The advent of the subprime market reflects a sea change in the way banks make [tag]home loans[/tag]. As recently as the mid-1990s, potential homeowners had to get over high hurdles to borrow money. Background checks could take weeks or months. Lenders typically required down payments of at least 20% of a home’s value. People with dented credit, or young folks without adequate credit histories, had few if any options. Over the past decade, though, a convergence of factors has emboldened banks to lend where they wouldn’t before. For one, the development of the Internet and advances in computing technology have made it much easier and cheaper to process and package new loans. (more…)

It never ceases to amaze me how widespread and deep-seated the belief is that somewhere out there must be a good fairy who will solve all of our financial problems. This belief sustains lotteries, which help keep poor people poor, and a host of schemes directed at homeowners that promise to [tag]pay down their mortgage loan[/tag]s quicker and easier.

Some of these schemes are outright frauds, such as the one peddled by Success Trust and Holding that I warned readers against last year. It took until August of this year before the SEC took action against them, by which time they had relieved more than 500 homeowners of several million dollars. At the opposite end of the spectrum are schemes that discipline borrowers to [tag]make extra payments[/tag], of which the most important are biweekly programs. So long as borrowers understand that they don’t need a biweekly program to make extra payments, and that what they are purchasing is only a convenient way to discipline themselves to make the extra payments, these programs are fine. (more…)

One of the many oddities of [tag]real estate investing[/tag] is that the best time to plunge in is usually just when things are starting to go south – meaning now. While momentum is starting to carry the market down, home prices are still out of range for a lot of would-be buyers, which helps to buoy rents. Further burgeoning the tenant ranks are the thousands of homeowners selling now in the face of rising interest rates. According to the National Association of Realtors, rents nationwide are expected to jump an average of 5 percent by year’s end.

First, inventory is shrinking: Public universities have suffered from continual belt-tightening in recent years, leaving most without money to upgrade or build out dorms and other housing units. Second, demand is skyrocketing: Colleges are starting to see a surge in admissions, especially from so-called [tag]echo boomers[/tag], the children of baby boomers. For investors, that adds up to remarkably low vacancy rates near campuses. Prime Property owns 21 apartment buildings in five [tag]college towns[/tag] in Florida and the Midwest, and Zaransky says “we are 100 percent occupied” – even during summer months. (more…)

A great teacher taught me years ago that many of the nuances of [tag]real estate law[/tag] only matter when it matters. How you hold title is one of those nuances and it really matters when it matters. Consider the case of one of our distraught readers whose significant other had placed both their names on the title in Joint Tenancy more than three years ago. Just a few months later, the relationship went south, and the significant other wanted to switch everything back the way it was before the [tag]Joint Tenancy agreement[/tag].

The problem was this reader pointed out that she had “made monetary contributions to ALL the upgrades done within the house, paying for 90 percent of the total renovations done which has increased the value of the property as well. I contributed to the household over the years I was there, but did not specify that these funds went to the mortgage, and these funds went to whatever. I just want to be fairly compensated for my “loss.” As a Joint Tenant, technically I am entitled to 50 percent of the equity, right? I am not on the loan. Help and fast. He sent me a letter from a lawyer and I want to make sure I know what I am talking about before I respond.” There are several ways of [tag]holding title to property[/tag] and if what this person wrote is correct, asking for a [tag]quit claim deed[/tag] is not one of the guaranteed 50 ways to leave this lover without an interest in the property, or at least a court appearance. (more…)

As the housing market continues to cool, [tag]higher interest rates[/tag] have increased the [tag]mortgage payments[/tag] for homeowners who have [tag]adjustable rate loans[/tag], or [tag]ARM[/tag]s, causing the number of them defaulting on their mortgages in default to rise. On The Early Show Thursday, money maven Ray Martin spelled out the problem, and offered advice to homeowners finding it harder and harder to make their mortgage payments:

According to Moody’s Economy.com, the percentage of mortgages with delinquent payments has risen nationally to 2.33 percent, the highest level since 2003. The metropolitan areas that saw the biggest increase in mortgage delinquencies include McAllen- Edinburg-Mission, Texas; Merced, Calif.; Fort Smith, Ark.-Okla.; and Las Vegas-Paradise, Nev. It’s expected that mortgage defaults — in which a borrower misses one or more payments on a loan — will increase when the economy weakens and job losses rise. Typically, higher job losses translate into a higher percentage of homeowners missing loan payments. At this time, the percentage of home loans in default at 2.33 percent is closer to the historical average. (more…)

I believe I spent about $6,000 over 14 years upgrading the electricity in the last house. I had an electrician who believed that if the squirrels hadn’t chewed the knob and tube to shreds, you blend it with the other generations of wiring, update and upgrade where needed, reorganize the box and work from there.

