As many of you might have already heard President Obama has just came out with a new mortgage rescue package which was unveiled to the public on March 4, 2009. The goal in this rescue plan is designed to help many homeowners in this mortgage turmoil that has gripped the whole country. Some of the most troubled mortgage areas has been the areas that have traditionally gone up and down very quickly in their home values. The troubled areas have been primarily Florida, California, Arizona, Michigan, Nevada. All the other states have been feeling some of the effects too. Millions have lost their homes to foreclosure, and the numbers continue to rise at an alarming rate. Many homeowners believe that their is no real help out there for them after they have been turned down time and time again by their lenders to have their loans modified to a new low fixed rate mortgage payment.
With the former administration, several mortgage rescue plans came out under President Bush's administration. However, the problem mortgages continued to rise. They were hoping the mortgage crisis would bottom out, but we have yet to see a bottom in the housing market with it's ripple affect in just about all industries. The problem with the mortgage bailout under the prior administration is that allot of homeowners were excluded out of that plan. The plan was set to modify homes of individuals who might have been able to qualify for a refinance, but many opted for a loan modification instead. There were provisions in the plan for Fannie Mae and Freddie Mac, HUD Loans, and of course many mortgage companies had provisions set for individual in extremely unusual circumstances. Many homeowners still did not qualify. For example, if a homeowner had too many bill and was always late on their payments, or if the homeowner did not have a HUD, Fannie Mae or Freddie Mac home loan or loan securitized by one of the above then they did not qualify. Unless they had privy information that some individuals in the mortgage industry might not even have, then they stood no real chance of getting a new lower loan payment.
The new plan that is still being worked out by President Obama is expected to take this mortgage rescue plan to the next level. It is believed to be the plan that will allow the market to bottom out which will stable the housing market, in turn which stabilize our economy ,start creating new jobs and boost our economy. Some of the details that have came out to just a select few, but not with all of the details yet; it's still sketchy. An overview of the plan with the remaining details are expected to coming out on March 4TH, 2009. Mortgage companies and homeowners alike are eagerly anticipating it's arrival.
Under the new homeowner affordability and stability plan, eligible borrower who are on time with their payments, but have been unable to refinance due to their home value eroding, may now have an opportunity to refinance into a new 15 or 30 year fixed rate mortgage loan. Fannie Mae and Freddie Mac will be allowing refinancing of loans that they hold or that are have been mortgage backed securities.
If you owe more than your property is worth, eligible loans will now include loan where the 1St loan will not exceed 105% of the current market value of the home. Lets say you owe $315,000 on your loan but your house is worth at least $300,000 then you may qualify for refinance. The details will be announced March 4Th, 2009. Some of the requirements will include having enough income to make your new payments and having a decent payment history. This loans are limited to Fannie Mae and Freddie Mac backed loans.
A buyer with 2 loans, a first and a second lien may qualify if the amount due on the first mortgage is no more than 105% of the property value with the new homeowner affordability and stability plan. Your eligibility will be based on if the 2ND lien holder is willing to stay in 2ND place and assuming that you meet the eligibility requirements for the 1St loan.
The goal of the plan is to help credit worthy borrowers who have been committed to paying their mortgages with affordable payments for the rest of their loan. Individuals with high interest, or if they had a teaser rate that will now be increasing might see a big difference in their house payment if they were to refinance. For those submitting a loan application, they will get a "Good Faith Estimate" which will include their new mortgage payment amount, the interest rate, and the total payment over the life of the loan. That homeowner can now use that "Good Faith Estimate" to compare it with what they are paying now and if it makes sense they can go with that option or stick with their original mortgage.
The object of the new plan to provide help with an affordable fixed rate mortgage. Every loan refinanced under the plan will have either a 15 or 30 year mortgage option with a fixed rate interest. Which ends up giving the borrower tremendous savings over the life of the loan. This plan will not reduce the total amount owed on the loan.
To find out if your loan is owned or if it have been securitized by Fannie Mae or Freddie Mac just contact your lender after March 4, 2009. Lender will start accepting application after details are handed out on March 4. So anytime after March 4, 2009 is "fair game" to start checking with your lender. Lenders will see tremendous increase in their call volumes and become very busy answering question. Many lenders might forgo many of their normal daily activities to accommodate the new calls they are going to be receiving after the announcement is given.
While anxious home owners are waiting they should get together their personal information that their lenders will need for after March 4, when the new program is rolled out. They will need at least
1. Their most recent income tax return.
2. Borrowers and co-borrowers monthly income.
3. Detailed information about any second mortgage on the house.
4. All payments on credit cards that they have and the balances.
5. Other loan payment obligations.
If your are at risk of foreclosure you might have questions too. To try to prevent more foreclosures the treasury plans to give out financial incentives to lenders to modify those existing loans on 1St liens that are delinquent in their payments, and for those at risk for foreclosure. They hope to intercept or prevent up to 4 million 1St liens that are at risk.
