Will Mortgage Reform Cause Rates to Rise?

Tuesday, 24 August 2010, 22:19 | Category : Mortgage News, Published Home Financing articles
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Mortgage guidelines have tightened to the point that very few borrowers qualify for home refinancing.  Home loan rates have dropped to record lows again. Bankrate.com reported 4.51% for 30 year fixed rate home loans and 3.51% for 5 year ARMs. Recently, these rates have been depressed by the United States’ reputation as a safe haven in a time of increasing uncertainty in Europe. However, do these rates accurately reflect the risk associated with loaning money to the US homeowner? No way! The only reason rates can be this low is that the US government is still insuring these mortgages and securitizing them through the actions of Fannie Mae and Freddie Mac. But how much longer can this go on?

About a month ago the government passed a sweeping financial reform bill that has generated speculation that the end might be near for these ridiculously low mortgage rates. First, the bill requires that lenders eat their own dog food/ drink their own bathwater – i.e keep 5% of the mortgages they originate. You know…what’s good for the goose is good for the gander. It’s a better idea than letting one man’s meat be another man’s poison. Seems like a good idea to me – may actually cause them to act responsibly. Second, there is increasing interest in eliminating Fannie Mae and Freddie Mac. In fact, even Barney Frank is predicting their demise – and that guy never met a government program he didn’t like. After all, they have so far cost the US taxpayer $150 billion, with more losses likely to come. There are even more subtle impacts lurking in this financial reform bill, not all of which will be as logical as what I discussed above, that are likely to negatively impact the mortgage environment. I asked Russ Martin of Perl Mortgage to pontificate on the bill and here is what he had to say:

Yeah, there are a lot of unknowns with that legislation right now.  I don’t think it will wind up being as bad as folks make, but like all government intervention, it will probably wind up raising costs for consumers and make an already complicated transaction a much bigger pain in the ass. FHA refinance activity continues to rise with record low rates.

The biggest part that had mortgage lenders concerned is that there is some language limiting loan officer and bank compensation to 3%.  While this isn’t much of a problem as most deals don’t pay us that much, it can be an issue on smaller loans especially when consumers want to do “no closing costs” deals since the costs have to be paid out of that percentage.  3% of a $100k loan is only $3k.  It costs about $2k to process a refinance in Illinois.  That only leaves $1000 for the loan officer which is split between the loan officer and the brokerage.  No loan officer worth anything is going to actively seek to do those deals.  Some states have more expensive costs like title insurance and it would make it virtually impossible to do small deals with a 3% cap.  The long and short of it is that Congress tried to put a cap on profit margins and really have been attempting to outlaw them altogether on mortgages.  Of course, this it isn’t reported this way, but that is really what is going on.

There is also some language where they are trying to decouple the bank profit margin/lo compensation from the interest rate on the mortgage.  Right now, as the rate goes higher, we obviously make more.  This functions like any business but for some reason this is considered bad in the mortgage world. Competition helps keep gouging lenders in check and with so much information available on the internet; it is really hard for any lender to gouge consumers like the politicians are claiming.

There is probably going to be some change in the comp structures at some point where loan officers are paid a flat rate per deal by their brokerage and paid out of a bonus pool.  It also isn’t clear how this is going to affect the wholesale mortgage market.  Obviously higher rate mortgages are worth more, so I don’t know if the market is going to appropriately price the loan products.

The Feds have really screwed consumers over the past couple of years.  A lot of these laws sound good on paper to people unfamiliar with how the industry works, but when you really sit down and look at what is going on it is borderline idiocy.  Unfortunately, the mortgage industry lobby (Brokers in particular) is too fragmented so it was very easy for uninformed consumer groups to paint the entire industry with a broad brush.

There will also be some issues with self-employed borrowers as well as innovative products to make the market more efficient.  The so-called liar loans were designed to not have to the most qualified borrowers through hell and back.  Unfortunately, during the bubble the banks allowed these products to be abused as a way for unqualified borrowers to qualify.  Now many self-employed borrowers or low income/but large asset borrowers are not going to qualify for mortgages [this is already a problem].

…the bill is too complex and it is really hard to determine what the exact impacts are going to be.  It is very hard to explain this stuff to folks that aren’t in the business, but the impact will be real.  Unfortunately, the financial markets are not something that Joe Plumber can relate to, so the public outrage about this stuff doesn’t really come up when the bills are debated because the average person can’t relate until one of these dumb laws affects them personally.

