Is the new $8K tax credit useful? Will it do THE JOB it was designed to do?
I'd like to find out what people think...is this federal program a good one, or is it just providing "lip service" to people concerned about the housing market?
Here's an article that appeared on CNN that describes the tax credit:
http://money.cnn.com/2009/02/13/real_estate/homebuyer_tax_credit_finalized/index.htm
What do you think?
Sunday, February 22, 2009
Thursday, February 12, 2009
Thursday, December 18, 2008
ARE YOU BEHIND IN YOUR MORTGAGE PAYMENTS?
DO YOU NEED TO SELL YOUR HOME?
DO YOU OWE THE BANK MORE THAN YOU CAN GET FOR YOUR HOME?
What are your OPTIONS?
Many people are not aware that they have a few options to explore when they are facing these situations. Some people just give up and abandon the house for the bank to take it over. Before you do this, it is important to explore other options that may affect your credit and personal finances less than foreclosure.
The first thing you have to find out is who owns your loan note (it may be different from the lender who sold you the loan and/or different from the company who services the loan). Once you find out who is holding your loan, you may want to call their LOSS MITIGATION DEPARTMENT, which specializes in dealing with these matters.
Notes: I am assuming that when you took the loan you were properly informed of the conditions, and that your lender performed all required disclosures as required by the Truth In Lending Act (if you feel you were not informed properly, or believe there was fraud involved in your loan, you have legal recourses you can pursue). Also, some of these options may have tax implications for you. If the lender accepts a short sale, the amount of principal they “forgive” may be counted as income for your tax return. It is essential to consult with your CPA and attorney before taking final action.
Option 1: LOAN FORBEARANCE Depending on your circumstances, a “temporary fix” option you might wish to consider as a way to prevent foreclosure is mortgage forbearance. This option is commonly used for temporary financial hardship situations such as short periods of unemployment or poor health. Mortgage forbearance enables you to temporarily stop making your mortgage payments. However, interest on your loan continues to accumulate and is added to the remaining principal balance of the loan. You are generally also asked to sign a forbearance agreement that states when the lender will require you to pay the amount you owe. Once the forbearance period comes to an end, you are once again obliged to make full payments on your home loan.
Option 2: LOAN MODIFICATION If your mortgage interest has readjusted upward (as in an ARM) and you cannot afford the new payment, or you are having trouble paying your mortgage and you are in a high-interest loan and cannot refinance, your lender may consider changing the terms of your loan to help you. Some of the factors that your lender will consider are: Nature of the hardship that is causing your mortgage payment problems; the amount of equity you have in the property; your ability to pay the mortgage; the amount owed on the mortgage; and mainly, what is financially better for them – whether to foreclose or pursue a loan workout with you or modify your loan.
Option 3: DEED EN LIEU OF FORECLOSURE This option basically provides a “free out of jail card” for the homeowner, who agrees to give the property back to the lender if the lender agrees to forgive the debt that was secured with the real estate. Deed-en-lieu-of-foreclosure is only approved by lenders in certain hardship circumstances (conditions vary according to each lender). Both sides have to enter the transaction voluntarily and in good faith. The property needs to be transferred at a fair market value.
Option 4: SHORT SALE In a declining real estate market, it is quite common for homeowners to owe more on their home than what they can net from sale at a “fair market price”, especially if they haven’t lived long in their home. In many cases you can still sell your home, provided that the lender(s) and other lienholders approve a short sale, where they are paid less than they are owed. Any other liens affecting the property (including mechanics’ liens, tax liens and any judgments against you, the owner) will have to be cleared to be able to “short-sell” the property.
Option 5: RE-FINANCE If you are in a situation where your loan is at a high interest rate, you may wish to consider re-financing (with the same or with a different lender) to lower your monthly payments. However, in the last two years the guidelines for re-financing have changed, making it impossible for some homeowners to re-finance their mortgage. The main recent changes affecting your ability to re-finance are: Declining home values; reduced loan-to-value and debt-to-income ratios; your payment capability and your credit score.
