or try to strike a deal with the holder of the second to accept 10 or 15 cents on the dollar" owed, he said.
If lenders and borrowers don't strike a deal, lenders may garnish the borrowers' wages and other assets, if the owners have some income or the potential for income. In some cases, banks sell the junior-lien loans to collection agencies, which take over recovery of the debt.
While many banks are making decisions about repayment of second-lien loans on a case-by-case basis, lawmakers are seeking solutions for borrowers unable to repay junior-lien debts. One U.S. Treasury program requires the reduction of payments on junior-lien mortgages by participating lenders if they're allowing reductions on first mortgages.
Of one thing you can be sure: we haven't heard the last of this issue yet. Other programs already are on the table.
Diane Wedner
Despite heavy political pressure to write off so-called "junior"- or second-lien, mortgages to help struggling owners keep their homes, banks aren't always willing to follow that script. Why? Because those loans amounted to $1 trillion in the U.S. at the end of last year, according to the Federal Reserve, and many banks hold a lot of that paper. A second trust deed is a loan in a subordinate position to a first trust deed loan secured by the same collateral.
Although owners and many banks are trying to strike deals to reduce the payments on homeowners' first mortgages, the main sticking point to consummating those transactions is that lenders holding the first liens often will not accept a deal unless the banks holding the second mortgages take a hit too. But those banks, which are trying to get their assets back in the positive column, don't always want to write off the junior liens.
It's not unusual for second liens -- typically loans taken out after the house was purchased -- to lack collateral backing today because of the steep drop in home values; sometimes a second mortgage is below the amount owed on the first mortgage alone. That's why some politicians are urging banks to write off those "worthless" second liens. Many homeowners who are in default on their first mortgages, however, still are making monthly payments on the second liens, so banks don't want to kiss those loans off. The ability for banks to collect on second liens varies by state.
How pervasive is the problem?
"I see it all the time," says accountant Earl Salter, an enrolled agent with Norwalk Business Service in Norwalk, Calif. Financially shaky owners who have lost their homes to foreclosure and face second-lien lenders demanding repayment "have two choices: file bankruptcy or try to strike a deal with the holder of the second to accept 10 or 15 cents on the dollar" owed, he said.
If lenders and borrowers don't strike a deal, lenders may garnish the borrowers' wages and other assets, if the owners have some income or the potential for income. In some cases, banks sell the junior-lien loans to collection agencies, which take over recovery of the debt.
While many banks are making decisions about repayment of second-lien loans on a case-by-case basis, lawmakers are seeking solutions for borrowers unable to repay junior-lien debts. One U.S. Treasury program requires the reduction of payments on junior-lien mortgages by participating lenders if they're allowing reductions on first mortgages.
Of one thing you can be sure: we haven't heard the last of this issue yet. Other programs already are on the table.
Diane Wedner
Thursday, April 8, 2010
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