So the bottom line is that you better party hard before the government takes the punch bowl away.

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Mortgage Reform and Consumer Protection Act

Tuesday, 24 August 2010, 22:02 | Category : Mortgage News, Published Home Financing articles
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President Obama recently signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (AKA, the “Financial Reform Act”).  It is difficult to predict all of the ramifications of the Financial Reform Act because many of the provisions provide for future regulatory measures.  The Obama Administration has made it clear that they want to remodel the mortgage loan industry.  They want to penalize mortgage lenders and brokers and make it criminal to commit mortgage fraud.  The administration wants to reduce bad mortgages and foreclosure prevention scams.

mortgage reform

Establishment of New Oversight to Financial System

  • Establishes a Financial Stability Oversight Council (the “Council”) to monitor potential threats to the financial system and regulate nonbank financial companies and financial activities that the Council determines pose a risk to financial stability.
  • Establishes an Office of Financial Research to support the Council.
  • Requires large financial companies to periodically submit plans for rapid and orderly shutdown.
  • Establishes an orderly liquidation authority for companies that the pose a risk to financial stability if the Secretary of the Treasury and two other federal regulators agree that such liquidation is necessary to mitigate serious adverse effects on financial stability. Costs of the liquidation will be borne by shareholders and unsecured creditors and, if necessary, by risk-based assessments on large financial companies, but not by taxpayers.

Oversight Responsibilities

  • Transfers the functions of the Office of Thrift Supervision to the Office of the Comptroller of the Currency to supervise federal thrifts.
  • Transfers the functions of the Office of Thrift Supervision to the Federal Deposit Insurance Corporation (“FDIC”) to supervise state-chartered thrifts.
  • Transfers the functions of the Office of Thrift Supervision to the Federal Reserve Board to supervise thrift holding companies.
  • Revises the FDIC’s assessment base for deposit insurance and makes permanent the increase in deposit insurance to $250,000.
  • Establishes offices of Minority and Women Inclusion by the Treasury Department.

Regulation of Investment Advisors                                                                           

  • Eliminates the “private advisor” exemption in the Investment Advisors Act of 1940, thereby requiring advisors to private funds to register with the Securities and Exchange Commission (“SEC”) within one year, with certain exemptions.
  • Raises the asset threshold for federal regulation of investment advisors from $30 million to $100 million in recognition of strong state supervision.

Insurance Industry Regulation

  • Establishes the Federal Insurance Office in the Treasury Department to provide a source of information on and monitoring of the national insurance marketplace and consulting on international insurance matters.
  • Provides for reform in the areas of non-admitted insurance and reinsurance.

Volcker Rule

  • Allows for regulation to provide significant limitations on banks, savings associations and their holding companies regarding proprietary trading and sponsoring and investing in hedge funds or private equities funds (the Volcker rule). Certain restrictions will also apply to nonbank financial institutions supervised by the Federal Reserve.

Transparency and Accountability for Derivatives

  • Provides for regulation regarding supervision of nonbank subsidiaries of holding companies, restrictions on transactions with affiliates, and limits on derivatives and securities lending credit exposure.
  • Provides regulators the authority to impose capital and margin requirements on swap dealers and major swap participants.
  • Authorizes the Commodity Futures Trading Commission and the SEC to adopt rules for swap and security based swaps markets, including mandatory clearing and trading of swaps and security based swaps and public reporting.
  • Prohibits federal assistance for swaps and to security based swap entities.
  • Requires disclosure by swap dealers and major swap participants of material risks and characteristics of a swap, including conflicts of interest and material incentives.
  • Prohibits a bank from converting its charter to escape an enforcement action

Risk Management Standards

  • Promotes uniform risk management standards for systemically important financial institutions and systemically important payment, clearing and settlement activities conducted by financial institutions which will be established by the Board of Governors of the Federal Reserve Board, the SEC and/or the Commodity Futures Trading Commission.

Investor Protections

  • Creates an Office of Investor Advocate and an Ombudsman to assist investors in dealing with the SEC, as well as an Investor Advisory Committee at the SEC.
  • Increases the SEC’s authority to conduct investigations and assess penalties for violation of the securities law.

