Facing Foreclosure?

Are you in need of Foreclosure Assistance

NeighborWorks/HOPE NOW/Homeownership Preservation Foundation Hotline
Homeowners facing foreclosure can call a tollfree hotline at (888) 995-HOPE, 24 hours a day, 7 days a week.

Federal Housing Administration
Government-insured refinancing for credit-worthy borrowers who went into default after their ARMs reset may be available by calling (800) 225-5342 or by visiting http://www.fha.gov (http://www NULL.fha NULL.gov/).

 

Other Resources

Avoid Foreclosure Rescue Scams (http://www NULL.ftc NULL.gov/bcp/edu/pubs/consumer/homes/rea11 NULL.shtm)
Federal Trade Commission

Equity Stripping & Loan Flipping  –  If you agree to a loan that’s based on the equity you have in your home, you may be putting your most valuable asset at risk. Certain abusive or exploitative lenders target borrowers, who unwittingly may be putting their home on the line. These abusive lending practices range from equity stripping and loan flipping to hiding loan terms and packing a loan with extra charges.

Foreclosure Rescue
(https://www NULL.masshousing NULL.com/portal/server NULL.pt?open=514&objID=2563&parentname=CommunityPage&parentid=0&mode=2&in_hi_userid=2&cached=true)
MassHousing

Foreclosure Resources for Consumers
(http://www NULL.federalreserve NULL.gov/pubs/foreclosure/default NULL.htm)
Federal Reserve Board of Governors

HomeOwnership Preservation Foundation (http://www NULL.995hope NULL.org/)

Private Mortgage Insurance

I read this article today and wanted to share it regarding The Private Mortgage Industry’s Role in the Current Mortgage Crisis

by Jack M. Guttentag (http://finance NULL.yahoo NULL.com/expert/archive/mortgage/jack-guttentag/1)

The blame game for the development of the current mortgage crisis is now in full swing, and, with one exception, no major participant escapes unscathed:

1. Lenders and investment bankers drastically relaxed their underwriting standards in response to the euphoria associated with rapidly rising home prices during 2000-2006. They approved loans that could not possibly be repaid without an indefinite continuation of house price inflation.

2. Bank regulators ignored the breakdown of underwriting standards until it was much too late to take effective action.

3. Mortgage brokers and loan officers encouraged borrowers to buy more house than they could afford, and to accept toxic mortgages that they did not fully understand.

4. Consumers allowed themselves to be seduced into buying houses they couldn’t afford, into purchasing second and third homes on speculation, and into depleting their existing equity through cash-out refinances, in order to maintain lifestyles they could not sustain.

5. Rating agencies provided AAA and AA ratings to securities issued against pools of new types of extremely risky loans, when they had no adequate statistical basis for estimating potential losses on the loans.

6. Fannie Mae and Freddie Mac invested in such securities, taking large losses and weakening their capacity to be a source of strength during the crisis period.

7. The Federal Reserve kept interest rates low well past the point where they should have raised them, and, as a regulator, was as asleep at the same switch as all the other regulatory agencies.

The exception is the private mortgage insurance (PMI) industry. It is the one sector that has not been cited as contributing to the crisis.

Since the industry was reconstituted in the late 1950s, it has enabled borrowers to obtain conventional loans — those not insured or guaranteed by the federal government — with down payments of less than 20 percent. Insurance premiums were scaled to down payment — the smaller the down payment, the higher the premium.

PMIs must place half of their premium inflow in contingency reserves which can’t be touched for 10 years except to meet unusually large losses. This encourages the companies to set premiums based on estimates of losses over long periods, so premium rates change infrequently. And it severely dampens the temptation to make a lot of money in a short period by taking advantage of ebullient markets. PMIs can’t pay themselves premiums net of losses in the current year, as most lenders and investment banks can.

The PMIs did not fully participate in the euphoria and excess that preceded the crash. They did insure some risky loans that would not have been acceptable to them earlier, but for the most part they stuck to their guns. As a result, their market share declined with the emergence of “piggybacks” (when a home is purchased using more than one mortgage from two or more lenders).

Lenders discovered that they could make 95 percent and even 100 percent loans by getting other lenders to offer second mortgages for the amounts over 80 percent of property value. Piggybacks carried higher rates than the first mortgages, but in many cases the cost to the borrower was smaller than the cost of mortgage insurance. The interest on piggybacks was deductible, while mortgage insurance premiums were not. In addition, borrowers could pay off the second mortgage in full at any time, whereas getting rid of PMI was a hassle.

Of course, the PMIs did not give up market share willingly. They induced Congress to make mortgage insurance premiums deductible, at least for a period, but this had only a small impact.

