New Bank Policies

Recently, the government announced that, to provide relief to homeowners, mortgage giants Fannie Mae and Freddie Mac would offer qualifying homeowners the opportunity to change (that is, improve) the terms of their mortgages if they’re at least 90 days behind on their payments. This was welcome news for those homeowners facing possible foreclosure who had already seen their credit destroyed through late and missed mortgage payments.

But for those homeowners barely keeping their heads above water –that is, still paying their payments on time– this new policy didn’t offer any real assistance. Until recently. Now, banks like Citigroup and JPMorgan Chase are offering mortgage terms adjustments to homeowners even if they’ve missed no payments at all. Before you fall behind on your payments, you can contact your mortgage company to discuss the terms of your loans. This policy has been administered through many banks throughout the country, especially in the areas hit hardest by the housing crisis, Arizona, Florida, and California among them.

Qualifying for Assistance

Sound like a good option for those of you struggling to get your mortgage payments made on time? It is. But only if you qualify. Unfortunately, though the policy of offering assistance to struggling homeowners is spreading, there are many requirements to be met in order to qualify for assistance. The most important of these is that you be hugely strained by your mortgage financially.

The kinds of people who qualify for mortgage term adjustments are people who have seen or are about to see a change in interest rates that will make it impossible for a homeowner to keep their head above water. Or those who have recently lost an income or seen it drastically reduced. The bank will look at whether or not you are truly overburdened by your mortgage payments. And they’ll be strict about what they consider to be an overburden. In essence, if you’re not seeing 40% or more of your monthly income go to your mortgage payment, you won’t be approved for mortgage assistance. And even then, there’s no guarantee that you’ll get help.

How to Get Assistance

Many banks have established special phone lines to deal with clients looking to negotiate new terms for their mortgages. In order to get help with your mortgage, you’ll need to locate the correct department at your bank (if your bank offers this option at all– not all of them do). Ask for a loans modification specialist, or even better, take some time out from surfing internet dating sites and check out your bank’s website. Many banking websites contain information to help distressed homeowners.

When you finally reach the correct department within your bank to adjust the terms of your loan, the hard part will begin. Banks are struggling, too, and they do not want to adjust your loan any more than they have to– and if they don’t feel they have to, they won’t help you at all. So you need to provide a lot of evidence to show that you are in financial distress. In general, banks will request your recent pay stubs, tax returns, and even a letter detailing what has happened in your life or with your finances to necessitate a change in the terms of your mortgage. If they don’t feel you’re having a hard enough time with your mortgage payments, they’ll turn you down flat. So be ready.

Most people requesting help with the terms of their mortgage will be turned down. But those that do qualify for assistance will see a small monthly change in their mortgage payments that may make the difference between being able to make their payments and losing their home. While you shouldn’t expect banks to make any changes to the final principal owed on your home (they want their money, in the end), qualifying homeowners will see adjustments made to their interest rates or temporary adjustments to their principal. And for some homeowners, these small changes can make all the difference.

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1. The earlier you act on problems the more options you will have. Refinancing may be a possibility, before you get behind on your payments. The first thing you want to do is talk to your lender and let them know you are having problems and find out what they can do for you. Sometimes, they are able to defer a few payments and this will be enough to help you get back on your feet.
2. Selling is probably you best option, but in these times that is easier said than done. Nonetheless, it should be an alternative that you explore.
3. A short sale is another form of selling. You will be selling the home for less than what is owed on it. This will get you out from under the mortgage, but there is the deficiency that will have to be dealt with, in one form or another. Some lenders will write it off, but it will more than likely be considered income and you will have to pay taxes on it.
4. A chapter 13 bankruptcy may be another option that will help you keep your home. With this type of bankruptcy your assets will not be liquidated, but your debts will be reorganized and you may be able to include your delinquent payments in this reorganization.

You do have options for fighting foreclosure. Not all of these alternatives are appealing, but inevitably in most cases a decision will have to be made. Being overwhelmed by the stress of an impending foreclosure, can be daunting, making it difficult to know what solution will work best for you.

There are professional organizations that have individuals trained in evaluating your financial situation and the current state of your mortgage. They can develop a foreclosure avoidance plan just for you. Your consultant can help you get out of a difficult situation and prepare to move forward for the future. If there is no way you can keep your home, the sooner you make a decision, the sooner you can begin moving forward. It will not be easy, but it is necessary.

If you are having problems making your mortgage payments, you do have options. Find out more about fighting foreclosure.

It’s a similar concept to having a credit card but much larger in credit limit. A Home Equity Loan is a credit facility secured with a first mortgage on a residential property. It allows you to withdraw funds up to a set limit (the equity you have in your home) at any time.