Test all [tag]smoke alarms[/tag] at least once a month, following the manufacturer’s instructions, or push the “test button” on the face of the alarm cover. Put new batteries in your smoke alarms at least one time each year; sooner if the alarm makes a regular chirping signal, indicating low battery power. If smoke alarms are more than 10 years old, buy new smoke alarms. When possible, use interconnected smoke alarms. Hard-wired, interconnected alarms with battery back-up run on your household wiring and are tied in together so that if one alarm operates, they all signal together. Also, wireless technology is now available to enable homes to have an interconnected smoke alarm system that can be installed independent of household wiring. (more…)

Real estate market downturn creates strange bedfellows as brokerage sleeps with the enemy. The U.S.[tag] real estate market[/tag] may be running out of steam, but the downturn may be helping to clear the air of mistrust between traditional [tag]realtors[/tag] and the Internet community as two realty firms announced groundbreaking deals with [tag]Google[/tag] and [tag]Microsoft[/tag].

Late Thursday, Prudential California/Nevada/Texas Realty, one of the largest real estate brokerages in the United States, said it will make its property listings available for search on Google, a watershed move for a major player in an industry that jealously guards its listing data.

In another air-clearing announcement, John L. Scott Real Estate, a Pacific Northwest-based realty company, said it will expand its use of [tag]Virtual Earth[/tag], Microsoft’s satellite and aerial imagery service, to home shoppers in Portland, Oregon, and Vancouver, Washington. (more…)

University life, for many traditional students, is one of few bills and responsibilities. However, every spring, new graduates enter the real world of full-time careers, families and [tag]mortgage[/tag]s. The average traditional student will first encounter mortgages in their first attempt to buy a home, without prior knowledge of what [tag]mortgage brokers[/tag] are looking for and what they need in order to be able to approve them.

Lenders require a copy of one’s driver’s license and social security card. If loan seekers have been renting, they must bring in the contact information of their landlord. They must also bring the most recent two months of bank statements for all accounts including stocks, checking, savings and money market accounts as well as tax information for the past two years and pay stubs for the past 30 days. It is wise to contact the [tag]loan agent[/tag] prior to your meeting in order to make sure that there are not other requirements for that individual lender. Once the [tag]loan seekers[/tag] have made their appointment with a lender and have gathered all of the information that is, necessary there are four things that lenders look at in order to approve loans: [tag]credit worthiness[/tag], cash on hand, income/job stability and [tag]debt ratio[/tag]s. (more…)

If the [tag]Federal Reserve[/tag] does as expected and leaves short-term interest rates unchanged next week, investors looking for a conservative income mutual fund might consider those that invest in Ginnie Maes. Some fund managers believe these [tag]government-backed mortgages[/tag] can perform well in a stable interest rate environment. Denis Jamison has been managing the same [tag]Ginnie Mae[/tag] fund for nearly 25 years _ almost as long as many people take to pay off their [tag]home mortgage[/tag]s. Having shepherded the ING GNMA Income fund through a variety of market conditions, he sees the present environment as ideal for investors looking for a steady income stream to invest in mortgage funds.

Ginnie Maes tend to pay less interest than other types of mortgage-backed securities because their principal and interest payments are guaranteed by the government. The Government National Mortgage Association works by packaging mortgages from agencies such as the Department of Housing and Urban Development or the Department of Veterans Affairs.Mortgage funds are worth examining, Jamison said, because the underlying mortgages prices are generally at or below par, or face value, giving a fund’s principal room to appreciate. Also, the coupon, or interest rate, on these mortgage securities is about 100 basis points higher than the yield on a benchmark [tag]10-year treasury note[/tag] before inflation. Ginnie Maes tend to be less sensitive to interest rates than are the 10-year Treasuries, he notes. (more…)

Everyone, no matter how rich or poor, enjoys saving money. For example, a few weeks ago a multimillionaire real estate investor friend took me to a lavish lunch, which must have cost him at least $100. As we were leaving the restaurant, he saw the city “meter maid” coming down the street. All of a sudden he sprinted to beat her to his Lexus with an expired parking meter so he wouldn’t get a $20 parking ticket.