Option 6: FORECLOSURE Foreclosure is a legal process whereby the lender(s) exercise their right to take possession of your home and kick you out for not honoring your commitment to pay the loan(s). This is a slow process (in SC it can take from 6+ months) and it is expensive for the lender. It also affects the homeowner’s credit substantially and for a long period of time. If you fail to pay your loan on time, you will first receive written notices that you are in default and warning you to pay or face foreclosure. After a few months (depending on the lender), they will issue a notice of their intention to foreclose. The case will be handed over to an attorney, who will file suit to foreclose and will file a lis pendens notice at the County Courthouse. Once the court rules the property will be sold to the highest bidder at public auction on the courthouse steps. If you are still living in the house, the new owner will file a motion to evict you.
Option 7: BANKRUPTCY In some particular cases, the only option that may make sense to you will be to file bankruptcy. The latest changes to the bankruptcy law make it a bit harder for some to file bankruptcy. Some filers with higher incomes won't be allowed to use Chapter 7, but will instead have to repay some of their debt under Chapter 13. You will have to get credit counseling before you can file a bankruptcy case. And, because the law imposes new requirements on lawyers, it may be tougher to find a bankruptcy attorney.
Alan Donald is a bilingual REALTOR® with Keller Williams Realty in Charleston, SC.You can ask him questions by sending him an email to adonald@kwcharleston.com or by visiting his website at www.BuyHomesInCharleston.com .
DO YOU NEED TO SELL YOUR HOME?
DO YOU OWE THE BANK MORE THAN YOU CAN GET FOR YOUR HOME?
What are your OPTIONS?
Many people are not aware that they have a few options to explore when they are facing these situations. Some people just give up and abandon the house for the bank to take it over. Before you do this, it is important to explore other options that may affect your credit and personal finances less than foreclosure.
The first thing you have to find out is who owns your loan note (it may be different from the lender who sold you the loan and/or different from the company who services the loan). Once you find out who is holding your loan, you may want to call their LOSS MITIGATION DEPARTMENT, which specializes in dealing with these matters.
Notes: I am assuming that when you took the loan you were properly informed of the conditions, and that your lender performed all required disclosures as required by the Truth In Lending Act (if you feel you were not informed properly, or believe there was fraud involved in your loan, you have legal recourses you can pursue). Also, some of these options may have tax implications for you. If the lender accepts a short sale, the amount of principal they “forgive” may be counted as income for your tax return. It is essential to consult with your CPA and attorney before taking final action.
Option 1: LOAN FORBEARANCE Depending on your circumstances, a “temporary fix” option you might wish to consider as a way to prevent foreclosure is mortgage forbearance. This option is commonly used for temporary financial hardship situations such as short periods of unemployment or poor health. Mortgage forbearance enables you to temporarily stop making your mortgage payments. However, interest on your loan continues to accumulate and is added to the remaining principal balance of the loan. You are generally also asked to sign a forbearance agreement that states when the lender will require you to pay the amount you owe. Once the forbearance period comes to an end, you are once again obliged to make full payments on your home loan.
Option 2: LOAN MODIFICATION If your mortgage interest has readjusted upward (as in an ARM) and you cannot afford the new payment, or you are having trouble paying your mortgage and you are in a high-interest loan and cannot refinance, your lender may consider changing the terms of your loan to help you. Some of the factors that your lender will consider are: Nature of the hardship that is causing your mortgage payment problems; the amount of equity you have in the property; your ability to pay the mortgage; the amount owed on the mortgage; and mainly, what is financially better for them – whether to foreclose or pursue a loan workout with you or modify your loan.
Option 3: DEED EN LIEU OF FORECLOSURE This option basically provides a “free out of jail card” for the homeowner, who agrees to give the property back to the lender if the lender agrees to forgive the debt that was secured with the real estate. Deed-en-lieu-of-foreclosure is only approved by lenders in certain hardship circumstances (conditions vary according to each lender). Both sides have to enter the transaction voluntarily and in good faith. The property needs to be transferred at a fair market value.
Option 4: SHORT SALE In a declining real estate market, it is quite common for homeowners to owe more on their home than what they can net from sale at a “fair market price”, especially if they haven’t lived long in their home. In many cases you can still sell your home, provided that the lender(s) and other lienholders approve a short sale, where they are paid less than they are owed. Any other liens affecting the property (including mechanics’ liens, tax liens and any judgments against you, the owner) will have to be cleared to be able to “short-sell” the property.
