http://www.articletrader.com/ Articles at ArticleTrader en-us http://www.articletrader.com/finance/real-estate/little-known-government-program-can-help-first-time-homebuyers-get-housing-with-little-money.html http://www.articletrader.com/finance/real-estate/little-known-government-program-can-help-first-time-homebuyers-get-housing-with-little-money.html Tue, 29 May 2007 00:00:00 -0500
What follows is an example how this program might work for a first time homebuyer using the FHA (Federal Housing Administration) through the Department of Housing and Urban Development (HUD).

James and Laticia have been living in a two-bedroom apartment for three years. They have two young school age boys and a sonogram in hand that indicates there is a baby sister on the way. The two-bedroom apartment will not accommodate two young boys and a new baby sister. James and Laticia received something in the mail regarding a homebuyer assistance program. Recognizing that the housing market is now weak in their town, it will be necessary to get the seller of a selected property to pay all the closing costs and prepaids and make a 3% contribution to the non-profit Penobscot Tribal Nation’s homebuyer assistance program. In spite of all the good intentions they have not been able to accumulate any significant savings for a down payment and connected cost with buying a home. James and Laticia have spent the last couple years paying off collections and delinquent hospital bills surrounding the two pregnancies for the boys. At the time, they did not have health insurance. Now both have new jobs in the same line of work making good money and can stretch the rental payment up to qualify for a bigger housing expense. Fortunately, both are covered with full health insurance and the pregnancy will be taken care of in full with no deductible. With the parental leave for the new birth coming soon it’s important for James and Laticia to find a home of their own soon. They are now on a month to month rental status.

Every available weekend James and Laticia look at homes on the market. The Realtor named Jesse has laid out a plan using this very homebuyer assistance plan. When searching for homes Jesse looks for vacant homes that can offer quick possession and have high motivation to sell. Some might be a property in foreclosure, real estate owned (REO) by a bank or lending institution or an owner whom must sell and has already moved on. Before even showing a home, Jesse calls the listing Realtor to determine whether the seller will be willing to pay all the closing costs and prepaids (which can be up to 6% of the purchase price). In addition to paying all the costs for a buyer the seller must also be willing to make a 3% contribution to the homebuyer assistance program plus a small administrative fee which is all sponsored by the Penobscot Indian Nation a non-profit corporation. If a seller is not willing to chip in, James and Laticia look at other homes. Jesse explained there is no need to waste any time with an unmotivated seller. There are plenty more motivated sellers in this buyer’s market who are willing to sell and do whatever is necessary to get the home sold as Jesse laid it out the buying strategy.

Jesse was charged with finding a four-bedroom home with two baths or more and a two-car garage with room for a pool later on. Jesse called James and Laticia excited with the news that he had located such a home and the seller was game to pay all the costs. The selected home that was in the school district and area that was a top priority for James and Laticia. When James and Laticia rolled up in front of the home it had good curb appeal. Some recent work had been done to spiff up the property. The bank had taken this home back six months ago through a foreclosure action and it was still back on the market. The home had an open floor plan and all the interior paint had been freshened with neutral colors. The appliances were new and had stainless steel finishes. The refrigerator, range and dishwasher all matched and were the same brand. The flooring had also been replaced with a neutral color with new tile installed in the bath and kitchen areas. The knobs and hardware in the kitchen were replace. The bank was obviously interested in moving this property ASAP. A year ago, first time homebuyers were second class citizens in the market place as far as asking for financial concessions and such. The worm had turned now. Buyers were king again.

James and Laticia loved the home and asked Jesse to write up an offer. Human nature being what it is, they decided to cut the offer price $10,000 from the listed price plus seeking major concessions. The list price was $215,000.00. The offer was constructed for $205,000 using FHA financing. The seller was asked to pay up to 6% of the offered price for closing costs and prepaid expenses which would be $205,000 x 6% = $12,300.00. All FHA financed deals must have a 3% contribution from the buyer. This would be $205,000 x 3% = $6,150.00. Although the required down payment could be as low as 2.25% the total required contribution from the buyer was 3% for down payment and costs. James and Laticia didn’t have $6,150 in cash lying around and there was no prospect of any family gifts or help. The seller was asked to pay 3% additional to the non-profit homebuyer assistance program plus a small administrative fee of approximately $400.00. At closing the seller would make a 3% contribution plus the administrative fee to the “Government sponsored entity” per the Penobscot Indian Nation. Upon receipt, the homebuyer assistance program would send 3% of the contract price to the closer to be used for the buyer down payment all for the cost of the administrative fee.