A few years ago my [tag]insurance agent[/tag] made a wise and profitable suggestion. He said I should cut my [tag]liability coverage[/tag] on each of my properties to $300,000 and take out a $2 million “umbrella policy” to give me better coverage at lower cost. Don’t tell the insurer, but my $700 annual premium for $2 million excess liability coverage is a genuine bargain. If you have net worth over $1 million, you can probably save money by following the same strategy. Check with your current insurance agent, plus one or two others, to see if a similar tactic can save you insurance premium dollars and obtain better protection. Incidentally, my [tag]umbrella liability insurance policy[/tag] not only provides excess coverage for insured property liability, but it also provides automobile liability coverage if I should be at fault in an auto accident. (more…)

[tag]Mortgage lenders [/tag]are making it easier to get loans even as the housing market cools — and as the number of [tag]borrowers[/tag] struggling to make their payments continues to rise, new studies show. In the latest sign that a cooling housing market and weaker credit standards are beginning to take their toll on borrowers and lenders, the number of past-due mortgages continued to rise in the three months ended Sept. 30, according to data from Equifax Inc. and Moody’s Economy.com Inc.

Agencies that counsel homeowners with mortgage problems say that many borrowers are running into problems because of the terms of their loans, not their personal circumstances. “It’s mostly people with adjustables” who are having trouble paying their loans, says Pam Canada, executive director of the NeighborWorks HomeOwnership Center in Sacramento, Calif. David M. Crosby, a Las Vegas bankruptcy attorney, says he has seen a “surge” in borrowers with mortgage problems. “Most of it is [tied to] the end of the housing boom, but I do see a good percentage of clients who got caught by a change in their mortgage rates.” In addition, some clients “bought a number of speculative homes,” he says. “The market turned on them, and now they are in a real financial mess.” Some homeowners are calling it quits. “A surprising number of people are walking away from their homes rather than trying to save them,” says Mr. Crosby, either because the rate on their loan has jumped or because they owe more than the home is worth. (more…)

Imagine back-road tours of scenic countryside, well-tended [tag]vineyards[/tag] bursting with ripe grapes, delicious [tag]wine[/tag], charming tasting rooms, authentic regional cuisine and historic accommodations. That sounds like the travel brochure for a tour of French or Italian wine country, but all these things are available a short drive from Charlotte. The [tag]N.C. wine industry[/tag] has grown in the last couple of years. If you haven’t discovered the pleasures of a winery visit, treat yourself on one of these beautiful fall afternoons.

Wine is not new to the Carolinas. Scuppernongs are North Carolina’s official state fruit. In fact, before Prohibition, North Carolina was the largest wine-producing state in the country. But it wasn’t until the 1970s that Westbend Vineyards in Lewisville planted the first vitis vinifera, grapes of European descent like chardonnay, sauvignon blanc, riesling, cabernet sauvignon and merlot. These European varieties do well in the central and western portions of the state, and produce a dry style of wine. While grapes will never replace the more traditional tobacco and soybean crops, many hope wine-making and its kissing cousin, tourism, will help replace lost textile and manufacturing jobs. (more…)

Though mortgage rates are still extremely low, the [tag]mortgage[/tag] market has somewhat dried up. Home sales plummeted 14 percent from a year ago. However, homeowners remain optimistic about [tag]home value appreciation[/tag] but the bottom line is home values are remaining steady or declining. So why am I thinking we may be headed for another boom? Between 2002 and 2004, many people took advantage of low fixed-rate loans. Rates were as low as 4.5 percent on a [tag]30-year fixed traditional mortgage[/tag]. However, many borrowers applied for adjustable rate mortgages or ARM loans that are now coming into their adjustment period and these adjustments could mean payments drastically going up or even doubling.

