Recent research shows that 1 in 7 American with home loans of more than $1,000,000 have missed 3 consecutive mortgage payments. According to marketplace.org only 1 in 12 of home owners with loans less than $1,000,000 are in seriously deliquent.
Large mortgages, called Jumbo loans, often carry a higher interest rate than a conventional loan. Some homeowners with these loans may view thier homes as bad investments and prefer to walk away from the homes instead of paying the mortgage. The research shows that the pressures of the economic downturn are impacting people across the entire economic spectrum. Every mortgage lender and financing institution will tell you that as soon as you think you are having trouble paying your mortgage you should contact your lender immediately and find out about loan modification programs and assistance to help you avoid foreclosure.
Par of purchasing a home is understanding its energy use. As a practice I research the utility bills of all the homes I list and sell. However the utility bills tells you about the energy and water being used, but to understand how efficient a home is you need an energy audit. Duke Energy provides a free energy audit, or you can contact a company that performs independent audits.
There is also a mortgage product on the market that allows home buyers to roll the cost of purchasing energy saving items into their mortgage. Examples include new furnaces, hot water heaters, and insulation. All of these costs can be financed into the mortgage amount so there is no out of pocket expense and the difference in the mortgage may be offset by the energy savings.
If you want more information on the Energy Improvement Mortgage follow the link to the article.
In recent weeks major real estate developers have been walking away from properties because like many home owners, they are underwater on their mortgages. Tishman Speyer Properties gave up the 56-building, 11,232-unit Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan, turning the properties over to its creditors after defaulting on some $4.4 billion in debt.
What is frustrating to many home owners is that financial institutions are doing everything that they can to prevent Homeowners from foreclosing, while large developers are simply handing the keys back over to the banks when thier properties become too much of a financial liability.
RealtyTrac continues to track the increasing number of short sales and foreclosure and the problem continues to weigh down the housing market. As the economy slowly recovers it is my hope that the unemployment rate will drop and with it, the number of families facing foreclosures. The Federal Government continues to put pressure on lenders to modify mortgages through the Making Homes Affordable program, and the program is slowly helping to relieve pressure on families that qualify.
The Making Homes Affordable program is designed to help individuals restructure their mortgages with their lenders. In lowering the monthly payments through renegotiating the terms of the loan, more people are able to avoid short sale and foreclosure situations.
One unforeseen consequence is that the homeowners benefiting from the program may also be taking a 50 to 100 hit on their credit score. The challenge is that lending institutions and banks are reporting the loan modification differently to the various credit agencies. It is this variation in credit reporting that is difference how credit scores are being impacted.
What is important to keep in mind is that a loan modification’s impact on a credit score will be substantially less damaging than a foreclosure or a short sale. In all three cases lenders report the change in credit, but a modification is not reported as a ‘charge-off’. Charge-offs are typically associated with short sales and foreclosures and stay on credit reports for 7 years. Modification is much preferable to a foreclosure, just make sure you are aware of the potential impacts on your credit.
The Federal Government is looking to increase pressure on many mortgage lenders and banks to follow through with the loan modification that began under the ‘Making Homes Affordable Program‘. In the program borrowers renegotiate their monthly payments to a lower level for a trial period. If they can successfully pay that lower amount the bank should make it permanent. When the lender permanently modifies a loan they receive a payment form the Government.
However Assistant Treasury Secretary Michael Barr says lenders are taking too long to make those new terms permanent. Currently the government says 375,000 homeowners have cut cheaper temporary deals with their mortgage companies. Borrowers are saving an average $576 a month. The impact on the local market may vary. If homeowners can permanently modify their mortgage and stay in their homes it will reduce the number of foreclosures up for sale and help stabilize the property values. As a Cincinnati Realtor the reduction in foreclosures is a key concern. I want to see families stay in their homes and negotiate affordable rates with their banks.
Dateline White Plains, NY – Bank Lost a Mortgage!
When banks decided to pool mortgages, slice them and dice them, and sell them off in pieces (mortgage backed securities) they generate a substantial chain of ownership that became more complex with each security sale. The process was so complex that buyers of these securities had little knowledge of what was inside, and more importantly they may lack the documentation to prove they actually own the title to the homes that are backing up these securities.
