AOL Real Estate - Blog http://realestate.aol.com/blog AOL Real Estate - Blog http://realestate.aol.com/blog/media/feedlogo.gif AOL Real Estate - Blog http://realestate.aol.com/blog en-us Copyright 2012 Weblogs, Inc. The contents of this feed are available for non-commercial use only. Blogsmith http://www.blogsmith.com/30-Year Mortgage Rate Again Nears Record Lowhttp://realestate.aol.com/blog/2012/04/13/30-year-mortgage-again-nears-record-low/http://realestate.aol.com/blog/2012/04/13/30-year-mortgage-again-nears-record-low/http://realestate.aol.com/blog/2012/04/13/30-year-mortgage-again-nears-record-low/#commentsFiled under: , ,

WASHINGTON -- The average rate on the 30-year fixed mortgage dropped near its all-time low this week, making homebuying and refinancing a bargain for those who can qualify. Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan fell to 3.88 percent from 3.98 percent. That's just above the rate of 3.87 percent reached in February, the lowest since long-term mortgages began in the 1950s.

The 15-year mortgage, a popular option for refinancing, plunged to a fresh low of 3.11 percent from 3.21 percent last week. The previous record of 3.13 percent was hit last month.

Mortgage rates are lower because they tend to track the yield on the 10-year Treasury note. Last week's disappointing report on March job growth led more investors to sell stocks and buy Treasurys, which are considered safer investments. As demand for Treasurys increases, the yield falls.

Yet the low rates are unlikely to draw in many more people looking to buy a home or to refinance their mortgage.

Waiting, As Home Prices Keep Falling

Some would-be buyers are still skeptical about purchasing a home with prices still falling. Home appraisals that are higher or lower than the sales price have scuttled a rising number of home contracts. Many Americans are struggling with damaged credit and unstable finances.

And mortgage rates have been below 4 percent for all but one week since early December, leaving some potential buyers and refinancers unimpressed by new record lows.

"The rates have been very attractive for some time," said Bill Armstrong, vice president of Mackintosh Realtors in Damascus, Md. "Rates going a little higher or lower is not going to have much of an impact."

Still, the mild winter has helped lift expectations for the housing market after four years of sluggish sales.

January and February made up the best winter for re-sales in five years, when the housing crisis began. And builders in February requested the most permits to construct homes in more than three years.

Fewer Apply

Applications for new mortgages have fallen over the past month, according to the Mortgage Bankers Association. But there has been a sharp rise in the average mortgage size, suggesting an appetite for bigger loans. The average size of mortgage applications has increased by $20,000 since December, to about $235,000 last month.

Home prices continue to fall. Prices tend to lag sales and millions of foreclosures and short sales -- when a lender accepts less than what is owed on a mortgage - remain on the market. And the housing crisis and recession have also persuaded many Americans to rent instead of buy, which has led to a drop in homeownership.

To calculate the average rates, Freddie Mac surveys lenders across the country on just Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fees for the 30-year and 15-year fixed loans were unchanged at 0.7.

For the five-year adjustable loan, the average rate fell to 2.85 percent from 2.86 percent, and the average fee fell to 0.7 from 0.8.

The average on the one-year adjustable loan rose to 2.80 percent from 2.78 percent, and the average fee was unchanged at 0.6.<

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

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See also:
Homebuying: 5 Key Steps to Your 1st Real Estate Purchase
Banks Neglect REO Homes in Minority Areas, Study Says
Home Costs: 4 Crucial Questions Reveal Hidden Expenses

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The Mortgage Process

 

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]]>30 year mortgage ratefreddie maclower mortgage ratesnewsrecord 15 year mortgage raterecord low mortgage ratesrefinancing 15 year mortgageThe Associated Press2012-04-13T11:59:00+00:00Obama: Mortgage Help Coming for Military, FHA Borrowershttp://realestate.aol.com/blog/2012/03/06/obama-mortgage-help-coming-for-military-fha-borrowers/http://realestate.aol.com/blog/2012/03/06/obama-mortgage-help-coming-for-military-fha-borrowers/http://realestate.aol.com/blog/2012/03/06/obama-mortgage-help-coming-for-military-fha-borrowers/#commentsFiled under: , ,



WASHINGTON -- President Barack Obama is aiming mortgage relief at members of the military as well as homeowners with government-insured loans, the administration's latest efforts to address a persistent housing crisis.

In his first full news conference of the year Tuesday, Obama was to announce plans to let borrowers with mortgages insured by the Federal Housing Administration refinance at lower rates, saving the average homeowner more than $1,000 a year. Obama also was detailing an agreement with major lenders to compensate service members and veterans who were wrongfully foreclosed upon or denied lower interest rates.

A senior administration official described Obama's proposals to The Associated Press, ahead of the announcement, on the condition of anonymity.

The efforts Obama is announcing do not require congressional approval and are limited in comparison with the vast expansion of government assistance to homeowners that he asked Congress to approve last month. That $5 billion to $10 billion plan would make it easier for more borrowers with burdensome mortgages to refinance their loans.

Lower Refinancing Fee

Under the housing plans that Obama was to announce Tuesday, FHA-insured borrowers would be able to refinance their loans at half the fee that the FHA currently charges. FHA borrowers who want to refinance now must pay a fee of 1.15 percent of their balance every year. Officials say those fees make refinancing unappealing to many borrowers. The new plan will reduce that charge to 0.55 percent.

With mortgage rates at about 4 percent, the administration estimates a typical FHA borrower with $175,000 still owed on a home could reduce monthly payments to $915 a month and save $100 a month more than the borrower would have under current FHA fees.

Though 2 million to 3 million borrowers would be eligible, the administration official would not speculate how many would actually seek to benefit from the program. The FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. The loans typically go to homeowners who do not have enough equity to qualify for standard mortgages. It is the largest insurer of mortgages in the world.

Review of Vets' Foreclosures

For service members and veterans, Obama will announce that major lenders will review foreclosures to determine whether they were done properly. If wrongly foreclosed upon, service members and veterans would be paid their lost equity and also be entitled to an additional $116,785 in compensation. That was a figure reached through an agreement with major lenders by the federal government and 49 state attorneys general.

Under the agreement, the lenders also would compensate service members who lost value in their homes when they were forced to sell them due to a military reassignment.

Obama is holding the news conference in the midst of a modestly improving economy. But international challenges as well as a stubbornly depressed housing market remain threats to the current recovery and to his presidency.

Obama has not held a full news conference since November. The White House scheduled this one on the same day as the 10-state Super Tuesday Republican presidential nominating contests. While aides insisted the timing was coincidental, it follows a pattern of Obama seeking the limelight when the attention is on the GOP.

The news conference comes amid a new sense of optimism at the White House. Obama's public approval ratings have inched up close to 50 percent. The president recently won an extension of a payroll tax cut that was a main element of his jobs plan for 2012. Economic signals suggest a recovery that is taking hold.

Still, he will probably face questions about the pace of the recovery. The unemployment rate in January was 8.3 percent, the highest it has been in an election year since the Great Depression. With rising gasoline prices threatening to slow the economy, Obama has also faced attacks from Republicans over his energy policy.

Iran's nuclear ambitions will also command attention in the aftermath of his meeting Monday with Israeli Prime Minister Benjamin Netanyahu. Tension over Iran has already contributed to higher oil prices, and Israel's threats of pre-emptive military strikes to prevent Tehran from building a nuclear bomb have dominated Washington discourse for weeks.

