This graph is a good indicator of what is to come (and when). It shows that subprime ARM resets will hit their peak in the next few months, while the Option ARMs, Prime ARM, and Alt-A ARM resets will peak in the next 36 months or so.
The sheer numbers are staggering, especially in the subprime market: $35 billion in subprime ARMs will reset in the coming months, and I believe that these are the problem loans. I'm sure that a sizeable amount of these loans are high LTV mortgages, and in a declining market, these loans will be nearly impossible to refinance, whether FHASecure is available or not. Keep in mind that HUD estimates that only 250,000 borrowers will be able to qualify for FHASecure.
I guess the good news is once we get past the next 6 months or so, the market should be in better shape. Most Option ARMs, Prime ARMs, and Alt-A ARMs have lower LTVs and higher credit scores, and for the most part, these borrowers should be in a better position to refinance to a fixed rate.
As foreclosure rates rise, more and more "Foreclosure Savers" are popping up. They are, of course, targeting unsuspecting homeowners who are having trouble paying their mortgage payments and are scared to call their mortgage servicer to discuss a payment plan.
According to an article on Yahoo! Finance, scammers are discouraging the homeowners from calling their servicers, and are stating that the calls could result in extra fees being tacked on by the lender. Trust me when I tell you that your current mortgage provider wants to avoid the expense of foreclosure, and would much rather work with you to come up with a solution.
The bottom line (and I know this was posted earlier) is that homeowners should ALWAYS call their servicer FIRST to discuss their options. Don't fall prey to these scam artists who promise to work with your lender to keep you out of foreclosure - they'll end up taking your money from you, and you'll still wind up losing your home!
How do you "buy" a better rate? Great question - let me tell you.
A point -- which equals 1% of the total loan amount -- is an up-front fee that lowers your annual interest rate and total interest due over the life of your loan. So, a one point loan will have a lower interest rate than a no point loan. Basically, when you pay points you trade off paying money later in favor of paying money now. You can pay fractions of points also, meaning you can paying 1.5% to get a lower rate than if you paid 1%.
Several major lenders are offering "No Closing Cost" and "No Fee" loans. This is a great concept for someone who is not planning to stay in their home for very long. Otherwise, it could be a big rip-off! No one, I repeat, NO ONE, does a loan for free. You either pay the fees upfront, or you pay them in the rate. A mortgage planner will look at your long-term goals and help you determine which is the best way for you.
Do you plan on keeping your loan for a while? Then it may make sense to "buy" a lower interest rate by paying one or more points. In these times of low interest rates, doesn't it make sense to buy your rate down as low as possible? Chances are, you won't ever be refinancing to get a lower rate again! Not only that, but points paid on a loan are usually tax deductible, depending on your income bracket (check with your CPA or tax preparer for details).
There are a variety of rate and point combinations available. When you look at different loan programs, don't look just at the rate -- compare the whole package. Federal law requires lenders to publish their loans' Annual Percentage Rate, or APR. The APR is a tool used to compare different terms, offered rates, and points. I can't count the number of times clients have thought they were getting better deals, until I told them to look at the APR, which tells the real story!
On August 29th, 2005, I was sitting in a hotel room in Fort Walton Beach, FL, with my wife, my best friend, and his wife. We were attempting to watch the news between power outages, sitting in the sweltering heat, and listening to the wind rage outside. The air conditioner had given up the ghost long before, due to the amount of sand it had been force-fed by the winds of Katrina. When the electricity was on, we were able to catch glimpses of the destruction that was being wrought by this powerful storm. There was news from New Orleans about the levees breaking; there was news from Mobile about flooding downtown, but there was no news from Biloxi whatsoever, which meant that either by some meteorological anomaly the MS Gulf Coast had been spared, or that the news crews were unable to report due to the extreme weather conditions there. It turned out, of course, to be the latter.
We returned to Biloxi on Tuesday, August 30th, and the two and a half hour journey took nearly eight hours, due to road closures and detours, fallen trees and downed power lines. We arrived on the coast about an hour before dark, and began to visit the properties that we owned. I cannot put into words the destruction that met us, and the pictures that I have taken barely convey the sights that we saw that day and the days thereafter.
The entrance to the condo that we own in Gulfport, MS was littered with 2 feet of debris from the storm surge. Being only 1 block from the beach, the condo took in 5 feet of water, but the structure itself remained intact. In walking around the property and the surrounding homes, we saw the tattered remains of peoples lives: pictures; articles of clothing; toys (including a stuffed animal still playing a song); and vehicles buried in debris.
