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Bank of America Stops Foreclosures in All 50 States

October 15, 2010 by Leave a Comment

In the case of president Obama they are stopping foreclosure in all 57 states.

How would you like to get up tomorrow and not have a mortgage payment? I’m sure many people would.  How would you like the security of a home that is free and clear? About one third of the population of the United States owns their homes free and clear and that means no mortgage payment. There are many other Americans that will get up tomorrow and not make a mortgage payment.  These people are in a totally different camp all together.  They do not have a mortgage payment right now,  however,  these people do not have the security of staying in their homes long term either.  It’s a terrible position to be in.  I personally know some  people that have been in their homes not making a payment for almost 2 years now!  With this freeze on foreclosures by several large institutions who knows how much longer this will go on.  Many believe, we need to foreclose on these non performing loans  in a timely manner and get the properties on the market, and sold to new buyers that will make the payments, before the market can begin to recover.  This current roadblock will only prolong the inevitable.

Just recently Fannie Mae and Freddie Mac have instructed the banks to start speeding up the foreclosure process and get rid of the shadow inventory on their books. Truth is, once the banks start certain foreclosure processes they are required to have greater and greater reserves on hand to meet those loan losses.  If the banks put too many properties into foreclosure all at once they quiet simply would not have enough reserves and the Feds would  have to drive up in their large black American  SUV’s  and cart away all their records. The free market as far as banks are concerned would be over.  The banking system would have to be nationalized. There is a very fine line for the banks to keep profits positive and stock prices up so that they are stable enough put away x amount of  reserves to handle x amount of foreclosed loan losses. This is why we have shadow inventory and why we are unable to get an accurate number on it. Matter of fact, do we really want to know?

This procedure error of not reading the foreclosure documents properly and signing in front of a notary will get resolved.  Whether by the banks or the administration it will get resolved. The country must move forward and housing is a big key in doing that. Many people have their wealth tied up in or to their homes and values must begin to stabilize and even begin to appreciate.  In the lower price ranges we have already hit the bottom and prices are moving higher. As the correction takes place,  people will feel better about their nest eggs and consumer confidence will begin take off.   Now is the window period to become a home owner for the first time or to move up!

Filed Under: Economy, Foreclosure, Loans, Shadow Inventory Tagged With: , ,

Is IT Always Best To Refinance To A Lower Interest Rate Loan?

October 6, 2010 by Leave a Comment

No, it isn’t always best to refinance to a lower interest rate! It really depends on your situation. For one thing, if you’ve made payments on a loan for several years you might be better off to keep paying on that marginally higher interest rate loan due to the fact that as a loan ages your are paying more toward principle and less toward interest. If you refinance, almost all of the initial payments will go toward interest and hardly anything toward the principle.  That’s just the way amortization works. Therefor it might make more sense to keep the mature loan since  you are paying down the loan balance to a much greater degree.

Another point to consider is, if the loan you are refinancing is the original loan you obtained when you purchased your property and you now refinance into a newer lower rate loan, that newly refinanced  loan becomes a recourse loan. That means that if you default on this newly refinanced loan at any time, the lender can obtain  a deficiency judgment against you for any unpaid balance.  On the original purchase money loan there is no possibility of a deficiency judgment and the property is the only recourse that the lender has.

The other consideration is do you have a fixed rate loan  or a traditional ARM-Adjustable Rate Loan? Many conservative consumers like myself feel more secure with a fixed rate loan. But a fixed rate loan doesn’t always mean that your mortgage rates will be lower than an ARM loan over the length of ownership of  any given property. Historically, ARM’s have resulted in lower overall interest costs compared to fixed rate loans particularly in  a low interest rate environment as we are currently experiencing.

Option ARM’s on the hand most likely should be refinanced due to the fact, that many of these loans usually  provide lower than market interest rates for the  first few years and then adjust upward in increments larger than most consumers feel comfortable with. Also, many consumers choose or OPTION to make payments on these loans that are actually lower than the interest rate necessary to carry the loan and accrue or increase their loan balances commonly know as negative amortization.

There is no one size fits all when it comes to refinancing. Each refinance should be determined on a case by case basis.

Filed Under: Loans, Real Estate Tagged With: , , ,

Jumbo Loans to $729,750 Extended

October 4, 2010 by Leave a Comment

Conforming Jumbo Loans to a Maximum of $729,750 have been Extended until September 30th 2011.

This is a really big deal for the housing market. Without the extension of these conforming jumbo loans limits,  properties with a sales price of about $520,000 would come to a screeching halt.  When a buyer purchases a property for $520,000 with a $104,000 (20%)  down payment  they obtain a $416,000 loan which is less than the $417,000 conforming loan limit.  To purchase a property above the $417,000 conforming loan limits, we need these higher jumbo loan limits.  Conforming jumbo loan limits allow a buyer to purchase a home up to  $912,000 with a $182,400 (20%)  down payment. And even though $182,400 is a healthy down payment for just about any one these days, imagine what would happen to the market above $417,000 if the buyer could not get jumbo financing.  In the case of a $912,000 sales price,  a buyer would need a down payment of $495,000 and what do you think that would do to our housing market in so called high-cost areas such as southern California?

Even better yet, these higher loan limits extend to loans insured by the Federal Housing Administration otherwise known as FHA loans. The benefit of this extension is that a buyer can purchase a property with a 3% down payment up to a loan amount of $729,750. This means a buyer could purchase a property with a sales price of $752,000 and a down payment of only $22,560 (3%) and finance the balance of $729,440 .  As you see , there  obviously are many more buyers that meet the parameters of a $22,560 (3%) down payment  versus a $150,600 (20%) down payment on a $752,000 sales price.  In addition,  a buyer could purchase a home with a sales price above $752,000 and still obtain an FHA loan as long as any additional increase in price above $752,000 was in a cash  and where the FHA loan did not exceed $729,750.  Of course with all these loan types a buyer must have a fully documented loan.

Luckily, buyers have an opportunity t purchase their dream home at reduced prices  and lock in these jumbo loans at historically low rates.

Filed Under: Loans Tagged With: , , , ,