It took a week to get an answer. Jesse explained the buyer’s financial situation and the fact that they had been pre-qualified for a FHA mortgage using this device and they could not fit a higher price into their family budget. It was a take it or leave it deal. The bank/seller decided to take it. The details broke down as follows: The price was $205,000.00. There would be 3% down thanks to the homebuyer assistance program sponsored by the Penobscot Indian Nation. The balance of $205,000.00 x 97% = $198,850.00 would be the base loan amount before the Up Front Mortgage Insurance Premium is added on. The UFMIP is at 1.5%. Thus, $198,850.00 x 1.015 = $201,832.75 rounded to $201,832.00 with the 75 cents paid in cash at closing. The taxes are $3,600 per year or $300/month. The hazard insurance is $2,400/year or $200/month. With an FHA there is a monthly Mortgage Insurance Premium (MIP) of .5%. This would amount to the first month payment of $201,832 x .5% = $1,009.16/year or $84.10/month. With a 6.00% 30-year rate, the payments would be $1,210.08/month. Adding the taxes, hazard insurance and MIP the total payment would be $1,210.08 Principal and Interest + $300/mo. taxes + $200/mo. insurance + $84.10/month MIP = $1,794.18/month for the total payment. As James and Laticia had paid off all their installment debts and medical collections and other adverse credit items the debt ratio was just under underwriter requirements. In this case the debt ratio came in at 28.9% for housing expense with plenty to spare on overall debts. With James and Laticia total monthly income at $6,208/month combined income the numbers worked for the underwriter. The payment shock was considerable from the apartment to the new home, but past residual income was utilized to pay the collections and debts on an accelerated basis. Now the earmarked funds could be used to meet their monthly obligations.

At day of closing, the 3% down payment was provided by way of the seller through the conduit non-profit established through the Penobscot Indian Nation. The seller paid the buyer’s closing cost which included 1% origination fee, title fees, lender fees, survey, termite report, home inspection, etc. The prepaids for tax escrows and the first twelve months of advanced insurance payment and two month’s reserves as well as prepaid interest were all set up from the 6% seller contribution of $205,000 x 6% = $12,300.00. By agreement, the buyer’s paid for the FHA appraisal of $375.00. That was really their only out of pocket except for the earnest money deposit of $1,000 which was returned at closing to the buyer.

The buyer’s were able to use whatever cash available for moving and ordinary fix up expense in moving in.

It’s been two month’s since James and Laticia moved in. Baby Rose has arrived and is lovingly set up in the newly decorated and furnished nursery. A knock at the door indicates Jesse has arrived for a small house warming for the family. Without Jesse’s efforts and the usage of this special government homebuyer assistance program (non-profit sponsored through the Penobscot Indian Nation) this purchase would have not happened for James and Laticia. Prior state homebuyer assistance programs had long since dried up of available funds. This program allowed these buyers to take advantage of a depressed housing market. The home market is forever shifting. Right now, advantage buyers.

This little known homebuyer assistance program can help FHA homebuyer move into a home of their own. The Penobscot Indian Nation steps up to help.


Dale Rogers
http://www.brokencredit.com


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Dale Rogers is a mortgage expert focusing on solutions in this dynamic real estate marketplace. Seller Helps Buyer is a free website where sellers who are willing to offer 'unique seller financing options' and 'closing cost assistance' are meeting every day and helping one another to buy and sell homes. Seller Helps Buyer is the only website of its kind and the wave of the future.