Credit Rating Agencies

Broadens the SEC’s power to regulate nationally recognized statistical rating organizations and establishes the Office of Credit Ratings which will (1) write regulations requiring credit agencies to create internal controls for ratings determinations, (2) establish independent boards of directors, (3) make greater disclosures to the public, and (4) develop universal ratings classifications across asset classes and types of issuer.

  • Prohibits compliance officers from working on ratings and prevents employees from both marketing ratings services and performing ratings.
  • Provides that ratings organizations can be deregistered for providing bad ratings.
  • Allows investors to bring private rights of action against rating agencies for a knowing and reckless failure to conduct a reasonable credit analysis.

Asset-Based Securitization Process

  • Requires securitizing companies to retain an economic interest of a material portion (at least 5%) of the credit risk for any asset that securitizers transfer, sell or convey to a third party. Regulations will determine specific risk retentions requirements.

Management of SEC

  • Requires several reports designed to assess SEC performance and provide recommendations for improvements.

Municipal Financial Advisors

  • Requires the registration of municipal financial advisors with the SEC which will create the Office of Municipal Securities. Municipal financial advisors will be subject to rules promulgated by the Municipal Securities Rulemaking Board and enforced by the SEC.

Consumer Protection

  • Establishes the Bureau of Consumer Financial Protection (the “Bureau”) which will be an independent bureau within the Federal Reserve System and will ensure that existing consumer protection laws and regulations are comprehensive, fair and enforced. The Bureau will also have the power to issue rules, including, but not limited to, rules under the Truth in Lending Act, the Equal Credit Opportunity Act and the Real Estate Settlement Procedures Act.
  • Revises the standard used to preempt state consumer protection law.

Federal Reserve Governance

  • Limits the Federal Reserve from making 13(3) emergency loans to individual firms.
  • Provides that the Government Accountability Office will conduct an audit of Federal Reserve 13(3) emergency lending since December 1, 2007.

Improving Access

  • Expands access to safe and affordable bank accounts, credit and financial information for low-income, minority and other underserved persons.

TARP Funds

  • Reduces the amount authorized under TARP from $700 billion to $550 billion and prohibits the use of repaid TARP funds for purposes other than deficit reduction.

Mortgage Reform

  • Sets minimum standards for mortgages by requiring lenders to establish that consumers have a reasonable ability to repay at the time the mortgage is issued.
  • Prohibits financial incentives that may encourage mortgage originators to steer consumers to higher cost mortgages.
  • Establishes penalties for lenders and mortgage brokers who do not comply with new standards.
  • Requires escrow accounts and appraisals in connection with higher risk mortgages.
  • Provides $1 billion for loans to homeowners who lose their jobs to help make mortgage payments during their unemployment.

Interchange Fees

  • Requires the Federal Reserve to issue rules that ensure that fees charged to merchants for debit transactions are reasonable. 

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Mortgage Refinance and Home Loan Index Fall

The Mortgage Refinance Index dropped 7.3% compared to the week before and the seasonally adjusted Purchase Index decreased 1.2 % from one week earlier. The unadjusted Home Loan Index fell 2.3% compared with the previous week and was 36.8% lower than the same week one year ago.  The decline in total home loan applications was driven by a 4.4% decrease in government applications, while conforming home purchase applications increased by 1.0%.  The four week moving average for the seasonally adjusted Market Index is down 0.5%.  The four week moving average is down 1.1% for the seasonally adjusted Purchase Index, while this average is down 0.4% for the Refinance Index.  The mortgage refinancing share of mortgage activity decreased to 73.8% of total applications from 74.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.9% from 5.2% of total applications from the previous week.

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Home Loan Rates Decline

Friday, 21 May 2010, 8:56 | Category : Mortgage News, Mortgage Rates
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Home loan rates declined again this week, with many reaching the lowest levels in years, according to Freddie Mac’s weekly survey of mortgage rates.   They have followed U.S. Treasury yields lower over the past several weeks as investor concern builds about Europe’s economic future. The benchmark 10-year yield touched a 5 1/2-month low Thursday.

Freddie Mac Chief Economist Frank Nothaft noted that the low mortgage rates, coupled with tax credits from the U.S. government, have helped strengthen the housing market.   “Moreover, home builder confidence rose for the second straight month in May to the highest level since August 2007,” he noted, citing National Association of Home Builders/Wells Fargo Housing Market Index data.

