Virginia Mortgage Bulletin

Just a brief recap of the (very) local market.  Of the 14 homes listed for sale in my development, all but 2 have the infamous “3rd party/ (lender) senior management approval required” blurb on the MLS listing. The bad news, 4 home sold at foreclosure auction at the convention center last weekend. The two closest to my house went for $230,000 or roughly 60% of their purchase price 2 - 2 1/2 years ago at the TOP of the market. One owner relocated, purchased another home in Texas and tried to rent/sell for 6 months before the house finally went to foreclosure. On the brighter side, there was an actual sale 2 homes west of the foreclosure property and I should know within the next couple of days what the sales price was. I know the last listing price was in the mid $300’s and this house was purchased 12 December 2004 for $366,000. The highest sales price I have seen in this development was $424,000 in June 2005, but this home has been vacant/listed for 10 months now and I fear that it will go to foreclosure soon.  
 

Here are some additional discussions relating to the mortgage industry from my main information site.

http://bestvirginiahomeloans.com/why_do_i_apply_once_get_15_calls_641.htm
http://bestvirginiahomeloans.com/content/stop_foreclosure_now_113.htm
http://bestvirginiahomeloans.com/content/mortgage_faqs_886.htm
http://bestvirginiahomeloans.com/content/should_i_get_a_fixed_rate_or_an_adjustable_rate_895.htm
http://bestvirginiahomeloans.com/content/will_my_mortgage_be_sold_and_why_988.htm
http://bestvirginiahomeloans.com/content/what_lenders_look_for_783.htm
http://bestvirginiahomeloans.com/content/improve_my_credit_score_608.htm
http://bestvirginiahomeloans.com/content/arm_adjustment_caps_898.htm
http://bestvirginiahomeloans.com/content/links.htm
http://bestvirginiahomeloans.com/content/below_500_refinance_630.htm
http://bestvirginiahomeloans.com/content/credit_dos_donts_during_the_loan_process_602.htm
http://bestvirginiahomeloans.com/content/should_i_own_a_home-rent_vs_own_ 755.htm
http://bestvirginiahomeloans.com/content/how_can_an_arm_loan_benefit_me_629.htm
http://bestvirginiahomeloans.com/content/refinance_180.htm
http://bestvirginiahomeloans.com/content/jumbo_home_loan_233.htm
http://bestvirginiahomeloans.com/content/what_are_discount_points_130.htm
http://bestvirginiahomeloans.com/content/do_i_need_a_mortgage_broker_291.htm
http://bestvirginiahomeloans.com/content/credit_repair_guide_7.htm
http://bestvirginiahomeloans.com/content/loan_programs_for_people_with_low_fico_score_189.htm
http://bestvirginiahomeloans.com/content/credit_collections_-_should_i_pay_537.htm
http://bestvirginiahomeloans.com/content/lenders_for_terrible_credit_465.htm Read the rest of this entry →

Our goal is to stop your foreclosure and give you a fresh start. We are specialists in working with your lender, or lenders, to restructure your current loan(s) by providing you with a unique, professional plan that you and your lender can accept.

We fully understand that you have a serious problem and only a short time to overcome the real possibility of losing your property.

The lender wants to see a provable relationship between the homeowner’s income and expenses that will ensure them and the federal regulators that the homeowner will be able to make his payments in the future.

KNOW THE LAW - Every State has different foreclosure laws that govern how long it takes a lender to foreclose on your home. Time can vary from 60 days to 9 months. Contact us and let us know what State you’re in and we will send you your rights, in your State Read the rest of this entry →

The Fundamental Question: Does An Interest Only Mortgage Save Me Money?

So here is an example of the math of a hypothetical 30 year mortgage compared to the same mortgage with an interest only option for the first 5 years.

$350,000 for 30 years fixed at 7.0%

The traditional payment, principal and interest, would be 359 payments of $2328.56 and 1 final payment of $2326.94 for a total of $838,279.98

That same mortgage making interest only payments for the first five years would give you 60 payments of $2041.61, then 299 payments of $2474.73 and 1 final payment of $2471.50 for a total of $864,616.97 for a difference of $26,336.99 .

While your payment during the first 5 years saves you roughly $287 per month, you will then pay almost $147 more per month for the next 299 months in order to pay the mortgage off by the end of the 30 year term. Read the rest of this entry →

This past weekend, I spoke again with someone who purchased a home which will now, in all probability, end up going back to the bank. At times like this, I wish I had a voodoo doll in the likeness of the loan officer who originated this loan. Here is the story which is the epitome of the mortgage melt-down.