A Home Equity Loan allows you maximum flexibility with your finances.

You can use the line of credit to carry out renovations, invest in shares, purchase another investment property or pay the bills.

Consider the following pros and cons before you decide on a Home Equity Loan:

Pros of a Home Equity Loan

* A home equity line of credit offers a much lower rate of interest than credit cards
* Interest paid on your home equity line of credit is tax deductible, a benefit not available with credit cards
* Flexible payment options – Some lenders offer interest only equity lines of credit which gives you the option to pay only the interest for a pre-determined amount of time or pay interest plus as much or as little principal as you want
* Accessibility – Money is easily accessed by cheque or ATM card linked to this loan
* Repayments can be made in full or on a monthly basis
* Extra repayments are allowed at any time
* Cheque book facilities are available if needed

Cons of a Home Equity Loan

* The interest rate of a home equity line of credit changes with the prime rate. There is also a margin that is added to the interest rate, which is fixed and is determined at the time of application
* Typically attracts higher interest rates than your standard variable rate loans

Low Doc Home Loan: If you are self employed and don’t have your financials in order, don’t scratch your head wondering if you can obtain finance or not.

One option most lenders offer is a simple and quick loan called a Low Doc Home Loan. Low Doc Home Loans cater mainly for self-employed borrowers who are unable to provide full financial statements and other evidence of their income.

More and more lenders are adopting the growing trend of low doc home loan products on the market with many lenders offering standard and premium ‘low-doc loans’, with the choice of fixed or variable interest rates.

With access to hundreds of lenders and the leading home loans on the market, you can be sure with DirectMoney HomeLoans, we will find the best rate and featured home loan for you.

Depending on the lender, some require you to pay for Lender Mortgage Insurance (LMI) if your loan reaches 80% loan to value ratio (LVR). Due to the risk associated with self employed customers some lenders also charge a higher interest rate for these products. After a period of time, or when customers are able to show their tax assessments, then the lender may reduce the interest rate for you.

Consider the following pros and cons before you decide on a low doc home loan:

Pros of Low Doc Home Loans

* Proof of financials is not needed
* Simple statement of financials required instead of a tax return
* Non-traditional and irregular income sources are considered

Cons of Low Doc Home Loans

* You pay higher interest rates and fees
* Your cash flows might suffer due to higher repayments

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With that said, you can stand to lose your property if you fail to pay off your mortgage loan. This is known to happen. In fact, the credit crunch is forcing homeowners into giving up their properties. The financial meltdown has caused interest rates to increase, making more difficult for homeowners to make payments. In situations like this, foreclosure seems to be the only way to get out of the rut.

The economic crisis is largely to blame in the sad plight of many people who have availed mortgage loan, however, had these people been informed of the risks involved, then they could have done something to protect themselves. As with any other secured loan, the very first step you need to take is to do a research. This means you have to have all the information you need to help you come up with a wise decision.

Don’t fall into the trap of clever marketing schemes. If you are well-informed about mortgage loans, you can weigh in your options and choose the one that will best address your borrowing needs.

A great start-off point is to know what comprises a mortgage loan. The most basic mortgage loan computation includes the principal amount, the interest, and number of years. Not everyone is equipped with the mathematical skills to compute for the monthly amortization. To make things easier for you, you need to make use of a mortgage calculator. You just need the values that go with the mortgage loan variables.

The basic calculator will initially give you an idea of how much funds you need and the corresponding monthly payments. Of course, the more advanced calculator will take into account your salary, taxes, insurance, non-mortgage debt, and other variables that can affect your ability to pay. Knowing just the monthly payments is not enough; you need to know the other factors that can help you in your decision-making.

The purpose of the mortgage calculator is mainly to determine how much you have to pay per month to cover the amortization. Suffice to say, it is a determinant of your ability to pay for certain number of years. If you have determined you cannot afford it, perhaps you are better of scouting for other options. On the other hand, if you the monthly payments are well within your budget, then by all means, get the loan.

If you are confident that your salary can cover for the costs during the length of the mortgage loan then it’s probably the best for you. To make sure that your loan is ‘future-proof’, then you have to play around with the interest rates. This means that even if you factor in the effects of the financial meltdown, you will still be able to keep your property.

Corey Palmer is a mortgage expert and teaches others the best ways to go about owning their own homes. He always ways that the best tool is a mortgage payment calculator.

Americans are split deeply about this legislation and as one might expect, much of the split does run along party lines, but also along the lines of those who support big government spending and those who believe that unchecked government spending is exactly what got us to the deficit and mess in which we find ourselves today.