The 30-year fixed-rate mortgage averaged 4.84% for the week ended Thursday, down slightly from last week’s 4.93% average but up a hair from 4.82% a year ago. Home loan rates on 15-year fixed-rate mortgages were 4.24%, down from 4.3% and 4.5, respectively, to hit the lowest level since Freddie began tracking such loans in August 1991.   Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 3.91%, down from last week’s 3.95% and 4.79% a year earlier, setting a new low since Freddie started keeping score in 2005. One-year Treasury-indexed ARMs hit a 5 1/2-year low of 4%, down from 4.02% and 4.82%, respectively.

Are you considering a refinance? To obtain these low rates, the fixed-rate home loans required payment of an average 0.7 point, while the adjustable rate loans had an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest

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Mortgage Refinance Applications Rise

Sunday, 31 January 2010, 20:48 | Category : Bad Credit Loan Tips, Mortgage News, Mortgage Rates
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As the average interest rate for the thirty-year mortgage with a fixed rate fell back toward the 5% mark last week, the Mortgage Bankers Association’s Weekly Mortgage Applications Survey found a corresponding increase in home refinancing applications. For the week ending Jan. 15, 2010, the Market Composite Index, a measure of refinance loan application volume, increased 9.1% on a seasonally adjusted basis and 10.4% on an unadjusted basis from one week earlier.  According to a subprime lending source, bad credit home loans remained difficult to find.

The mortgage refinance Index increased 10.4% and the seasonally adjusted Purchase Index increased 4.4% from one week earlier. There was a small gain in the market share of refinance activity, from 71.5% one week ago to 71.7% for the survey period. The market share of adjustable-rate mortgage loan applications increased to 4.1%, up from 4.0% for the previous two weeks. The average contract interest rate for 30-year fixed-rate mortgages fell to 5% from 5.13%, with points decreasing to 1.05 from 1.17 (including the origination fee) for loans with an 80% % loan-to-value ratio, the association reported. The average contract interest rate for 15-year FRMs decreased by 12 basis points to 4.33% from 4.45%, while for one-year ARMs the average contract interest rate increased by 11 basis points to 6.72%.

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125 Home Loan Update

Monday, 16 November 2009, 15:33 | Category : Bad Credit Loan Tips, Debt Consolidation Tips, FHA Loan Advice, Subprime Home Loans
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All conventional home loan banks have stopped offering 125 loans so only private investors offer that type of mortgage loan.  They are very strict with their guidelines and they underwrite with the low score of whichever bureau has the lowest score and they want a $5,000 residual income after all your bills are paid.  The 125 mortgage suddenly has the highest default rate out of the second mortgage loans so they are strict. 

FHA mortgage products have become popular because they allow debt consolidation and cash out refinancing up to 95% loan to value.  If a client has no other alternatives our attorney could possibly settle their debt which would significantly reduce the balance and the payments.  Debt settlement is a viable solution that does not have the long lasting negative credit impact that bankruptcies have.

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Home Loan Applications Drop Nearly 20 Percent

According to a recent Bloomberg article, home loan applications in the US fell last week by the most since February, defying efforts by President Barack Obama’s administration to revive the sluggish housing market.   The Mortgage Bankers Association’s index of applications to home purchase loans or mortgage refinancing declined 19% to 444.8 in the week ended June 26 from 548.2 the prior week. The group’s refinancing gauge declined 30% to the lowest in seven months, while the index of purchases fell 4.5%.  Unemployment, which touched a 26-year high in May, and rising borrowing costs discouraged homeowners from refinancing, while a growing number of foreclosures sidelined potential buyers waiting for house prices to stop tumbling.

Pending home sales showing contracts signed in May rose 0.1%, compared with a gain of 6.7% in April, the National Realtors Association said today.   “2nd in FHA mortgage rates is exacting a toll in terms of depressing mortgage applications,” Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts, said in an interview. “The economy is in a phase of attempting to find a bottom. Anything that comes in the way of that, like higher rates, is going to mean it takes longer.”

Home loan rates climbed above 5% the week of May 29th for the 1st time in three months, according to mortgage bankers’ data, and have remained elevated relative to 10-year Treasuries. The percentage age of consumers who said they plan to buy a home in the next six months fell to 2.7 % in June from 2.8 % in May, the Conference Board in New York said yesterday. FHA home loans have been a great opportunity for 1st time homebuyers to jump into the real estate market with only 3.5% of the sales price required for the down-payment. 