Applications for refinance transactions fell sharply once news of raising interest rates hit the media but are now up 10 percent from a year ago, according to the [tag]Mortgage Bankers Association[/tag]. This is the highest share of [tag]refinance[/tag] business seen since February 2005. This rise is most likely the result of payment shock felt by homeowners who got their notices of rate increases once the fixed period of their [tag]ARM loan[/tag]s was over. These rate increases mean payment increases to an already debt-sensitive market. (more…)

A lack of enforcement at the state level is a major reason appraisals remain at the root of [tag]mortgage fraud[/tag], said panelists at a symposium sponsored by the Appraisal Foundation earlier this month. A third of the states “are doing a great job” at responding to cases alleging fake, false or [tag]erroneous appraisals[/tag], Mark Simpson of Fannie Mae told the conference. And another third are “so slow that we don’t know what to think. They sit on referrals for three years.”

[tag]Appraisers who commit fraud[/tag] need more than just slaps on the wrist, they “need to be punished” by having all their assignments taken away, the industry spokesman said. Valuations may be subjective, he explained, but fraud is not. “Fraud is an intentional and material misrepresentation. A faulty or even [tag]fake appraisal[/tag] is at the basis of most fraudulent [tag]mortgage[/tag] transactions.” Richard Powers, president of the Appraisal Institute, agreed that state regulators lack the money and the manpower to effectively oversee the business. In some states, he noted, a single agency polices “each and every license” granted within their borders, from hair dressers to contractors. They have so much responsibility, he added, that they can’t possibly be effective. (more…)

In your columns on repaying mortgage loans, you skip over a detail that I have often wondered about … I don’t think that saving 6 percent interest on a mortgage is quite the same as earning 6 percent on other investments because mortgage interest is deductible … I get further confused by the possibility that the income taxes due on other investments may be deferred if they are in a 401K or other [tag]tax-deferred retirement account[/tag]….

In numerous articles, I have argued that [tag]mortgage repayment[/tag] should be viewed as an investment with a yield equal to the [tag]mortgage rate[/tag] — and that this yield should be compared to those available on other low-risk investments. The “low-risk” qualifier is important, because mortgage repayment has zero risk to the borrower. You are right that in making such comparisons, account should be taken of possible different tax treatment. Mortgage interest is always deductible on first mortgages up to $1 million, but other investments can be subject to different tax rules. Four different situations are worth distinguishing. (more…)

U.S. [tag]mortgage applications[/tag] fell last week, retreating from a nine-month high as home loan interest rates crept up, an industry trade group’s data showed on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity , which includes both [tag]refinancing and purchasing loans[/tag], for the week ended Oct. 6 fell 5.5 percent to 599.1. This was a slide from the previous week’s 11.9 percent surge to 633.9, which was its highest level since January.

“Housing is something to pay close attention to, but I think you have to be careful you’re not losing sight of the entire economy,” he said. “The biggest effects from housing are secondary effects and not the primary effects of actual construction of homes and to date, we have yet to see the secondary effects play out in any incredibly negative way.” Matus expects U.S. economic growth to slow due to the direct effects of softer housing investment. Borrowing costs on [tag]30-year fixed-rate mortgages[/tag], excluding fees, averaged 6.27 percent. This was up 0.03 percent from the previous week but below a four-year high of 6.86 percent touched in June. (more…)

Seven U.S. [tag]real estate brokerage firms[/tag] unfairly blocked some home sellers from their listing service, the [tag]Federal Trade Commission[/tag] said Thursday.The FTC settled its case against five of the real estate brokerage firms and is suing two more for “anticompetitive rules or polices.” The brokerages withheld access to a valuable [tag]real estate listing service[/tag] if the seller did not sign up for a wide range of brokerage services, the FTC said. That action limited consumers’ ability “to obtain [tag]low-cost real estate brokerage services[/tag],” the FTC said in a statement.

