Ivan and Delores Eichers are among thousands of people who fall each year for offers that promise to help them avoid foreclosure but that leave them with none of the equity they had built up in their property. Their situation matches one of the three common models of foreclosure fraud the National Consumer Law Center described in a report on the problem. The number of foreclosures nationwide soared 42 percent in 2006 to 1.26 million, said RealtyTrac, a company that tracks foreclosures. That creates opportunities for more foreclosure fraud, although the exact number of cases is hard to determine.

The Eichers thought they were taking out a $1,700 loan to help them pay the roughly $4,700 in back payments they owed on their mortgage. They learned too late they had signed their house over to Mid-America Financial Investment Corp. and agreed to lease their home from Mid-America when they accepted that loan. Although the couple no longer owned their home, the mortgage remained in their names, so they made their $554 payments on the loan through Mid-America, along with monthly fees of at least $100. A second scheme described in the report involves consultants charging high fees to help homeowners out of trouble but never delivering the promised services. A third involves an agreement where a homeowner knowingly signs over his or her home and agrees to buy it back over time, but the terms of the agreement make it nearly impossible for the homeowner to succeed. (more…)

search for : foreclosure fraud, National Consumer Law Center

f you are adverse to new ways of thinking about your mortgage and building wealth, don’t read “Untapped Riches” by Susan and Anthony Cutaia. This new book will challenge your thinking about mortgages. Instead of making extra mortgage principal payments to own your home and investment properties free and clear as fast as possible, the mortgage broker authors advise never paying off your mortgage and building wealth instead.

This book is not for typical homeowners who think it’s smart to pay off their home loans as fast as possible. Instead, the husband and wife co-authors explain why interest-only, so-called “option mortgages,” and even negative-amortization mortgages cut monthly mortgage payments, enabling borrowers to acquire more properties. Contrary to what most mortgage advisers suggest, the Cutaias are big advocates of using the leverage of borrowing and periodic refinancing to use tax-free cash to acquire more properties. They recommend interest-only adjustable-rate mortgages (ARMs) with maximum payment increase “caps,” and making 20 percent cash down payments to obtain 80 percent loan-to-value mortgages. The book’s themes are (1) minimize your mortgage payments, (2) maximize the use of leverage and the use of compound interest, and (3) pay yourself first before you pay the bank. (more…)

search for : Untapped Riches, option mortgages, negative-amortization mortgage, refinancing

Finding the right NC home mortgage loan provider is complicated enough, but when you buy a house from a builder who has an in-house lender, the complications multiply. The builder wants you to use his North Carolina lender, and will offer significant inducements to do so. This puts many buyers in a quandary as they realize that the inducements must be weighed against the likelihood that the builder’s lender will overcharge them. Offering inducements is legal if it is done properly. A builder cannot post a sale price of $290,000 and raise the price to $300,000 if a buyer insists on using his/her own lender.

In developing a strategy for dealing with a builder pushing an in-house loan provider, it is useful to know where the builder is coming from. He expects to make money on the lending operation, but the main reason for having a preferred lender is to provide assurance that home sales won’t fall through because of lack of financing. The builder wants to avoid investing significant marketing dollars in finding a buyer who then leaves him at the altar because his loan doesn’t come through. This won’t happen with his in-house lender because of some prior arrangement with the builder. While the arrangement can take many forms, the thrust of it is that in the event that a loan to a buyer can be closed only at a loss, the loan will nonetheless be made, since the profit margin on the house will more than cover it. (more…)

search for : NC home mortgage loan, North Carolina lender

For the American mortgage market, it could be the hottest buzzword of the year: suitability. That’s because Congress has a new top legislator for mortgage matters, Rep. Barney Frank, who believes that “you shouldn’t lend (home buyers or refinancers) more than they can afford to pay back, and you don’t lend them more than their house is worth.” Frank, a 14-term Massachusetts Democrat, is the new chairman of the House Financial Services Committee — the primary originator of banking and mortgage-related federal legislation. In an interview, he made it clear that a top priority this year will be enactment of a nationwide lending-standards law designed to protect consumers from deceptive, unfair and predatory mortgage practices.