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Credit Score Report Shows Mixed Results

Tuesday, 31 March 2009, 14:46 | Category : Uncategorized
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Record low interest rates on home loans are finally getting the attention of new home buyers who may have been on the sidelines in recent years waiting for signs of the housing recovery.  Earlier this week, FICO released a new report showing the affects of credit line reductions.  The credit score study measured the credit card limit cuts as well as the subsequent impact to consumer’s FICO credit scores. The study is the first of its kind since credit card issuers began to heavily ramp up their credit limit reduction activity in early 2008.

In a interview by telephone, home financing tipster, Jason Cardiff said, ”I understand why the banks are cutting credit lines, but for many homeowners trying to qualify for a refinance, the 20-40 points they lost often pushes them out of the range for refinancing contention.”  Cardiff continued, “To make matters worse, many credit lines have set up alerts in their system when their credit card customers’ fico score declines or when their other credit lines percentage of available credit diminishes and they react by cutting the credit limit again.”  Clearly the train reaction can be devastating to homeowners looking for a mortgage solution.  

Cardiff considered some note-worthy points of the credit report study by FICO: 16% of the U.S population had their overall available revolving credit reduced between April and October of 2008. With credit bureau databases holding 200+ million consumer credit files, this would seem to indicate that at least 32 million cardholders lost some of their credit limits during the study timeframe of April 2008 through October 2008.

The Fair Isaac report found that 10 million consumers acknowledged that their credit limits were reduced by a credit card company or home equity lender.  The financial companies that hold the debt on these credit cards claim that the maximum revolving debt for these accounts changes “because of some sort of risky credit activity including late payments, accounts in collections, or a negative public record added on their credit reports.”  However thousands of consumers with good credit scores reported to have their credit lines cut or significantly reduced without any changes in the credit profile.  Many of these consumers also claim that the reduction in credit limits caused their credit scores to drop on average of 40 points. 


Read more of the article > Does Credit Report Study by FICO Consider the High Cost Regions?

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NAACP Sues Leading Mortgage Lenders

Tuesday, 17 March 2009, 12:27 | Category : Bad Credit Loan Tips, Mortgage News, Published Home Financing articles, Subprime Home Loans
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The NAACP, contending that several major mortgage lenders forced African Americans into bad mortgages that sparked a foreclosure crisis, filed a class-action suit last week in a Los Angeles court. Among the culprits, says the nation’s largest and oldest civil rights organization, are Wells Fargo and HSBC, which steered Blacks into bad credit mortgage loans, even in cases when their credit qualifications such parameters as credit scores, incomes and down payments were better or identical to those of “White” borrowers.

Watch Video on NAACP Sueing Wells Fargo and HSBC for Discrimination

African-American homebuyers have been nearly four times more likely to receive a bad credit home mortgage loan than White borrowers, and six times more likely to get a subprime rate when refinancing mortgages, NAACP co-lead counsel Austin Tighe told the Associated Press. The lawsuit is “totally unfounded and reckless,” argues Melissa Murray, vice president of corporate communications for Wells Fargo & Co., whose bank is receiving federal bailout funds. “We have never tolerated, and will never tolerate, discrimination in any way, shape or form in any of our business practices, products or services.”

Officials at HSBC declined to discuss specifics of the case, saying it does not comment on litigation, AP reported. “HSBC stands by its fair lending and consumer protection practices, and we are confident that we are treating our customers fairly and with integrity,” said Neil Brazil, vice president for public affairs. The NAACP also has lawsuits pending against a dozen other subprime mortgage lenders.

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How Will Obama’s Mortgage Rescue Plan Affect You?

Monday, 9 March 2009, 18:23 | Category : Bad Credit Loan Tips, Foreclosure Prevention Tips, Mortgage News
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Housing industry researchers say the U.S. Treasury Department’s $75 billion “Making Home Affordable” plan likely will help a host of borrowers wounded by rising unemployment rates, high levels of credit card debt and diminished property values nationally.


John Berlau on Obama’s Mortgage Rescue Plan


Homeowners who aren’t behind on house payments, but who have suffered financial hardship also stand to benefit. So could people who are in default and need more affordable mortgages. Even some people who own vacation or investment homes could benefit by refinancing at low interest rates.

