The Obama Administration Announces New Plan for TARP Funds

The Obama Administration rolled out its much awaited foreclosure-prevention plan they will use the second half of the TARP funds for on Wednesday, saying it could help as many as 7 million to 9 million homeowners meet their mortgage payments. Some of the Key components include modifying the terms of delinquent loans, refinancing underwater mortgages and putting more money into the federal housing agencies in order to keep mortgage rates low. But will it work?

The fact of the matter is that while the housing market may have started the devastating decline of our economy, we now have a record number of people out of work, and even more on the horizon. However, this plan may be a good start as it is a series of targeted interventions designed to help specific groups of borrowers and by doing that, it’s hoped, limit the damage caused by foreclosures both to neighborhoods and to the overall economy.

The idea in this new plan is to use TARP funds to restructure the loans of homeowners who are behind on their mortgages or, and here is where the plan may do some real good, those who are an imminent danger of falling behind. The Obama Administration is keenly aware that up until now, only homeowners that were already behind on their payments qualified for government assistance, which only made the problem bigger. Now, those of you that have been struggling to keep up and have somehow managed to scrape by have a chance of reducing your mortgage as well. Up to now, homeowners had to wait to default before they could even get a return phone call from their bank. However, some people are saying that this new plan won’t do a lot of good because it gives much of the power to make the decision on who gets help and who doesn’t to the lenders.

The Obama Administration accounted for this though and added incentives to lenders that cut the interest rate on loans to help reduce homeowners’ monthly payments. The plan is to pay lenders $1,000 every time they do this, but they have to reduce the borrowers’ payment down to 38% of their gross income, which is quit a bit. But the $1,000 will be paid out for three and five years for keeping the loan current. This doesn’t sound like much of an incentive, but given the economic pressure banks and lenders are under, every little bit helps.

Another criticism of this plan for the second half of the TARP funds is the fact that the Obama Administration didn’t make it mandatory for lenders to make these deals, and with the lack of help many homeowners are getting, the fear is banks won’t spend a lot of their time on these restructured mortgages. But given the fact that policymakers had to walk a fine line between helping borrowers who have been caught off guard by tricky mortgage products and falling house prices and those who simply made imprudent decisions and genuinely can’t afford their homes, it is at least a step in the right direction. In order to avoid propping up the second group, Treasury won’t subsidize loan modifications that reduce the interest rate below 2%. If you can’t afford a 2% mortgage, in the eyes of the government, you can’t afford your house. The plan also doesn’t apply to investors or people with jumbo mortgages — those, historically, larger than $417,000. Loans for homes that would be more valuable to lenders if repossessed won’t get modified.

As to how much the Obama Administration’s new plan will help, that remains to be seen. However, we all know how dismal the results were for the first half of the TARP funds, so we should at least be better off than we are now. Mortgage lenders will have to really get on the ball in order for it to work, because deciding who gets the reduced interest is in their hands. How about you homeowners? Do you think this plan will help you out? How about the lenders out there; do you think it’s too much pressure on you? I really want to know what the rest of you think about this plan, and if you believe there was any better alternative. Please leave your comments, questions and suggestions, and let’s keep the conversation going.

Fannie Mae and Freddie Mac Roll Out New Deal for Homeowners

There’s finally some good news on the real estate front; “Fannie Mae and Freddie Mac have directed their network of servicers to halt all foreclosure and eviction proceedings between Nov. 26 2008 and Jan. 9, 2009, meant to give a recently announced rescue plan time to work,” according to money.cnn.com. It’s been a few months since these mortgage giants got bailed out by the government, and this is the first sign that they are finally doing something to try and at least help, if not fix, the problem they helped create in the housing market.

This action is meant to keep homeowners afloat while they await the start of the Streamlined Modification Program, which begins Dec. 15, and will allow homeowners behind in their mortgage to get a modified mortgage to no more than 38% of their gross incomes. Some people may feel as though this is bailing out those who never should have gotten into the real estate market to begin with, but the fact is that home foreclosures hurt us all, by lowering home values and draining our economy.

