Would Down Payment Assistance Programs Help or Hurt the Credit Markets?

In the midst of the mortgage crisis, rising interest rates and tighter lending and the disappearance of 100% financing, the last lending option has been taken away for credit worthy borrowers who lack the money for a down-payment

Down-payment assistance programs like

• Ameridream,
• Nehemiah 
• Grant America Program

have offered Phoenix area home buyers....an opportunity to obtain mortgage loans with the help of non-profit organizations and charity assistance groups that contribute the down-payment for buyers to obtain FHA loans.

However,

Federal Regulators believed that these lending practices and programs is actually a contribution or kick-back from the seller. Here's why.

The buyer is including an extra amount (usually 3%-5%) in the price of the loan which is insured by FHA which insures all loans involving down-payment assistance. The money then is a credit funneled from the seller to the non-profit organization to the buyer as a down-payment.

This practice, which has been described as a ‘loophole' in FHA guidelines that allows down -payments from charities has been banned.

Now that sub-prime loans require much higher down-payments, this has become a very popular strategy to get risky loans approved with little money down that are still insured by FHA. Thus, Wall Street buyers of loans can more comfortably buy the debt as any default would be insured by the FHA.

The housing-reform bill eliminatd this practice.

What do you think??  should this be reversed ??

Would Down Payment Assistance Programs Help or Hurt the Credit Markets?

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Contact James Wexler (480) 221-8080 for all your Phoenix | Scottsdale Real Estate needs

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Danger Signs that your Finances are in Trouble!

As real estate prices continue to slide in greater Phoenix and the surrounding towns including Scottsdale, Fountain Hills, Peoria, Tempe, there has been a flurry of activity of an again emerging class of buyers, First-Time home buyers.

Prices have fallen back into affordability levels. Interest rates are still historically very low. And with Federal legislation allowing incentives and exceptions in Fannie Mae and Freddie Mac financing,

...these buyers are who had been for many years, priced out of entry level housing are now the lone winner of they housing crisis sweepstakes.

However, if you are in the market to buy a home using FHA financing, keep an eye out for  danger signs of your personal finances before you buy as financing and purchasing home using FHA loans is now more than ever credit score driven.

• Know your FICO score and what it means
• Review your credit report with a lender sooner than later
• Report mistakes or outdated information
• pay down debt
• do not make an large purchases
• Dont' fall for credit repair scams
• Pay your bills on-time

these may be signs that your finances are in trouble.  If you find yourself ,

• maxing out credit cards
• paying late on debt
• borrowing on cards to pay other cards
• tapping into home equity to pay other debt
• receiving notices that credit lines are being reduced
• HELOC or credit card rates are  being increased

If this might be the case, I encourage you to address the situation sooner than later. And,...

...definitely do not add more debt and leverage and

don't purchase a home before your financial foundation is firmly on the ground.

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©  James Wexler, *Danger Signs that your Finances are in Trouble! *

Contact James Wexler (480) 221-8080 for all your Phoenix | Scottsdale Real Estate needs

Is your Phoenix AZ Builder going bankrupt?

Until now, Phoenix area home sellers where those most severely impacted by the sharp drop in Arizona real estate prices and disappearance of home buyers.

A new victim is emerging; .....Buyers of new home construction.

There are an increasing number of builders who are suffering from this Real Estate recession. As a result, they are having problems with financing and many new home builders in Arizona are filing for bankruptcy protection.

In fact, nationally, there are a record number of builders going broke and looking to the U.S. bankruptcy court for protection from creditors.

The larger builders are suffering less than the small local builders who were caught in the Phoenix, Scottsdale downturn and national mortgage crisis and have less access to capital to weather the storm.

Let me be clear. The vast majority of builders in the Greater Phoenix area are stable and have the assets and resources to remain.

However, there are also a growing number who are struggling to meet financial demands. As a result, they are having difficulty continuing operations.

What does this mean to buyers?

The new victim is the buyer of new construction from these failing builders. Buyers bough lots, picked floor plans and are in the middle stages of the building process of their home. Now, there are increasing instances of builders not being able to finish the homes.

The buyers of new construction are in a unfortunate situation. They have put down a minimum of 10% of the home value. They have prepared to move into their home at a predetermined date. Now the builder is insolvent and filing for Bankruptcy. They do not have the financial capability to complete construction.

This is such a growing concern that Sam Wercinski, Arizona's Real Estate Commissioner, issued a Consumer Alert to buyers of homes form Arizona home-builders.

 

"Homebuyers and their real estate agents have the right to know if a builder is in financial trouble and what the status of their earnest money or home completion is. The Department of Real Estate can help provide this information and give assistance to consumers in need,"

 

The Arizona Department of Real Estate is now posting information on builders who are in bankruptcy or are having financial difficulties so consumers can make informed decisions and take steps to protect themselves.

A list of known builders is available on the Department's website: www.azre.gov Consumers should also reference the Commissioner's Advisory No. 2 on the website's home page which provides guidance for homebuyers, real estate agents and others impacted by a builder ceasing operations.

You can also contact the National Association of Homebuilders (NAHB) or the Arizona Association of Homebuilders for information on local builders financial health.

If you have been considering buying a home from a new home builder, make sure you check the list before making a decision.

If you are in the middle of the home building process, ask your Realtor for an update and information on its ability to continue and complete construction.

Bernanke: " Must back Fannie Mae Debt" !

5 Reasons Not to Buy a home!

I am sure that if you have thought about buying a home and asked real estate agents, co-workers, friends and family the question if now is the time to buy, you have heard this response,

"there will never be a better time to buy".