If you are on time with you mortgage payments you can still qualify for a loan modification. If you are struggling, loss some or all of your income, or you are on an Adjustable Rate Mortgage(ARM) that is fixing to adjust. Regardless, don't just give up. You might still qualify and actually get a modification. Allot of times if you live on the property as the primary resident, your mortgage payment is above 31% of your monthly gross income, and your loan is not more than 105% above your home's current market value then you stand a good chance of getting a lower payment. Your mortgage lender or servicer will make the final decision based on if they think you have the financial ability to pay the loan back at the new lower rate.
Lets say the property you financed is a now a rental property, or a vacation home then you will not be eligible for reduction in the payments. If you use to live on the property but have moved out of the property then you would not qualify either. This is for primary residence only.
On the other hand, if you live in a duplex and you rent out the other 3 units, then you would qualify for help under this new plan. If you live in at least 1 of the units is what it takes to qualify.
If you have 2 mortgages, a 1St and a 2ND loan, only the 1St loan qualifies under this plan. If you have 2, and they are both 1St liens; then both your loans qualifies. Or if you have 3 loans: 2 being 1St and 1 being a 2ND lien; only the 2 1St liens would qualify.
Even thought the plan is designed to lower payment on the loan by reducing the interest rate, some lenders will consider lowering your total principal balance also. That will be at your lender's discretion.
To encourage borrowers to work maintain ownership of the property, the plan will give incentive payments as a borrower make they modified payments on time. This reduction will accrue on a monthly basis and will be applied directly to the mortgage principal balance making it lower as time goes along. An on time paying homeowner that has been modified can have up to $5,000 applied directly to their principal balance by the end of 5 years, just for paying on time.
Mortgage lenders are not required to participate in this new program, they do it on a voluntary basis and all loans will be modified on a case by case basis. In fact many lenders are putting off foreclosure for some of their loans that they think might qualify for a loan modification. Remember, there are financial benefits for both the lender and borrower to make this worthwhile.
If you are a homeowner you will probably get some information from your lender that will make you aware of the new program now available to borrowers.
Many critics believe that this plan will not do much more than what the prior plan did, which was like "putting a band aid on a sore." Some critics believe we need a comprehensive plan that will give home owners more credits when the buy a new home to encourage spending to build back consumer confidence once again. That way consumers will start spending again, and the new money circulation in the economy will create more new jobs for many. Therefore, lifting our economy to the level we all enjoyed recently.Economist statistics show that when a million new houses are not built there is a 89.7billion in government revenue lost, because state and local government profit a great deal from all the building activities. In 2005, 1.7 million houses were built, and compare that to 2005 where a bit under 500,000 new houses were built in the United States. So from those numbers alone, they is huge decline in new houses built since 2005. That represent huge jobs losses and loss revenues. The housing market has lead this country into and out of recession since world war II, except for the recession of 2002; So housing is the driving force in our market in helping our economy to recover and to start seeing real changes. When we built new homes we can create new jobs; that will churn our economy and get us moving in the right direction again.Which will build consumer confidence and foster consumer spending. In fact, a few experts on different housing panels believe now is the time to buy a new home when the prices are low and so is interest rate. This kind of condition is the "perfect storm," buy at an all time low as far as the house prices and interests are. That way once the market bottoms out, and starts to turn around you would have gotten in at a great price and with an unbelievable interest rate. Back in 2006 and 2007 when a large number of people bought homes, that was the wrong time, considering what happened right after that. If you wait too long and start to sense that we have already bottomed out, then it might be too late at that point. Interest might start to climb once again, and the now low house prices might start rising also. Think about it. See F.A.Q on loan modification.
We have the knowledge and skills to help you get modified quickly without all the hassles and games many homeowners are faced when trying to lower their house payments. We have played the "mortgage game" before with lenders, so we have in depth knowledge that you probably will not have not being apart of that industry; And if you have the experience or some knowledge you might not have the patience for it. That's where we come in, because modifications usually takes a long time ; usually about 2-4months to complete with ongoing negotiations. We will do all the work. We will pressure your mortgage lender as much as possible to get them to do the right thing for you and lower your house payment. That's what we do. To get started go to http://hstrial-oswingrant.homestead.com/information.html
A lot of mortgage companies have grown tired of waiting on the latest mortgage assistance program from congress that was to be really promising for homeowner all around the country; But the Treasure Department still has not completed the necessary steps it needs to take in order to get the plan working for homeowners whom have been long anticipating the government program's arrival. Some mortgage companies are being pro-active and started to do the very own version of the government loan modification program. Most of them will most likely end their form of loan modification once the government affordability and stability plan is rolled out, until then we will have to see what mortgage companies are willing to do. The program has been delayed many times since early 2009.
