After a rejection Some borrowers think that because their mortgage application is turned down the first time, they won’t ever be approved. In reality, some borrowers succeed on the second or third attempt, usually with a different mortgage professional, and often several months later, after they have saved more money for a larger down payment or improved their credit score.
Making sense of the story
* Before reapplying for a mortgage, borrowers are advised to look at the reasons they
were initially rejected.
* The Equal Credit Opportunities Act requires lenders to give loan applicants specific
reasons in writing within 30 days of their decision. If it’s based on a problem in the
borrower’s credit report, the lender must tell the borrower the name and address of the credit agency that provided the information.
* Talking to the loan officer who denied the application to see how close the borrower was to being approved also can be helpful. Sometimes the gap is small and could be
bridged with a larger down payment or another home appraisal, for example.
* It also may be worthwhile to shop around for other lenders. Borrowers can work with a mortgage broker or an online network like LendingTree or Zillow’s Mortgage
Marketplace.
* A credit union also might be a better bet for some applicants. Credit union loan
committees may permit better deals for longtime members; they might also modify loan terms for borrowers they already know.
* However, first-time buyers may need to scale back their aspirations. One reason people get turned down for a mortgage is because they try to buy more property than they can afford based on current incomes.
* Applicants also should look at ways to strengthen their financial picture. If a borrower’s credit is poor, paying down credit-card balances can help to increase a FICO score.
Read the full story The New York Times
After a Rejection
Getting back in the black
More than 2.6 million households are at least 60 days delinquent on their mortgage payments, according to the nonprofit coalition Hope Now. While those who are delinquent 60-120 days can make back payments to help them become current, those who are more than two months behind may need to employ other means to catch up.Making sense of the story
* Beyond the obvious threat of foreclosure, falling behind on a mortgage can be costly: Lenders charge late fees as well as legal and administrative costs, and the borrower’s credit score will suffer. Experts say the sooner a delinquent borrower deals with the situation, the better the chances are of making a full economic recovery.
* Borrowers who are determined to stay in their home but cannot immediately make back payments need to start by contacting their lender or a credit counselor to discussavailable options. Among them are devising a repayment plan, modifying the loan, doing a short sale, and adding what is owed back into the mortgage balance.
* The first step borrowers should take is to assess their financial situation by looking at the amount of money brought in each month versus what is spent. Many credit and housing counselors have worksheets on their websites to help with this.
* Next, borrowers should collect pay stubs, documentation on other income, two years’ worth of tax returns, two months of saving and checking account statements, and mortgage records. If the borrower has experienced a hardship, such as a layoff, adivorce, or an illness, they should gather evidence of that, such as unemploymentinsurance receipts, medical bills, a copy of a doctor’s letter to their employer, or a divorce decree.
* Finally, borrowers should talk to their lender, servicer, or an adviser. The federal Dept. of Housing and Urban Development certifies counseling agencies that provide free advice and assistance, and has a list of them on its website. Counselors can offeralternatives and prepare a budget to see if the homeowner can afford to stay in the house.
* Before agreeing to a repayment schedule, it is important homeowners understand how their lender treats partial payments. Some credit partial payments toward the balance immediately, while others hold the money in a “suspend account” until the full amount is received. Some will return the check to the borrower, and some will stop accepting payments after the mortgage is seriously delinquent.
The New York Times Read the full story
A reprieve for unemployed borrowers
Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give
short-term aid to unemployed homeowners, but housing counselors warn that these borrowers
will need to look at longer-term solutions.
Making sense of the story
* In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
* There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time.
* The new temporary mortgage payment is often set to 31 percent of the household
income; in some cases lenders agree to accept no payments. Fannie Mae’s extended
unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
* However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
* Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Develpment.
Read the full story The New York Times
Shopping for the best rates
Interest rates are the lowest in decades, enticing many borrowers to shop for a loan. Mortgage lenders adjust their rates based on perceptions of risk, so unless the borrower can show they’re a low-risk individual, the borrower is unlikely to qualify for a rate that matches those seen in recent advertisements and headlines.
Making sense of the story
The rates quoted are averages drawn from a variety of financial institutions, and lenders use varied approaches to set them. Consumers who want to try for the lowest rates available need to consider basic factors, such as credit score, points, property type, down payment, and length of the loan.
Credit score: The ideal borrower has a FICO score of 740 or higher, which puts the individual in the best place for pricing.
Points: The lowest rates usually are decreased by paying a fee called a point, or 1 percent of the loan amount. Borrowers may buy points in order to get the best rates at many banks. Points might make sense depending on the borrower’s financial situation and how long they expect to stay in the home.
Property type: Borrowers planning to buy a duplex or a four-unit build likely will have a higher interest rate. Condominiums also may have a rate premium rate, especially if they are newer or the down payment is less than 25 percent. Lenders also may charge more if the borrower is not planning to live in the home.
Down payment: Borrowers who put down at least 25 percent are more likely to obtain the best interest rates. Lenders offer different breaks on rates if equity in the property is higher, so borrowers should ask what is available.
Length of loan: Borrowers who are likely to move in a few years may want to look into an adjustable-rate loan with a low interest rate fixed for a few years, and adjusted afterword.
Read the full story The New York Times
State targets property-tax payers
Beginning with the 2012 tax bill (the one due in April 2013), the state Franchise Tax Board will require property owners to break down their property taxes into deductible and non-deductible portions.
Read the full story
Orange County Register
FHA extends waiver of anti-flipping regulations
The Acting FHA Commissioner has extended a temporary waiver of FHA’s anti-flipping regulation through 2012.
“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Carol J. Galante. “FHA remains a critical source of mortgage financing and stability, and we must make every effort to promote recovery in every responsible way we can.”