In White Plains, NY a home owner going through a chapter 13 bankruptcy may have gotten some good news courtesy of these complex securities. PHH Mortgage Bank filed a claim for $461,000 against the home owner, and asked for a foreclosure so they could reposes the home and sell it to recover the money. The judge in the case ask PHH to prove they actually owned the Title and mortgage lien, but PHH could not furnish enough proof.
WHY?!? Because PHH purchased the Mortgage lien in the form of a Mortgage Backed Security and it was not able to show a clean paper trail proving their clear ownership of the debt and rights to reposes the property.
HOWEVER!
The ruling says that PHH dose not have the ownership of the debt or rights to the property … but it also did not say that the homeowner has those rights either. In short the house is in limbo. No bank can legaly take the home away from her, but at the same time she does not have clear title and rights to SELL the property to anyone else. To settle the title dispute there are bound to be more court dates and law suits. The real question is how many more cases like this will we see in the coming moonths and years.
House swapping, the practice of exchanging properties is making a resurgence with help from a number of home swapping websites and services. Home owners who are interested in searching for others willing to exchange properties now have a number of resources to use to make their searches more fruitful.
Property owners are using sites such as onlinehousetrading.com , mkhomeswap.com , and besthouseswap.com to identify potential swap partners in the areas they are looking to relocate to. The reach of the Internet is making finding those elusive swap partners easier and faster.
In most cases these swap site require a registration fee that can range from $20 to over $250. Also the idea of a swap can be misleading. In most cases homeowners negotiate sale prices and work with real estate attorneys and mortgage lenders to facilitate property exchanges particularly when there is a difference in value between the properties. House swapping could be a for home owners looking to sell their Cincinnati Real Estate.
I received some useful information from one of the loan officers I work with, Mike Zipfel from Midwest Mortgage. Home loan interest rates have been on a downward trend for the last few months, however as the economy begins to stabilize, and the stimulus money enters the economy, interest rates are beginning to rise. In the last week, rates have risen above 6% for the first time in recent history.
There are wide economic factors that drive interest rates and a number of economists on a recent NPR program feel that as inflation begins to appear interests rates will rise. A 1% change in interest rates can make a difference in the price range that a buyer afford. Below is a table that shows the impact a 1% interest rate increase can have in the monthly payments on a 30 year mortgage.
With this information in mind we are suggesting that any prospective home buyers who have been considering making a move do so now to take advantage of the affordability of Cincinnati’s current real estate market, the low interest rates, and the $8,000 tax credit for first time home buyers.
The National Association of REALTORS is actively lobbying the U.S. House of Representatives for specific changes to the H.R. 1 Bill, The American Recovery and Reinvestment Act of 2009.
In 2008 Congress introduced a $7,500 refundable tax credit in the Housing and Economic Recovery Act of 2008 (H.R. 3221), the amount taken by a homebuyer is to be paid back over a 15-year period. The major change under H.R. 1, is that he $7,500 would become a full tax credit – the homebuyer would not have to pay it back.
Near the end of 2008 NAR presented Congress with “Unlock America’s Economy” – a stimulus plan aimed at the housing market.
NAR will continue lobbying Congress to:
1) make it a true tax credit (not an interest-free loan)
2) extend the credit to December 31, 2009, and
3) make it available to all buyers (not just first-time buyers)
Effective December 13, 2008 Fannie Mae will have a new set of mortgage lending guidelines, all in response to the sub prime challenges currently facing the marketplace. The bottom line is that Cincinnati home owners will need to have more equity in their home, or to put it another way they will need to maintain more of thier own money in thier home vs. the bank’s money. Each of the following changes is a 5% increase over the previous set of guidelines.
- Primary residence, “cash out” refinances are limited to 85% loan-to-value
- Second home, cash out refinances are limited to 75% loan-to-value
- Investment properties cannot be refinanced without a 25% equity position
The changes are designed to lower the exposure to lenders, and to make sure home owners have more of stake in their own homes. We are advising our clients who will be looking for homes to make thier move before the changes take effect.