Some states are starting to come down hard on mortgage companies that are not assisting homeowners enough. For example, S.Carolina is one of the 1St state to start their own litigation against mortgage companies that do little, or nothing to prevent foreclosure for distressed homeowners. In turn, properties in South Carolina are not going to foreclosure sale at this moment until mortgage companies have exhausted all of their efforts in trying to help homeowners stay in their property. I believe many other states will soon follow. Mortgage companies will simply have to do more to help homeowners in serious trouble.
Mortgage Crisis Update
Well the mortgage crisis continues. We still have not reached the end of the road yet with regards to the mortgage troubles that have been affecting us since the fall of 2006. Many economist and experts believe this mortgage downturn will not bottom out for about another year, around 2010. For most places it will begin to turn around gradually as the economy improves, with some places taking much longer.
Most of the country has seen record decrease in the median home price for years now. We have had a list of unfortunate circumstances that we have not seen since the 90‘S. We have had a downturn in home prices, high unemployment rates, and salaries that aren’t able to support the mortgage payments. Take California for example, at the peak of the housing bubble, many borrower’s home value to their yearly salary was around 20%, a comfortable percentage should be around 30-35%, it was especially low in the coastal communities. None the less, there are places that have seen modest appreciation in their home prices such as Seattle, WA and Nashville, TN. Other places have seen slight decreases in the median price such as Austin, TX where the median price is around $191,000, so has Omaha, NE with a median price of $126,000. However, places such as Detroit, MI and Cleveland, OH has seen home price reduction as high as 32%. Detroit for example, has the highest unemployment rate in the country with about 13%, and Cleveland has about 9 % respectably. With unemployment rates so high from major employers cutting jobs, and with not sign of relief in sight for those regions of the country, recovery will be more painful and take a longer time. Prices will have to continue to fall before hitting a equilibrium price. Similarly with places such as Miami, FL and Sacramento, CA with has had major over production of homes and condo back in the boom days of the early 2000’S, they will have a hard time recovering too. They have a high number of vacant homes on the market, and to add to their problem they have the problem of a flood of new foreclosed homes on the market that has to be bought up. The problems is, consumers are not buying right now, they are holding out for a more positive housing market future if they have a choice; but is a good time to buy and it will be so for about another year. So there is no rush to buy right now. The housing market looks bleak right now as viable means of saving with home prices continually slipping to what seems to be an endless bottom.
Places with a relatively low unemployment rate will do best in the housing downturn, and see the least decline in home prices. Having a low unemployment rate will have homeowners defaulting less on the mortgage payments and will be less likely to be a candidate for sub-prime home loans, so will an affluent community. Areas that have a high influx of immigrants with education will help in the recovery of the housing market in those areas too. They will buy up vacant homes, and help to reduce the inventory of homes on the market in certain areas. Likewise, areas with a high number of immigrants who are mostly uneducated, will be more likely to default on their home loans, and end up in apartments due to the job market continually downsizing; It’s a struggle for the educated to get well fitted jobs much less someone with little or no education, which will add to the inventory of homes on the market. Thus slowing the decrease in home inventory.
We should begin to see a turn around for most of the country by 2010, and by 2012 the worst hit areas will have fully recovered; even in areas such as Florida with home inventory as high as 40 months worth of homes with a high numbers of their homes being high end condos. Areas that have major employers such as Google and Yahoo will recover much quicker, because these companies will create a high number of jobs for the locals, therefore reviving the local economy. When the economy strengthens which should by the 3rd quarter of 2010 to the 1St quarter of 2011, unemployment rate will decrease significantly, and we will swing back in the other direction. At that point we should go through a period of growth and resurgence. The gross domestic product will continue to contract by about 3% this year, then growth will be around 1.7% by 2010, and about 4.5% by 2011. When the gross domestic product begins to grow, unemployment will decrease, and salaries will begin to increase; With that comes new possibilities for everyone, and a period of prosper will emerge once again.
Is a Short Sale better Than A REO or A Foreclosure
This is a common questions for homeowners in trouble with their mortgage company. Well lets take a look at each of them to make a determination. A short sale is when a homeowner sells a property for less than what is owed to the bank for the property with the banks permission. A foreclosure sale is when a property that was taken back by the bank ends up going to auction to try to recover for any losses. A REO is a real estate owned property or bank owned property that was to auction off, but it was not sold to a 3rd party at the foreclosure sale.