www.sellerhelpsbuyer.comf

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/investing/mortgage-lenders-are-dropping-like-flies-with-their-little-legs-turned-up-and-kicking.html http://www.articletrader.com/finance/investing/mortgage-lenders-are-dropping-like-flies-with-their-little-legs-turned-up-and-kicking.html Wed, 23 May 2007 00:00:00 -0500
Per contrarian actions of the past, this class of investor gets as far away from the maddening crowds as possible. The public usually has it wrong on a consistent basis while arriving at the party late and staying too long. Whether stocks, real estate, Dot Coms or other hot and flashy investments the public investor, in far too many cases, lose. In the cases of long-term investment would be the exception with regard to real estate IF they can stand to hold it. There are high inventories of foreclosures in many areas of the country with more coming. Commercial and residential properties in trouble are ripe for acquisition. Now, the Debt Service Ratios and Capitalization rates might actually make some sense IF the price is right. In most areas, the rents have been holding if not slightly appreciating. There are exceptions of course, but overall, returns are possible at the right price. Banks and mortgage lenders are compelled to dispose of real estate owner (REO) quickly. Thus with a flooded market of foreclosures (in many areas of the country) and other non-performing assets coupled with a slow real estate market situations are ripe for working something out with lenders. After all efforts to bring residential defaults current have failed and the foreclosure action has taken place the bank or mortgage lender owns the property it is here that the opportunistic contrarian may take a shot.

It is here say with a single family home the rents are imputed for a long holding period to determine the “strike price” of the deal. At this point there is no lack of properties to make contractual purchase offers on Real Estate Owned inventories. Working backwards, the contrarian investor will plug in the projected rents based on current market rents while backing out the monthly maintenance and upkeep, the hazard insurance, the taxes, professional management, a vacancy factor of 5% or more and other expenses. Like the massive tax changes that took place with depreciation schedules in 1986 large portfolio investors moved to a low to moderate leverage positions. The reason these properties became REO properties is that debt has the potential to suck the life out of value based returns versus similar investments. The same can be said in this scenario. A buy and flip strategy may work IF the acquisition price is low enough for a quick turn by strategically pricing the property say 10% to 15% below the market and has been put in reasonable or great shape. A little higher leverage could be considered in this instance, but until the market strengthens this could turn out badly. Deep discounts can cure many a risky investment.

Back to the watching paint dry method of renting and holding. It’s slow and steady and not as flashy as the buy and flip program.

As an example: Bob the “Neighborhood Contrarian” is looking at a REO owned property serviced by an out of state lender in bankruptcy. A court appointed trustee is temporarily handling the portfolio of loans, where this loan is serviced. Bob has an interest in a property that is listed by a local Realtor. Originally the home had been purchased two years prior for $250,000.00. The prior owner closed on a piggyback first and second mortgage loan with a first mortgage of 80% LTV (Loan To Value) of $200,000.00 and a 20% LTV second mortgage of $50,000.00. The first and second mortgage holders were two separate lenders. The home has been vacant for over five months and the grass gets cut periodically. A string of open houses and marketing efforts have gone for naught with zero results. Bob and his sharpened pencil begin to figure returns. The foreclosure action on part of the first mortgage holder wiped out the second mortgage holder who chose not to bid at auction. When the gavel fell at the court house sale of the foreclosure sale, the first mortgage holder was the only one left subject to real estate taxes as a superior lien.

Bob determines after careful due diligence that the market rent for this property will be $1,800/month. The taxes are currently $3,600/year or $300/month. The hazard insurance is quoted at $1,800/year or $150/month. The professional property manager’s fee will be 75% of the first month’s rent and 10% per month of the collected rents. A vacancy factor of 5% is applied to the equation. The home has four bedrooms, 2,000 square foot ranch style with two baths and a two-car garage with a pool. The pool has a security fence and child alarm system. Schools and employment and shopping centers are close by. The carpet and paint need immediate attention. The appliances need to be upgraded. The roof had been replaced five years ago. Bob figures new carpet and tile will run $6,400.00 with a total interior painting color scheme change at $3,900. New refrigerator and stove and updated microwave above the stove will run $2,800 installed. The tenant will pay all the utilities and pool and lawn maintenance and minimal repairs.