We made it home just before dusk, and on the way there, I feared the worst, because the sheer destruction of the area was incredible. We carefully navigated around fallen trees and debris and pulled into the driveway of our home. In walking around the property, I noticed a water line around the bottom of the chain wall that was only 2-3 inches high, enough to come up to the front door, but not enough to come into the house. The amazing thing about this is that our house was only 1 block from the bay, and every house north of us on the bay side had flooded with anywhere from 12 inches to several feet of water. The interior of our home was largely untouched, with the exception of sagging sheetrock from a few leaks here and there from the roof damage that the home sustained, and the fact that the chimney was ripped off.
As it began to get dark, we went to our friends' home. They wanted to see how they had fared in the storm, and upon arrival, we discovered that they had definitely gotten the worst end of the deal. Their home had about 4-5 feet of water in it, and all of their belongings were waterlogged and strewn all over the place, including the refrigerator, which was flipped over in the kitchen.
We went back to our house and spent the night, without electricity or water, which was a delightful experience. The next morning, we got up and drove to Highway 90 (Beach Boulevard) to view more of the destruction. What we saw will forever be embedded in my mind. The first thing I noticed was that there was so much of the beach to see - a beach that had previously been populated with restaurants, casinos, hotels, and gas stations was eerily empty except for a few slabs here and there. The huge casino barges, which weigh several hundred tons, were torn from their moorings and tossed across the highway like they were toy boats. Huge plantation-style homes that had stood for hundreds of years were gone, or reduced to a shell of their former glory. And then there were the coffins - littering the road across from an above-ground mausoleum that had housed hundreds of the deceased. Some were cut in half and thrown onto the beach, others were battered and hanging halfway out of their crypts. The air was heavy with despair and sadness, and there was a smell in the air that I couldn't quite place at first; then it hit me - it was the smell of death.
Over 200 people lost their lives on the Gulf Coast that day, either because they were too old to evacuate, or because they couldn't afford to. There were also those that had lived through Hurricane Camille in 1969, and thought they would never see anything of that magnitude again. Of course, they were wrong.
Over the next few weeks, as the cleanup began, we heard the tales of the people swimming out of their homes to higher ground; of people who watched their loved ones die in front of them, powerless to help; of those who lost everything they owned and had no insurance to cover the damages. When those tales were told, we came to realize one thing: God had blessed us immensely, as undeserving and unworthy as we were, and we are forever in His debt.
Here are a few pics from my collection. They're an indication of what a 30 foot storm surge can do in just a few hours.
Since the start of the year, more than 38,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.
Lehman Brothers has just announced that they are closing their subprime mortgage unit, BNC Mortgage. The move will mean the loss of approximately 1200 jobs in 23 locations. They stated that current market conditions have forced them to reduce its resources and capacity in the subprime market.
There's a simple trick to significantly reduce the length of your mortgage and save you thousands of dollars. The trick is to make one extra mortgage payment a year and apply that payment toward your loan's principal.
This is the method being used by "Bi-Weekly Mortgage Reduction Services" and "Bi-Weekly Mortgage Savings Programs". Only, when you do it yourself, you don't pay a third party unnecessary set-up costs and fees, and you pay it on YOUR schedule, when you have the funds available!
It may not be possible for you to increase your monthly mortgage payment. Keep in mind that most mortgages will permit you to make additional payments to your principal at anytime. Perhaps, five-years after moving into your home you receive a larger than expected tax return, or an inheritance or a non-taxable cash gift. You could apply this money toward your loan's principal, resulting in significant savings and a shorter loan period.
Example:
With a $100,000, 30-year, 6.5% fixed interest rate mortgage loan, the borrower will pay a total of $227,542.98 to pay back the loan in 30 years. That equals $127,542.98 in interest payments.
If the same borrower makes a one-time $5,000 payment the first day of year 6, he/she will pay a total of $204,710.75 and pay off the loan in 27 years (324 months). That's a savings of $22,832.23 in interest.
Of course, there's also something to be said for taking the extra money you COULD pay on your principal balance and investing it instead, which is always a viable option, depending on what your long-term goals are. There are also Mortgage Accelerator programs available for disciplined borrowers who want to pay off their mortgage as quickly as possible.
Contact your mortgage planner today to create a financial plan that's right for you!
USC is at the top as usual, and LSU (GEAUX TIGERS!) is number 2, after finishing strong last season at #3. Overall, the SEC (the toughest conference, in most people's opinions) has a strong showing with 6 teams.
A bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn't mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy have been able to obtain a mortgage, although it is often at a higher rate than someone qualifying for a prime or "A-paper" loan.
