The current real estate and financial crisis is unprecedented. The onslaught of daily news reports is overwhelming and confusing, and people are looking for solutions to protect their assets and prevent foreclosure... It is my hope that with this new weekly publication I can provide meaningful information for the benefit my current and prospective clients. At your service .... Paul
What are the foreclosure prevention options?
Loan modification is the most common option, but every alternative needs to be considered to determine the client-preferred solution(s). We also need to weigh this against the lender-preferred solutions to develop the right negotiating strategy. (See right margin and also "The Proven Plan").
How long does long does the process take?
Usually 30-60 days. Sometimes faster. After we have pre-qualified the case we need to prepare the presentation and collect the supporting documentation. Once submitted we will push for an offer (and counter-offers during the during the negotiating process) but ultimately we are dependent on the lender turnaround times.
Analysis: Is loan modification the new refinance?
I'd like to think not, but sadly the answer often is "yes". If you desperately need a reduction of payments and you do not qualify for a refinance, LM is the next best solution. And to get the best LM you need to be in arrears. It is also cheaper than a refinance (no closing costs), and you typically end up with better terms than with a refi. How sad is this? - People struggle to keep up the payments, desperately need to refi to get affordable payments, do not qualify, then go in arrears, then get a LM with better terms than they would with a refinance! Sad indeed....
New long term rates and market low may result in turnaround
For the week ending Jan 8th the 30-year fixed averaged 5.01% with an average 0.7% fee, a 37 year low. "Lower rates and falling house prices are making homeownership more affordable. House prices fell 18% over the 12-month period ending in October, according to the
S&P/Case-Shiller® 20-city composite index. From its peak set in July 2006, the composite index is down 23.4%."said
Frank Nothaft, Freddie Mac vice president and chief economist.
It appears that the stimulus plan set to be proposed by President-elect Barack Obama will include the long-contested "cram-down" proposal, which allows bankruptcy courts to modify the terms of a mortgage loan. The most common criticism is that this will raise the cost of borrowing for everybody because lenders need to charge risk premiums. (See below). As real estate pros we should welcome the initiative because it will contribute to the emergence of
loan modfication standards. Right now it's a zoo. Having said that, I think that some of the deals we can get for loan loan mods may not be available in the future.
- Paul
Long term rates down for 10th week in a row
For the week ending Wednesday Jan 8 the 30-year fixed averaged 5.01% with an average 0.6% fee, down from last week when it averaged 5.10%. Last year at this time, the 30-year fixed averaged 5.87%. - "Interest rates for 30-year fixed-rate mortgages fell for the tenth week to a fourth consecutive record low due in part to the Federal Reserve's recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae," said Frank Nothaft, Freddie Mac vice president and chief economist.
Jumbo loan rates still high
Plunging mortgage rates have spawned a frenzy of refinancing, borrowers with larger, so-called jumbo loans are still seeing interest rates in the 7%. Read more (I can overcome this. Contact me)
Citi throws weight behind cram-downs
In a move that clearly caught much of the financial and mortgage markets, Citigroup, Inc agreed with key legislators on a plan that would allow bankruptcy judges to modify the terms of mortgages during debt restructuring. The move is a surprising break from the financial industry’s long-standing and strong stance against allowing so-called mortgage debt cram-downs. Read more
Mortgage bonds and rates hit by cram-down legislation
Indexes of the riskiest mortgage bonds slumped after one of the largest U.S. banks said it will support legislation that would give bankruptcy judges the right to alter mortgage contracts. Read more
Distressed residential lending program
Financing is available to the opportunistic investor for both acquisitions and post-acquisition recapitalizations. The following are the program highlights:
- Small to mid-size residential portfolios
- Target discounts should be in the 60% range from the note amount or high value
- Leverage up to 70% of total project cost
- Typical property pricing in the $150K to $250K range and could be rented for approximately $1,500/month
- Detached housing and condo properties
Contact me for further information
_________________________
"Doubt isn't the opposite of faith;
it is an element of faith"
Paul Tillich (1885-1965)
I wish all of us the very best for 2009!
Out with the Old and in with the New! The spirits are up, rates are down, the bottom of the market is in sight, and the (new) government looks ready to actually
do something useful. Opportunity will come knocking this year! Let's get ready!
- Paul
PLAN 2009
I will: 1. Reconnect with all my clients to review their financial situation, possible refinances, real estate plans and mortgage readiness, and: 2. Offer a fully integrated loan modification and short sale preparedness service (Realtors note: more listings, easier sales, plus an additional source of revenue). Read all about it. What's in your plan? - and how can I help you?
Analysis: Is loan modification the new refinance?
I'd like to think not, but sadly the answer often is "yes". If you desperately need a reduction of payments and you do not qualify for a refinance, LM is the next best solution. And to get the best LM you need to be in arrears. It is also cheaper than a refinance (no closing costs), and you typically end up with better terms than with a refi. How sad is this? - People struggle to keep up the payments, desperately need to refi to get affordable payments, do not qualify, then go in arrears, then get a LM with better terms than they would with a refinance! Sad indeed....
Long term rates setting another low
For the week ending Wednesday Nov 26th the 30-year fixed averaged 5.10% with an average 0.7% fee, down from last week when it averaged 5.14%. Last year at this time, the 30-year fixed averaged 6.07%. - "Lower rates and falling house prices are also making homeownership more affordable. For instance, house prices fell 18% over the 12-month period ending in October, according to the
S&P/Case-Shiller® 20-city composite index. From its peak set in July 2006, the composite index is down 23.4%."said Frank Nothaft, Freddie Mac vice president and chief economist. .
UK house prices seen falling 10% in 2009
Banks rein in mortgage lending and buyers are deterred by the economic slowdown. Read more
Credit limits: It's not what you do, it's where you do it
Remember how credit card issuers and home equity lenders are cutting back on credit lines even to good customers and/or dramatically raising interest rates? Well, there is a new wrinkle. Read more
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"He who fails to plan, plans to fail"
Analysis: When to go for a no closing cost refi
You may not get the best rate, but for the cost of an appraisal you can refi as often as you like as rates come down! Refi cost are typically 1-2% of the loan amount, depending on the size of the loan. Do the math for your situation...
30-year fixed fall to at least a 37-year low
For the week ending Thursday Dec 18 the 30-year fixed averaged 5.19% with an average 0.7% fee, down from last week when it averaged 5.47%. Last year at this time, the 30-year fixed averaged 6.14%. The 30-yr fixed has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.
FHA minimum down payment will increase to 3.5%
The minimum down payment for FHA loans which was scheduled to increase from 3% to 3.5% on October 1, 2008 was postponed. The revised effective date of the increase is now January 1, 2009.
Want to get into the loan modification business?
It is not a long-term opportunity, but for now you can help your clients, and yourself.
Read more
IRS speeds relief for sales and refinances
The IRS has unveiled an expedited process designed to make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home. Read more
Home buyers turn to USDA mortgages
Created in 1991 as a way to boost homeownership in rural areas, the program is being tapped by home buyers in overbuilt exurbs who are attracted to the no-money-down terms. Read more 