Under traditional listing agreements, property owners appoint a real estate broker to act as an exclusive agent and pays when the property is sold. An alternative, and typically less costly, arrangement preserves the property owner’s right to sell without extensive help from the broker. The FTC faulted the named brokerage firms for denying full listing services to sellers who sought this alternative arrangement. There are several hundred such real estate brokerage listing services around the country that dominate the regions they serve, said Jeff Schmidt, director of the commission’s Competition Bureau. “The value they provide can sometimes be abused,” Schmidt said, and the FTC has several more such investigations “in the pipeline.”
(more…)

Freddie Mac today released the results of its Primary Mortgage Market Survey (PMMS) in which the [tag]30-year fixed-rate mortgage[/tag] (FRM) averaged 6.37 percent with an average 0.5 point for the week ending October 12, 2006, up from last week when it averaged 6.30 percent. Last year at this time, the 30-year FRM averaged 6.03 percent.

The 15-year FRM this week averaged 6.06 percent with an average 0.5 point, up from last week when it averaged 5.98 percent. A year ago, the 15-year FRM averaged 5.62 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.10 percent this week, with an average 0.6 point, up from last week when it averaged 6.00 percent. A year ago, the five-year ARM averaged 5.57 percent. (more…)

Using [tag]e-signatures[/tag], the e-recording of a mortgage could wind up as the final piece to the e-mortgage puzzle. Secured Funding quotes information from the Property Records Industry Association showing that electronic recording systems are growing. The e-recordings include the process of receipt, examination, fee calculation, payment and endorsement of recording information and the return of recorded [tag]electronic document[/tag]s that were submitted for recording in a county’s land records office.

A true electronic mortgage is a totally paperless transaction from end to end. It begins with origination through post closing and on into the secondary market, including electronic registration of notes and deeds. Among the 3,142 individual county jurisdictions in the United States, just a handful has the ability to electronically record and store documents that would be part of a paperless package. Only a few states passed enabling legislation establishing standards for electronic recordation. Many more counties need to come online, agree on an acceptable technology to use, purchase equipment, have enabling legislation, and training, Secured Funding says. (more…)

[tag]Mortgage rates[/tag] have been trending down, but that won’t do much to benefit those who signed up for low-teaser-rate [tag]adjustable-rate mortgages[/tag] in the past few years. An ARM charges an initial discounted rate for a period of time, after which it adjusts to market levels. When some types of [tag]ARM[/tag]s with teaser rates of 2 percent or less reset, the rates are likely to jump to more than 6 percent – and even as high as 9 percent.

That can mean a doubling in monthly payments owed for those homeowners saddled with the loans. The jump in payments could be even bigger for some people. They could have a [tag]loan balance[/tag] that’s larger today than it was when they got their mortgage – a situation called negative amortization. And it’s common with what are called “payment option” ARMs. That’s because the initial teaser rate is a “payment rate,” not an interest rate. That means the market-rate interest on the loan starts to accrue from the get-go and monthly payments aren’t enough to cover it, let alone pay down any of your principal. There may also be a trigger ceiling, meaning when the balance reaches a certain level – say 120 percent of the original balance – the introductory terms will end and the rate will reset upward, according to Christopher Cagan, director of research at First American Real Estate Solutions, a mortgage information provider. (more…)

To help move at least some of the [tag]unsold houses[/tag] glutting local markets, lenders are beginning to look “back to the future” for financing techniques that worked in the tough times of the 1980s. One creative technique is known as a mortgage rate “buydown.” Rather than lower the asking price on a house by thousands of dollars, a seller can offer a discounted rate package that lowers’ purchasers’ effective [tag]interest costs[/tag] and [tag]monthly payments[/tag] during the early years of their loans.

The most popular form of buydown in the 1980s was a “3-2-1″ on a fixed rate 30 year mortgage. During year one of the new purchaser’s mortgage, the seller agrees to pay 3 percentage points of the interest rate on the [tag]mortgage note[/tag]. During the second year, the sellers pays 2 percent, and in year three the seller pays 1 percent. After that, the purchasers pay the full note rate. (more…)

Over the past two decades millions of people have moved to the Lone Star State and, along with this growth, we have seen a steady rise in housing prices. Many home buyers trying to keep up with an ever-changing market are turning to what at first appear to be attractive loans with very [tag]low monthly payment[/tag]s. Virtually anyone who surfs the Internet has seen banner and pop-up ads touting enticing offers, such as “$350,000 mortgage for $750 a month.”