Had PMIs followed the prevailing pattern during the go-go years, they would have cut their insurance premiums sharply and gone after the riskier loans. But they didn’t, and the piggyback market thrived until the crisis hit. At that point, the market got an object lesson in the value of PMI. First mortgage lenders discovered that piggybacks provided substantially less protection against loss than PMI. As home prices declined and the crisis grew, a large proportion of piggybacks (the market has now virtually vanished) lost all or virtually all of their value.

Borrowers experiencing payment problems discovered that having to deal with two lenders was a substantial barrier to getting loan contracts modified. In contrast, mortgage insurers will often help borrowers negotiate modified contracts with first mortgage lenders.

Nonetheless, the PMIs have been badly hurt. Losses have been eroding their capital and reserves, and their stock prices have tumbled badly. Yet the industry is doing exactly what it was set up to do, which is to cover losses to lenders during a period of stress, out of reserves that they accumulated during periods of prosperity. The industry should play a more prominent role in the very different housing finance system that emerges in the future.

Found Your Dream Home – What’s Next?

After looking at the comparables for the area a reasonable offer for the home of your dreams is agreed upon and your realtor will submit to the sellers real estate agent. Once submitted, the Sellers agent will come back with an accepted offer, or the negotiations will begin until an agreement is met.  With Foreclosures or Short Sales the time frame will be longer. Foreclosures can take up to 60 days from offer acceptance to closing.

Now that the offer is accepted the contract is sent over by your realtor to the Mortgage Broker or Bank and they will start the loan completion process.  Up until now you as the buyer have a pre-approval letter.  It is your mortgage broker/bankers’ responsiblity to stay on top of getting your loan closed.  There will be various documents needed to complete this process.  Whatever you do, do not go purchase anything on credit that might change your approval status

While this is going on there is an option period that you as a buyer can pay a small fee normally $10 a day for 10days.  This will give you time to have the home inspected to ensure there is no costly damage, such as foundation or roof repairs needed and to ensure no termite damage.

Once the inspection is done and the loan is approval process is completed  the mortgage folks will order an appraisal, and the title company orders the survey,

This process is normally done within a 30 day period unless it is a foreclosure and then it can take longer. Before you go to closing your realtor will receive a HUD statement which breaks down the expenses for closing on the home and will let you know what $$ amount is needed. There are a lot of documents that must be signed so expect the closing to take about 45 minutes.

Heres to wishing you luck on your new home purchase, give me a call I will help you….www.pattimace.com or pattimace@sbcglobal.net (pattimace null@null sbcglobal NULL.net).

Talk again soon,

Patti

What is the process to purchase a Home

Now that you understand where credit scores are derived from the next step in your home purchase is to go to your bank or a mortgage broker and get a pre-approval letter.  This pre-qualification will let you know based on your income and debt ratio what price range your home purchase needs to be at/under.

Realtors do not want to disappoint their clients in anyways so as a realtor when a client comes in the first step is the pre-qualification with a mortgage broker or bank.  This prevents the realtor from showing clients homes that are not within their ratio and ultimately making it more difficult to find them a home that fits their personality.

The next step in your home purchase is knowing where you want to live. Is there a subdivision or rural area that particularly interest you?  If you are new to the area then this could be a difficult decision but ask around your job or friends to see what opinions they have. 

Now that you have the pre-approval and know what area you would like to live in then the next step is to get with your realtor and/or find a realtor if you do not have one yet.  This step is easy if you live in Texas near the Woodlands, Houston, Spring, or surrounding areas you can contact me at pattimace@sbcglobal.net (pattimace null@null sbcglobal NULL.net), if not then I would be glad to assist you in finding someone in your area, or speak with a family member, or friend.

Realtors and clients then work together to find out what type of home you like, traditional, colonial, modern. Then how many bedrooms, bathrooms, and other areas you desire such as a study, or a gameroom. Do you want an older home in a mature area with grown trees or do you like the feel of a new home in an up and coming area.

Once this is all figured out off we will go to look at the inside of the homes to see how well they have been maintained and if the home fulfills your desires.  Most clients like to see 8-10 homes or more before making a decision and will usually narrow down to two and go and look at them again to make their final decision.

See you back here soon to check out my next blog on ….Now that the home has been chosen what is the next step……..

 www.pattimace.com (http://www NULL.pattimace NULL.com)  …. pattimace@sbclgoblal.net (pattimace null@null sbclgoblal NULL.net)

 

 

Interest Rates – How they are derived from your Credit Score

I wanted to touch base on one of the major issues people deal with when trying to make a major purchase such as a home.  The interest rate you are quoted when purchasing a home is based on your credit score that is pulled from the 3 major Credit Reporting agencies. These agencies get this calculated information from different companies who lend credit and if paid on time it gives you a rating, the higher the better!  With help from Wikipedia I want to get the word out to individuals how important it is to try and maintain your credit.

