Thursday, October 28, 2010
Some home buyers who may be concerned about paying high closing costs might be tempted by a “zero-cost” or “no-cost” loan option, which requires no cash outlay, but typically adds a half percentage point to the rate. However, some financial consultants say these loans tend to be most beneficial to buyers planning to have the loan for less than five years.
KEEP THIS IN MIND
• One of the primary differences between a no-cost loan and similar loans is that no-cost loans do not tack on closing costs to the balance, but instead increase the rate.
• With no-cost loans, third-party fees including the appraisal, credit report, title insurance, recording, and the use of a mortgage broker are paid by the lender. The fees, including the amount the broker is being paid, are disclosed on the closing statement.
• Home buyers who bypass a broker and work directly with a lender may encounter less transparency, as loan officers are not required to disclose the amount the bank is making on the loan.
• Borrowers weighing their loan options are advised to use a mortgage amortization calculator to compare the costs for a conventional loan compared with a no-cost loan. The Federal Reserve provides an amortization calculator on its Web site at www.federalreserve.gov.
Read the full story:
Wednesday, October 27, 2010
The housing market in the United States may not be thriving, but business is booming for foreclosure rescue and loan modification scammers.
The US Government Accountability Office (GAO) released a report in July 2010 entitled "Home Ownership Preservation". It says that: "The current foreclosure crisis has provided persons who may perpetrate mortgage foreclosure rescue and loan modification schemes with unprecedented opportunities to profit from homeowners desperate to save their homes. In March 2010, we reported that national default and foreclosure rates rose sharply from 2005 through 2009, to the highest level in 29 years. The most recent data from the Mortgage Bankers Association, which are for the first quarter of 2010, show that the number of home loans with payments more than 60 days past due, and therefore potentially facing foreclosure, is 2.7 million."
The GAO report says there are two main types of foreclosure rescue and loan modification scams: advance-fee loan modification schemes and sales-leaseback schemes, with advance-fee schemes being the most common. In an advance-fee scheme, someone charges you a fee in advance to negotiate a deal with your mortgage lender. They may even offer a money-back guarantee. But the usual outcome is that they take your money (the average is about $3,000), provide little or no service, and then refuse to refund the fee. In a sales-leaseback scheme, the scammer persuades you to transfer your deed to them by offering to assume your payments and let you pay rent while you get your affairs in order. They promise to sell the property back to you once your financial situation improves, but, of course, they don't. Often they take out another loan on the home or even sell it out from under you.
The Federal Trade Commission reports on a new twist on the advance-fee scam that's showing up this year, a "forensic mortgage loan audit." The scammer offers to find regulatory violations in your original mortgage that will help you avoid foreclosure or even cancel your loan. There's no evidence that anyone has ever succeeded in modifying their loan using this approach.
Here are some “red flags” that at-risk homeowners should watch out for when looking for foreclosure help, courtesy of the FTC. You should avoid any business that:
- guarantees to stop the foreclosure process – no matter what your circumstances
- instructs you not to contact your lender, lawyer, or credit or housing counselor
- collects a fee before providing you with any services
- accepts payment only by cashier’s check or wire transfer
- encourages you to lease your home so you can buy it back over time
- tells you to make your mortgage payments directly to it, rather than your lender
- tells you to transfer your property deed or title to it
- offers to buy your house for cash at a fixed price that is not set by the housing market at the time of sale
- offers to fill out paperwork for you
- pressures you to sign paperwork you haven’t had a chance to read thoroughly or that you don’t understand.
Monday, October 18, 2010
After two years of gains, home sales in California are expected to fall 10 percent this year but prices should continue to rise.
The California Association of Realtors expects 492,000 sales this year, compared with 564,500 in 2009. C.A.R. predicts that sales activity will rise next year to 502,000 as the recovery regains momentum.
Sales increased by 27 percent in 2008 and 24 percent in 2009 after two sharp years of declines as the real-estate market collapsed.
"We have had weaker economic activity in the second half of this year as we have weaned ourselves from the federal government stimulus programs," Robert Kleinhenz, the association's deputy chief economist, said during a conference call.
The Los Angeles-based trade group expects next year's median to grow a modest 2 percent to $312,000.
The increase follows price decline of 38 percent in 2008 and 21 percent in 2009. Los Angeles County market should closely track the state, Kleinhenz said.
There were 60,000 home sales in the county last year and they should fall 24 percent this year, due in large part to the end of the federal tax credits. Modest gains should return next year, Kleinhenz said. The median price is on track to increase 5 percent this year and make a similar gain next year, Kleinhenz said. There was also word on Monday that the nation's residential housing market remains under pressure. The National Association of Realtors said that its index of sales agreements for previously occupied homes rose 4.3 percent to a reading of 82.3 in August. That's still more than 20 percent below the pace in the same month a year ago. "With underlying economic conditions still so weak, a robust housing recovery remains highly unlikely," Paul Dales, U.S. economist at Capital Economics, told the Associated Press.
Monday, October 4, 2010
On Thursday, Governor Schwarzenegger vetoed SB 1178 (Corbett), C.A.R.'s sponsored bill that would have expanded anti-deficiency protections. In his veto message, the Governor made clear his view that the bill interferes with an existing contract. While disappointed in the Governor's misinterpretation of the bill, C.A.R. is grateful to the almost 13,000 California REALTORS(R) who urged him to sign the bill by responding to the Red Alert.
C.A.R. sponsored SB 1178 to better protect homeowners going through foreclosure. SB 1178 would have ensured that homeowners keep the same "anti-deficiency" protections they have in the original loan after the loan has been refinanced.
California's anti-deficiency protection for "purchase money" mortgages says that if a homeowner defaults on a mortgage used to purchase his or her home, the homeowner's liability on the mortgage is limited to the property itself. The law has worked well since the 1930s to protect borrowers, ensure the quality of loan underwriting and allow borrowers brought down by financial crisis to get back on their feet.
Unfortunately, the 1930s law hasn't kept up with current times. Current law doesn't apply to loans used to refinance the original purchase debt, even if the refinance was only to gain a lower interest rate. Recent years of low interest rates have induced tens of thousands of homeowners to refinance their mortgages. During those years, almost no one realized that refinancing their mortgage to obtain a lower rate, they were forfeiting their protections and were becoming personally liable on the new note.
SB 1178 would have corrected this injustice by extending anti-deficiency protections to those who have refinanced their loans.
Thank you again to everyone who joined C.A.R.'s Government Affairs Team and fought for our clients.
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