Loan modification

August 18, 2008 | Leave a Comment

… is a big buzzword today. The government has been wanting lenders to rework the loans of many troubled homeowners so as to avoid additional foreclosures. The problem is that thus far very few loans have actually been modified.

So what gives. Let’s say you feel like the value of your home has declined somewhat and you’d like to modify your loan. Will the lender just happily lop tens of thousands of dollars from your balance and call it a day. Not really.

But if you are facing a hardship, that might be another story and loan modification could be a potential solution. If your interest rate increased because you took out an adjustable rate mortgage and “didn’t know” that an adjustable rate meant that your payment might increase over time, you can join the chorus of the many who seem to fall into that situation. Even if you did know how an adjustable rate mortgage worked, today’s lending problems work to your advantage because you can probably claim ignorance because you still face financial hardship.

If you or your wife got divorced, lost your job or had unexpected expenses from an illness, you most definitely are facing a financial hardship and should seek a loan modification program with your lender.

Some lenders are more open to the process than others and it might not be easy. Please take note, you’ll have to prove you are facing a financial hardship, not just feeling like you’d like to lower your interest rate or monthly payment.

It will be better than just waiting to be foreclosed but don’t wait until it’s too late. 

Read more from the Department of Housing and Urban Development (HUD)

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Posted by Howard | Filed Under Blog, Charleston real estate, Mortgage / Finance 

All ARM’s are not created equal

May 5, 2008 | Leave a Comment

Understanding mortgage choices for Charleston South Carolina real estateMy annual termite inspection was this morning to maintain the termite bond on my home. (By the way, if you live in the Charleston area, you should maintain a termite bond because it isn’t a question of if but when.)

But the reason for this post was that the inspector (after learning that I am a real estate agent) said that he was considering buying a home but not with an adjustable rate mortgage (ARM) because he felt they were bad.

I’m not surprised because with the media focus on all the problems in the mortgage market today, people have good reasons to not understand that all ARM’s are not created equal.

If you understand that an ARM is fixed depending on the term you select and will not reset to a higher rate for either 3, 5 7 or 10 years and that is how long you plan to live in your home, it might be a good decision to choose an ARM. If you understand that there are limits to how much an ARM can reset after that period and what the maximum rate can be, it might be a good decision. But the most important thing is whether there is a wide enough rate spread between a 30 year fixed rate and an ARM.

Now of course, many people didn’t understand what an ARM really meant while others chose to ignore what they were told because they figured (incorrectly) they could refinance later when their home increased significantly in value (and possibly take some equity out at the same time).

But let’s talk briefly about the really destructive ARM, the Option ARM. With this product, you are paying an artificially low 1% rate the first month and there is no limit on how much the rate can reset the second month. Your payment doesn’t change for the first full year but you owe the difference. But the most evil thing about the Option ARM is that because you have an artificially low payment and it is your option to pay more than the minimum, if and when you don’t (and most people don’t), you owe more on your house after a year than when you bought it (this is called a negative amortization loan). And when the payment increases, you may not be able to afford your home. 

The Option ARM is one of the many reasons that homeowners are finding themselves in financial trouble today and why there are so many foreclosures. But all ARM’s are not created equal and an ARM is not necessarily a bad mortgage choice.

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Posted by Howard | Filed Under Blog, Buyer Tips, Charleston real estate, Mortgage / Finance 

Interest rates and closing costs

May 2, 2008 | Leave a Comment

I’m not sure whether Bank of America innovated the no closing cost loan or they are simply the best known mortgage lender to offer the program but several of my clients have chosen to go with their program and they have been very happy with the program.

Bank of America’s No Fee Mortgage Plus has no application fees, no closing fees (including loan origination fees, attorney fees, credit check, appraisal etc. but does not include prepaids which includes taxes and insurance) and no private mortgage insurance. This can save a buyer many thousands of dollars in upfront costs when buying a home for sale in Charleston.

Now you know nothing is ever free and Bank of America is able to charge a slightly higher interest rate when offering the program. They also hope that they will be able to sell other bank and financial services to borrowers to make more money and that’s certainly ok. Other lenders have followed the market leader and are now offering similar programs.

With a down payment pretty much required in today’s mortgage lending environment, the best thing about a no closing cost mortgage loan is that money that would have been used for closing costs can now be applied to a down payment. If you are a little short of up front funds when buying a home, this is an excellent option to consider. And 30 year fixed rates are still attractive.

I work with an outstanding mortgage professional at Bank of America in Charleston and if this program is something you are interested in, just send an email or call me at 843.343.3004.

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Posted by Howard | Filed Under Blog, Buyer Tips, Charleston real estate, Mortgage / Finance 

Deceptive mortgage practices

March 25, 2008 | Leave a Comment

online mortgage ads An example of a rather deceitful ad disguised as a news article.

A couple of points. The Fed rate cuts have nothing to do with long term mortgage rates and in fact, on several occasions when the Fed cut the Fed Funds rates, both 10 year Treasury Bonds and mortgage backed securities (what mortgage rates are actually based on) were actually higher.

The real monthly payment for a $180,000 mortgage is approximately $1080 for principal and interest at a fixed 6% interest rate. Don’t forget to add approximately $150 to $200 per month for insurance and taxes for a total payment of approximately $1250.