Other developments in the Middle East, where turmoil has soured some of the promise of last year's Arab Spring, are also likely to be addressed. Syria's bloody crackdown on protesters has increased pressure on Obama to intervene. Republican Sen. John McCain on Monday urged the United States to launch airstrikes against Syrian President Bashar Assad's regime to force him out of power.

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

Also see:
Only 5% of Underwater Homes May Qualify for Write-Downs
REO to Rental: Fannie Mae Dips Further Into Foreclosure Pool


Obama's Address Centers on Economic Fairness

 

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]]>Federal Housing Administrationfha borrowersfha financingfha loansforeclosures militaryforeclosures veteransHUDmilitary homeownersmortgage settlementobamaObama news conferencerefinancing feesshaun donovanThe Associated Press2012-03-06T10:00:00+00:00Obama State of the Union Plan Inadequate for Housing?http://realestate.aol.com/blog/2012/01/25/obama-state-of-the-union-plan-inadequate-for-housing/http://realestate.aol.com/blog/2012/01/25/obama-state-of-the-union-plan-inadequate-for-housing/http://realestate.aol.com/blog/2012/01/25/obama-state-of-the-union-plan-inadequate-for-housing/#commentsFiled under: ,

Obama state of the unionBy Jon Prior

Even if the promising mortgage refinancing plan that President Obama announced Tuesday night passes Congress, critics say it will fall short of solving the deepest housing problems.

The White House did not release great amounts of detail, but the plan would help homeowners current on their mortgage to refinance down to a lower rate and save an average $3,000 a year on payments. The plan widens the Home Affordable Refinance Program to include mortgages not guaranteed by Fannie Mae and Freddie Mac and would tax banks to raise funding.

Analysts said Wednesday morning that the program could cost as much as $10 billion and could reach between 2 million to 3 million borrowers.

Read the full story on HousingWire.

Also see:
Bernanke: Fed Should Help Turn Foreclosures Into Rentals
Principal Reduction Better Than Short Sales, Report Says

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]]>2012 state of the unionHome Affordable Refinance ProgramObama housing planObama refinance planObama refinancingobama state of the unionstate of the unionstate of the union refinancingHousingWire2012-01-25T13:30:00+00:00When It Comes to Mortgages, Women Don't Shop Enoughhttp://realestate.aol.com/blog/2011/11/18/when-it-comes-to-mortgages-women-dont-shop-enough/http://realestate.aol.com/blog/2011/11/18/when-it-comes-to-mortgages-women-dont-shop-enough/http://realestate.aol.com/blog/2011/11/18/when-it-comes-to-mortgages-women-dont-shop-enough/#commentsFiled under: , , ,



There's a surprising new finding that says women get lousier mortgage rates than men, but not because of gender discrimination. It's because instead of shopping around for cheaper loans, they rely on the recommendations of friends.

To recap: When it comes to mortgages, women don't shop enough.

The report published in the Journal of Real Estate Finance and Economics set out to explain why women were 32 percent more likely to get a subprime mortgage than men in a 2006 study. According to a team of researchers led by Florida Atlantic University's Ping Cheng, the answer wasn't discrimination because of gender or even income disparities.

Women pay higher rates because they are more likely to listen to friends' recommendations, whereas men are more likely to shop around for the best deal.

"Our empirical test confirms that search effort is rewarded in marketplace, and suggests that gender disparity in mortgage rates may be addressed by policies aimed at improving women's financial literacy and search skills," the report summarizes.

It makes sense to Daily Finance columnist Laura Rowley. "It's not surprising, because mortgage shopping can be incredibly complex, so we look to people we can trust to help make the decision," says Rowley. "But this is one area where you don't want to get by with a little help from your friends."

Instead, she advises, call two mortgage brokers and a direct lender, preferably a local small or mid-size bank, and try the following script: "Hi, my name is ____ and I'm in the market to buy a $____ house, and I'm going to put down ____ percent. I'm getting three written estimates, and then I'm going to choose. Can you email me a cost-estimate worksheet stating all the fees and the interest rate?"

Be sure to get the estimates on the same day, as rates can change quickly. Also, don't ask for rates and fees by phone; unscrupulous brokers will simply low-ball their estimate to get you in the door, says Rowley.

For more tips on shopping for a mortgage, see these AOL Real Estate guides:

How Much Can You Afford [Video]
How to Get a Low Mortgage Rate
Mortgage Jargon in Simple Terms

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]]>Journal of Real Estate Finance and Economicsmortgage ratesmortgage rates for womenmortgagesshopping for a mortgageAnn Brenoff2011-11-18T11:00:00+00:00Barbara Corcoran on Refinancing Do's and Don'tshttp://realestate.aol.com/blog/2011/11/14/barbara-corcoran-on-refinancing-dos-and-donts/http://realestate.aol.com/blog/2011/11/14/barbara-corcoran-on-refinancing-dos-and-donts/http://realestate.aol.com/blog/2011/11/14/barbara-corcoran-on-refinancing-dos-and-donts/#commentsFiled under: , ,



The refinancing market is hot right now. Last week, applications were up by more than 10 percent.

But even if you can get approved by a lender--which is no easy task these days--that doesn't mean you should take whatever deal the bank offers you.

"Today Show" real estate expert Barbara Corcoran has some strong advice, particularly when it comes to avoiding extra charges at closing time.

In the video below, she explains the importance of the good faith estimate, whether it's worth using a mortgage broker and how to research potential lenders.

But the best thing you can do to protect yourself against unpleasant surprises, she says, is "bring a pushy friend with you who's going to ask the important questions that you yourself might not ask."

To which we say, Hey Barbara, want to come with us to meet our lender next Tuesday?

Also see:
Barbara Corcoran: Queen of NYC Real Estate Tells All

More great videos from AOL Real Estate:
Understanding Home Mortgages
Negotiating Strategies for Home Buyers

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]]>Barbara Corcoranrefinancingrefinancing dos and dontsrefinancing home mortgagestoday showAOL Real Estate Editors2011-11-14T09:00:00+00:00Refis Soar on Falling Rateshttp://realestate.aol.com/blog/2011/11/09/refis-soar-on-falling-rates/http://realestate.aol.com/blog/2011/11/09/refis-soar-on-falling-rates/http://realestate.aol.com/blog/2011/11/09/refis-soar-on-falling-rates/#commentsFiled under: ,

Mortgage applications increased 10.3 percent this past week as more homeowners refinanced existing mortgages or took advantage of lower interest rates to buy homes.

The Mortgage Bankers Association said its market composite index -- a measure of loan application volume -- increased 10.3 percent on a seasonally adjusted basis from a week earlier.

On an unadjusted basis, the index grew 9.9 percent from the previous week. Meanwhile, refinancing activity soared with the index that measures refinance loans jumping 12.1 percent from the previous week. The seasonally adjusted purchase index also rose 4.8 percent.

"Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and 30-year mortgage rates dropped to their second lowest level of the year," said Mike Fratantoni, MBA's vice president of research and economics. "Refinance applications jumped more than 12 percent to their highest level in a month and some lenders experienced even larger increases. As has been the case all year, many refinance applicants are opting to de-leverage by choosing 15-year mortgages."

Read the full story at HousingWire.