Option 5: RE-FINANCE If you are in a situation where your loan is at a high interest rate, you may wish to consider re-financing (with the same or with a different lender) to lower your monthly payments. However, in the last two years the guidelines for re-financing have changed, making it impossible for some homeowners to re-finance their mortgage. The main recent changes affecting your ability to re-finance are: Declining home values; reduced loan-to-value and debt-to-income ratios; your payment capability and your credit score.
Option 6: FORECLOSURE Foreclosure is a legal process whereby the lender(s) exercise their right to take possession of your home and kick you out for not honoring your commitment to pay the loan(s). This is a slow process (in SC it can take from 6+ months) and it is expensive for the lender. It also affects the homeowner’s credit substantially and for a long period of time. If you fail to pay your loan on time, you will first receive written notices that you are in default and warning you to pay or face foreclosure. After a few months (depending on the lender), they will issue a notice of their intention to foreclose. The case will be handed over to an attorney, who will file suit to foreclose and will file a lis pendens notice at the County Courthouse. Once the court rules the property will be sold to the highest bidder at public auction on the courthouse steps. If you are still living in the house, the new owner will file a motion to evict you.
Option 7: BANKRUPTCY In some particular cases, the only option that may make sense to you will be to file bankruptcy. The latest changes to the bankruptcy law make it a bit harder for some to file bankruptcy. Some filers with higher incomes won't be allowed to use Chapter 7, but will instead have to repay some of their debt under Chapter 13. You will have to get credit counseling before you can file a bankruptcy case. And, because the law imposes new requirements on lawyers, it may be tougher to find a bankruptcy attorney.
Alan Donald is a bilingual REALTOR® with Keller Williams Realty in Charleston, SC.You can ask him questions by sending him an email to adonald@kwcharleston.com or by visiting his website at www.BuyHomesInCharleston.com .
Thursday, November 27, 2008
TO "LOCK" OR TO "FLOAT"?
It is very important for home buyers or for those who want to re-finance to be aware that in these volatile financial markets we are living in, interest rates on mortgages can fluctuate substantially in a matter of hours! I have heard many stories from mortgage lenders about how they were able to lock a fantastic interest rate for a loan using a 2-3 hour "window of opportunity" that disappeared afterward, or others that missed out because they floated the loan (to "float" means to let the interest rate fluctuate with the market). Understanding how "locking-in" a rate works may help you evaluate your options and could result in thousands of dollars in savings!
So, what is a "lock"? A lock is a GUARANTEE from a lender that if you close your loan within a stipulated time (usually 30 days), the note on your loan (i.e. the nominal interest rate) will be set at a specific interest rate.
When you ask a lender for a quote (also called a "Good Faith Estimate" or GFE), you can ask how long the rate is good for. Bear in mind that until you lock the interest rate, it can (and probably will) change. If you think you need more time to close the transaction, ask the lender for an adjusted rate quote. If you are afraid that interest rates may rise, lock your rate now (rate locks are recommended when interest rates are on the rise, to avoid ending up with higher monthly payment than anticipated). Floating the loan in a volatile market is a gamble - you may win if rates drop, but you may also lose if they go up.
What many people don't know is that long-term mortgage rates don't depend on the inter-bank rates set by the Federal Reserve Bank. This rate normally affects only short-term lending (such as credit cards, car loans, home equity lines, etc.). Long-term rates depend on the behavior of the financial (stock & bond) markets. Thus, if bonds are in high demand, mortgage rates drop.
Professional mortgage representatives are constantly checking the financial markets and related news releases to be able to predict future movements in interest rates. Ask your lender to keep an eye out for a favorable rate to lock in your loan! This is one of the reasons why it is very important to pick a very sharp and experienced mortgage representative (if you ever have the need for one, I can recommend several...)