With foreclosures rising and many credit-stressed homeowners facing imminent rate resets on controversial “payment-option” and other adjustable-rate loans, pressure is building on Capitol Hill for tougher rules for mortgage brokers and lenders. A recent study by the Center for Responsible Lending predicted that as many as 1 of every 5 subprime borrowers who took out reduced-payment, low-documentation mortgages between 1998 and mid-2006 could ultimately lose their homes because of steep payment increases and penalties they can’t handle. Proponents of a suitability standard would require loan officers — whether mortgage brokers or retail lenders — to make certain that applicants are financially capable of handling a particular loan before and after payment increases, and that they fully understand the cons as well as the pros of the mortgage type they select. (more…)

search for : Barney Frank, refinancers, House Financial Services Committee, nationwide lending-standards law, mortgage brokers

For the American mortgage market, it could be the hottest buzzword of the year: suitability. That’s because Congress has a new top legislator for mortgage matters, U.S. Rep. Barney Frank, who believes that “you shouldn’t lend more than [homebuyers or refinancers] can afford to pay back, and you don’t lend them more than their house is worth.” Frank, a 14-term Massachusetts Democrat, is the new chairman of the House Financial Services Committee, the primary originator of banking and mortgage-related federal legislation.

In an interview, he made it clear that a top priority this year will be enactment of a nationwide lending-standards law designed to protect consumers from deceptive, unfair and predatory mortgage practices.

With foreclosures rising and many credit-stressed homeowners facing imminent rate increases on controversial “payment-option” and other adjustable-rate loans, pressure is building on Capitol Hill for tougher rules for mortgage brokers and lenders.

A recent study by the Center for Responsible Lending predicted that as many as one of every five subprime borrowers who took out reduced-payment, low-documentation mortgages between 1998 and mid-2006 could ultimately lose their homes because of steep payment increases and penalties they can’t handle. (more…)

A spike in loans to cash-strapped home buyers is raising concerns that more trouble may lie ahead for the housing market. The Center for Responsible Lending predicted last month that one in five subprime mortgages initiated in the past two years will end in foreclosure, kicking 1.1 million homeowners to the curb and costing them a total of $74.6 billion.

Subprime loans target borrowers with low incomes or poor credit, charging higher rates for the risk. Increasingly, these loans contain risky provisions to get people into a home, such as adjustable rates or initial teaser rates that don’t even cover the interest charges. In the worst cases, lenders offer credit without verifying income or assessing if borrowers can keep up with payments, the CRL report said. “Lending got overly eager in the past several years, and we’ll see the ill effects of that over the next several years,” said Mark Zandi, chief economist at Moody’s Economy.com, which supplied data for the study. (more…)

search for : cash-strapped home buyers, subprime mortgage

Brian and Lisa Wilcock looked at mortgage interest rates four years ago, did the math and came up with a plan: Because they intended to move in three years, they’d refinance their 30-year fixed-rate mortgage into a three-year adjustable-rate mortgage (ARM) at a lower interest rate and save hundreds of dollars a month. The lower rate shaved $375 off the mortgage payment on their Rochester Hills home. But four years later, they’re still in their three-bedroom, split-level house and have no plans to move. Their introductory rate of 4.37% reset last year, with a 1.25% cap that spared them the full brunt of the interest rate increase. But that’s set to expire in April when the ARM resets to a rate that will likely be above 6%.

Just five years ago, adjustable-rate mortgages carried interest rates so low they allowed homeowners like the Wilcocks to lower their monthly mortgage payments by hundreds of dollars. First-time home buyers flocked to the loans as well, since they allowed often cash-strapped first timers to afford a larger house. “There are more people now than ever with adjustable-rate mortgages,” said Greg McBride, senior financial analyst at Bankrate.com. “The problem — and you could see this coming a mile away — is that interest rates have increased and those same borrowers are coming up for a rate increase.” If a homeowner in 2004 got a three-year ARM at 4% on a $250,000 loan, the monthly mortgage payment was $1,150. That payment today would increase to $1,500 monthly, lenders said. And figured at an interest rate of 7.5%, the payment would increase $509 more per month. (more…)

search for : refinance, 30-year fixed-rate mortgage, three-year adjustable-rate mortgage, ARM, mortgage payment, adjustable-rate mortgages

For the last six years, I have lived in my mother’s house to take care of her, as she is very senile. I have been making the mortgage payments and paying the property taxes. However, when I had my income taxes prepared last year, I was told I am not entitled to these deductions because my name is not on the title and my mother’s name and Social Security number are on the mortgage. Is this true? -

The reason you are not entitled to claim those itemized deductions on your personal income tax return is you have no legal obligation to make those payments. You may have a moral obligation to help your mother, but that doesn’t count with the IRS. However, this problem is easily solved. If your mother is capable of signing a quitclaim deed, she can add your name to her title, perhaps by holding title in joint tenancy with right of survivorship. Her name still remains on the title but now you will be legally obligated for those payments you have been making and can claim them as itemized deductions on your personal income tax returns. (more…)

search for : mortgage payments, property taxes, income taxes, quitclaim deed, holding title in joint tenancy