Also see:
Open Houses of the Week: Hobnob With the 1 Percent
Where Are the Real Home Bargains? Not Where You Think!
Viewpoint: Obama's Drop-in-the-Bucket Idea for Housing

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]]>housingwireMike Fratantonimortgage applicationsmortgage bankers associationmortgage marketmortgage ratesmortgage refismortgagesrefinancerefinance mortgageHousingWire2011-11-09T11:00:00+00:00Mortgage Rates Stay Low, But Homebuyers Aren't Budginghttp://realestate.aol.com/blog/2011/11/04/mortgage-rates-stay-low-but-buyers-arent-budging/http://realestate.aol.com/blog/2011/11/04/mortgage-rates-stay-low-but-buyers-arent-budging/http://realestate.aol.com/blog/2011/11/04/mortgage-rates-stay-low-but-buyers-arent-budging/#commentsFiled under: , , ,

mortgage ratesWASHINGTON -- The average rate on the 30-year fixed mortgage fell to 4 percent this week, nearly matching the all-time low hit just one month ago.

Freddie Mac said Thursday that the rate on the 30-year loan dropped from 4.10 percent last week. Four weeks ago, it dropped to 3.94 percent -- the lowest rate ever, according to the National Bureau of Economic Research.

The average rate on the 15-year fixed mortgage fell to 3.31 percent from 3.38 percent. Four weeks ago, it too hit a record low of 3.26 percent.

Mortgage rates tend to track the yield on the 10-year Treasury note. They yield fell this week after investors shifted money out of stocks and into the safety of Treasurys on fears that Europe's debt crisis could worsen.

The Federal Reserve is also shifting more money into longer-term Treasurys to try to force mortgage rates lower. Treasury yields fall when buying activity increases.

Less Home Buying Than Expected

Federal Reserve Chairman Ben Bernanke said Wednesday that low rates have failed to spur the increase in home buying or mortgage refinancing that government officials had expected.

High unemployment and declining wages have made it harder for many people to qualify for loans. Many Americans don't want to sink money into a home that could lose value over the next three to four years. And most homeowners who can afford to refinance already have.

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The number of Americans who bought previously occupied homes fell in September and is on pace to match last year's dismal figures -- the worst in 13 years.

Sales of new homes rose last month after four straight monthly declines. But the increase was largely because builders cut their prices. And it followed a peak buying season that was the worst on records going back nearly 50 years.

A Run on Refinancing

The low rates have caused a modest boom in refinancing, but that benefit might be wearing off. Most people who can afford to refinance have already locked in rates below 5 percent.

Rates have been below 5 percent for all but two weeks in the past year. Just five years ago they were closer to 6.5 percent. Ten years ago, they were above 8 percent.

The average rate on the five-year adjustable loan fell to 2.96 percent from 3.08 percent. That matches a record low hit four weeks ago.

The average rate on the one-year adjustable loan declined to 2.88 percent from 2.90 percent. It fell last month to 2.81 percent, the lowest on records dating to 1984.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year fixed mortgage fell from 0.8 to 0.7. The average fee on the 15-year fixed loan was unchanged at 0.7. The average fees on the five-year adjustable loan one-year adjustable loan were also unchanged at 0.6.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

Copyright 2011 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

Also see:
Open Houses of the Week: Hobnob With the 1 Percent
Where Are the Real Home Bargains? Not Where You Think!
Mortgage Giant Asks Taxpayers for Another $6 Billion

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]]>Ben Bernanke mortgage ratesFreddie Maclow mortgage rates housing marketmorgage rates home buyingmortgage ratesMortgage Rates Stay Lowmortgage rates treasury notesyield on the 10-year Treasury noteThe Associated Press2011-11-04T09:45:00+00:00Obama's Refinance Plan: Who Will Benefit?http://realestate.aol.com/blog/2011/10/25/obamas-refinance-plan-who-will-benefit/http://realestate.aol.com/blog/2011/10/25/obamas-refinance-plan-who-will-benefit/http://realestate.aol.com/blog/2011/10/25/obamas-refinance-plan-who-will-benefit/#commentsFiled under: , ,

home refinanceWASHINGTON -- Today's record-low mortgage rates are out of reach for millions of U.S. homeowners who would benefit from them most.

One in four homeowners with a mortgage -- 11 million people -- owe more than their home is worth. These "underwater" borrowers have virtually no shot at refinancing.

Their plight is a drag on the housing market and the broader economy.

The Obama administration is hoping at least 1 million of these borrowers will take advantage of its refinancing program under more lenient rules unveiled Monday. Homeowners who are current on their payments will be eligible to refinance no matter how much their home's value has dropped.

Still, it's unclear how many borrowers will benefit. Lenders will remain under no obligation to refinance a mortgage they hold.

A growing number of these people are missing mortgage payments and falling into foreclosure. And the higher rates they're locked into limit how much they can contribute to a weak economy. If they were able to refinance at today's rates, it could boost consumer spending by tens of billions of dollars, economists say.

Underwater homeowners are paying an average 30-year fixed mortgage rate of 5.7 percent, according to an analysis of mortgage data by CoreLogic and The Associated Press. That compares with today's average rate of 4.11 percent on a 30-year fixed mortgage. For a homeowner with a $250,000 mortgage, the lower rate would save more than $200 a month.

For many Americans, a few hundred dollars each month would mean the difference between paying their mortgage on time and in full and losing, or walking away from, their home.

Underwater borrowers are the "most desperate population in the country today," says Barry Bosworth, an economist at the Brookings Institution.

Dan and Maggie Micoff bought a two-bedroom home in the Detroit suburb of Marine City in 2003. They paid $119,000. Eight years later, they're underwater with a 6 percent loan.

If they could refinance, the Micoffs, both 58, could shave at least $120 from their monthly bill.

"The banks won't work with us," Maggie Micoff said. "We helped bail them out, and now we can't even get a personal loan to get by. We could rent something for a few hundred dollars cheaper."

Even among homeowners who do have equity in their homes, few are refinancing. Many have already refinanced within the past year. Others can't meet tighter lending standards. That's why underwater borrowers represent the best chance for refinancing to unleash spending that's otherwise going toward mortgage bills.

With millions locked into artificially high rates, foreclosures are rising. Mortgage default notices surged nationally last month.

Whether the administration's revamped mortgage refinancing program will reach more Americans this time is unclear, said Mark Vitner, senior U.S. economist at Wells Fargo.

"No one knows if it will spur a lot more people to refinance, but it's a start," Vitner said.

Also see:
Viewpoint: Obama's Drop-in-the-Bucket Idea for Housing
The Mortgage Fix That Can Save the Economy
Republican Candidates: Short on Housing Policy, Long on Houses

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]]>foreclosureHARPHome Affordable MOdification Programhome affordable refinance programhome refinancehousing crisisObama AdministrationrefinancingUnderwater homeownersThe Associated Press2011-10-25T11:00:00+00:00Viewpoint: Obama's Drop-in-the-Bucket Idea for Housinghttp://realestate.aol.com/blog/2011/10/24/viewpoint-obamas-drop-in-the-bucket-idea-for-housing/http://realestate.aol.com/blog/2011/10/24/viewpoint-obamas-drop-in-the-bucket-idea-for-housing/http://realestate.aol.com/blog/2011/10/24/viewpoint-obamas-drop-in-the-bucket-idea-for-housing/#commentsFiled under: , , , , ,

Let's hold off blaring the triumphant trumpets just yet for President Obama's plan to allow holders of underwater loans to refinance at a lower rate through revisions in the Home Affordable Refinance Program.

