Entries Tagged 'General' ↓

If you’ve been dealing with your loan servicer and not your lender, you’ve been talking to the wrong people. A recent CNN article, published today, discusses the story of Yolanda Cruz. Cruz had been negotiating with America’s Servicing Company (ASC) about getting current on her loan when she was told a $3,000 payment could catch her back up. She mailed the check and then ASC said it was for the wrong amount and “mailed it back.” Well the check got lost and cashed, she was out $3,000 and not in any better a position. All this only to find out that, according to Erin Kemple, the Connecticut Fair Housing Center’s Executive Director, that “the servicer doesn’t have the power to renegotiate a loan … because they don’t actually own the loan [they can't] make changes to the payment plan.”

Lessons Learned:

• Loan servicers can’t renegotiate your loan.
• Get everything in writing.
• If a check is being returned by regular mail, put a stop payment on it.

The Office of Federal Housing Enterprise Oversight, (OFHEO) announced today that it would be loosening the capital requirements on Fannie Mae and Freddie Mac such that an additional $200 billion in liquidity will become available to the mortgage pipeline. What’s that mean in english? Fannie Mae and Freddie Mac lend out money but need to hold a certain amount of reserve in the event of calamity, the OFHEA announced that that reserve amount has been reduced by $200 billion. That $200 billion will then go into the mortgage pipeline and trickle out to additional funds for lending, great news for folks who are fearful of a potential foreclosure.

The good news is that if you’re looking at an ARM resetting in a few months, now is the time to call your lender and negotiate a new loan. Every single day you wait means that $200 billion is trickling away and the probability you get a good deal gets smaller and smaller. The bad news is that if you’re already in foreclosure, it’s too late to take advantage of this change.

So, call your lender and face the problem head on. Please don’t wait and hope it’ll get better, this is the hope you’ve been waiting for - now go get it.

Today it was leaked that the Bush Administration has hammered out a deal in which ARMs could be frozen for five years to help the economy recover from the subprime mess. The agreement was a compromise between banking regulators who wanted 7 years and the mortgage industry who wanted 1-2 years. Ultimately, the detail have yet to be released but here are a hint: “the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.”

More in this My Way article but the only salient detail released was what I wrote above..

Henry Paulson, the Secretary of the Treasury, is confident than an arrangement may be in place for a freezing of adjustable rate mortgages for homeowners. The current plan is to freeze ARMs for financially responsible borrowers, whatever that means, for a period of anywhere from one to two years to as many as five or seven. This would help the housing market recover what is the worst housing slump in at least twenty years.

An estimated 2 million subprime mortgages, loans offered to borrowers with spotty credit histories, are scheduled to reset to much higher levels by the end of 2008. Those resets will push the payment on a typical mortgage up by $350 per month, taking it from $1,200 currently to $1,550.

What does this mean for you if you’re going to take an ARM rate increase? Not entirely sure because they haven’t been clear on who will be eligible other than to say that it’s “financial responsible” borrowers who can “make the lower payments, but not the higher ones.” Which really is a bunch of baloney to me because everyone fits that description. If you couldn’t make the lower payments, you wouldn’t be in trouble because you wouldn’t be in homes. It’s the adjustment that’s killer.

We will have to wait and see how this shakes out.

Thanks to Consumerist for pointing out a story on CNN about how debt counselors are getting slammed in the subprime meltdown.

“I don’t think people fully appreciate the pressure that’s being put on those counselor organizations today,” says a Housing and Urban Development official. In addition to offering financial advice, the counselors try to help negotiate payment plans with lenders, stave off foreclosure notices, and even offer mental health support for people so distraught that they become depressed or suicidal. The average pay: $30-50,000 a year.

If you’re facing foreclosure and working with a debt counselor, please be very very patient. They are trying to help and the last thing they want to do is screw you over or screw up; so if they slip up, be patient and work with them - it’s in your own best interest.

What is a Deed of Trust and what is a mortgage and what is the difference?

Okay, let’s go over the basics of buying a home so that we can properly frame the concept of deeds of trust and mortgages. When you buy a home, you probably took out a loan and signed a promissory note. The loan gives you money and the promissory note legally obligates you to pay back the loan. In return for the money, you also gave your lender a mortgage which is a lien against your home. The mortgage is called a “security interest,” which secures “the performance of an obligation (usually but not always the payment of a debt) which gives the beneficiary of the security interest certain preferential rights in relation to the assets.” What that means is that if you don’t pay back the debt, the lender gets the house. Now, another version of the security interest is called a Deed of Trust.

The difference with a Deed of Trust is that the deed, or title to the home, is transferred to a trustee (a trust or title company) instead of to the bank. The trustee holds the property for the loan and if the loan is repaid, the title is transferred to the borrower. If the borrower defaults, the trustee can then sell the property and pay the lender back from the proceeds of the sale without going to court.

You may remember, from the foreclosure process article, that in foreclosure the lender must file papers with the court. With a Deed of Trust, this filing process is unnecessary and so the process is much faster.

Are you about to have your home foreclosed? Can you no longer make your mortgage payments because of unforeseen circumstances or a rate increase? Do not be afraid of foreclosure, do not ignore the notices, do not abandon your house, and don’t panic.

Remember one fact: Given a choice, the bank would much rather prefer to continue receiving some sort of payment from you than receive the house in foreclosure. Read that again… the bank does not want to foreclose, they only do it if they are given no other choice. The bank is not in the real estate business, it’s in the money lending and collecting business, so they don’t have it “out” for you.

It’s crucial that you keep the communication channels open and always try to make alternate arrangements with your lender. Sometimes they will be accommodating, sometimes they won’t be, but if you don’t communicate with your lender then you won’t know. Especially with so many ARMs re-adjusting these next few months, your lender may be especially forgiving as long as you have a plan to get back on track.

So, if you know your payment is going to increase or you foresee any sort of problems, definitely start talking to your lender. The answer may be to refinance or an alternate payment agreement can be reach, but don’t ignore your lender and don’t be afraid to talk.