With an idea of each of those in mind now try to figure out which option can be more harmful to a homeowner whom is trying to save his/her credit, and suffer the least damage going forward. In all actuality, a short sale is the most beneficial of all the options mentioned. The reason why this is so is because the short sale looks much better on your credit report as a settlement, as opposed to a REO sale or a Foreclosure sale. With the REO sale it will have tax implications, you might want to talk to a tax attorney about that. A foreclosure can stay on one’s credit for up to 10 yrs. Trying to get any kind of loan with a foreclosure can be devastating, you would be considered among the highest of risk to a lender. On the other hand when you do a short sale which is settling what is owed on the account, that is much more attractive for future lenders that you might deal with after the short sale. It looks like you tried and succeeded at taking care of most of your obligation with your lender.
Making smart decision in tough economic times can be very beneficial to you and your family in the long run. Which can help you to recover from a bad situation much quicker in terms of your credit. Another attractive option is a Deed-in-lieu of foreclosure, which is where a homeowner gives back a property to the bank and walks away owning nothing. This is a more ambitious request from a bank. Some banks will do it if your have equity, which equals them recovering all or most of their losses; but they usually require you to make an attempt at selling the property in a short sale 1St, and if that does not work out then they will usually attempt to look at that option if it makes sense.
Always try to talk to your lender to see if they have any new and different programs available, because banks are always looking at new and different ways to try to recover their losses at the end of the day. Check on settlement where you can live in the property if you settle what you owe with them for in a large enough lump some settlement. This is primarily for someone who has had their mortgage for a long time and are close to paying it off, but instead of paying it off in payments they settle and owe no more. Always try to think creatively and bring up any unique option to your mortgage company, you never know sometimes. I have seen a lot of things work out in tough times that would not happen when the economy is thriving.
HAFA Home Affordable Foreclosure Alternatives
With the creation of the newest government foreclosure prevention program, more homeowners will be benefiting. This new program is another extension of the regular short sale with more benefits. It is designed to allow homeowners more time to try to get their homes sold as a short sale or a deed-in-lieu of foreclosure rather than having the borrower file for bankruptcy, or go to foreclosure sale. This is another programs that encourages lenders to extend the foreclosure sale date, and find a suitable workout option. By doing this, the homeowner gets to avoid a foreclosure on their credit. Remember, a short sale or deed-in-lieu of foreclosure has minor effect on a homeowner's credit reporting, unlike a bankruptcy or foreclosure, which is very damaging for many years to come.
In this program lenders are searching their database and looking for the ideal homeowners that are behind on their mortgage payments, those that have had failed attempts at a regular loan modification, or failure for any kind of suitable work out. Once they target these borrower, lenders will send out mass mailing of the new HAFA program, and briefly explain the benefits to homeowners. Another thing borrowers should keep in mind is this, many lenders are not going after deficient balances after a short sale has been completed. Most lender are writing off any shortages from a short sale. The only implications might be income taxes owed for any deficient balances after a short sale. For example, if you owe $200,000 on a mortgage and you short sell your property for $180,000. You might get a tax bill for the taxes owed on the $20,000 shortage after you have completed the short sale of your home. That $20,000 can be viewed as income, therefore, it becomes taxable; but hey, you might be able to set up a repayment arrangement with the IRS. That sure beats going to foreclosure sale or filing for bankruptcy.
The government makes the program attractive for both homeowners and lenders alike. The seller(you) will get up to $3000 and the lender up to $1500 for completing the HAFA program. The HAFA program has a lot of the same requirements as the government modification.
HAFA Requirements:
1. The property should be your primary residence.
2 The unpaid principal balance must be $729,000.00 or less.
3. Your account must be in default or past due.
4. HDTI or Housing Debt To Income Ration must be 31% or greater. Meaning your mortgage payments must be at least 31% of your
gross monthly household income.
5. The loan must have be originated before 01/2009.
Mortgage companies are aggressively trying to lower homeowners mortagages any way they can.
Lenders are going back to the original custom modifications and doing them better than before. Before these modifications would take months or longer to complete, not anymore. The only difference is that lenders are modifying loan a lot more these day in an effort to preserve home ownership, and mitigate losses. A part of this can be credited to the slower government mortgage loan modifications that can seem to take a good while to complete.
Banks have been stream lining their processes, and doing things differently from the way they use to do custom mortgage loan modifications. A custom mortgage loan modification is simply a loan modification performed by a mortgage company, a lender, or a mortgage servicer. It is not the government mortgage loan modification that recently became popular, however, there are many similarities. The government modifications take a longer time to complete, they can take months in most cases. The custom modifications are being completed in as little as 10 business days in most cases once the homeowner submits all of their documents. A homeowner can inquire with their mortgage lenders about their available programs.
