Home Loan Focus

Archive for September, 2007

Lower fees, easier process, less credit checks or income verification, all of those things probably mean that you are going to pay a higher interest rate on your mortgage.  Lendors are like the mob in that they always take a sure bet, and their bets can be assured when they charge you enough interest to profit!

This video is a little dated, but the concept can definitely be extrapolated even in today’s mortgage crisis world.  Just because the industry is in ‘crisis’ over sub prime, it doesn’t mean they are not going to have a profitable year.  If Las Vegas could come up with a great idea to run into ‘financial trouble’, I’m sure they would like to go to capital hill for a bail out too!

This year has become the year of the F Word.  There are home foreclosures setting new records in almost every state of the country.  Foreclosures are a terrible experience for anyone that has to go through the process, but there are ways to prepare yourself so that you can avoid this process or at least mitigate the problem as much as is reasonably possible.  All does not have to be lost.  Furthermore, there is a flip side to foreclosures.

First, if you are or ever get behind on your mortgage or start to run into financial trouble there are things that you can do to avoid foreclosures.  You can renegotiate with your mortgage holder, refinance, possibly even refinance under new governmental programs that are being revamped this fall to enable people in trouble to convert their mortgage to an FHA loan.  You could even attempt to sell your home to pay off the mortgage.  Taking a loss on a sale might be better than foreclosure.

Even as a last resort you might opt to turn your home over to your mortgage holder.  This does not save your home, but it is better for your credit than a foreclosure and might make it possible for you to buy another home sooner than if you go through foreclosure.  Its not pretty but lets you survive to fight another day.

Finally, from a systematic perspective there is another perspective.  To keep the real estate market alive, someone has to buy up those foreclosed homes.  Right now, the real estate market is correcting from a number of bubbles in real estate prices.  Foreclosed homes typically sell at a discount and overall this process helps to reset and correct home prices.  Investing in foreclosed homes is not as simple as it sometimes made out to be on late night infomercials, but for people with the means and possibly with the capabilities to do light renovations, purchasing foreclosed homes could be good for business and good for the economy.  As a final thought, neighbors might even come together personally or through home associations to purchase foreclosed homes to keep neighborhood homes safe and help maintain property values.

Here’s another great video in the series from Money Talks News offering ways to reduce your mortgage fees by pitting them against each other.

The key here is to stop and take time to go over the paperwork, one page at a time.

This is the window dressing version of what is going on.  There are a lot of lines between the lines to read into the real Sub Prime mortgage mess.

The Federal Reserve and other banking regulators issued special guidance Tuesday, advised loan service companies to work with borrowers on the verge of defaulting on their home mortgages.  The aim of this guidance was to address the problem that in many cases the company in charge of collecting monthly mortgage payments is not the same company that originated the loan. 

The guidance suggested that appropriate strategies to avert defaults could include modifying the terms of the loan or deferring payments.  In the statement by regulators:

In addition, institutions should consider referring appropriate borrowers to qualified home ownership counseling services that may be able to work with all parties to avoid unnecessary foreclosures.

First American Corp, one of the nation’s largest sellers of home title insurance said it would eliminate 1,300 full-time jobs and cut some executive perks to trim costs during the ongoing housing slump.  At the end of Wednesday, shares dropped $1.15, or 2.7 percent, to $40.25.  The job cuts planned for the third quarter amount to 3 percent of the 40,000 employees at the Santa Ana-based company, which eliminated 600 jobs in the second quarter.

First American Corp expected to eliminate a total of 1400 jobs.  This set of job cuts is expected to save the company $108 million annually.

Minorities were far more likely than whites to be given high-cost sub-prime mortgages last year, according to a study to be released today by the Association of Community Organizations for Reform Now, an advocacy group.

Some of these risky loans were given to people who do not have bad credit. Especially minorities were given loans far worse than what they qualified for.

Nationwide, the study found that African American home purchasers were 2.7 times more likely to receive a high-cost loan than white borrowers.  Latinos were 2.3 times more likely to receive sub-prime loans than whites. (This report used a federal definition of high-cost loans as those with an annual percentage rate at least three points above the rate for comparable U.S. Treasury securities.)

For home refinances, high-cost loans were made to African Americans 1.8 times more often and to Latinos 1.4 times more often.

Robert Steel, Treasury undersecretary for domestic finance, appeared before a House committee.  He told them that the full impact of the upheaval in financial markets “has yet to play out,”, while stressing that the effect will be dampened somewhat by solid economic growth. Stocks fell sharply Wednesday morning, as a nervous Wall Street digested a report showing a large drop in pending home sales. The Dow Jones industrial average dropped about 160 points in morning trading.

Democrats in Congress are planning to introduce bills in the coming days that would exclude a range of practices used
to market sub-prime loans to people with weak credit histories or low incomes.

This bill prohibits mortgage brokers from steering people into sub-prime loans if they qualify for cheaper conventional mortgages.
It also bans hidden brokerage fees that are rolled into higher interest rates and prepayment penalties that make it difficult for
people to refinance.

Federal Reserve reported on Wednesday that the painful credit crunch is taking its worst toll on the already ailing housing market, while its impact on the rest of the economy so far seems limited.  Both Wall Street and Main Street have anxiously awaited the Fed’s survey of business conditions for clues about what the central bank
will do regarding interest rates on Sept. 18, its next regularly scheduled meeting.

Economists increasingly believe the Fed at that meeting will lower a key interest rate, now at 5.25 percent, by at least one-quarter percentage point to protect the economy from the credit crisis. The Fed has not lowered this rate in four years.

The Fed’s report said the following, “”Outside of real estate, reports that the turmoil in financial markets had affected economic activity during the survey period were limited.”