Real Estate Info

3 Ways to Avoid the Foreclosure Trap

Recent statistics indicate that the number of foreclosures in the US are nearly twice what they were a year ago. In some states, foreclosures reportedly claim one in every 199 households!

If you or someone you know has an Adjustable Rate Mortgage (ARM) that is scheduled to adjust in the next 2 to 18 months, please schedule an appointment with us before it's too late. Don't let a foreclosure or default situation sneak up on you. For many borrowers, there are a number of viable foreclosure alternatives that can help, including short sales, FHA refinancing, or FHASecure, to name a few.

Short Sale

A short sale is a legally-binding agreement to allow a home to be sold for less than the amount that is owed. For debt-ridden homeowners or those who owe more than the house is currently worth, a short sale could save them some of the enormous pain, embarrassment, and major credit challenges associated with bankruptcy and/or foreclosure. For lenders, it helps avoid some of the hassle and expense of seizing and auctioning off delinquent real estate. For potential homebuyers and real estate investors, a short sale offers a great opportunity to purchase property at a significant discount.

It's important to note that short sales occur at the sole discretion of the existing lender or servicing company. This is not like negotiating the price of a home under normal circumstances.

A written declaration and supporting documentation demonstrating financial hardship and an inability to make payments will definitely be required by the lender in order to even consider a short sale. This may include pay stubs, tax returns, and liquid asset statements - including those for retirement accounts - among other documenttation. In addition, the borrower must be at least 91-days delinquent before a lender will even discuss a short sale.

In the United States, HUD administers low down payment loan programs to help increase and promote home ownership opportunities for Americans.

In recent years, FHA loans had become less popular, especially in areas with higher loan requirements. With the collapse of sub prime lending, however, FHA has reemerged as a valuable resource for many borrowers.

The FHA guidelines are not FICO-score driven and are said to be "forgiving" about certain negative financial circumstances, including bankruptcies, foreclosures, or certain consumer credit counseling programs. According to HUD, FHA transactions are projected to surpass 100,000 loans by the end of the fiscal year, which does not include refinances for delinquent borrowers.

You've probably heard about FHA reform in the news recently. As a result of the significant market volatility experienced this summer, lawmakers are clearly invested in updating and expanding the limited reach of FHA lending. All politics aside, this new flexibility will likely help many homeowners who take the initiative and seek out help before it's too late. However, there is still a lot of confusion and misinformation about the features and benefits of new FHA legislation currently awaiting approval.

Home buyers, home sellers, ARM holders, and other borrowers looking to refinance, don't allow yourself to be overwhelmed by all of the information surrounding these initiatives. Call us and find out what real opportunities are available right now to help you meet your financial goals.

FHASecure Initiative

FHASecure is a temporary lending program - which expires in late 2008 - announced by President Bush on August 31, 2007, and released to FHA-approved lenders on September 4th. Qualified homeowners seeking payment relief from their ARM may be able to use FHASecure to refinance their loan into a more stable, fixed-rate program, even if they are already delinquent on payments. This program is estimated to rescue somewhere between 80,000 and 220,000 ARMs borrowers.

The FHASecure initiative will utilize existing FHA guidelines. Eligible homeowners will be required to pay a mortgage insurance premium and, like all FHA loans, FHASecure will not include pre-payment penalties or "teaser rates.”

A number of important criteria must be met in order to be considered for this and the other programs discussed in this article. Give us a call and, even if you do not meet these specific criteria, we'll help you find the resources you need to overcome challenges and reach your financial goals.

This is where an experienced real estate professional becomes invaluable to your cause. Knowledgeable real estate agents have likely negotiated short sales in the past and are well-versed in the substantial risk and reward involved in this extremely complex and often drawn out process.

FHA Refinancing

The Federal Housing Administration (FHA) was established in 1934. Its purpose is to provide and improve home ownership opportunities to the general public by insuring home loans made by lenders. The FHA is the only government agency that operates entirely from its own income, and costs the taxpayers nothing. It is also the largest insurer of mortgages in the world. The Federal Housing Administration became a division of the Department of Housing and Urban Development (HUD) in 1965.

Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth." In other words, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.