The story begins with a borrower looking for some cashout for improvements to his existing home valued at roughly $300,000 dollars. He chose a loan officer recommended to him who also spoke his native language. This loan officer told the borrower that for the projected refinance payment, he would be able to buy a larger, newer house in a neighboring county. So the borrower pulled the equity out of his primary residence, the loan officer refinanced him into a payment-option ARM to keep his payment low while he sold his house, and they used the down-payment to put a contract on a much larger home through a Realtor referred by the loan officer. So far, not so bad, except for the owner occupied loan on a property the LO knew would be sold. Now the real mischief begins. The borrower’s target payment for the new home was $1200 per month. The sales price of the new home was $575,000.  (Hmmm, that’s what I said.) The down-payment of $82,000 was not enough to make the loan work, so instead of finding a lower priced home, the LO also originated a second mortgage of $16,000 on the first home and wrote both a first and second mortgage on the new home with a pay-option ARM as the first loan (at $1400 per month before escrows) and just over $200 per month on the second mortgage. Looking at the HUD-1 settlement statements, these two first mortgages generated $12,000 and $18,000 in commission-able revenue to the mortgage broker, excluding anything made for the second mortgages.    Read the rest of this entry →

That was the quote this morning on a local news show. If you believe the financial” expert”, homeowners just blundered into these bad loans, or were duped into these bad loan products and he recommended people should refinance now into conforming fixed rates loans to get out of these high-rate, subprime loans. . “These subprime loans were stupid”, he said. 

 Wow, how do I get to be an “expert” like this? Here’s the problem I have with comments like this, especially in the wake of all the press regarding the current real estate market.  I agree that relatively loose lending guidelines and “cheap” money provided home ownership opportunities for some people that would not have qualified for mortgages as recently as 4 or 5 years ago. The untold story is that not all of these were bad loans, not all were sub-prime loans, and not all of these will result in foreclosure. If you believe some of the hype, there are as many as 17 million foreclosures expected within the next 2 years. That number seems incredibly high, since there are an estimated 50 million homeowners, according to recent census data.  Even Senator Obama only predicts 2 million foreclosures, still a historically high percentage. Read the rest of this entry →

Wow. Any loan officer that has been in the business for more than 20 minutes has heard this question. Without selling you ANYTHING, let me give you a couple quick pointers to help determine if the rate, points and fees you are getting quoted are actually competitive.

First, you need to understand how the person originating your mortgage will be compensated. After all, we don’t do this for free. I get paid one of two ways. I can give you the absolute best rate that you qualify for and get paid a fee by you directly in the form of a broker fee or origination fee. This is normally expressed in terms of “points”, 1 point representing 1 percent of the loan amount. I can also be paid by the lender to sell you a rate higher than what you qualify for which will require less upfront points, sometimes no points at all. The “premium” being paid to the loan originator represents a “yield spread”, so you may see the term YSP or yield spread premium on your settlement statement. Sometimes, the premium paid by the bank is high enough (because the interest rate is so high ) to even pay closing costs. This is part of the way lenders offer no closing cost loans. The fees have to get paid, they are just paid out of the proceeds of the loan because the borrower is willing to pay an above-market rate. It is important to understand that points and fees are directly related. Read the rest of this entry →

Ok, so yes Mr. Kiyosaki is smarter than me (just a touch richer, too). Watching CNBC this weekend, he discussed wealth through real estate, among other things, along with a panel of 4 other people. During the show, he mentioned that he is looking for tenants to pay at least 150% of his mortgage (or full mortgage payment plus 1/2 payment as profit) in monthly rent. As a continuation of my Mortgage Math blog series, I want to actually take a look at this and, of course, run some numbers. Read the rest of this entry →

Are stated income loans BAD?

It seems like open season right now on lenders who have issued Stated Income loans over the last several years. Here is a brief introduction to stated income loans.

Historically, when applying for a mortgage, potential borrowers would take their paycheck stubs and the (hefty) down-payment to their local bank, sit down with a loan officer and a stack of forms and begin the process of loan qualification. The bank would consider the credit profile of the borrower, the capacity to repay the mortgage (income) and the collateral securing the bank’s interest in the loan. These have been referred to as the Three C’s, although I have heard of the Four, Five and even Six C’s of mortgages, depending on which training program you look at. Based on a set of guidelines, a loan application will be approved or denied based on easy to define characteristics. This is a pretty straight-forward process, but is based on a complete understanding of a borrower’s earnings as documented by W-2s and paycheck stubs.

Now let’s consider a self employed borrower. Income calculations are suddenly much more complex, sometimes even impossible. The IRS will determine income based on your tax returns, but a self employed borrower has deductions which reduce his/her taxable income which a wage-earner will not have. Although the money deposited to each bank account could be identical in both cases, the taxable income can be drastically different. When you consider the number of people who have multiple jobs, or receive income that is difficult to verify (paid in cash) then it is easy to understand how the traditional mortgage qualification process does not fairly evaluate the ability of a potential borrower to repay the loan. Read the rest of this entry →

If you are deep in the loan process, I hope your loan officer is keeping you informed. Or at least, as informed as possible. Lenders seem to be dropping off like crazy right now. Loans submitted to lenders, some even “clear to close”, are eclipsed by the dreaded ” thank you for your past business, but we are ceasing operation” email. You think the Nigerian-millions-waiting-for-your-bank-account email is rampant, just take a look at the number of lenders shutting down.

www.ml-implode.com

OUCH!

What does this mean for a borrower? TALK TO YOUR LOAN OFFICER (assuming he/she is still employed). With lenders shutting down daily, it is harder to find program guidelines than it is to find a rate.