What this change does is amend the loan-to-value ratio in a refinance. By removing the cap on how upside-down you can be, it will allow more people to avail themselves of the lower interest rates out there. You still will owe more than your house is worth, but you can pay less for the privilege.

Here's what the proposed plan doesn't do:

1. Reach many people.

The only homeowners who will qualify are those who are current on their underwater loans and have loans that are backed by Fannie Mae and Freddie Mac. (No jumbo loan holders or those with mortgages backed by the FHA or the USDA.) That's an estimated 800,000 homeowners who can avail themselves of this. To put things in perspective, most experts say there are between 8 million and 9 million people in the foreclosure pipeline -- and some put that number as high as 11 million. So 800,000 is hardly a game-changing number.

It is, perhaps somewhat ironically, about the same number of homeowners that HARP has helped to date. When the program was announced in 2009, we were told it would help 4 to 5 million underwater borrowers. To date, just 838,000 homeowners have been able to refinance through HARP. So even if this new tweak doubles the number of people helped, it's still just a fraction of the number of people in trouble.

2. Reach the people who need it the most.

To qualify, you can have missed only one mortgage payment in the previous year and none in the past six months. The group being targeted here are those who are potential strategic defaulters -- folks who go to sleep at night calculating whether it makes financial sense for them to just walk away. They have demonstrated that they can afford the loan because they are current on their payments.

The people who are not being helped here are the ones who can't afford their mortgages anymore. These are the people at risk of losing their homes because of job loss, income reduction, illness, divorce or adjustable rate loan resets.

So to recap: If you are heading for foreclosure because you choose to be, this could change your mind. If you have no choice in heading for foreclosure, tough noogies to you.

3. Reduce anyone's principal loan amount.

If your house is worth $200,000 and your loan amount is $250,000, you will still owe the bank $250,000 -- just at a lower interest rate than what you originally signed up for. The underlying assumption here is that the housing market will recover sufficiently so that in a few years you will no longer be upside down on your loan -- or if that doesn't turn out to be the case, Obama won't be running for re-election anymore and you become the next guy's problem.

4. Help the unemployed.

The days of stated income -- or no doc -- loans are long gone. Consider them something you'll tell your grandkids about, along with cell phones without cameras. To qualify here, you'll need pay stubs, W-2s, tax returns and other documentation. And of course if you don't have a job, you won't likely be able to refinance your home into a lower-rate loan.

Here's a little salt in the wound: Many long-term unemployed keep themselves afloat by working multiple freelance jobs. This puts them in the self-employed category -- and even if they've managed to stay current on their mortgage, qualifying for the HARP relief would prove difficult because of their fluctuating income.

So the bank would rather keep them at a higher interest rate and wait for them to stumble than let them refinance into a lower interest rate. The fact that they have been making their payments faithfully doesn't matter. The tweaks to HARP don't tweak in the direction of the unemployed.

5. Pump more money into the economy.

The underlying logic behind this measure is that the money that those 800,000 lucky homeowners aren't spending on their mortgage each month is money they'll spend on other things -- eating out, traveling, shopping -- and that such spending is good for the economy.

Sorry, but this one has me laughing all the way to the credit union, which is where I suspect most of those homeowners will be headed too. First of all, their numbers are just too thin to make a statistical difference. This isn't a "jump-start the economy" measure by a long shot. At best, it will allow a proverbial handful of homeowners to splurge on the occasional Friday night pizza, assuming there is enough left over from the "windfall" savings after they pay their health insurance and grocery bills.

Also see:
Obama's Refinance Plan Explained
The Mortgage Fix That Can Save the Economy
Republican Candidates: Short on Housing Policy, Long on Houses

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]]>foreclosure crisisforeclosuresHAMPHARPObama housing planAnn Brenoff2011-10-24T17:09:00+00:00Obama's Refinance Plan Explainedhttp://realestate.aol.com/blog/2011/10/24/obamas-refinance-plan-explained/http://realestate.aol.com/blog/2011/10/24/obamas-refinance-plan-explained/http://realestate.aol.com/blog/2011/10/24/obamas-refinance-plan-explained/#commentsFiled under: , ,

By Nick Timiraos

The Obama administration is revamping a program that's designed to let more homeowners refinance their mortgages even if they don't have any equity. This isn't a new program, but instead attempts to turbo-charge an existing federal initiative called the Home Affordable Refinance Program.

Here's a look at some frequently asked questions:

What is HARP? The Obama administration in 2009 rolled out HARP to refinance borrowers whose loans were backed by Fannie Mae and Freddie Mac and who were current on their payments. The idea was simple: If you were making your payments on time but didn't have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance.

Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes.

But a series of unforeseen "frictions" have led fewer borrowers to take up on the offer of lower rates. Fewer than 900,000 homeowners have refinanced under HARP over the past 2&frac12; years, and just 72,000 of those borrowers have loan-to-value ratios between 105% and 125%.

Click here for the rest of the Q&A.

See also:
Obama to Announce Refi Help for Underwater Homeowners

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]]>HARPhome affordable refinance programhousing crisismortgage refinance ObamaObama refinance planThe Wall Street Journal2011-10-24T10:40:00+00:00'Mortgage Prof': 5 Reasons Banks Would Rather Foreclosehttp://realestate.aol.com/blog/2011/10/18/mortgage-prof-why-banks-foreclose-instead-of-settling-for-les/http://realestate.aol.com/blog/2011/10/18/mortgage-prof-why-banks-foreclose-instead-of-settling-for-les/http://realestate.aol.com/blog/2011/10/18/mortgage-prof-why-banks-foreclose-instead-of-settling-for-les/#commentsFiled under: , , , , , ,



"Why won't the bank just reduce the amount of my loan instead of taking my home and then selling it to someone else for way less than I would have been happy to pay?" It's a question that gets asked repeatedly these days, especially by people who are facing foreclosure or are upside down on their mortgages.

For the answer, we turned to Jack Guttentag, the Mortgage Professor and Inman columnist.

Guttentag believes that lenders have been too stingy when it comes to reducing loan balances. Private lenders have offered loan reductions only sparingly, he says, and Fannie Mae and Freddie Mac not at all.

Here's the professor's take on why homeowners can't catch a break on loan reductions.

1. The buck stops there.

The decisions to reduce principal loan amounts are made by the firms that service mortgages -- the same folks who brought the country the robo-signing scandal. As servicing firms, anything they decide must be in the financial interest of their client -- that's your lender, not you. If they depart from customary practice -- and writing down loan balances is a departure from customary practice -- the buck stops with them, Guttentag says. In other words, who's going to take the risk of reducing Joe Homeowner's loan amount and then have to explain it to the boss? To take Nancy Reagan out of context: They just say no.

2. Banks are in the business of making money.

No lender is going to write down the balance of a loan in default just because you owe more than the home is worth. Truth is, there is no benefit to the lender to helping Joe Homeowner keep his house instead of selling it to the next guy. Plus, to help Joe would eliminate the possibility that the bank could also get a deficiency judgment against him. Banks are in this for the squeeze and think of Joe as just the orange. Nothing personal, of course.

3. In this economy, you will likely default anyway.

Sure, you want to believe that the economy is going to turn around and the value of your home will again rise to what you paid for it. After all, hasn't listening to a fairy tale been a surefire way to fall asleep?

From the lender's standpoint, the only reason to write down a loan balance is that it will reduce the chance that you will default. And evidence has shown that people who are heavily underwater -- that's deep in negative equity territory -- are more likely to default than those who aren't. Truth is, negative equity discourages people from making their mortgage payments. They figure: Why keep throwing good money after bad?