Notification to the homeowners who have already received eviction notices and/or have homes up for auction, should begin immediately, which should make for a much brighter holiday season. Unfortunately, homeowners who are in jeopardy of eviction between Nov. 20 and Nov. 26 will not get to benefit from this new deal; however, they may qualify for other deals offered by FHA.

This is good news, to be sure; however, it will boil down to a small percentage of homeowners in the shaky real estate market, even though Fannie Mae and Freddie Mac hold the mortgage for approximately half of the people currently in the housing market.

There are several factors that will go into the eligibility of this new deal. First, homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy. Again, it’s a good offer, but will only end up helping a small percentage of people, so I wouldn’t say it’s going to put a huge dent in the housing crisis.

On the up side, something has to be done and at least this is a start. The real estate industry is a vital part of our economy, and even the global economy as a whole. Things will get better in the housing market, but it may take a bit longer than we originally thought. Holding off on at least some of the foreclosures out there, is a good first step.

 

     

What Happens To IndyMac’s Customers Now?

Now that the government has taken over IndyMac Bank, what happens to all their customers? That’s the question I’m sure thousands of people are asking themselves today. With the housing market already in a downward spiral, the seizure of one of the nation’s top mortgage lending companies only adds to the fear and confusion everybody in the real estate business is feeling, not to mention all the homeowners who got their mortgage through IndyMac. Even worse is the fact that IndyMac also has thousands of customers who bank with them.

 

For those of you who have bank accounts with IndyMac, you will still be able to access your account by phone or the internet and you will still be able to use your ATM cards, debit cards and checks. Although the bank is closed over the weekend, they plan on opening up Monday. While this is shocking news to many in the housing market and real estate industry, a lot of people that do business with IndyMac may have seen the writing on the wall. After IndyMac slashed over half their jobs and their stock went from as high as $50 per share to 28 cents, about $100 million depositors began withdrawing their money.

 

 According to John M. Reich, director of the OTS, “This institution failed Saturday due to a liquidity crisis”, and “although this institution was already in distress, the deposit run pushed IndyMac over the edge.” So, it looks like IndyMac is yet another victim of the housing market crash. There appears to be mass hysteria surrounding real estate, which has now spread out to every aspect of our financial lives. With gas prices rising, the cost of groceries going up and jobs being cut, I can’t say that I blame anybody who feels their money may be safer tucked underneath their mattresses.

 

But for those of you who still have your money tied up in IndyMac, the FDIC has set up a toll-free phone line at 866-806-5919, and a page on its Web site for bank customers to keep up with what is happening and what they need to do. But customers of IndyMac are desperate to find out what will happen with their money.

 

Depositors’ accounts at IndyMac are insured by the FDIC’s Deposit Insurance Fund up to the statutory limits. Customer questions regarding the institution, including questions about federal deposit insurance coverage, should be directed to the FDIC at 1-866-806-5919. The hotline’s recorded message explains the bank’s status. The message states that Internet banking has been suspended for the weekend, but online banking should be available Monday. The OTS has appointed the FDIC as conservator of the newly chartered successor institution and will transfer most of the assets and liabilities of IndyMac to the new thrift.

 

Now I know this still doesn’t answer all of your questions, but I get the feeling the FDIC wants to try and ensure they don’t lose anymore money either. As for the people who have outstanding mortgage loans with IndyMac, trust me they’ll find somebody for you to give your money to. While this news is less than helpful for the already pressured housing market, it could actually end up having a silver lining for those of you who are looking to purchase real estate. Foreclosures don’t do the mortgage lender any good, which means they want to get rid of their overstock and fast. That usually means pretty good sales. I know it doesn’t look good folks, but I strongly believe we are on the cusp of a turnaround.

 

If you bank with IndyMac, you should call the hotline for up-to-date information. If you are thinking about looking around for a good deal on a home, visit Mahler & Associates for all your appraisal needs.