These offers, also known as [tag]“exotic” mortgages[/tag], might be the solution for some consumers, such as those who want the convenience of low payments initially and can afford substantially higher ones in the long run. But for those who are not fully aware of the terms, they could quickly find themselves in a bind. Most of these low-ball offers are for interest-only loans. In the example above, the $750 a month payment will likely serve to simply pay off the interest that is accumulating, and that’s assuming that the loan was extended with a very low interest rate (exotic mortgages sometimes have starting rates as low as one percent). However, consumers can rest assured that the low rates are for a limited amount of time. After a few payments, they rise to prevailing market offerings, based on the [tag]consumer credit score[/tag] and other factors. (more…)

During the [tag]real estate boom[/tag]’s peak from 2002 to 2004, the [tag]National Association of Realtors[/tag] ([tag]NAR[/tag]) saw memberships soar 26 percent. Today, over 1.2 million Americans call themselves Realtors. But the exuberance couldn’t last forever: the NAR forecasts existing home sales to fall 7.6 percent in 2006. Agents, who work on commission, are already beginning to feel the bite.

Real estate is a notoriously difficult industry for newcomers. The NAR reported in 2005 that those who have been in the business for two years or less had an average income of only $12,850 a year. Long-time brokers – those with at least 26 years of experience – had an average of $92,600. “You’ve got a lot of people who got into the business in the last two to three years who never really had to do the hardest work of an agent, people who were basically picking low-hanging fruit,” said Fryer. “Now they’re suffering the most.” (more…)

James and Meegan Atkins spent Sunday afternoon planting fence posts in front of their North College Park home. It’s the latest in a line of improvement projects the couple have worked on “constantly” since buying their fixer-upper two years ago, Meegan Atkins said. “It was in our price range,” she explained. The percentage of Seattle residents who, like the Atkinses, own their homes increased over the past five years — even though [tag]home values[/tag] and [tag]mortgage payments[/tag] rose much faster than incomes, data the U.S. Census Bureau released today shows.

According to Census numbers, the trend in Seattle also was true in the county, state and nation, although the chasm between income and home values widened more in the city. Local economists said [tag]low interest rates[/tag] were the biggest reason more people were able to buy their own homes between 2000 and 2005. They also worried about what the trend might mean for coming years. During that period, “we got [tag]home ownership[/tag] levels nationwide really at record highs, to a point where I’m not sure it’s sustainable,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. (more…)

[tag]Freddie Mac[/tag] today released the results of its Primary Mortgage Market Survey (PMMS) in which the [tag]30-year fixed-rate mortgage[/tag] (FRM) averaged 6.30 percent with an average 0.3 point for the week ending October 5, 2006, down very slightly from last week when it averaged 6.31 percent. Last year at this time, the 30-year FRM averaged 5.98 percent. This is the lowest the 30-year FRM has been since the week of March 2, 2006, when it averaged 6.24 percent.

The 15-year FRM this week averaged 5.98 percent with an average 0.4 point, unchanged from last week. A year ago, the 15-year FRM averaged 5.54 percent. This is the lowest the 15-year FRM has been since the week ending March 23, 2006, when it averaged 5.97 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.00 percent this week, with an average 0.5 point, unchanged from last week. A year ago, the five-year ARM averaged 5.48 percent. This is the lowest the 5-year ARM has been since the week ending March 23, 2006, when it averaged 5.96 percent. (more…)

[tag]Reverse mortgages[/tag] have become hot items on the financial planning market. A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home [tag]mortgage payments[/tag] can be paid to the homeowner through an established [tag]line of credit[/tag]. Unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer uses the home as their principal residence, sells the home or dies.

The three basic types of reverse mortgages are [tag]single purpose reverse mortgage[/tag]s, which are offered by some state and local government agencies and nonprofit organizations; [tag]federally insured reverse mortgage[/tag]s, which are known as [tag]Home Equity Conversion Mortgage[/tag]s, and are backed by the U.S. Department of Housing and Urban Development; and [tag]proprietary reverse mortgage[/tag]s, which are private loans that are backed by the companies that develop them. To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration requires that the borrower is a homeowner, 62 years of age or older; owns the home outright, or has a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. (more…)

[tag]Homeowner equity[/tag] is property value less the sum of all debts secured by the property. If equity is negative, it means that the debts exceed the property value. Homeowners who think of themselves as tenants may not be much bothered by negative equity. As long as they make their monthly payments, they can continue to live in the house, just as if they were tenants. But homeowners with a homeowner — rather than a tenant — mentality are looking to a future in which they build equity. For them, [tag]negative equity[/tag] is a psychic burden until they rid themselves of it, and it can turn into a curse.