4. Banks are short-staffed and the staff they do have is untrained.

Most interactions between mortgage borrowers and servicers are handled by computers or relatively unskilled employees, says Guttentag. Borrowers in serious trouble are referred to a smaller number of more skilled and specialized employees, but until you enter the red zone, you are likely to encounter frustration.

Guttentag says that at the onset of the mortgage crisis, servicers were caught short-handed and the sheer volume of foreclosures in the pipeline hasn't allowed them to catch their breath.

5. Mortgage insurance works against you.

When mortgages carrying mortgage insurance go to foreclosure, banks are protected up to the maximum coverage of the policy, which generally is enough to cover all or most of the loss. This discourages modifications, says Guttentag. Why would a bank do a modification for $15,000 if the $40,000 foreclosure cost is going to be paid by the mortgage insurer? Even if the insurance coverage falls short of the foreclosure cost, the shortfall has to exceed the modification cost before modification becomes financially more attractive.

So there you have it. A five-point plan for keeping homeowners on the hook for that hefty loan balance.

Also see:
Viewpoint: Where's Housing in the 'Occupy' Protests?
Mortgage Mod Hell: Trapped Between Lenders, Collectors
The Mortgage Fix That Can Save the Economy


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]]>foreclosuresJack Guttentagloan reductionsmortgage loan modificationmortgage modificationsmortgage profmortgage professorprincipal loan reductionsprincipal mortgage loan reductionsAnn Brenoff2011-10-18T14:00:00+00:005 Mistakes to Avoid When Refinancinghttp://realestate.aol.com/blog/2011/09/20/5-mistakes-to-avoid-when-refinancing/http://realestate.aol.com/blog/2011/09/20/5-mistakes-to-avoid-when-refinancing/http://realestate.aol.com/blog/2011/09/20/5-mistakes-to-avoid-when-refinancing/#commentsFiled under: , ,

mortgage refinanceMortgage rates are at record lows and should stay that way as long as economic reports continue to be disappointing, according to Bankrate.com, which tracks mortgage rates weekly. However, if you've been thinking about refinancing, you should act quickly. If mortgage rates rebound, they could do so fast, according to Bankrate.com.

But don't make mistakes in your rush to refinance. Here are five of the biggest ones, according to a survey of LendingTree network lenders. LendingTree is an online marketplace of mortgage lenders.1. Overestimating the value of the home. Despite the fact that home values continue to drop, homeowners still tend to over-value their home. As a result, they receive higher-than-expected loan offers. Use our tool to track home prices in your area so you'll have a better idea how much your house is worth.

2. Hesitating to lock in low rates. Lenders are seeing borrowers waiting for rates to drop further, missing out on the opportunity to lock-in with the current low rates.

3. Focusing only on interest rates. Borrowers often forget to factor in lender fees, loan terms and lender reputations into their decision to refinance. Compare several offers and run all the numbers (including fees) using calculators at Mortgage Professor to see which offer is the best and to determine whether refinancing even makes sense for you.

4. Overlooking shorter-term loans. Remember, the 30-year mortgage isn't your only option. A 20-year or 15-year mortgage can shorten the life of the loan and significantly reduce the amount of interest paid.

5. Not knowing what documents are required to refinance. If you haven't taken out a mortgage or refinanced recently, you might not be aware that you need a lot more documentation these days to get a loan. Be ready to provide pay stubs from a recent month, two months of bank and other financial statements, two years of W-2s and, if you're self-employed, two years of tax returns showing self-sustaining income.

More from Kiplinger:
10 Cities With the Lowest Cost of Living
Should I Refinance?
10 Best Value Cities for 2011

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]]>home financehome mortgageKiplingerrefinancingKiplinger2011-09-20T15:17:00+00:00Foreclosure Victims Plan Protests Across U.S.http://realestate.aol.com/blog/2011/09/19/foreclosure-victims-plan-protests-across-u-s/http://realestate.aol.com/blog/2011/09/19/foreclosure-victims-plan-protests-across-u-s/http://realestate.aol.com/blog/2011/09/19/foreclosure-victims-plan-protests-across-u-s/#commentsFiled under: , , , , , ,

Victims of the foreclosure mess and housing crisis are taking to the streets -- literally. Street demonstrations are being planned in 10 cities, and in the crowd at the first one you are going to see Dixie Mitchell, a 74-year-old cancer survivor who refinanced her paid-off home to help one of the foster kids in her care -- and is now losing it in a foreclosure.

Mitchell (pictured at left), who along with her 76-year-old husband raised eight biological children and 50 foster children in this house, says that she intends to make her voice heard loud and clear as she marches in front of bank offices in Seattle on Sept. 21. The march is the first in a 10-city rollout of protests organized by The New Bottom Line, a coalition of community groups that challenges big banks' role in the housing crisis.

Mitchell's story is particularly heart-wrenching: She and her husband were doing just fine living in the house they've owned for 44 years until he suffered a stroke that left him paralyzed and cost him his job. The house was fully paid off in the mid-1980s, but they borrowed against it to make roof and kitchen repairs. The straw that broke the camel's back came in 2005, when Mitchell needed to hire a lawyer, at a cost of $20,000, in an effort to keep a 3-year-old boy who had been in her care since he was an infant.

She was advised by the bank to refinance her house to get the cash. She took out an adjustable rate loan that would reset in two years, at which point, Mitchell says, the lender told her that she would be able to refinance into another 30-year-fixed rate loan. But the original loan was bundled and sold multiple times to different lenders. It reset to a higher rate right around the time her husband suffered a massive stroke, and she quickly fell behind in her payments. Without his earnings, her monthly income is just $2,200 in Social Security and her monthly mortgage is $2,568.

Mitchell filed for bankruptcy, tried getting assistance from every social service agency she could think of, spent two years trying to get a loan modification and even offered to rent out rooms to boarders if the bank would just let her keep her house.

"My husband wants to die at home, at our home," she says. Her home is set to be auctioned on Oct. 28 and she has no place to go.

Why is she going to participate in the demonstration?

"I need them [the bank] to look me in the eye and tell me why they think it's better to put people out in the street," she said. "They haven't done their share to help. They don't even give you a chance ... all they do is lose your paperwork and make you send it over and over again. Each time you talk to somebody, you get a different answer."



Those are sentiments shared by many.

LeeAnn Hall, executive director of Alliance for a Just Society and one of the organizational members of The New Bottom Line, said the Seattle area protests will be staged both in downtown Seattle and at the annual policy summit meeting of the Association of Washington Business, a statewide chamber of commerce. The meeting is being held in Suncadia, a mountain resort near Cle Elum, Wash. The governor is expected to attend the meeting and Hall said that the group hopes to engage her.

Subsequent demonstrations are planned across the country in Boston, Chicago, Denver, Los Angeles, New York City, San Francisco and other locations.

The New Bottom Line said that it is targeting "big banks that bankrupted the country and drained wealth from American families." The direct actions primarily target JPMorgan Chase, Bank of America and Wells Fargo, and include taking over bank buildings, meetings of corporate officials, civil disobedience, prayer vigils and mass mobilizations.

"We are struggling with less and less, while the big banks profit more and more," said George Goehl, executive director of National People's Action, another organizational member of The New Bottom Line. "The big banks have done nothing but dodge taxes, throw people out of their homes and choke small business, all the while draining our wealth to pad their bottom line. It's time for JPMorgan Chase, Bank of America and Wells Fargo to pay us back."