Credit ratings are determined differently in each country, but the factors are similar, and may include:

  • Payment record – a record of bills being overdue will lower the credit rating.
  • Control of debt – Lenders want to see that borrowers are not living beyond their means. Experts estimate that non-mortgage credit payments each month should not exceed more than 15 percent of the borrower’s after tax income.
  • Signs of responsibility and stability – Lenders perceive things such as longevity in the borrower’s home and job (at least two years) as signs of stability. Having a respected profession can improve a credit rating.
  • Credit inquiries – An inquiry is a notation on a credit history file. There are several kinds of notations that may or may not have an adverse effect on the credit score. Soft pulls don’t affect the credit score and are characteristic of the following examples:

A credit bureau may sell a person’s contact information to an advertiser purchasing a list of people with similar characteristics, like homeowners with excellent credit. A creditor can check a person’s credit periodically. Or, a credit counseling agency, with the client’s permission, can obtain a client’s credit report with no adverse action. Each of the preceding examples are commonly referred to as a “soft” credit pull.

However “hard” credit inquiries are made by lenders. Lenders, when granted a permissible purpose by a borrower for the purposes of extending his credit, can check his credit history. Hard inquiries from lenders directly affect the borrower’s credit score. Keeping credit inquiries to a minimum can help a person’s credit rating. A lender may perceive many inquiries on a person’s report as a signal that the person is looking for loans and will possibly consider that person a poor credit risk.

  • Credit cards that are not used – Although it is believed that having too many credit cards can have an adverse effect on a credit score, closing these lines of credit will not improve your score. The credit rating formula looks at the difference between the amount of credit a person has and the amount being used, so closing one or more accounts will reduce your total available credit. And the lower the percentage of available credit, the more the credit score will drop. The credit formula also factors in the length of time credit accounts have been open, so closing an account with several years of history is another avoidable credit mistake.

Consequences

The information in a credit report is sold by credit agencies to organizations that are considering whether to offer credit to individuals or companies. It is also available to other entities with a “permissible purpose.” The consequence of a negative credit rating is typically a reduction in the likelihood that a lender will approve an application for credit under favorable terms, if at all. Interest rates on loans are significantly affected by credit history—the higher the credit rating, the lower the interest while the lower the credit rating, the higher the interest. The increased interest is used to offset the higher rate of default within the low credit rating group of individuals.

In the United States, in certain cases, insurance, housing, and employment can also be denied based on a negative credit rating.

Note that is not the credit reporting agencies that decide whether a credit history is “adverse.” It is the individual lender or creditor which makes that decision, each lender has its own policy on what scores fall within their guidelines. The specific scores that fall within a lender’s guidelines is most often NOT disclosed to the applicant due to its nature as a trade secret. In the United States, a creditor is required to give a reason for denying credit to an applicant immediately and must also provide the name and address of the credit reporting agency who provided data that was used to make the decision.

Credit Bureaus

Several credit reporting companies: Equifax (http://www NULL.equifax NULL.com/home/), Experian (http://www NULL.experiangroup NULL.com/)TransUnion (http://www NULL.transunion NULL.com/) .

I know that this is a lot of information to take in, but the lower the interest rate the more home you can purchase. I will let you absorb this information and then blog more on the various mortgage notes based on the interest rate.

If you have guestion email me at pattimace@sbcglobal.net (pattimace null@null sbcglobal NULL.net).  Hope to see you subscribe to my blog at www.pattimace.com (http://www NULL.pattimace NULL.com).

Chat again soon,

Patti

Credit Scoring and Repairing

When people mention the word ‘credit score’ the subject often brings on fear and anxiety, and for good reason. With the exception of recognizing that the best score wins, the average home buyer knows very little about the whole credit scoring process. Borrowers who have credit that is not so great (sub-prime) and who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history. Now more than ever it is possible for people to improve less-than-perfect credit scores and obtain a loan for the home they truly want.

The first step in the process is making sure that to acquire a current copy of their credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus try to request a free report from each of the three companies. (www.annualcreditreport.com (http://www NULL.annualcreditreport NULL.com/))

It’s also important to know just what a good credit score is. Most A-Paper scores generally begin around 680. Don’t despair if it comes up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan’s interest rate.

According to the various affiliates, while credit repair is necessary for some, it’s not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

  • Evenly distribute credit card debt to change the ratio of debt to available credit. Let’s say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.
  • Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit.
  • Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you’re only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Remember, credit scores don’t change over night. Improving them requires time and diligent effort, so it’s a good idea to get the ball rolling at least three to six months prior to submitting an application for home financing.

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