The rental agent confirmed Bob’s findings that with the upgrades the rent could command $1,800/month. Bob’s investments in the market and Certificates of Deposit were yielding a little over 6% per annum. To move quickly, Bob decides to make an
all-cash offer which can close in ten days or less. The only thing better than cash in buying a foreclosure is FAST CASH. Bob continues to sharpen his pencil. Starting with the rental amount of $1,800 less $293/month (includes initial rent up) for management, $300/taxes, $150/month insurance, maintenance and reserves budgeted at $100/month and a vacancy factor of 5% or $1,800 x 12 = $21,600 x 5% = $1,080/12 = $90/month. The total projected offsets to the rent are $933/month. Taking the gross rent of $1,800 less $933 gives a gross rental net of $867.00. If Bob demands a 8% initial return on his money (not including appreciation or tax benefits) just on the surface it would be $867 x 12 = $10,404 divided by .08 (8%) gives us $130,050.00. The upgraded carpet and tile is running $6,400 and the new paint scheme is $3,900 and the appliance upgrade of $2,800 for a total of $13,100. So taking the $130,050 less $13,100 upgrades and $2,200 for acquisition costs the penciled offer would be $116,950 or $116,000 CASH with a TEN DAY CLOSE subject only to a home inspection, termite inspection, survey and a clear title. An attorney would be advised. All figures and calculations could accompany the offer to the mortgage holder with the upgrades and improvements necessary to capture the necessary market rents. This will give decision-makers at the mortgage holder company cover in the CYA game of justifying a huge write down.

The key, Bob has found is to make several offers at bargain basement prices on properties that have an opportunity to appreciate over time with benefits of appreciation.
Dealing with highly motivated REO portfolio holders will lead to an eventual YES on the offers. If Bob chose to look at this deal on a five-year basis while assuming a 3% appreciation rate the numbers might look like this. Let’s assume the original owners overpaid and the home is really now worth $180,000 as-is. In five years $180,000 would appreciate to $208,669 or say $208,000. The land has been determined by tax assessment to be worth $50,000 leaving ($130,050-$50,000) $80,050. Let's further reduce this number by the appliances and take them over a five-year period. $80,050 less $2,800/5= $560/year. The improvement would be $80,050-$2,800=$77,250/27.5 years = $2,809.09/year in depreciation. The total appreciation would be rounded to $3,369/year. If Bob is in the 25% tax bracket he would shelter $3,369 x 25% = $842.27
In taxes per year or $842.27/12= $70.19/month. This is a real worst case scenario with the deflated value, low appreciation over the five-year period. With an on surface cash flow of $867 plus tax savings of $70.19/month = $937.19. Based on a 30-year mortgage with a rate of 6.5% with a principal and interest payment of $937.19/month would be a mortgage of $148,273. This is more than the acquisition price so to avoid PMI an 80% LTV would allow for a mortgage of $116,000 x 80% = $92,800 with a payment based on a rate of 6.5% on a 30 year loan would be $586.56/month.

So Bob, after the cash all cash closing could take out cash out refinance with a low closing cost lender and gain the bulk of his cash to buy another deal. With $937.19 adjusted monthly cash flow less the new $586.56/month principal and interest payment would leave a $350.63/month cash flow with tax savings. However, now Bob would also be able to write off an interest deduction. That would be $92,800 x 6.5%= $6,032 in mortgage interest which would save additional income taxes of $6,032 x 25% = $1,508/12 = $125.67/month in projected tax savings on the mortgage interest deduction.

So how does Bob do at the end of the five-year period? Let’s say the home is now worth a measly $208,000 and Bob decides to sell it with an 8% selling cost giving an adjusted sales price of $191,360. If the improvements are added to the basis for figuring capital gains tax. The acquisition cost of $116,000 plus improvements for carpet and tile, appliances (*some depreciation recapture may be required at sale) and paint for a total adjusted basis of ($116,000 + $6,400 carpet and tile + $3,900 paint + $2,800* appliances + $2,200 acquisition cost) = $131,300.00. On the surface the capital gain would be $191,360 - $131,300 = $60,060 x 15% = $9,009 capital gains tax. Overall on the full cash basis purchase with no mortgage: the $131,300 investment would give back approximately $191,360 in adjusted sales price. Then add the 60 months of net monthly income of $937.19/month x 60 months = $56,231.40 less $9,009 in capital gains for a total return of $191,360 - $131,300(acquisition) + $56,231.40 (net rents) - $9,009 capital gains for a net of $107,282.40. The question would be “If I could show you a way of taking $131,300 and getting the original investment back plus $107,282 over a 5 year period on an after tax basis, would that be a good deal?” Roughly, that would be a 14.59% annualized after tax return on a Internal Rate Of Return Basis.