 

     

How to Beat Mortgage Fraud

For many people, the current housing market is the perfect time to buy. It may sound counterintuitive, but those extremely low interest rates during the height of the housing bubble actually caused the cost of real estate to be much higher than it was actually worth. Real estate appraisers were bringing in reports that appraised homes for upwards of $500,000 and more. Those same homes today are appraising for around $300,000, so you can see how much the times are a changing. That’s the good news; the bad news is that there is still a lot of mortgage fraud going on. So, if you are looking to get into the housing market, and you want to make sure you don’t get caught up with a shady mortgage lender, here are a few tips that may help.

 

Fraud in the mortgage industry has been in the news a lot since the crash of the housing market, and has caused many people who were thinking about getting into real estate to back off. One of the biggest problems is the fact that so much of the paperwork you have to sign in order to get a mortgage loan is filled with language that is difficult for the average person to understand. There’s also the fact that many mortgage lenders push a real estate appraiser of their choosing on their clients. Sadly, many of those appraisers were being coerced into bringing in the numbers the mortgage lender wanted, which contributed to the high prices in the housing market.

 

Fortunately, there are plenty of reputable real estate appraisers and mortgage lenders out there that will help you get into the housing market in a way that is best for all concerned, not just their bottom line. But it is still good to have some knowledge of your own, before you sign those papers. In fact as far as papers go, make sure you read the documents you are signing thoroughly.

 

You may think that’s an obvious piece of advice, but you would be surprised how many people rely on their mortgage lender to explain everything to them. While the lender should be there to help you understand all the legalities and professional jargon, it is really up to you, the buyer, to make sure you aren’t signing your life away. This may mean that you take longer to sign with the mortgage lender than they may like, but this is your home and it is your right to take as much time as you need to ensure you thoroughly understand every part of the contract. You may even want to hire your own real estate appraiser to make sure you are paying the fair market price for your home. You may even want to consult a HUD approved housing counselor who can help you look over the loan application.

 

Another biggie is making sure you are being completely honest with all the information you are providing on the mortgage loan application. It is considered fraud to provide false information on any contract, and it isn’t worth getting your real estate taken away, or worse. That’s another good way to gauge how good your mortgage lender is, because if they suggest you fudge anything, they are probably doing the same to you. If this happens, I suggest you find yourself another lender who specializes in getting people into the housing market.

 

You wouldn’t let an unlicensed doctor operate on you, nor should you be dealing with a mortgage lender, real estate appraiser or real estate agent who isn’t licensed.

Taking the time to review the background of your real estate agent and broker can prove to be invaluable. Make sure you do this before you ever provide any personal information or sign loan documents. Finding out if there is any pending litigation or complaints will help you decide if they are the best people to do business with.

 

One final tip; check out how much the mortgage broker you are dealing with is making off of your loan. Don’t’ worry about offending the lender; often times the paycheck they earn from your loan is dependent on the interest rate you get for it. You can see how this may influence the deal you are getting.

 

Buying a home is a huge investment and should not be taken lightly. Follow your gut, if something doesn’t feel right it probably isn’t. Find a reputable mortgage lender, real estate appraiser and real estate agent, and you will be able to reach your dream of becoming a homeowner, even in today’s housing market.

     

Is a Reverse Mortgage Right for You?

With the instability of the housing market, and in fact the economy in general, many people are looking into reverse mortgages. But before you decide whether a reverse mortgage is right for you, you should know what it is. Simply put, a reverse mortgage is a type of home loan that allows you to convert a portion of the equity in your home into cash. This means that the equity you have built up in your real estate can be paid to you. The best part is that, unlike traditional home loans, no repayment is required of the homeowner until and unless the home you’re in no longer becomes your primary residence. Sounds great…right? One of the places you can go to for a reverse mortgage is HUD. Here are some answers to frequently asked questions, so you can decide if this type of deal is right for you.