There is no doubt about the severity of the stake riding on the outcome of this Bill which passed the House of Representatives and now has a version in the Senate.

With one of the worst economic recessions since the Great Depression upon us, with unemployment rising weekly along with record home foreclosures, Congress has set about to make a plan which has been billed a “stimulus package”, designed to stimulate the economy and create jobs. Proponents of the package claim that it is needed and needed now to start projects to put Americans to work.

Opponents are quick to point out that most of the projects don’t have an immediate impact and question just how many will receive employment as a result of many of the provisions contained in the Bill, calling them “Pork” or pet projects. Critics say they will serve only one purpose, spending money or paying back political backers and contributors but will not create massive jobs.

The package was originally sold as infrastructure improvement (roads, bridges, energy, etc) putting millions of Americans to work on much needed projects which would not only stimulate the economy but also improve the nation.

But when reading over the Bills crafted at both the House and Senate, one can find tax dollars going to programs such as $50 Million for the promotion of the arts; $335 Million for education about sexually transmitted diseases; $600 Million for new “green friendly” cars for government workers (even though the infrastructure of gas pumps to run these cars is not currently in place);

$600 Million for grants for diesel emission reduction; $650 Million foralternative energy technologies, energy efficiency enhancements, and deferred maintenance at Federal Facilities; $1.5 Billion for construction of :Green Cars”; $800 Million to clean up Superfund sites; $400 Million for NASA scientists to study climate change; $1 Billion to the controversial union Community Oriented Policing Services Hiring Program;

$2.75 Billion in stem cell research; $83 Billion for an earned income credit for those who do not pay taxes; $4.19 Billion to groups like ACORN and other larger dollar amounts for plug in car stations, $246 Million for Hollywood, $75 Million for smoking cessation programs, bike and walking trails and even ATV trails (those All Terrain Vehicles that you see people enthusiastically riding with the three or four wheels).

In fact, only a little over 3% appears to be going to tangible road and bridge construction. There are projects for many federal agencies. Billions of dollars are slated to go to federal programs overseen by the Office of Management and Budget or the Government Accountability Office ($54 Billion), repairs to the Smithsonian Institution Facilities; for agricultural research.

How about $1 Billion for the follow up to the 2010 Census (just try to figure how that will stimulate the January 2009 economy)? And then there is the ever-popular $227 Million for over-sight of pork barrel spending we have pork to over-see the pork!

When looking at all these billions of dollars, surely it will mean some jobs, but in the grand scheme of things, not many Americans will go to work based on the list above. So what are some of the things coming from this Bill that WILL help Americans? Right off the top is a proposed limit increase to the Home Equity Conversion Mortgage (Reverse Mortgage or Heck-um) to $625,500.

The limit was just increased to a national limit of $417,000 in 2008 which did help many areas where the old limits were considerably lower but didn’t do much for the higher cost areas which already had a limit of $362,790. This proposed increase will help senior borrowers with higher valued homes, especially those who have mortgages to retire when the old limits just didn’t get them enough cash to pay off their existing mortgage.

Realtors are currently urging congress to increase FHA funding. FHA’s market share has increased from 2% in 2006 to what many believe will be 30% in 2009. Many are concerned that FHA does not become the new sub-prime, but FHA does play a vital role in serving customers such as first-time homebuyers, borrowers with little to put down and those with less than perfect credit. But FHA will really have to grow to accommodate the new demand.

As people still scratch their heads and wonder where the first $350 Billion of TARP funds were spent (since it seems that all the banks are still plagued by the troubled assets and there was no relief), we can only hope that this new stimulus bill actually does put American workers back to work and helps American Homeowners.

If the government is going to put the money into programs that don’t really put people to work but will hopefully have an ancillary benefit to the economy, we would love to see it going to reduce Up Front Mortgage Insurance Premiums for Senior Reverse Mortgage borrowers and FHA borrowers alike;

release the Reverse Mortgage for purchase program as they announced in their 2008-33 Mortgagee Letter where they were going to determine eligibility based on appraised value (not the lower of appraised value or sales price which the latest indications from HUD are that they will soon issue the clarification to include); and that HUD would bring back the DPA (down Payment Assistance) programs.

There are good and bad things that can be said about each of these things as well but hey, by the time they include interest we’re talking about a $1.1 Trillion Package so there has to be a little room for home owners and home purchasers!

Michael G. Branson (CEO All Reverse Mortgage Company)is a Mortgage Broker who has over 31 years of mortgage banking experience. Toll Free (888) 801-2762
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