06.20.08
Posted in Mortgage Problems at 9:39 pm by Jeanne
Situation: An acquaintance of yours plans to walk away from her four-bedroom house in a close by subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby. She comes to you for advice. She can find the same exact house now for half the price she claims. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300, and she doesn’t want to continue to own a home that is now worth $200,000 less than what she paid for it just a couple of years ago. What to do?
Across the country with falling home prices and rising foreclosures, lenders are discovering this new trend - borrowers with good credit, who buy a second home at a much lower price than the one they have, then default on the mortgage for their first home. We are not talking sub-prime mortgages here, we are talking market fluctuation.
Homeowners are even being coached through the process by unethical real estate agents. A few unethical agents, looking to obtain a commission encourage clients to run, not walk away from their mortgages. They are told to make payments only until they close on the new house. Rarely are they told the downside of significantly damaged credit. The agents quip it is not the buyers fault. The lender appraised it too high! The lender is unreasonable. The lender is refusing to forgive the debt or restructure the loan. The agent does not mention the fact that in order to legitimately qualify for the new loan, the borrower will likely have to dishonestly hide the liability on the existing loan application and can be subject to serious legal penalties for fraud.
Notwithstanding the mortgage industry’s frenzy as it tries to restructure billions of dollars in mortgages, it appears fraudsters have been able to “buy ‘n bail” with ease. The lending industry is just catching up to the latest scam.
The End Result?
Lenders and government agencies are once again forced to draft more and tougher regulations so that homeowners cannot qualify for new mortgages as they bail on old loans that going into foreclosure. Accordingly, Fannie Mae is making changes that will likely take effect in July, so that borrowers with a mortgaged first home have to produce signed leases to prove that they can pay both mortgages, property taxes and insurance on both residences, or they will have to provide proof of sale for the first residence to qualify for the new loan.
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06.12.08
Posted in Important new HUD program changes, Industry News, Mortgage Problems, RESPA, Regulation of Insurers and Banks at 4:28 pm by Jeanne
We all know the bad apple loan officer, title agent or appraiser. We all know the consumer, who anzious to move into that new home, signed on for a bad deal. Well, RESPA is looking to help out that consumer.
The vast majority of consumers shop for a mortgage focusing not on rates or settlement costs or other loan features, but on the one key number that signals to them whether they can afford the loan: the grand total that they will have to pay each month for their home. Most people know how much income they take home each month, and they try to figure out whether out of that monthly amount, the monthly mortgage payment will fit into their budget.
The new RESPA rules propose that the GFE disclose the monthly total of principal, interest, and mortgage insurance. I believe the GFE also disclose the estimated monthly payment for property taxes and insurance as well and for any adjustable rate mortgages, the GFE should provide the grand total both for the initial monthly payment and for the maximum monthly payment that could be reached under the loan terms.
The proposed RESPA law is designed to improve the life of the consumer, by requiring advance disclosure of accurate settlement costs, including higher enforcement of the existing law that requires delivery of the HUD-1 settlement statement three days prior to closing. It seeks to penalize those who hand out “bad” Good Faith Estimates (i.e. those where the estimated charges on the GFE bore little or no relationship to the actual charges shown on the HUD-1 closing statement.)
In the past, RESPA has had none of the proverbial “teeth” to enforce the law. So that, theoretically, handing out a blank piece of paper that said Good Faith Estimate with just about anything filled in would qualify. The proposed law would create a new GFE form to assist a line-by-line comparison between the GFE and the HUD-1 at closing. The plan is to better monitor compliance with newly defined tolerance limits that restrict the allowable differences between estimated and actual closing costs. The rule would also clarify and update consistent escrow account requirements and mortgage servicing transfer provisions for lenders.
To put teeth in the plan, HUD says it plans to seek legal amendments to RESPA to obtain specific enforcement authority including money penalties; the ability to obtain court orders to prohibit actions; and authority to require restitution for violations as well as the ability to further amend and enforce disclosures. They will be focusing particularly on the GFE and Special Information Booklet; loan servicing; prohibition against kickbacks; illegal referral fees; unearned junk fees; title insurance, and escrow account fees. RESPA will also seek such authority for HUD and State Regulators.
The proposed rule does not include the packaging or bundling stipulations that proved controversial in 2005 and provides a 12-month transition period for compliance once finalized. The proposed rule will also allow RESPA disclosures to be given to consumers in electronic form (so long as the consumer consents.) And will permit documents to be retained in electronic form, so long as certain requirements for document retention are met.
While HUD estimates that consumers will save on average $518 to $670 per transaction, industry insiders speculate the changes may actually cost consumers more per closing. I think it will make everyone a bit more honest, or at least a bit more careful in our disclosures.
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11.07.07
Posted in Mortgage Problems at 1:21 pm by jtcampbell22
Hi there…just a quick question about our current property deed. We purchased a residential property in 2001 - my husband’s first name was misspelled as Jeffery, not Jeffrey which is shown on his drivers license. No one caught this error and the mortgage closed with no issues. Fast forward to now and we are currently in the process of refinancing our mortgage. Our lender noticed the problem yesterday and we sent another copy of my husband’s drivers license but have not heard back from our mortgage rep after a couple of phone calls/emails. Do you know if this is a potentially deal-breaking issue? If not, could it cause a delay in the mortgage closing date? Any advice you would have would be really appreciated. Thanks in advance
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08.14.07
Posted in Money and Finance, Mortgage Problems at 9:52 pm by Jeanne
A good article in American Chronicle reminded me of the closings that changed over from MIP to Piggy-back loans, where a first and second mortgage kept the borrower from having to pay the traditional Mtg. Ins. premium.
The article said “Most loans with higher than 80% loan to value ratios when they were originated had to have mortgage insurance on them if they were bought by institutional federally chartered savings and loans or FDIC insured banks.”
It seemed like a good idea from the borrowers perspective - save a few bucks. But from the Lender’s perspective, they lost their default insurance and will pay a corresponding price in this foreclosure market.
The article also pointed out “For every million dollars in loans being serviced on defaulted loans, many banks are losing about $10,000 a month plus the loss of value as the property market spirals inward on its dwindling integrity and corrupt viruses which have infected the entire industry. That is a serious implosion.”
Another perspective on what the lending industry has done to itself.
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08.03.07
Posted in Education, Mortgage Problems, Mortgage and title Fraud at 3:44 pm by Jeanne
“Mortgage Industries Wild Ride ends with new laws” as stated in Twin Cities Pioneer Press Paper see article
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06.15.07
Posted in Education, Money and Finance, Mortgage Problems at 1:22 pm by Jeanne
Did you know that deeding your property back to the Lender instead of allowing foreclosure can cost you! Under Federal Law, Lenders who accept less than the full remaining balance on the loan (including late fees, interest and other chargable items) must file a 1099-C (as opposed to the 1099-S.) The 1099-C shows any concessions made by the Lender, and tells the IRS the concessions are TAXABLE INCOME.
For example, say your Mother took out an exotic loan to help pay medical bills and refinance the house. The loan is an adjustable rate for $312.250. -(125% of the then current value of $250.000.) The loan was at 5% interest two years ago and is now at 9%. She was assured that housing markets would continue to rise.
Now she finds herself unable to make the payments, and the current house value is estimated at $242,000. If the Lender is willing to accept $242,000. for a deed in lieu of foreclosure, knowing that is the best they can do, it must file a 1099-C with the IRS. The IRS will then show that Mother has received TAXABLE INCOME in the amount of $70,250. OUCH! As unfair as it seems, she now has another problem, one bigger than just losing her home.
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