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Home Loan Workouts Available for Millions of Struggling Homeowners

Home Loan Relief with Federal Loan Modification Programs


The Loan Modification Outlet provides mortgage relief with loss mitigation opportunities with negotiated loan workouts that will lower the interest rate on your existing home mortgage. Let LMO help you negotiate an affordable mortgage payment with companies like Bank of America, Countrywide, Citi Bank, Chase, WAMU and Wells Fargo. We suggest foreclosure prevention solutions that preserve your homeownership with renegotiated home loan payments that meets your current budget!


The worst value stricken cities are located in the where the sun shines bright. Riverside, San Diego, Orange County, Los Angeles and Las Vegas, 61.4% of all primary residence homes are underwater.

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Rebuilding Confidence in Credit Markets with Home Loans

Over the last few years, mortgage lenders have tighten the lending guidelines for home loans to the point where very few people actually qualify to refinance their home.  Bill Stone, of PNC Wealth Management, discusses how long it will take to see a return of confidence in the credit markets. 

Will the financial rescue package help lift America out of the recession?  Does the economic stimulus package go far enough to help distressed homeowner get back on their feet and avoid foreclosure?  How long will it take for TARP to help revitalize credit markets?  Consumer confidence remains weak, so easing home loan guidelines should help.

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Fed Agrees to Purchase Bad Credit Securities and Keeps Key Interest Rates Near Zero

Fed Agrees to Purchase Bad Credit Securities and Keeps Key Interest Rates Near Zero
Federal Reserve committed to buy bad credit mortgage securities and treasuries if deemed effective; Fed says mortgage rates to remain low for “some time”; Fed ready to expand purchase of housing debt by buying or insuring defaulted home loans.

Watch the Mortgage Financing Analysis by Richard Dekaser of National City Bank.

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1st Time Home Buyer Loans Are Still Available

Interest rates are low but if you are a first-time buyer, is the situation is different? Do you have enough cash for a down payment — at least 3.5 percent for a Federal Housing Administration loan, as much as 20% for a conventional mortgage or FHA home loan. — plus closing costs?  Bad credit home loans are not as readily available in 2009, but FHA still offers new home financing to borrowers with poor fico scores if the applicants have significant compensating factors.  Is your job or career relatively stable?  “Now is a much better time for home financing than a year and a half ago,” said Chris Toadvine, a certified financial planner in Orlando and president of the Financial Planning Association of Central Florida. “I think home prices may fall a bit further, but if I were a buyer, I would not be trying to time a bottom.”

From a dollars-and-cents perspective, it’s certainly a buyer’s market. Asking prices for Orlando-area homes have not been so low at any time in the past four or five years, and the number of properties on the market is still at or near record levels.  “There’s a substantial amount of inventory still to be sold,” said Hank Fishkind, a private economist who analyzes the Florida and Central Florida real-estate markets for Attorney’s Title Insurance Fund and other industry groups and companies.

Foreclosures news continues to document the discounted homes for sale and these mortgage defaults will continue adding to the volume of homes for sale and keep downward pressure on prices throughout the year, Fishkind predicts, though he notes that the rate of increase in the number of foreclosures is now slowing.  The median sales price for existing homes in Central Florida has fallen about 30 percent in the past year, to well below $200,000. Prices are now back to levels last seen in the spring of 2004. New-home prices in the Orlando area have dropped about 20 percent from their 2006 peak, according to some industry surveys, to just more than $300,000, and are still heading down.

As a result, homes are much more affordable now than they were only a year ago. For example, a first-time homebuyer with the median household income of $34,947 in January 2008 had only 75 percent of the income needed to afford the median-priced existing home, which cost $188,275 at the time. But as of two months ago, a first-time buyer making the median of $35,334 had 96 percent of the income needed to afford that median-priced starter home, which by November cost $141,971.  Denise Kovach, a certified financial planner with Certified Financial Group Inc. in Altamonte Springs, said that, for first-time homebuyers who do not have to sell an existing house, this is a decent time to consider making a move. “As with the stock market, usually the best time to buy is when everyone is feeling most pessimistic,” she said.