It is very important for home buyers or for those who want to re-finance to be aware that in these volatile financial markets we are living in, interest rates on mortgages can fluctuate substantially in a matter of hours! I have heard many stories from mortgage lenders about how they were able to lock a fantastic interest rate for a loan using a 2-3 hour "window of opportunity" that disappeared afterward, or others that missed out because they floated the loan (to "float" means to let the interest rate fluctuate with the market). Understanding how "locking-in" a rate works may help you evaluate your options and could result in thousands of dollars in savings!
So, what is a "lock"? A lock is a GUARANTEE from a lender that if you close your loan within a stipulated time (usually 30 days), the note on your loan (i.e. the nominal interest rate) will be set at a specific interest rate.
When you ask a lender for a quote (also called a "Good Faith Estimate" or GFE), you can ask how long the rate is good for. Bear in mind that until you lock the interest rate, it can (and probably will) change. If you think you need more time to close the transaction, ask the lender for an adjusted rate quote. If you are afraid that interest rates may rise, lock your rate now (rate locks are recommended when interest rates are on the rise, to avoid ending up with higher monthly payment than anticipated). Floating the loan in a volatile market is a gamble - you may win if rates drop, but you may also lose if they go up.
What many people don't know is that long-term mortgage rates don't depend on the inter-bank rates set by the Federal Reserve Bank. This rate normally affects only short-term lending (such as credit cards, car loans, home equity lines, etc.). Long-term rates depend on the behavior of the financial (stock & bond) markets. Thus, if bonds are in high demand, mortgage rates drop.
Professional mortgage representatives are constantly checking the financial markets and related news releases to be able to predict future movements in interest rates. Ask your lender to keep an eye out for a favorable rate to lock in your loan! This is one of the reasons why it is very important to pick a very sharp and experienced mortgage representative (if you ever have the need for one, I can recommend several...)
Saturday, November 22, 2008
COMMERCIAL REAL ESTATE - ALSO GOING SOUTH?
Today I was reading an NAR update on Commercial Real Estate (CRE) - it seems that CRE is following the path that Residential Real Estate took two years ago!
Donald Trump just asked for more time to pay his $770 million in construction loans on his Chicago Tower. Many of the leading commercial developers are having difficulties making the payments on their construction loans because absorption has been slower than expected (when the economy slows down = fewer jobs = less need for space).
To add insult to injury, we'll see many banks suffering from defaults in their commercial loan portfolio next year... this is not good news for residential real estate either - more defaults = more restrictive credit for everyone.
On the flip side, Wall Street woes and unpredictability may convince investors that, after all, real estate is a great long-term leveraged investment!
Today I was reading an NAR update on Commercial Real Estate (CRE) - it seems that CRE is following the path that Residential Real Estate took two years ago!
Donald Trump just asked for more time to pay his $770 million in construction loans on his Chicago Tower. Many of the leading commercial developers are having difficulties making the payments on their construction loans because absorption has been slower than expected (when the economy slows down = fewer jobs = less need for space).
To add insult to injury, we'll see many banks suffering from defaults in their commercial loan portfolio next year... this is not good news for residential real estate either - more defaults = more restrictive credit for everyone.
On the flip side, Wall Street woes and unpredictability may convince investors that, after all, real estate is a great long-term leveraged investment!
Friday, October 31, 2008
REVERSE MORTGAGE PROGRAM UPDATEDThe Daily Real Estate News reported today that the limit for FHA-backed reverse mortgages (or Home Equity Conversion Mortgages - HECMs) had been increased to $417,000.
This new regulation also places a 2% cap on origination fees for the first $200K of the loan amount, or a 1% cap for higher amounts, with a $6,000 limit (adjustable for inflation).
Senior citizens will be allowed to use HECMs to purchase a new property, and lenders will no longer be allowed to sell annuities and other financial products along with the mortgage.
I think this will increase the flexibility for those seniors (like my own parents) who are “house-rich” but “cash poor”. Good move!!
This new regulation also places a 2% cap on origination fees for the first $200K of the loan amount, or a 1% cap for higher amounts, with a $6,000 limit (adjustable for inflation).
Senior citizens will be allowed to use HECMs to purchase a new property, and lenders will no longer be allowed to sell annuities and other financial products along with the mortgage.