No one is laughing now. The continued muse of desperate sellers is “Where have all the buyers gone?” They’re right here babies! The Contrarians are on the beachhead and moving in. The maddening crowd is on the sidelines wondering if it might be time to put their toe in the water. When the temperature of the water is just right, it will be too late. The deals are here and now. With all things being equal, value based investments have worked every time it’s tried.

Dale Rogers
http://www.brokencredit.com


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Dale Rogers is a rapid rescore mortgage expert who contributes his credit repair and mortgage knowledge regularly to the Broken Credit Blog. Broken Credit Blog hosts the internet's #1 credit repair seminar. All are welcome to gain free knowledge on how to improve their credit score and obtain the lowest mortgage rates available in the market.

www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/when-banks-are-left-to-their-own-devices-consumers-get-the-hosed.html http://www.articletrader.com/finance/credit/when-banks-are-left-to-their-own-devices-consumers-get-the-hosed.html Fri, 18 May 2007 00:00:00 -0500
Draped in the cloak of “good deeds” of community service and efforts of “giving back” many large banks give the appearance of upstanding business citizens. This too may a bit contrived as many bank charters are subject to a percentage of “giving back” to the community as a condition of maintaining their seat. If this provision were removed, how much “giving back” would really happen? There are exceptions, but it is now rare and a welcomed surprise. The smaller community banks of the past could be counted on for a high school yearbook ad, parking lots made available on week ends for the high school band fundraising car washes, or even the sponsorship of a little league baseball team or bowling league. Those small towns with community banks are the lucky ones in this era of big conglomerate financial centers. These small banks are deep into the community and no amount of bank charter requirements for “giving back” would change how they go about their business. They do it because that is the thing to do.

Extraordinary efforts were made by bank lobbying efforts to change the bankruptcy laws to make it more difficult for consumers to wipe out credit card debts. Now, when things go bad and at a specific income level, consumers have to take a Chapter 13 Repayment Plan and pay back the bulk of the credit card debt. The skids are greased to obtain a ready credit card for consumers. Once the addictive fruit is tasted many a consumer is pulled in to the clutches of credit card addiction. With what is going on with the current mortgage fiasco there is extreme pressure on the fringe consumers under heavy financial pressure. A consumer has to ask, “Shall I save my home and keep a place for my family live, or should I skip some credit card payments?” At this point we are not looking at the blame game on how the consumer got into this spot. It’s just where we find many consumers up to their eyeballs in debt.

As a parallel, cigarette smoking has been deemed to cause deadly cancer. The cigarette companies spend their marketing efforts to hook as many smokers as possible to drive sales. It has been further determined that cigarette companies were adding addictive elements that would further hook the user. Advertising has been limited but smoking continues. It’s made to be the cool thing to do as found in many a movie and TV scripts. Credit card ownership has been portrayed as the cool thing to do as well. If you don’t have ready credit you are just nothing by this portrayal. Once credit limits are approached, the credit line is increased or the consumer responds to a credit card offer from another company. The minimum payment each month barely scratches the surface. For the consumers who use credit cards wisely and pay their balances off each month this would be deemed a “loss leader” for the credit card issuing banks to get to the grist leading to high profits on the credit challenged consumers.

Patience on part of the credit card issuer is rewarded as one consumer after another crosses the line by a 30 day late on a credit card bill. Once that happens, per the user legalese embedded in the fine print, a phenomenon called “universal default” kicks in. At that point, all the credit card interest rates on ALL cards are accelerated to the maximum rate. This can be 22%, 29%, 33% or in some cases 40% depending on the state. Couple the maximized interest rates with high late fees of $15 or $25 then the thumb on the scale starts to approach the stratosphere of Jack and his cousin Jerry and their friendly neighborhood lender at the VIG. The banks, which help precipitate the consumer credit challenges with easy credit issuance, have now targeted students and illegal aliens for their credit card products. The banks got legislation passed to close off one escape route, the new bankruptcy law, which was allegedly costing them serious losses, have not reciprocated by lowering rates and fees. If anything, the late fees and interest rates for the credit challenged consumer, have gone up. The last time I looked, in spite of mortgage losses, have been doing real well. I wonder how that is happening?