With certain exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, FHA temporarily waived this regulation through Jan. 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
The extension announced is effective through Dec. 31, 2012, unless otherwise extended or withdrawn by FHA. All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.
California Association Realtors.org
PMI files for bankruptcy, listing $736 million in debts amid rough housing market
Walnut Creek-based PMI Group filed for bankruptcy Wednesday, listing debts of $736 million resulting from the meltdown of a housing market that remains weak.
The company, which insures mortgages when borrowers make small down payments, was forced into bankruptcy when a judge upheld the takeover by Arizona state regulators of PMI’s primary units to insure mortgages.
“Continued high unemployment in the United States and the slow economic recovery in U.S. residential and mortgage and housing markets” have contributed to PMI’s losses, L. Stephen Smith, PMI’s CEO, said in a court filing.
PMI pays lenders after an insured homeowner defaults and a foreclosure fails to recoup enough to cover the lender’s losses. Over the 12 months that ended in June, it lost $727.1 million and generated revenue of $762.9 million.
PMI has lost money for 16 straight quarters, including a $1.01 billion loss in the October-December period of 2007. The last time PMI turned a profit was in the April-June quarter of 2007.
Arizona regulators took control of PMI Mortgage Insurance and PMI Insurance in August. Neither of those companies filed for bankruptcy but were ordered to cease writing new policies, which undermined a vital revenue stream for PMI.
The regulatory seizure also unleashed a new financial squeeze for PMI because takeover allowed lenders to seek immediate payment in full of the financing. In this case, about $736 million in notes were due in short order.
PMI, in a last-ditch attempt to dodge bankruptcy, asked an Arizona judge to overturn the seizure by the state’s Insurance Department. But earlier this week, the judge denied PMI’s gambit, leaving the company with few escape routes.
The company filed for Chapter 11 in a quest to reorganize its finances, listing assets of $225 million. It said it hopes the bankruptcy filing will enable the company to assess its options following the regulatory actions.
Mortgage insurers, including PMI, have been able, in recent years, to capture decent profits in providing mortgage insurance to cover lenders. But PMI has been battered by losses because of mortgages it insured before the collapse of the housing market.
The slump in home prices has erased equity and shoved some borrowers to the brink of foreclosure.
“There are still an extremely high number of underwater loans,” said Jeffrey Michael, director of the Stockton-based Business Forecasting Center at University of the Pacific. “The worst of the price declines are over. But foreclosures continue to be a problem. There is a very long road before we have a normal housing market.”
By George Avalos
Contra Costa Times
Congress reinstates FHA loan limit
C.A.R. applauds reinstatement of FHA loan limits; urges longer extension of flood insurance
LOS ANGELES (Nov. 18) – The U.S. Congress late yesterday passed a “minibus” appropriations measure that will continue to fund the government and includes a provision to reinstate the Federal Housing Administration (FHA) loan limit in high-cost areas for two years. President Obama signed the measure into law today.
The higher Fannie Mae, Freddie Mac, and FHA conforming loan limits of $729,750 expired Oct. 1, when it was reduced to $625,500. The passage of H.R. 2112 provides for an extension of FHA-insured mortgages at the higher level through December 2013. It also provides for a short-term extension of the National Flood Insurance Program (NFIP) through Dec. 16, 2011. C.A.R. and NAR strongly urge Congress to work on a five-year NFIP reauthorization bill to provide certainty and avoid further disruption to real estate markets.
“C.A.R. is pleased the Senate and House were able to come to a reasonable compromise on extending the FHA loan limit to ensure affordable home financing for middle-class buyers,” said 2012 C.A.R. President LeFrancis Arnold. “However, we are disappointed that the Senate and House could not agree on increasing the loan limits for Fannie Mae- and Freddie Mac-insured loans, especially since the Senate bill included a premium on high-cost loans that protected U.S. taxpayers from footing the costs.”
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher loan limits.
A continued government role in housing financing will ensure stability in mortgage markets and that home buyers in high-cost areas will be able to refinance and obtain FHA financing for new home purchases more easily. However, it will cost these home buyers more to finance their homes either through jumbo mortgages or with FHA than it would have through Fannie Mae or Freddie Mac.
The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Non-conforming or “jumbo loans” typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.
Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
C.A.R. November 18, 2011
REALTOR.com Goes Global
The National Association of REALTORS® and Move Inc. have announced the launch of the REALTOR.com International Web site. Available at www.REALTOR.com/International, the new site delivers 4.4 million for-sale property listings to buyers across the globe, as well as residential properties fed to the site by foreign content providers.
At launch, Realtor.com International will feature residential real estate listings from Brazil, Bulgaria, Croatia, France, Italy, Portugal, Romania, Serbia, Slovakia, and Spain. The site can also be accessed from the REALTOR.com home page. In the past three months, nearly 2.6 million international visitors searched for U.S. real estate on REALTOR.com. The top five countries where searches originated from are Canada, the United Kingdom, Germany, Australia, and India. Daily Real Estate News
FHFA revises HARP to help more borrowers
The Federal Housing Finance Agency, along with Fannie Mae and Freddie Mac, on Monday announced changes to the Home Affordable Refinance Program (HARP) to help more borrowers.
The program will continue to be available to borrowers with loans sold to Fannie Mae and Freddie Mac on or before May 31, 2009, with current loan-to-value (LTV) ratios above 80 percent.
The new program enhancements address several other key aspects of HARP including:
Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
Extending the end date for HARP until Dec. 31, 2013, for loans originally sold to the Enterprises on or before May 31, 2009.
Fannie and Freddie plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by Nov. 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.
CAR.org
DRE# 00917133