Dear Reader,
An American Dream has become an American Nightmare for some homeowners. As the guidelines for sub-prime mortgages tightens more and more families will have to wait and be patient to purchase their home.
My Thoughts:
The changing of the guidelines is making it more difficult for borrowers to get approved by major financing institutions. I personally don't see any light at the end of the tunnel for the time being. As major financial gurus/financing analysts on CNBC http://www.cnbc.com/ said this past week, it is going to get uglier and no ease is in sight. It is very sad to see homeowners defaulting on their mortgage payments and possibly going into foreclosure and ruining their credit history. One asks, who's fault was it? Was it the lenders? Was it the realtors? Was it the borrowers themselves? What is the feds fault? I think every case is different and no finger pointing should be done. I was very discouraged to see a financial analyst on CNBC state that some mortgage professionals were at fault. I know it is hard for me to swallow that news clip because I am a mortgage professional myself but what an average person sees on tv is what they believe. This is considered the balming game or finger pointing and it should not just be pointed at the mortgage pros.
My Sub-Prime Success Story:
This passed Friday night I received a phone call from a homeowner from Manchester, Connecticut. He told me that his wife had done some research on the Internet and they found me and thought that I seemed like an honest and reliable mortgage professional that they can speak with and possibly work with. He called me and told me that he purchased a home in October of 2006 which is only a handful of months ago. I asked him all the basic questions and I was trying to understand his current lifestyle and financial/mortgage situation. I learned of the following that he was given two mortgages. The first mortgage was a 30 year fixed mortgage at 7.375% which is not that bad but I promised him that I will see if I could save him some money with a better rate/term refinance. He purchased his home with only 5% down so he does not have any equity in the home. He then told me that he received a second mortgage (HELOC) at 13.75% which almost made me fall out of my chair. Not only is this a variable mortgage but it is at an unbelievably high interet rate. I told him that I will try to lower this as well. I told him that let me go do some work/research on my end and that I would call you back with some options for you and your wife. I called him back and told him that I can get him a 7% 30 year mortgage with a second fixed mortgage at 9.125% and he was instantly surprised and happy. He quickly said that his family member who is in the same boat as him is going to call me as well. He was so happy that I was being honest and upfrong with him. Here is the breakdown of the money I am going to save him!
Current Mortgage Payments
1st Mortgage (80%): $320,000 @ 7.375% = $2,210.16/monthly
2nd Mortgage HELOC Interest Only (15%): $60,000 @ 13.75% = $687.50/monthly
Total Monthly Mortgage Payment of: $2,897.66
NEW MORTGAGE PAYMENTS AFTER HE REFINANCES WITH ME:
1st Mortgage (80%): $320,000 @ 7% = $2,128.97/monthly
2nd Mortgage Fixed Principle & Interest (15%): $60,000 @ 9.125% = $613.03/monthly
Total Monthly Mortgage Payment of: $2,742
SAVINGS of $155.66/month!
SAVINGS of $1,867.92/year
SAVINGS of $9,339.60/5 years
Not only am I going to help this young couple save so much money in short term and long term but their 2nd mortgage is not a fixed 2nd mortgage with no adjustable rate and it is also a principal and interest payment so they are paying off their loan as well. Lots of negative news about sub-prime borrowers and this is a success story which needed to be shared with you. Not everyone is in trouble and there are options out there for you if you decide to take advantage of them before it is too late.
Article:
I was just surfing the web and I found this interesting article on Yahoo Finance about the recent sub-prime meltdown so I wanted to share it with you readers today.
Reuters
Housing "nightmare" tarnishes the American dream
Sunday March 18, 12:37 pm ET
By Emily Kaiser
CHICAGO (Reuters) - Jillayne Schlicke's father used to tell her that mortgage banking was the "highest calling of all" because it involved helping people live the American dream of homeownership.
"I learned how to spell 'mortgage' when I was about 6 years old. It was on a flash card," said Schlicke, the daughter of two mortgage bankers and co-executive director of the Ethical Lending Foundation near Seattle.
As a widening crisis over nontraditional and subprime mortgages gone bad threatens to force millions of people out of their homes, Schlicke worries that mortgage brokers are well on their way to overtaking used car salesmen on the list of professions least trusted by consumers.
"We're in ethical chaos in mortgage lending," said Schlicke, who followed in her parents' footsteps and became a mortgage banker and now teaches classes for real estate agents, lenders and consumers on ethical mortgage practices.
"All you have to do is open up your spam (e-mail) bin and you see porn spam, and you see Viagra spam, and you see mortgage spam," she said, adding that the unethical behavior of a small minority of brokers was tainting the entire industry.
"It's going to be a long road to climb out of that gutter."
After the housing market slowed in 2006 and more people fell behind on mortgage payments, the foreclosure stories became front-page news across the United States.
In the last three months of 2006, lenders began foreclosure proceedings on about one out of every 200 mortgages, the highest rate on records dating back 37 years, according to the Mortgage Bankers Association.
Some 1.5 million homeowners will face foreclosure this year, research firm RealtyTrac estimates.
"An American dream has become an American nightmare," said Howard Pitkin, commissioner at the Connecticut Department of Banking.
PAYING FOR THE DREAM
Many people accepted complex mortgages to buy homes that were probably out of reach, but deals such as 100-percent financing and adjustable-rate mortgages that initially carried low monthly payments encouraged excess, critics contend.
"The quality of the loan has everything to do with this crisis," said Josh Nassar, vice president for federal affairs at the Center for Responsible Lending in Washington.
Among the biggest culprits were the so-called "2-28" loans that offered low interest rates and payments for the first two years, but then spiked up. Many borrowers misunderstood the terms or thought they could refinance, and found themselves stuck with mortgages that they could no longer afford.
Nassar and others worry that the true cost of chasing the American dream is adding up quickly. They say soaring foreclosure rates will rip apart lower-income communities where a disproportionate number of those loans were written.
A study released this month by a group of fair housing agencies showed that the price of homeownership was often higher for black and Hispanic borrowers.
The groups examined lending in six major cities including New York, Los Angeles and Chicago and found that black borrowers were 3.8 times more likely to receive higher-cost home loans than were white borrowers. Hispanic borrowers were 3.6 times more likely.
"There's a lot of pain that's occurring and will occur because home ownership was sold at too great a price," said Kevin Stein, associate director of the California Reinvestment Coalition, one of the agencies that worked on the study.
John Taylor, president and chief executive officer of the National Community Reinvestment Coalition, said foreclosure not only devastates the homeowner's credit rating, but also tends to lower the value of properties nearby.
"We're not anti-subprime. There's a role for them. They're important. But these exotic, nontraditional mortgages that are designed to strip wealth need to be eliminated," Taylor said.
He wants lenders to restructure loans to help people stay in their homes, and has called on the Bush administration and Congress to amend rules governing the Federal Housing Administration so that the agency could refinance subprime borrowers' loans that are in default.
For many, any changes would come too late.
Almas Sayeed, an economic policy analyst at the liberal policy group Center for American Progress, said borrowers going through foreclosure had little chance of regaining the financial footing they would need to qualify for another loan.
"This promise of home ownership starts to elude families that tried to buy a home, bought into a loan that they really couldn't afford, and once they foreclosed, the possibility of owning a home again is really, really limited," she said.
For further information on the subprime crisis, see (ID:nN14246848).
THIS ARTICLE WAS TAKEN from YAHOO Finance: http://biz.yahoo.com/rb/070318/usa_subprime_dream.html?.v=3
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Nima Rezvan
203.913.6016
http://www.nimarezvan.com/
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