Those first-time buyers can take advantage of a relatively new federal tax credit for primary residences purchased by July 1, 2009. The credit reduces your income tax dollar for dollar as much as $7,500, with the size of your credit depending on your home’s purchase price. It’s actually more like an interest-free loan from the government, because the IRS “recaptures” the credit during the next 15 years, or when the home is sold.  Read the original article>

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Home Buying & Financing Your 1st Home Loan

If you believe you’re old enough and have a secure job, but you are nervous, but you feel ready to take that huge leap into the real estate market.  Financing your 1st home can be difficult. You don’t have home equity in an existing home to apply toward a down payment. Not to worry though.   Everyone who has ever purchased a house has stood in your shoes. There are some simple steps to ensure that you will be able to buy your first home, even without help from your parents:

Get pre-approved for a home loan. It’s easy if your credit is good (if it’s not, see my last column). Go to a licensed mortgage broker. I recommend an independent broker. They will have many more options than a bank. Be prepared with 2 years of tax returns. The application takes about 20 minutes and you should have your answer within a couple of days at the most.  If you have poor credit scores, make sure you are approved for bad credit home loan options with FHA or a subprime lender that puts it in writing for you.

Establish your budget.  Getting a pre-approval may not be enough anymore. Only you know you know your own spending habits. Can you afford to make that jump from $1000 per month in rent to a $2000 PITI (principle, interest, taxes and insurance) payment? Ask your mortgage lender to help you or use this affordability calculator.

How to Get a First-Time Home Buyer Loan > 


Do not start shopping until you are pre-qualified with a written pre-approval letter in your hand. Most real estate agents won’t even show you property without a pre-approval letter from a mortgage company. You don’t want to waste their time, but more importantly, you don’t want to set yourself up for disappointment. There’s nothing worse than finding the perfect house and then realizing that everything within your price range pales in comparison.  You will need to a documented saving for the deposit and down-payment. In an ideal world, you would have a 20% down-payment and a few extra thousand for closing costs. However, very few people are in that situation, so the FHA loans that cover 96.5% of the home, with closing costs built in. There are also some grants designed to help first time home buyers, who are defined as anyone who hasn’t owned a home in the last three years.

Make a list of what you need in a home, not just what you want. Do you have children or are you planning on having they in the near future? Then good schools and low crime rates will probably be a larger priority than proximity to nightlife. If you’re looking to green your life, then access to public transportation will be a priority. Are you prepared to maintain the property? If not, you might want to look at condos or townhomes, where outside maintenance is taken care of for you.  For example, if you have a dog, might want to consider a house over a condo. How many bedrooms do you need?  Read the complete article>

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Pushing For Homeownership Backfired

Tuesday, 6 January 2009, 8:48 | Category : Published Home Financing articles
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One of the central themes that I’ve written about extensively over the course of the past few years here at HousingWire is that the current mess isn’t the result of any one single group — there are, of course, now no less than 25 books out there that you can buy that provide some detail on these sort of claims. But the one group that has clearly been given a free hall pass, at least thus far are consumer advocacy organizations.

In June of last year, HW published commentary that shed light on just how involved many advocacy groups really were in driving the push towards greater homeownership, particularly in lower-income geographies and minority-heavy neighborhoods. I suggested then that the push towards ever-greater homeownership, particularly in minority communities, was aided and abetted in most cases by the very same groups now indignantly suing lenders for so-called “reverse redlining.”

On Monday, the Wall Street Journal caught up with this theme in a story that looks at how homes were marketed to the Hispanic community as part of the Bush administration’s vision for the “ownership society.” The story focuses on California Rep. Joe Baca, chairman of the Congressional Hispanic Caucus, but the message within is a bit broader: that many of the so-called advocacy groups now indignant about lending practices in their communities actually helped push their constituents into the muck to begin with.


Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the U.S. Census Bureau. Over that same period, homeownership nationally grew by 8%. In 2005 alone, mortgages to Hispanics jumped by 29%, with expensive subprime mortgage loans soaring 169%, according to the Federal Financial Institutions Examination Council.

An examination of that borrowing spree by the Wall Street Journal reveals that it wasn’t simply the mortgage market at work. It was fueled by a campaign by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, who all were pushing to increase homeownership among Latinos.

A spokesperson for the Center for Responsible Lending told the Journal that “lenders were seeking out those borrowers and charging them through the roof.” Perhaps, but it was also often done hand-in-hand with community groups, and those through-the-roof fees were often charged at the hands of brokers that represented the interests of the communities they allegedly served: agents and brokers, for example, that were members of the National Association of Hispanic Real Estate Professionals. Read the Complete Paul Jackson Article >

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Saturday, 3 January 2009, 18:43 | Category : Uncategorized
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