According to a press statement, the group's goals are that banks:

o. Pay their fair share of taxes -- their statutorily required 35 percent corporate income tax and not "game" the system through off-shore tax shelters and loopholes.

o. Stabilize the housing market and revitalize the economy by reducing principal for all underwater homeowners to current-market value. "This would end the foreclosure crisis, reset the housing market, pump billions of dollars back into the economy and create one million jobs a year," the group says.

o. Invest in American jobs by using their trillions of dollars in cash reserves to invest in small businesses -- the main source of jobs in the U.S. -- and other job-generating investments.

Also see:
Viewpoint: What's Behind Banks' Big Foreclosure Push?
101-Year-Old Foreclosure Victim to Get Home Back
Woman Faces Foreclosure on Home She Bought for $1

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]]>big banksDixie Mitchellforeclosureforeclosure crisisThe New Bottom LineAnn Brenoff2011-09-19T12:45:00+00:00Low Mortgage Rates Are Great -- But Most Can't Qualifyhttp://realestate.aol.com/blog/2011/09/09/low-mortgage-rates-are-great-but-most-cant-qualify/http://realestate.aol.com/blog/2011/09/09/low-mortgage-rates-are-great-but-most-cant-qualify/http://realestate.aol.com/blog/2011/09/09/low-mortgage-rates-are-great-but-most-cant-qualify/#commentsFiled under: ,

low mortgage rates qualify

WASHINGTON -- Mortgage rates have reached their lowest levels in six decades, making this the best time in most Americans' lives to buy or refinance a home. For people who qualify, today's rates could save thousands of dollars a year.

Yet most people can't take advantage. Half of would-be buyers say they'll never save enough for the 20 percent down payment now usually required. And shrunken home values have erased much of the equity that people need to refinance.

"Low rates are great, but the real issue is that the pool of people who can get a loan or refinance is small," said Greg McBride, Bankrate.com's senior financial analyst.
This week, the average rate on a 30-year fixed mortgage fell to 4.12 percent. It's the lowest for a 30-year fixed loan since mortgage buyer Freddie Mac began tracking rates in 1971. The last time rates were cheaper was in 1951, when most long-term home loans lasted just 20 or 25 years.

The average on the 15-year fixed loan, a popular refinancing option, dropped to 3.33 percent this week. That's also an all-time low, according to most economists.

Record-low rates have done little to energize depressed home sales. The average rate on the 30-year fixed loan has been below 5 percent for all but two weeks this year. Yet sales of previously occupied homes are on pace for their weakest year since 1997.

Too many would-be buyers can't come up with a down payment, don't have a job, lack enough income or are burdened by large debt loads.

Mortgage rates are low largely because investors are worried about the U.S. economy. As a result, they're moving their money out of stocks and into U.S. Treasurys. Mortgage rates tend to track the yield on the 10-year Treasury note, which touched an all-time low this week.

A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate on a 30-year fixed loan being offered in January 2010. Refinancing the loan at 4.12 percent could save him or her roughly $2,000 a year.

But many homeowners with good jobs and stable finances have already refinanced in the past year. The average rate on the 30-year fixed loan fell to 4.17 percent last November, and to 4.15 percent last month. Both were previous lows.

Homeowners typically pay a few thousand dollars in closing costs when they refinance. To refinance again, most experts say, rates would need to fall an additional 1 percentage point to make it worthwhile.

Still, plenty of people could benefit from the low rates. More than 75 percent of homeowners with a government-backed mortgage are paying rates above 5 percent.

But most can't qualify. Mike Anderson, a mortgage broker in Baton Rouge, La., said he's turning away roughly 40 percent of customers seeking home loans and refinancing.

"I've never had to turn down so many loans upfront," Anderson said.

Banks are insisting that applicants have higher credit scores and make 20 percent down payments if they are a first-time buyer.

Roughly 40 percent of U.S. households have the necessary credit scores above 700 to get a prime mortgage rate, according to an Associated Press analysis of Fair Isaac Corp., or FICO, data.

But just half of potential buyers say they can save enough for a down payment, particularly one as high as 20 percent, according to a survey by the National Foundation for Credit Counseling.

Another problem is that nearly a third of homeowners either have less than 5 percent equity in their home or are "underwater" - that is, they owe more on their mortgage than their home is worth -- according to the real estate research firm CoreLogic.

As a result, they can't afford a down payment on a bigger home and can't refinance because of lender-imposed limits and the cost of extra fees. The low rates now being offered don't include such fees, which many borrowers must pay to get the rates. Those fees, known as points, make a mortgage rate, in effect, higher than it's advertised.

One point is equal to 1 percent of the loan amount. The average such fee for the 30-year loan held steady this week at 0.7 point. For the 15-year fixed loan and for five- and one-year adjustable-rate loans, the average fee was 0.6 point.

Lack of equity is what's keeping Don Meadows from refinancing. He owes $247,000 on a house in Orlando, Fla., and is paying 7 percent on a 30-year fixed loan. His monthly payment is $1,840.

If Meadows, 40, a sales manager, could refinance at today's rates, he could save more than $400 a month.

But he has no equity in his home. He bought it two years ago for $274,000. It's now worth $170,000.

"I couldn't (refinance) even if I wanted to," Meadows said. "Now, we just have to ride it out."

Copyright 2011 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

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]]>credit scoredown paymenthousing crisislow mortgage ratesmortgage ratesmortgagesqualify low mortgage ratesrefinancingThe Associated Press2011-09-09T16:30:00+00:00Mortgage Mod Hell: Trapped Between Lenders, Collectorshttp://realestate.aol.com/blog/2011/09/08/mortgage-mod-hell-trapped-between-lenders-collectors/http://realestate.aol.com/blog/2011/09/08/mortgage-mod-hell-trapped-between-lenders-collectors/http://realestate.aol.com/blog/2011/09/08/mortgage-mod-hell-trapped-between-lenders-collectors/#commentsFiled under: , , ,

Kate Hanni is no stranger to public advocacy. After she was trapped in a plane on the tarmac for more than nine hours, she formed Flyers Rights, the largest nonprofit advocacy group for airline passengers' rights. The result was the passage of the Airline Passengers Bill of Rights and the three-hour tarmac-delay limit for the flying public.

Now Hanni -- who blogged about her experience for The Huffington Post -- is standing up for another cause that affects her personally: the housing crisis. This time, instead of an airplane, she's trapped in mortgage modification hell. Her complaint? Lenders won't talk to you unless you are behind in your payments, and then once you are, their debt collectors start harassing you with calls asking when you expect to pay up.

Hanni, a real estate agent for 23 years, and her husband, who worked in the wine industry, were doing just fine until the recession dried up both their businesses. Their incomes shrank, along with the value of their Napa Valley, Calif., home. They turned to their savings to stay afloat, running through about 75 percent of their retirement fund and the money they had set aside for their son's college education. And then -- despite all she had read about the frustrations and failures of the loan modification process -- Hanni decided to try for one.

The first thing her lender, Bank of America, told her was that loan modifications were only for those who were behind in their mortgage payments, and since buying the house in 1997, Hanni had always paid on time. So in order to qualify, it became necessary to stop paying her mortgage and start ruining her credit.

The collection calls started coming about three weeks after she was late with her first payment. "These calls just won't stop," Hanni says, despite her attempts to explain that she's only doing what the bank advised her to do. "Bank of America is spending a zillion dollars having people make these calls, and it just makes no sense. Why not have a loan modifier call instead?"