This may or may not be true. In greater Phoenix, Scottsdale, Fountain Hills, Peoria and many other of the surrounding cities of Phoenix, home prices are down more than 20%. In some place more than 30%.

Real Estate Buyers are asking themselves if now is the time to buy. No one has a crystal ball or clear picture of the future. However, one answer to the question of whether or not now is the time to buy a home is "it depends"!

I am not skirting the question. In fact, "it depends" is the only certain answer. What may make sense for you friends, may not be the right reasons for you and your family to buy a home.

In theory, every time there is a buyer , there is a seller. Thus, 2 people simultaneously having the exact opposite outlook. The reason is not opposite long-term outlook on Real Estate; but simply, different wants, needs, desires and financial conditions at that point in time.

Bottom line; each person's individual situation situation is unique.

Ask yourself these 5 questions, ...

so you can decide if now is "Not" the right time to buy real estate.

1. Will you be in your current job for at least 3-5 years? - If there is any chance of relocation or job change in the near future, I would not recommend you buy with this potential financial instability.
2. Do you see any major family changes, children, divorce or separation in the foreseeable future? children are a large expense and selling a home through a divorce or separation is not an ideal scenario for best results.
3. Will a new mortgage test your financial limits? - there is no reason to work so hard to barely pay a mortgage on a home you cannot enjoy.
4. Do you have at least 6 months of emergency savings in case of unforeseen financial hardships? Make sure that you have savings should an unforeseen event cause short-term problems in paying your mortgage. Losing your home can be emotionally and financially devastating to families.
5. Do you have 10% (20% is better) down payment? - If you cannot get a fixed mortgage payment at a favorable rate, it is likely that you cannot quite be certain enough you will be able to afford your home for more than 3 -5 years.

There are other consideration and questions to ask if you should buy a home. However, it is an important decision. Be prudent and consult with many real estate experts who truly understand your personal and financial snapshot.'

If you are not 100% sure, it probably means you should wait; Remember, there is no last opportunity to buy.

For a list of more important questions you may want to ask prior to buying a home, please contact me directly 480.221.8080 

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Copyright ©  James Wexler,  *5 Reasons - Not to Buy a home! *

Contact James Wexler (480) 221-8080 for all your Phoenix | Scottsdale Real Estate needs

Will mortgage brokers become extinct?

earlier this year, while it was still in business, Wachovia Bank announced that they, (Wachovia) is exiting the General Bank wholesale mortgage origination channel.

This was a shocking follow up from the announcement from Bank America closing its wholesale division of lending through mortgage brokers.

Look no further than www.ML-Implode.com; Here you can watch the wreckage in the mortgage lending business tallied for the world to see.

Industry guru, Rob Blake wrote asked ... are Mortgage Brokers are an endangered species?

He pointed out that If you listen to Mortgage (broker) Industry insiders you will hear whispers that the 'all-powerful' "banking lobby will finally get the Government to legislate mortgage brokers out of existence."

In his very well written article, he outlines the history of the banking industry's "pursuit of the killing off their competition, many believe the banks decided upon a "scorched earth" plan to rid themselves of retail mortgage competition once and for all. The Plan was one they pulled from the S&L play book a decade earlier".

Blake argues that if the Banks "Give the mortgage brokers just enough rope to hang themselves just like the Savings and Loans did!"

Before, you write this banter off as conspiracy theory hogwash, listen to what has happened and the now dreaded word of the year for 2007. Sub-Prime :

Sub-prime loans, Alt-A loans, option-arm 's , etc.. where originated through private banks; specifically depositor banks to start. (many other private and smaller institutions entered the frenzy to make a quick buck from borrowers who mostly could not afford the loans. Although this is another topic for another day.)

Borrowers did not need to go to their local banks to get a loan. They could get these sub-prime loans through mortgage brokers who could virtually originate a loan to anyone who could sign their name.

Borrowers wanted to buy, they wanted these aggressive loans and the bank underwriters approved the loans. Hey, give the customer what they want, right? and, ultimately the deposit banks where approving these loans.

So, in the vast majority of cases, it's not the honest mortgage broker's fault. It's the banks who approved the risky loans. Right?.. Wrong!

You know who is now getting too much of the blame.  -- The mortgage broker.

Currently, their is a vast inspection and audit of the entire industry. Primary focus are new and strict lending guidelines and practices aimed primarily at the mortgage broker.

In fact, not only are the banks not being blamed. They are getting bailed out by the Government.

Think Bear Stearns. Think Fannie Mae. Think Freddie Mac. So on, and so forth , and so on.....

Wow, a deposit bank, JP Morgan/Chase was able to sweep in and buy Bear Stearns . Not only at pennies on the dollar, but with guarantees and assurances and actual insurance from the Federal government. Not bad for Chase Bank, right?

The current and pending Federal Legislation (pushed by the banking lobby) that requires heavy regulation and oversight of mortgage brokers. Mortgage brokers will continue to have less and less product availability. Comparatively to banks, they have unfavorable pricing of rates.

It is not unforeseeable that these factors may ultimately put mortgage brokers out of business!.

Ask yourself, ....why would you go anywhere else but a big bank?

"when the dust settles a few years from now, every one will go to a bank to get a mortgage because that is all that is left.

Often, where there is smoke, there is fire.

I hope he is wrong. However, I am concerned he may be right

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Copyright © James Wexler *Will mortgage brokers become extinct?*

Contact James Wexler (480) 221-8080 for your Phoenix | Scottsdale Real Estate needs

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