$699 could be your payment for the first month or possibly the first year but certainly not for the life of the loan. Don’t be fooled into thinking you can buy a $180,000 home for $699 per month and don’t forget, you need good credit, your income must be verified and a down payment is helpful.  

This type of deceptive advertising is especially shocking today considering the subprime mortgage meltdown and the corresponding credit crunch. If you are interested in buying a home in the Charleston real estate market, I know several very good, reputable lenders who can offer you the best possible loan rates and will thoroughly review the terms of the loan with you.

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Posted by Howard | Filed Under Blog, Buyer Tips, Charleston real estate, Mortgage / Finance 

Foreclosure data, February 2008

March 13, 2008 | 1 Comment

There is a lot of interesting foreclosure data from RealtyTrac.

First of all, closer to home, South Carolina has far fewer foreclosures than much of the country both by the number of homes and the rate of foreclosure while the media is almost obsessed about the problem and the government is trying to figure out how to help those in trouble.

South Carolina is ranked 37th of the 50 states in foreclosure rates with 698 properties entering some stage of the foreclosure process last month with one foreclosure for every 2762 households in February. In the United States, there were 223,651 homes that entered some stage of the foreclosure process in February which was up 60% from February 2007 with one foreclosure for every 557 homes.

Which states have been most impacted by foreclosures by numbers of homes and and by the foreclosure rate.

RealtyTrac foreclosure map February 2008

Two states, California and Florida have 38.4% of all the foreclosure activity in the United States in February. Five states, adding Texas, Michigan and Ohio to California and Florida have over 50% of all foreclosure activity and ten states, adding Arizona, Illinois, Georgia, Colorado and Nevada to the above mentioned states comprise over 70% of all the foreclosures in the United States.

On a percentage rate basis, Nevada leads in the percentage of all homes in some stage of the foreclosure process followed by California, Florida, Arizona and Colorado. Interestingly, because of population disparity, Texas has a low rate with a lot of foreclosures while Nevada has a high rate despite fewer actual foreclosures.

Clearly, there is a problem. The combination of rapid escalation of home prices in some states that caused borrowers to overextend themselves and ultimately find they could no longer afford the mortgage payments and the economic woes causing job losses and outward migration in the industrial Midwest have negatively impacted the housing markets in those states.

If you are looking for distressed property sales in the Charleston South Carolina real estate market, there are some (sadly, there have been a couple in my neighborhood) but the Charleston real estate market does not resemble anything like the media might be reporting. If you are looking to only buy distressed properties, you really have to look to some of the above named states. Here are the complete statistics for foreclosure activity for February from RealtyTrac.

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Posted by Howard | Filed Under Blog, Charleston real estate, Mortgage / Finance, Statistics 

Funny or sad, it is what it is

March 11, 2008 | Leave a Comment

The housing mess.

 

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Posted by Howard | Filed Under Blog, Charleston real estate, Mortgage / Finance 

South Carolina ranks 39th in foreclosures

January 30, 2008 | Leave a Comment

There is no good news regarding foreclosures, one is too many and millions of homeowners may be foreclosed upon. The only bright news I’ve seen recently is that it is nowhere near a big a problem in South Carolina as it is in other states and the total number of foreclosures in the United States is only 1% of all properties.

According to the latest information from RealtyTrac, the largest publisher of foreclosure data, South Carolina ranks 39th among the states.

Click here for data for all 50 states.

Here is the latest information for South Carolina and the United States:

South Carolina

  • Total foreclosure filings 5038
  • Change from 2006 -27.56%
  • Change from 2005 -33.76%
  • Total Properties with filings 4247
  • % Households (foreclosure rate) 0.220%

Please note: The total foreclosure filings would be higher than the number of properties with filings because a first and a second mortgage would count as 2 foreclosure filings.

United States

  • Total foreclosure filings 2,203,295
  • Change from 2006 +74.99%
  • Change from 2005 +148.83%
  • Total Properties with filings 1,285,873
  • % Households (foreclosure rate) 1.033%

Most interesting are these points. South Carolina foreclosure rates have not increased from either 2005 or 2006 but even more surprisingly, have actually declined. While one foreclosure is bad and 2+ million is worse, only 1% of households in the United States are in foreclosure activity which means 99% of all households are not in foreclosure.

The 10 states with the highest foreclosure rates include states that led the housing boom and the economically troubled Midwest. Nevada, Florida, Michigan, California, Colorado, Ohio, Georgia, Arizona, Illinois and Indiana have the highest rates of foreclosure.

Posted by Howard | Filed Under Blog, Mortgage / Finance 

Congress in action

January 18, 2008 | Leave a Comment

Should you vote? Take a look at a current elected official in action discussing the economy with Ben Bernanke, chairman of the Federal Reserve, not to be confused with Henry (Hank) Paulson, former Chairman of Goldman Sachs and current Secretary of the Treasury.

 

Posted by Howard | Filed Under Blog, Charleston real estate, Mortgage / Finance 

Mortgage prequalification and preapproval

January 16, 2008 | Leave a Comment

My good friend, The Phoenix Real Estate Guy, Jay Thompson and mortgage guru, Shailesh Ghimire offer great advice on mortgage prequalification and preapproval.

Read about it here.

Posted by Howard | Filed Under Blog, Buyer Tips, Mortgage / Finance