While Hanni's story certainly can't top that of Deborah Crabtree -- the woman in Hawaii who claims in a lawsuit that Bank of America's debt collectors called her up to 48 times a day, including at her husband's wake -- it does represent what a lot of homeowners are experiencing.

Trashing Your Credit to Save Your House

With President Obama about to announce mortgage reforms, we are a nation with crossed fingers, hoping that one of the practices he ends is the one in which lenders refuse to give you the time of day unless you first miss a couple of payments.

Hanni, 51, and her husband, 59, "don't have a whole lot of time to recoup" their spent savings, she says, adding, "every issue facing America is facing my family . . . unemployment, low resources, and being forced to destroy our excellent credit" to apply for a loan modification.

"Forcing Americans out of their homes, removing their real estate residential interest tax credits, and crippling their ability to own again or even to get a decent rental due to a forced, reduced creditworthiness is insane," Hanni says. "The outcome is that the home will still be devalued, drag down values in the neighborhood and create a worse situation for the former homeowner. Depending on their age, they may never recover from this disaster."

Judging from what happened the last time Hanni got passionate about a consumer issue, the banking industry had better watch out.

Also see:
HAMP Mortgage Modification Program Still No Help
The Mortgage Fix That Can Save the Economy

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]]>Flyers RightsKate Hannimortgage modmortgage modificationNapa Valley real estateAnn Brenoff2011-09-08T16:00:00+00:00Young Real Estate Investor: Where to Stash Extra Cash?http://realestate.aol.com/blog/2011/09/08/young-real-estate-investor-where-to-stash-extra-cash/http://realestate.aol.com/blog/2011/09/08/young-real-estate-investor-where-to-stash-extra-cash/http://realestate.aol.com/blog/2011/09/08/young-real-estate-investor-where-to-stash-extra-cash/#commentsFiled under: , ,

Andy Buman, 29, got interested in real estate a few years ago while working in construction. Since then, he has purchased two bank-owned single-family homes near Omaha, Neb., as rentals, and last fall bought a primary residence for himself and his fiancée, Valerie (both pictured at left). He has managed to save $20,000 in cash, and is looking for the smartest way to apply it.

Buman, an Iowa State graduate who now manages a call center, comes from a family of strivers. His great-grandfather emigrated from Germany and started the farm in Harlan, Iowa, where Buman grew up -- and where his uncles and grandfather still raise 2,000 head of cattle and 1,000 acres of corn. (His dad went into banking.)

From the outset, Buman focused his real estate interests on a few small towns surrounding a retail distribution warehouse and a trucking center, about 25 miles from Omaha. The Omaha/Council Bluffs, Iowa metropolitan area had an unemployment rate of 4.9 percent in June, which explains how Buman managed to rent both homes five hours after listing them.

"There's a lot of employment -- services, farming, cattle, railroads, stores -- it's not hard to get a job here," says Buman. "A lot of employees want to be close to work and the cost of living in these little towns is next to nothing."

His first purchase was a two-bedroom, 900-square-foot home for $24,000. He invested $5,000 in repairs, rented it for $550 a month, and has already paid off the mortgage. Buman followed up with a four-bedroom 1,500-square-foot home. He paid $34,500, invested $7,000 in repairs and rented it for $700 a month. The home still has a mortgage balance of $16,500 at 5.5 percent.

Last fall, Buman and his college sweetheart, who are marrying later this month, bought a three-bedroom ranch 10 minutes from Omaha for $185,000. It's close to family, and to the University of Nebraska Medical Center, where Valerie begins her residency next spring.

The home has a 30-year, fixed-rate mortgage at 4.25 percent, and a balance of $168,000. When the balance on the loan falls below $148,000, the couple can stop paying mortgage insurance, which costs $94 a month.

Buman's question: With his extra $20,000, should he pay off the mortgage on the rental property? Pay down the single-family home to eliminate the mortgage insurance payment? Or consider another option?

See the full story at Daily Finance.

Also see:
College Town Real Estate Investments Score High Marks
Low Refi Rates Are Great, But Not for Everyone
5 Reasons Why Real Estate Deals Collapse

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]]>Andy Bumancash investinginvesting extra cashmortgage insurancemortgage ratesmortgagesreal estate investingrental incomeyoung investorsDailyFinance Staff2011-09-08T08:00:00+00:00The Mortgage Fix That Can Save the Economyhttp://realestate.aol.com/blog/2011/08/25/the-mortgage-fix-that-can-save-the-economy/http://realestate.aol.com/blog/2011/08/25/the-mortgage-fix-that-can-save-the-economy/http://realestate.aol.com/blog/2011/08/25/the-mortgage-fix-that-can-save-the-economy/#commentsFiled under: , , ,

foreclosure crisisThe loan modification programs have been a joke. You have a house that has tanked in value and the best the banks can come up with is a plan where they sort of delay what you owe long enough for you to get back on your financial feet -- if that -- based on the flawed logic that the housing market is certain to improve in just a matter of months.

The real answer for what ails us is a Third Rail solution that banks don't want to touch: Erase some of the amount we borrowed, a process known as a principal reduction. To do so would share the burden of the housing crash with the lenders who helped create it. It would also allow us to get on with our lives, and, according to The New Bottom Line, save the economy in the process. Got your attention now, didn't we?

Banks would rather poke out their proverbial eyes with sharp sticks than offer principal reductions. Only 2.8 percent of all loan modifications in the first quarter of 2011 involved any actual sort of principal reduction, according to the ratings agency DBRS. And that number is actually up a full percentage point from the same time last year.

But some analysts believe that the industry-wide reluctance to perform principal reductions on a wide scale is actually what is holding back the housing recovery.

If lenders would reduce all underwater mortgages to their current market value, the nation's banks could pump $71 billion per year into the economy, create more than 1 million jobs annually and save families up to $6,500 per year on mortgage payments, according to The New Bottom Line, a collaborative of 1,000 faith-based and community organizations who want Wall Street held accountable for the mess it created.

Grassroots organizations associated with The New Bottom Line have called on state attorneys general to investigate banks for foreclosure fraud and to work for a settlement that includes large-scale principal reduction for borrowers.

According to the report, "The Win/Win Solution: How Fixing the Housing Crisis Will Create One Million Jobs," homeowners are struggling to pay their "boom-era mortgages with their recession-era salaries" and the economy is suffering for it. The report adds: "Writing down the principals and interest rates on all underwater mortgages to market value would serve as the second stimulus that America so desperately needs, only without added costs to taxpayers." Amen to that part.

The plan says that the money that homeowners would save on their mortgage payments each month would be spent instead on groceries, clothing, and household necessities.
As consumer demand increased, businesses would start hiring again.

The plan projects an annual stimulus of $20.5 billion in California alone, leading to 300,000 new jobs a year created there. A $12 billion stimulus to the economy of Florida would result in almost 180,000 new jobs.

The report says that in 2010, the nation's top six banks paid out more than twice the cost of the plan ($71 billion per year) in bonuses and compensation alone ($146 billion in 2010). And that currently, the country's banks have cash reserves of $1.64 trillion -- a historic high.

Tell us what you think. Could principal reduction revive the economy? Add your comment in the box below. Click here to see a new post that looks at some of the reader comments so far.