Who benefits from this cut?
If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates, the lowest we've experienced in years, could actually increase after today's cut, based on historical performance and recent trends.

So if you're waiting for long-term rates to fall further, don't count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it's too late.

What REALLY moves mortgage rates?
Fixed-rate mortgage rates aren't directly tied to Fed interest rate moves. Instead, they tend to follow in the direction of other long-term government bond yields, such as the 10-year Treasury, which historically moves in accordance with the economic outlook and in advance of Fed actions. The performance of Mortgage Backed Securities, issued by Fannie Mae and Freddie Mac, is what really determines long-term mortgage rates.

How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.

On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in 20 high-cost areas across the country.

What should you do next?
If you're unsure how the rate-cut or the proposed legislation affects your mortgage, don't worry, you're not alone. There's no one-size-fits-all answer. Give us a call right away. We'll review your mortgage and see what, if anything, can or should be done to make the most of your individual financial goals and needs. Call us today at 858.455.6700

The Federal Reserve surprised everyone Tuesday with an emergency intersession rate cut of .75%, the deepest cut in the Fed Funds Rate since 1984. The Fed Governors are acting in direct response to recent reports that the country is on the brink of recession.

If you have credit cards, auto loans, HELOCs, or an Adjustable Rate Mortgage, the Fed's decision to cut this key interest rate is great news. For long-term mortgage rates however, this could signal the beginning of the end for the lowest 30-year home loan rate borrowers have experienced since 2005.

Let's look at the impact of a few recent Fed Funds Rate cuts and the corresponding impact to home loan rates to see what this could mean for you:

Rates are predicted to be cut again when the Federal Reserve meets at the end of this month. Many believe Tuesday's action was taken because of a dramatic downturn in the stock market, where the Dow dropped 464 points, the worst single day drop since September 11, 2001. Since the Fed's announcement, the Dow has recovered much of those losses but volatility is likely to remain a consistent theme throughout the week.

If you are waiting for long-term mortgage rates to fall further from here, don't count on it. Your best chance to lock in the lowest mortgage rates since 2005 is now. Getting your application in process will allow you to capture a rate near all time lows and, with many experts predicting home values could continue to decline, waiting could kill your chance to capture a great rate if your home doesn't appraise.

This is an unprecedented market and things are moving fast. Regardless of your current mortgage, please give me a call so that we can review your current financial situation in light of these market movements.

Call today to discuss how I may assist you. Not calling today could cost you tens of thousands of dollars in the next few years. Don't let this happen. I look forward to hearing from you.

Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

When you fill out a credit application, we run a credit report for the underwriter. Each lender and each loan program has different guidelines they must follow. You should not do anything that will have an adverse affect on your credit score while your loan is in process. We know it's tempting...If you're moving into a new home, you might be thinking about purchasing new appliances or furniture, but this is really not the right time to go shopping with your credit cards. You'll want to remain in a stable position until the loan closes and give us the opportunity to help you lock in the best interest rate we can possibly get for you. Here is a handy list of do's and don'ts that you should adhere to after your loan application has been submitted to the lender.*

DON'T APPLY FOR NEW CREDIT OF ANY KIND - If you receive invitations to apply for new lines of credit, don't respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, don't establish new lines of credit for furniture, appliances, computers, etc.

DON'T PAY OFF COLLECTIONS OR CHARGE-OFFS - Once your loan application has been submitted, don't pay off collections unless the lender specifically asks you to in order to secure the loan. Generally, paying off old collections causes a drop in the credit score. The lender is only looking at the last two years of activity. DON'T CLOSE CREDIT CARD ACCOUNTS - If you close a credit card account, it can affect your ratio of debt to available credit which has a 30% impact on your credit score. If you eally want to close an account, do it after you close your mortgage loan.

DON'T MAX OUT OR OVER CHARGE EXISTING CREDIT CARDS - Running up your credit cards is the fastest way to bring your score down, and it could drop up to 100 points overnight. Once you are engaged in the loan process, try to keep your credit cards below 30% of the available credit limit.

DON'T CONSOLIDATE DEBT TO ONE OR TWO CARDS - Once again, we don't want you to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.