FHA Loan Defaults Increase Again
This is cause for concern seeing as I have talked about this before and how I feel they are still loaning money to those who shouldn’t buy. They need to pay a little less attention to credit score and more attention to reserves and debt to income ratios.
Remember in the article I posted today that 9 out of 10 mortgages are backed by Fannie, Freddie, and the government. I hope I am wrong on this topic too.
“Loan defaults crossed the 9% mark in December, ending the year at 9.12%, up from 6.82% one year earlier and 8.94% at the end of November. Through 2009, the agency had insured 5.8 million loans worth $752.6 billion, or a 24% increase from one year ago.
FHA officials say that the loans that are being originated this year will help the agency turn a profit and offset the need for any taxpayer subsidy to offset rising losses. Officials point to sharply improved average credit scores on loans originated over the past year, which ended the year at 694, up from 661 one year earlier. But critics say that the assumptions used by the agency’s independent actuary are probably too optimistic, which could require Congress to make up a shortfall at some point down the road.”
http://blogs.wsj.com/developments/2010/02/09/fha-loan-defaults-surpass-9/
Tax Credit Benefits For Military Homebuyers & Sellers
Filed under: Mortgage Education 101 | Tags: Military Homebuyers, Tax Credit
Leave a Comment I think it is great that the $8,000 and $6,500 tax credits have added benefits for the military. Here is a breakdown of how it works:
”Under the Worker, Homeownership and Business Assistance Act, which was signed into law in November, military personnel and certain other federal employees serving outside the country have an extra year to qualify for the $8,000 tax credit offered to first-time buyers and the smaller $6,500 credit available to repeat buyers.
Also, the recapture rule has been waived for members of the uniformed services, members of the foreign service and employees of the intelligence community.
Under the new law, eligible taxpayers must enter into a contract to purchase a principal residence by April 30 and close the transaction no later than June 30. But servicemen and women get an extra 12 months, so they must sign a binding contract by April 30, 2011 and close no more than 90 days later.
The rule applies to individuals or their spouses who serve on qualified official extended-duty service outside the country for at least 90 days between Jan. 1, 2009 and April 30, 2010. According to the IRS, only one spouse need be overseas on official extended duty for the requisite time to qualify.
For most buyers, if the home is sold or otherwise ceases to be used as their principal residence within three years of the initial purchase, the credit must be repaid. But when the home belongs to an eligible member of the armed services, intelligence community or foreign service that provision is waived if the house is sold in connection with orders sending the taxpayer to a new duty station at least 50 miles away.
The new post can be either inside or outside the United States, but the change must be because the taxpayer is under orders to move for a period in excess of 90 days or indefinitely.”
http://www.marketwatch.com/story/added-tax-credit-benefits-for-military-home-buyers-2010-02-05
Fannie & Freddie To Concentrate On Helping Homeowners Stay In Their Homes
It seems they are attempting to care less about their balance sheet and more about the homeowner, or so they say. Again, I am not a pessimist but I hear the stories all the time about people not getting any help. My comments aren’t based on these articles that I read and write about. I hope I am wrong about this.
The article has a scary statistic in that 9 out of 10 mortgages are funded by Fannie, Freddie, and the government. WOW!
Assistant Treasury Secretary Michael Barr says that because Fannie and Freddie are “owned by the taxpayers in the middle of the biggest housing crisis in 80 years,” it would be unrealistic to expect the companies wouldn’t be used to help stabilize the market. He says the administration’s actions have been “prudent” and “consistent with taxpayer protection.”
The Hidden Costs of Foreclosure
Filed under: Mortgage Education 101 | Tags: Foreclosure Hidden Costs
Leave a Comment I have said this a hundred times now make sure to use an expert inspector. Even if you have to pay a little more it is worth it and you get what you pay for. I don’t have much more to say on this topic but here is just another story about someone who got hit with the “hidden costs.”
Paying Your Credit Cards Before Your Mortgage
Filed under: Bailout, Foreclosure | Tags: Bailout, Foreclosures
Leave a Comment It’s scary but true and it makes sense. The bailouts are in the housing industry and just like the article states if you have a cash shortfall you want to be able to have access to your credit cards for your everyday essentials. It used to be that a homeowner would do whatever they could to pay their mortgage and save their home, not anymore.