While credit card companies may care about what happened before you filed for bankruptcy, many mortgage lenders are more interested in your recovery - what you've done since your filing. It won't happen over night, but here are some tips and things to keep in mind when you inquire about a mortgage with a tarnished credit past:
Give explanations. No mortgage lender is going to ignore the fact that you've filed bankruptcy and he or she will likely want to know the cause of the filing. Your lender will be particularly interested in whether the same situation could happen again. Your chances of being qualified are much better if your bankruptcy was caused by a single event such as a loss of employment or a death in the family, than if it was the result of "just spending too much."
If the bankruptcy resulted from a single event, it is important to show your lender paperwork describing the incident, such as the layoff notice or death certificate. You may also want to bring in court documents to indicate when the bankruptcy was filed.
Demonstrate good money habits now. Many people who file bankruptcy swear off credit altogether, however, it is important to re-establish your credit rating. Get a secured credit card or take on some sort of loan - furniture, a car or a major appliance - to demonstrate that you are able to make timely payments. Make sure you are making other payments (utility bills, cell phone, etc.) on time as well. You won't turn things around in a year but your credit score will improve over time.
Dispute any credit report errors. There's no need to add to your troubled credit history with errors on your credit report. Get a copy of your credit report from each of the three major credit reporting agencies: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. If you encounter any errors, inform the CRA in writing what information you believe to be inaccurate and request deletion or correction. You can also get a free credit report at http://www.annualcreditreport.com/.
Save your money. Lenders may be more willing to loan you money if you've saved up a considerable amount of money for a down payment.
Live within your means. Even subprime lenders (the few that are left) won't risk loaning you money for an opulent oceanfront mansion. Think small when the time comes to look for a home. Smaller homes often mean smaller mortgages.
In summary, don't be discouraged if you have filed bankruptcy in the past, or are currently in bankruptcy. There are still loan programs available to you, and FHA will even allow you to remain in a Chapter 13 bankruptcy while purchasing a home! Most lenders these days are requiring borrowers to be 2 years out of bankruptcy before they can qualify for a home loan, but there are exceptions to the rule.
Don't wait to start re-building your credit, start today!
Many new homebuyers make the mistake of rushing out to buy things to fill their home with as soon as the seller accepts their purchase offer and the lender pre-approves their loan. But there are still a few major hurdles to overcome before the keys are handed out. Here are some things to avoid during the home buying process to assure your transaction goes as smoothly as possible:
Don't make an expensive purchase. It may be tempting to order that new sofa for your soon-to-be living room, but it's best to avoid making major purchases like furniture, cars, appliances, electronic equipment, jewelry, or vacations until after the closing. Financing that furniture with a store credit card or even one of your own credit cards could jeopardize your credit worthiness during the time it means the most. Using cash to purchase big items can also create a problem because many banks take into consideration your cash reserves when approving your mortgage.
Don't get a new job. Lenders like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan - especially if you are going to be making more money. But for some people, getting a new job during the loan approval process could raise some concern and affect your application.
Don't switch banks or move money around. As your lender reviews your loan package, you will likely be asked to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account - even if its just to consolidate funds - could make it difficult for the lender to document your funds.
Don't give a good faith deposit directly to the seller in a FSBO purchase. As a rule, your good faith deposit belongs to you, not to the seller, until the deal closes. Your FSBO seller may not know that your good faith funds should be applied to your expenses at closing. Get an attorney or other neutral party who can hold the deposit or put it in a trust account until you close on the home. Your purchase contract should dictate to whom the funds go should the transaction fall through.
Don't disregard your lenders requirements. You may have been pre-approved for the loan but your work with the lender is far from over. In order to process your loan, you need to meet certain requirements. Your lender will need copies of your bank statements, W2s and other paperwork. It is up to you to get it to him or her as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home.
Don't be afraid to speak up. If you get to the closing table and the loan details have changed, don't be afraid to ask for an explanation! A good lender will inform you about any changes BEFORE you get to closing. Above all, if you're not happy with the loan, DO NOT SIGN the documents! Too many people get coerced into doing a loan that they don't want, all because they're concerned about what everyone will say if they choose not to close. Purchasing a home is a big step; be sure that you are satisfied with what you're getting.
Questions? Comments? Please don't hesitate to contact me!
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How do you "buy" a better rate? Great question - let me tell you.
A bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn't mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy have been able to obtain a mortgage, although it is often at a higher rate than someone qualifying for a prime or "A-paper" loan. 
er time.
Things to avoid when buying a home
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