I found this interesting information on CNN Money and thought it worth sharing. This real estate market is not for the faint of heart.
The question is, "How long can this last?" if any one has the answer please let me know. So many people are upside down in their properties right now and wondering if it is worth waiting it out or is now the time to find a way out. Jingle mail is back big time. It is hard to think of making payments on a house that is not worth as much as your mortgage. When is one throwing good money after bad? Is there a moral issue in just walking away from your mortgage? How long does a foreclosure usually hurt one's credit and can you ever get another mortgage? If there are any accountants or loan brokers out there that would like to comment on this please, I welcome your post.
1 comment:
It’s important to realize that the real estate market has seen many tough times before. This is not the first time that people have been in a situation where their home is worth less than they owe and it probably won’t be the last. Important to note is that, in many cases, if you compare the “after tax” cost of owning to renting, there is often little difference when comparing similar properties especially for people in higher tax brackets with few deductions.
How long until the market rebounds? Nobody knows for sure. In the United States, if you look at the last 50 years, typically declining market values last a few years, with several more years of stagnant or moderate growth followed by a “Real Estate Boom”.
Certainly there is a moral issue with walking away from a home. The Bank is expected to honor their commitment as is the borrower. However there is an old saying that “All is fair in love and business” and make no mistake about it, this is business.
A foreclosure will stay on your credit report for about ten years, but more time that passes, the less detriment will be reflected in the credit score. Time heals all wounds and credit scoring is no exception. Fannie Mae said it will increase the period needed for borrowers to “re-establish” their credit history after a foreclosure to five years from four years. Fannie said it would allow shorter recovery periods for borrowers with “documented extenuating circumstances” that caused the foreclosure. Changes will affect loans submitted after June 1st.
Companies that collect loan payments can increase their forbearance period on delinquent borrowers to as much as six months from four months to allow more time to seek alternatives to foreclosure. Fannie Mae hopes that move will reduce the number of loans on which it needs to recognize losses, though it may be only delaying the pain in some cases.
Joseph Lee
Home Loan Consultant
joseph@loansbyjoseph.com
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