I think this will increase the flexibility for those seniors (like my own parents) who are “house-rich” but “cash poor”. Good move!!
Friday, September 19, 2008
WHAT’S HAPPENING TO THE MORTGAGE MARKETS? (Sept. 18, 2008)
On the positive side, Freddie Mac reported that 30-year fixed rate mortgages fell this week for the 5th consecutive week. According to the Mortgage Bankers Association (MBA), lenders saw a 58 % surge in mortgage applications since August 15th, led by a 122 % surge in re-financing applications. Fixed-rate mortgages are currently the predominant choice (95 % of all new applications) among home buyers. Applications for adjustable rate mortgages (ARMs) have fallen by almost 50 % since the end of last year.
After the government takeover of Freddie and Fannie last week, rates came down substantially (by almost 1%). We are now experiencing very low 30-yr rates (similar to 4 years ago). Definitely a great relief for potential buyers, and a great opportunity for refinancing higher interest loans.
On the other hand, there are a multitude of negative factors affecting the eligibility of buyers to get a loan. The Downpayment Assistance Programs (DAPs), that allowed 100% financing, are disappearing as of October 1st. Mortgage insurance rates are going to be drive (upward, I imagine) by credit scores. And lender underwriters went from one extreme (you just had to fog a mirror to get 100% financing three years ago), to the other (demanding an overwhelming amount of information and questioning issues that verge on the ridiculous for event low LTV loans).
So, on one hand we have great interest rates that should drive demand for housing up. On the other hand, it is difficult to qualify for those loans.
Where are we going? This is my crystal ball: I believe lenders will finally realize that they are in the business of lending money, not just in the business of avoiding losses. If they make it very difficult for buyers, their lending business will die. So they will probably start to relax their guidelines and requirements a little next year. I also believe that inflationary pressures are evident, and when inflation goes up, it affects negatively the stock and the bond markets, so I believe we’ll see mortgage rates creeping back up after the presidential election.
The next six months will be a great window of opportunity for buyers and investors who wish to buy inexpensive properties and get low interest rates. Beyond six months, it is hard to say… In the long term (4+ years), I believe real estate will prove that it is still one of the best and most stable investments around (look at the S&P 500 roller-coaster this week!)
On the positive side, Freddie Mac reported that 30-year fixed rate mortgages fell this week for the 5th consecutive week. According to the Mortgage Bankers Association (MBA), lenders saw a 58 % surge in mortgage applications since August 15th, led by a 122 % surge in re-financing applications. Fixed-rate mortgages are currently the predominant choice (95 % of all new applications) among home buyers. Applications for adjustable rate mortgages (ARMs) have fallen by almost 50 % since the end of last year.
After the government takeover of Freddie and Fannie last week, rates came down substantially (by almost 1%). We are now experiencing very low 30-yr rates (similar to 4 years ago). Definitely a great relief for potential buyers, and a great opportunity for refinancing higher interest loans.
On the other hand, there are a multitude of negative factors affecting the eligibility of buyers to get a loan. The Downpayment Assistance Programs (DAPs), that allowed 100% financing, are disappearing as of October 1st. Mortgage insurance rates are going to be drive (upward, I imagine) by credit scores. And lender underwriters went from one extreme (you just had to fog a mirror to get 100% financing three years ago), to the other (demanding an overwhelming amount of information and questioning issues that verge on the ridiculous for event low LTV loans).
So, on one hand we have great interest rates that should drive demand for housing up. On the other hand, it is difficult to qualify for those loans.
Where are we going? This is my crystal ball: I believe lenders will finally realize that they are in the business of lending money, not just in the business of avoiding losses. If they make it very difficult for buyers, their lending business will die. So they will probably start to relax their guidelines and requirements a little next year. I also believe that inflationary pressures are evident, and when inflation goes up, it affects negatively the stock and the bond markets, so I believe we’ll see mortgage rates creeping back up after the presidential election.
The next six months will be a great window of opportunity for buyers and investors who wish to buy inexpensive properties and get low interest rates. Beyond six months, it is hard to say… In the long term (4+ years), I believe real estate will prove that it is still one of the best and most stable investments around (look at the S&P 500 roller-coaster this week!)
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