 

The first thing you want to find out is if you are eligible for a reverse mortgage. Right off the bat, you should know that this type of mortgage, at least through HUD, is only for people 62-years-old and older. You also must own your home, or real estate, outright, or have a mortgage balance that is low enough to be paid off with part of the reverse loan. You can see why this type of loan isn’t for everybody. But, if you are one of those in the housing market who qualify, read on.

 

If you go through HUD for your reverse mortgage, your new loan will be insured through FHA, which is a good thing because this means your loan will be more secure than those that are floating around the housing market right now. But there are restrictions on the types of homes that qualify as well. For example; your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible as well.

 

Now, you may be asking yourself what the difference is between a reverse mortgage and a home equity loan. With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less.

 

On to the important question…how will you receive the payments from your reverse mortgage? There are several options for payments. You can choose tenure, which is an equal monthly payment for as long as at least one of the signed borrowers lives, term, which is an equal monthly payment for a fixed period of time, a line of credit, which is installment payments that the borrower chooses, modified tenure, which is a combination of a line of credit with monthly payments or modified term, which is a combination of a line of credit with monthly payments for a fixed period of time.

 

So you can see a reverse mortgage isn’t for everybody, but can be a good option for those who qualify. For more information check out HUD’s website or contact a HUD adviser.

 

If you are thinking about buying a home, selling a home, refinancing a home or just want to know the current value of your home, please visit us at Mahler & Associates for all your appraisal needs.

 

 

      

How to Prevent Foreclosure

Having a home foreclosed means more than losing a house, for many families, it means losing their future, losing security and losing their place in the American Dream. Sadly, we are seeing more and more foreclosures everyday. But here’s a little secret…mortgage lenders don’t want your house; they would much rather be able to make a deal that will keep you in your piece of real estate. So take heart, because there are steps you can take to help prevent foreclosure.

 

More than 3,000 times daily, struggling homeowners call the foreclosure Help Hotline for advice on how to save their homes.

And so begins the complicated and time-consuming foreclosure prevention process. But that’s just the first step, because you can enlist the aid of mortgage servicers, which are the companies that manage the loans, and get a foreclosure prevention counselor to act as the go-between for you. Let’s face it most average people can’t even begin to understand the jargon contained in all the paperwork mortgage companies push their way. In fact, that’s how most people got into the mess they are currently in with their home loans.

 

The good news is that homeowners and mortgage lenders have a common objective, which is to correct the situation before catastrophe strikes. But beware, because the best solution for the mortgage lender isn’t always the best solution for the homeowner. As to whether or not you will be able to prevent foreclosure really boils down to the numbers. If keeping an at-risk borrower in their home is going to cost the lender more than a foreclosure will, that homeowner is usually out of luck. The good news is that foreclosures are expensive – at least $50,000 according to the Center for Responsible Lending. So here’s what you need to do.

 

Before any mortgage lender will consider helping you prevent foreclosure you must document your financial situation. Servicers request details about a borrower’s income, as well as what the family spends on food, clothing, car payments, credit card debt, and student loans, and you will have to submit copies of pay stubs, bank statements, and utility bills to back up your claims. If you had some type of life-altering event happen that caused you to get behind on your mortgage payments, you can also submit a letter that explains the situation.

 

Preventing a foreclosure doesn’t mean life will go on as usual, because in order to stay in your home, you will almost always have to cut back on other expenses. For example, your credit counselor may suggest you get rid of cell phones, cable television and eating out. This scaled back budget will help the team you’re working with come up with a dollar amount that is left over after all your reasonable expenses have been deducted from your income. That will also include some money for emergencies, which is usually around $200.

 

The mortgage company wants to see that you can pay all your expenses with a little left over. So if a homeowner has $3,000 in monthly income, $1,400 in household expenses and puts aside $200, which leaves $1,400 for a housing payment. It’s just a matter of simple math to figure out, but painful to put into place. But it is worth it to save your home. After the numbers have been figured out, the mortgage lender and your counselor will review the options you have for saving your home; options that will cost the mortgage lender as little as possible.