The data reflects a “fundamental paradigm shift” in the way consumers prioritize payment of debt obligations, says Ezra Becker, of TransUnion. “This is dramatically different,” he says. “It is a clear manifestation of the dynamics that lead up to the recession and the recession itself.”
http://finance.yahoo.com/news/Forget-the-Mortgage-Im-Paying-usnews-816222158.html?x=0&.v=2
Borrowers To Be Paid To Pay Their Mortgage
I don’t know how effective this will be because the borrower doesn’t get the cash incentive upfront. They get it once the mortgage is paid off. The purpose behind the program is to curtail borrowers from strategically falling behind on their mortgage.
“Here’s how the program works: The mortgage investor (possibly joining with other risk holders, such as mortgage insurers or second-mortgage holders) offers a cash reward to borrowers if they agree to keep paying their mortgage. The incentive amount varies by borrower depending on income, negative equity, geography and other risk factors—those who are more likely to cause steep losses receive a bigger carrot. The “responsible homeowner reward” grows for up to five years as the borrower makes monthly mortgage payments.” http://blogs.wsj.com/developments/2010/02/08/pay-borrowers-to-pay-their-mortgage/
Again, I feel you either need to do a principle reduction or a short sale if you are going to try to do anything improve it. I don’t think this program is enough to entice someone especially since people still don’t understand anything about financial responsibility. More and more people feel that is the case but the biggest problem is the individuals who aren’t behind will stop paying.
“As the mortgage crisis drags on, some activists and investors have formed a loose coalition to prod banks into sharply cutting the amounts owed by borrowers whose loans far exceed the depressed values of their homes. Principal reductions are the best incentive for such borrowers to keep making monthly mortgage payments, some activists and investors say.”
http://online.wsj.com/article/SB10001424052748703615904575053610885133270.html?mod=rss_whats_news_us
An Alternative To A Reverse Mortgage
Reverse mortgages can be expensive so some are giving their parents a private reverse mortgage. It sounds like it could be a good idea if you have the cash to do it.
It’s pretty interesting article that talks about the pros and cons of doing it. Always make sure to consult your CPA and Financial Planner before doing it.
“When Wayne Tew, a credit-union president in Las Vegas, realized that his parents needed money, he bought their house and leased it back to them, freeing up their cash for a new car and travel. The son claimed tax deductions for the home’s depreciation. And after his mother died four years ago, he sold it for a small profit.”
http://online.wsj.com/article/SB10001424052748704194504575031532356220378.html?mod=rss_Money
Americans Are Passive As They Lose Their Homes
Isn’t that the truth. Everyone wants to complain, point fingers, etc. but won’t do anything about it. If you are trying to save your home go to a “Save the Dream” event offered by the Neighborhood Assistance Corporation of America (NACA), get counseling, see if you can get mediation, etc.
The article asks this question, “Why do Americans remain disorganized at home while their European and Asian counterparts flood into the streets and strike in militant, organized protest? Why do others believe in their potential to reclaim their lives while we do not?”
Click on the link below to read the answers to this question. Pretty interesting.
Reverse Foreclosures
This was very interesting. A reverse foreclosure apparently is where you speed up the process of the foreclosure. Now, why would anyone want to do that? It can allow an association to get paid their past association dues much faster.
“The Association Law Group of Miami won the case on behalf of the Keys Gate HOA using what it calls a reverse foreclosure, designed to speed up the process of awarding a property to a bank, thus making the bank liable for fees and maintenance, even if the property is vacant.”
http://southflorida.bizjournals.com/southflorida/stories/2010/01/25/daily10.html
Mortgage Bond Securitization May Revive
But it will be slowly. More and more players will get back into the game. I think Rob Chrisman, who I got this article from, said it best:
“What is the American Securitization Forum? Darned if I know, exactly, but they were meeting in Washington DC and came out with a statement conjecturing that non-agency product (a $1.2 trillion market 4-5 years ago, $25 billion in ‘08 and $44 billion in ‘09) may start to be securitized again later this year. The reason? There’s more talk about it this year than last! Right now, however, jumbo loan production is pretty small, and profit margins are pretty slim since jumbo rates aren’t all that much higher than agency rates. (I have an idea! Let’s split the pools into tranches, and then have Wall Street work with the rating agencies… oh, never mind, I guess we tried that.) As I mentioned yesterday, banks are holding onto this product, but if other buyers materialize and the loans can be sold at profits, things could loosen up. Whole loan packages and syndications of interests in pools of loans may be steps in the right direction.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajsXmyJJltjs&pos=5