When you sell your house, you must pay off all liens on the house — all mortgages including [tag]HELOCs[/tag], and any [tag]tax or mechanic’s lien[/tag]s. If you don’t retire all existing liens, you can’t convey good title to a buyer, which means you can’t sell. You cannot escape this trap by transferring an existing lien to another property. Hardly a week goes by that some homeowner with negative equity does not ask me whether, in selling his/her house, the second mortgage can be transferred to the new house he/she plans to purchase. The answer is “no”; liens are not transferable. Liens apply to a particular property and can’t be transferred to another property without the permission of the lender, which you won’t get. (more…)

New federal guidelines released last Friday take direct aim at mass-marketed “non-traditional” mortgages — payment-option, [tag]negative amortization[/tag], [tag]interest-only[/tag] and “stated income” plans — that have boomed in high cost real estate markets over the past three years. The joint guidelines, issued by the [tag]Treasury Department[/tag], [tag]Federal Reserve Board[/tag], [tag]FDIC[/tag] and the [tag]National Credit Union Administration[/tag], are designed to tighten up lenders’ underwriting standards for payment-option adjustable rate mortgages, interest-only and [tag]low-documentation mortgage[/tag]s.

The new guidelines almost certainly will reduce the number of payment-option, negative amortization and low-doc mortgages being originated nationwide — especially for applicants with below-par credit scores, minimal assets and incomes insufficient to handle fully-amortizing payments on the size loan they seek. That’s because the new rules will force lenders to restrict higher-risk loans to applicants who actually have the financial resources to pay for the houses they buy at interest rates and monthly costs considerably higher than what most payment-option and interest-only programs permit. (more…)

If you’ve been in the market to buy or [tag]refinance a home[/tag] recently, you likely know that [tag]mortgages[/tag] come in many sizes and styles, from the classic 30-year fixed rate to the non-traditional variety, such as [tag]adjustable-rate mortgage[/tag]s ([tag]ARM[/tag]s) and [tag]interest-only loan[/tag]s. These “exotic” mortgages, as they are sometimes called, became more desirable as home prices started to climb in 2002, according to government housing agency Freddie Mac. [tag]Adjustable-rate mortgage[/tag]s offer buyers lower initial payments for the first few years, and many of these loans are due to reset in the near future at higher interest rates.

The most common adjustable-rate mortgage is the “5/1 ARM.” With this loan, the interest rate remains the same for the first five years and can adjust every year thereafter. The initial fixed-interest period can range from one month to 10 years — thus, other types of adjustable mortgages include the 1/1, 3/1 and 10/1 ARM. At the end of the initial period, and at every subsequent — usually annual — adjustment, the interest rate can change based on current market conditions as reflected in an index such as the U.S. Treasury Bill. Most ARMs, however, have caps that limit the amount the interest rate can increase at each adjustment and over the entire life of the loan. (more…)

While economists, investors and even [tag]Federal Reserve[/tag] policymakers express concern that the [tag]slumping real estate market[/tag] will hurt the economy, [tag]U.S. stocks[/tag] may well be getting an unexpected lift from problems in the sector. That’s because a wide range of real estate experts agree that much of the current weakness in sales and home prices is due to investors pulling out of the sector. And some stock market experts say that the money being pulled out of homes is finding its way into stocks.

“We know new money is not going into [tag]real estate[/tag], since it looks more and more like that is dead money,” said Chan. “I’m not sure the flow has been strong enough to cause an avalanche. But it’s been enough to help the [stock] market hold its own.” He estimated that from a quarter to about half the gains in the major stock indexes this year could be due to the housing market weakness. How much money has flowed from real estate to stocks is impossible to say for certain, but even a conservative estimate would suggest it is in the range of hundreds of billions of dollars. The latest annual survey by the National Association of Realtors found that 27.7 percent of all home buyers in 2005 were buying homes as an investment, rather than as a primary or even secondary residence for their own use. (more…)