Also see:
Realtors' Latest Challenge: A Surge of Squatters
Low Refi Rates Are Great, But Not for Everyone
How to Buy Foreclosures
VIDEO: All About Short Sales

 

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]]>housing crisisloan modificationloan modificationsNew Bottom LinerefinancingThe New Bottom Lineunderwater mortagesunderwater mortgageAnn Brenoff2011-08-25T12:30:00+00:00Low Refi Rates Are Great, But Not for Everyonehttp://realestate.aol.com/blog/2011/08/22/low-refi-rates-are-great-but-not-for-everyone/http://realestate.aol.com/blog/2011/08/22/low-refi-rates-are-great-but-not-for-everyone/http://realestate.aol.com/blog/2011/08/22/low-refi-rates-are-great-but-not-for-everyone/#commentsFiled under: ,

Talk about pressure! Everyone and his brother is clenching a mortgage refinance application in his fist and rushing to a lender. With record-low interest rates, you'd be nuts to sit this one out, right?

Actually, wrong.

While no one disputes that mortgage rates really can't get much lower, there are certain homeowners who actually are better off sitting tight with their higher rates. If any of the scenarios below apply to you, refinancing -- even into a lower rate -- could be a bad financial move. Here's why.

1. You've had your loan a long time.

Mortgages work like this: In the beginning of the loan, what you are paying is mostly interest. But once you've had the loan a while, you begin to actually pay down the principal. If you've had your loan a really long time, you have reduced the amount you borrowed (your debt) substantially -- a good thing by everyone's scorecard. But if you take out a new loan, you are rewinding the interest clock and starting over and won't be paying down the principal anymore -- just the interest.

Refinancing rarely makes sense for a homeowner who has been paying for 20 years on a 30-year mortgage. Refinancing and signing up for another 30 years may lower his monthly bills, but he'll be making payments for 30 more years instead of just 10.

If you are just a few years away from retirement and like the idea of not having a mortgage to pay each month, resetting the interest clock may not be in your best interests. If you need some cash out of your house to pay for college or a new car, a home equity line of credit (HELOC) may be a better bet than refinancing and taking cash out.

2. You plan to sell soon.

Refinancing a loan costs money -- anywhere from $2,000 to $5,000 in closing costs, appraisals, fees and points. If your new loan saves you $250 a month but it takes you seven years to recoup those expenses and you are planning on selling next year, it isn't worth the trouble. To find out whether it's worth it, do the math: Divide your monthly savings into the total cost of the loan and that's how many months it will take to recoup your closing costs (divide by 12 if you want to know how many years). If you are planning on moving before that, don't bother.

And don't be fooled into thinking your loan is "free" because the lender has so graciously rolled the closing costs into the amount being borrowed. All you are doing there is increasing your loan amount and taken yourself that much further away from paying it off. You pay now or you pay later, but you are paying it just the same. And in the meantime, you are paying interest on that extra amount you just borrowed.

3. You don't have a real and present need for lower payments.

Sure, it sounds great to knock a few hundred dollars off your monthly mortgage, but what will you be using the money for? If you don't have a need and are comfortable paying your current loan, why not consider increasing what you pay and knocking down your principal debt faster? "Mortgage repayment is a risk-less investment that yields a return equal to the interest rate on the repaid loan," notes The Mortgage Professor Jack Guttentag on his website.

Here's another way to think of it: You have a 6 percent loan. By paying down what you owe, you are saving that 6 percent interest you would have paid. How many investments are paying you 6 percent these days? If you don't need the money -- and we aren't suggesting draining your rainy day fund here -- and have some extra cash lying around, why not use it to pay off your mortgage faster?

But Guttentag makes a much more valid point: "The bigger story is that the people who most need to refinance are the ones who can't." Lending standards have tightened to the point where those without a job and/or who are struggling to stay in their homes aren't able to get loans.

Also see:
Refinancing Do's and Don'ts
Cash-Out Refinancing: Sign of the Times?

 

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]]>mortgage ratesmortgagesrefinancingrefinancing home mortgagesAnn Brenoff2011-08-22T16:40:00+00:00Homebuyers Take Note: Mortgage Elevator Is Going Uphttp://realestate.aol.com/blog/2011/07/06/homebuyers-take-note-mortgage-elevator-is-going-up/http://realestate.aol.com/blog/2011/07/06/homebuyers-take-note-mortgage-elevator-is-going-up/http://realestate.aol.com/blog/2011/07/06/homebuyers-take-note-mortgage-elevator-is-going-up/#commentsFiled under: , , ,

mortgage elevatorConsider this the "snap out of it" slap that Cher gave Nic Cage in "Moonstruck." If you're in the market for a house, you need to buy it while the interest rates are low -- and by the way, those rates crept up a bit already this week.

Purchase price? Feh. When it comes to how much house you can afford, the number that really matters -- unless you live in the rarified world of cash buyers -- is what interest rate you can get. And the bad news, for those of you who thought you could wait it out until some expert told you the housing market elevator had reached the bottom floor, is that the real elevator is heading back up -- and that's the elevator of interest rates, not home prices.

According to Dan Green at The Mortgage Reports, for each 1 percent increase in mortgage rate, your home purchasing power drops 10.75 percent. That means if you could afford a $600,000 house when interest rates are 4.5 percent, you can only swing a $535,000 house when the rates go up a percentage point, assuming the same monthly mortgage payment. For each 0.125 percent increase to mortgage rates, your maximum allowable purchase price falls 1.35 percent.

With the exception of a three-month period, average monthly 30-year fixed mortgage interest rates have been at or below 5 percent since 2009. That's completely unprecedented: Average rates had never even hit a low of 5 percent prior to 2009.

The message: You'll get a whole lot more house for your money if you move quickly.

For more on mortgages and related topics see these AOL Real Estate guides:
More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.

 

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]]>dan greenmortgage ratesthe mortgage reportsAnn Brenoff2011-07-06T16:10:00+00:00Cutoff Date for Relief Loan Applications Fast Approachinghttp://realestate.aol.com/blog/2011/07/05/cutoff-date-for-relief-loan-applications-fast-approaching/http://realestate.aol.com/blog/2011/07/05/cutoff-date-for-relief-loan-applications-fast-approaching/http://realestate.aol.com/blog/2011/07/05/cutoff-date-for-relief-loan-applications-fast-approaching/#commentsFiled under: , ,

Washington is acting to rescue tens of thousands of beleaguered homeowners by offering interest-free loans, some of which will ultimately be "forgiven" if borrowers follow the rules.

But the pre-screening deadline for applicants is July 22, so interested homeowners must move fast. Click here to get started.

Coming out of the budget of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the $1 billion allotted for the Emergency Homeowners' Loan Program is expected to help about 30,000 of them, reports The Washington Post.

But qualifying for the relief program is not easy. Among other conditions, applicants must be unemployed or underemployed, 90 days behind on mortgage payments and have received a foreclosure notice.
Homeowners who qualify for the program -- which is offered only in 32 states -- receive a loan enabling them to meet up to two years or $50,000 worth of mortgage payments. The loan requires no payments for five years, as long as borrowers contribute 31 percent of their income or at least $150 to their mortgage payments. After that, the magic starts: The government reduces the loan balance by 20 percent each year until, poof -- no more loan.

MSN Money offers a more thorough breakdown of the program.

For more on mortgages and related topics see these AOL Real Estate guides:
More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.

 

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]]>Dodd-Frank Wall Street Reform and Consumer Protection ActEmergency Homeowners Loan Programforeclosureinterest-free loanTeke Wiggin2011-07-05T13:45:00+00:00