 

The solution most lenders like is a repayment plan, which allows them to make up missed payments; after all they are a business, so you wouldn’t expect them to take a total loss. Besides the repayment plans are better for homeowners as well because it helps them get back on track after emergency expenses like medical bills have put them in a financial mess. Think of it this way, this whole process will not only help keep your home out of foreclosure, it will also help curb excessive spending and put you on a reasonable budget, which can help ensure you don’t end up in a financial crises again.  

 

Another option is to get a new loan, which actually involves restructuring your current loan. These mortgage modifications require sacrifices by investors, since some of the loan’s value has to be written down. Investors accept this if the alternative, foreclosure, would be even more costly. It’s all about the bottom line, and the bottom line here is that in order to prevent your home from being foreclosed, you must show the mortgage lenders that it will cost them more to foreclose on you than to make a deal.

 

One thing is for sure: If a borrower is fortunate to get an offer for a workout, the servicer isn’t going to negotiate beyond that. By that point, workouts have already gone up the line for approvals from the mitigation specialists to department managers and directors to sign off on. So, if you are in fear of foreclosure, call the foreclosure help hotline, get a counselor to help navigate you through the process and try to work with your mortgage lender.

 

If you are thinking of buying a home, selling a home, refinancing a home or understanding the current value of a home, please visit us at www.iappraiseforyou.com for more information.

 


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More Good News for Home Buyers

Here is some good news regarding mortgage applications, finally! According to the Mortgage Bankers Association, mortgage applications rose 3.6% for the week ending June 27th, and that’s not all. Thanks, in part, to the prices of homes dropping (thank god) people are starting to get over the shell shock they suffered when the housing market crashed. Real estate appraisers are noting that they are starting to get much more business from home buyers wanting to know if the houses they are purchasing are being sold for fair market value, as opposed to the last several years, which saw most of their business geared toward appraising homes in order to discern the going rate to sell a house.

 

Shout hallelujah because a new day is dawning, and it is slowly starting to become a goldmine for home buyers. Now that being said, you still have to make sure you research the real estate market thoroughly, because it takes some time for prices to hit rock bottom. You also have to make sure you are dealing with reputable real estate agents who will negotiate the best deal for you, real estate appraisers who are on your side (not the sellers) and mortgage lenders who explain the details of your loan in language you can understand. And listen up, because mortgage applications weren’t the only things that went up.

 

Refinance applications accounted for 36.8% of total applications, compared with 36.3% a week earlier. This means current homeowners have been able to renegotiate their ever-rising loans with mortgage lenders to ones that are more stable. So, we have more people buying homes and more people who are going to be able to stay in the homes they bought during the height of the housing market bubble. This is also great news for people in neighborhoods that are experiencing an influx of foreclosures and people who are simply walking away from homes they can’t afford. When you start to see abandoned homes peppered throughout a neighborhood, you start to see a decline in value.

 

So why all this encouraging news…well there are several reasons for it. For starters fixed-rate mortgages went down; for example a traditional 30-year fixed-rate mortgage fell to 6.33% from 6.39% the week before. More people are able to refinance because the 15-year fixed-rate mortgage fell to 5.9% from 5.95%. I know, you may be saying to yourself, “but that’s much higher than those interest rates during the peak of the housing market.” Yes they are, but guess what…those interest rates were unrealistic, they were variable rates, which means once they started to rise, your mortgage could double or triple and they helped cause the over-inflation of home prices. Real estate appraisers in Los Angeles were reporting values at no less than $500,000, and that was for your typical starter home!

 

So what does all this mean? Well it means it is the era of the home buyer. While you may not be able to make millions flipping homes now, you can move yourself and your family into that home you’ve always dreamed of. But keep this in mind; you should always have reputable real estate professionals on your side. A real estate agent will help you navigate your way through the best deals and neighborhoods, an appraiser will help you understand the fair market value of the home you are buying and a good mortgage lender will get you the best deal.

Your new home is out there, so go and find it.

If you are looking to purchase, sell or refinance a home, please visit us at www.iappraiseforyou.com for all your appraisal needs

 

 

 

 



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