When a little competition sneaks its nose under the tent the alarm bells go off and the banks are all in spouting phony alarmist diatribe. Wal-Mart introduced a $4.00 drug card for consumers that made sense. There is no governmental agency involved, just free enterprise. Consumers are lining up to take advantage. That’s why it’s a bit unnerving when the banks were moving in force to block Wal-Mart in their efforts to set up a banking operation in their stores. The outcry was loud and continuous from the banks. The lobbyist were button holing every legislator and regulatory with an ear to influence a “NO” against Wal-Mart and their banking dreams. One thing for sure, who ever the competitive player might be, would offer consumers a fairer shake on credit card debt. Sam Walton’s vision would make it happen. You can almost see the dusty old red pick up rolling up to a Wal-Mart to see if consumers were being treated ok on their credit card bills. Sam’s wrath was applied to a Wal-Mart store that he found that was just too dirty for the company’s image. He closed the store and stood outside with the consumers until the store was clean enough for his customers. Wal-Mart or someone like them needs to bring a consumer friendly bank and credit card vendor who will give the credit challenged consumer a little break when they hit a bump in the road. It’s no time to step on their neck and bring sever punishment to the offender. Like many of the community banks, if a farmer got in trouble, the banker sat down and worked it out until the customer could get back on his feet.

I’m sure Sam would have set up some sort of consumer counseling with a family budget information to help get the consumers back on their feet. Something would have been worked out. He would not have stepped on their neck till their faces turned blue. When customers are treated with respect and like a human being, it is never forgotten. Wal-Mart has shown the world that good products at reasonable prices can lead to billions in sales. The banks shake in their boots at that prospect. Shudder the thought that bank credit card lenders would have to act responsibly in the issuance of credit cards and credit limits. To graduate from high school additional emphasis must be placed on consumer knowledge with regard to consumer credit and all the pitfalls that can entail. Family budgeting coupled with this overview of proper credit usage would empower consumers to avoid the pitfalls of operating by the seat of the pants and self-discovery and how the “house” has a decided advantage. Knowledge is power.

In conclusion, the credit issuing vendors appear to have ALL conspired to price fix rates and fees on consumer challenged consumers. This egregious conduct needs a champion to determine just how much is enough for a consumer to pay. Perhaps as an expanded follow up to Senator Carl Levin’s initial Senate hearings with banks the credit card issuers can be placed under further scrutiny. If there ever something that smacks of monopoly conduct, this is it. If it walks like a duck, quacks like a duck, …it may be an abusive credit card lender. Let’s start by opening up the books and take a look at a “fair return” on lending with a Federally and State charted banks. Consumer friendly, I think not. Competition is needed to level the playing field. Sam Walton’s legacy of someone like him is necessary to offer a fair break to consumers with free enterprise. Ralph Nader must be busy. It may just be up to Senator Carl Levin to be the people’s champion for reasonable credit conduct and rules. Enough with stepping on the consumer’s neck. Blue is an unbecoming color when gasping for air. Consumer Bill of Rights anyone?

Dale Rogers
http://www.brokencredit.com


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Dale Rogers is a rapid rescore mortgage expert who contributes his credit repair and mortgage knowledge regularly to the Broken Credit Blog. Broken Credit Blog hosts the internet's #1 credit repair seminar. All are welcome to gain free knowledge on how to improve their credit score and obtain the lowest mortgage rates available in the market.

www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/mortgage/there-was-this-guy-banging-on-the-door-inquiring-about-lis-pendens-foreclosure-action-on-his-home.html http://www.articletrader.com/finance/mortgage/there-was-this-guy-banging-on-the-door-inquiring-about-lis-pendens-foreclosure-action-on-his-home.html Tue, 15 May 2007 00:00:00 -0500
Bobby straightened the guy’s shirt out and smoothed it out the best he could. He invited the bloke in. He said his name was Frederick. Bobby asked him, “Look what were you saying before I was interrupted?” Frederick explained the plan that simply he’d try to save Bobby’s home or would negotiate with the mortgage lender to accept less than what was owed on a “short sale”. He further explained that Bobby would need to quit claim the deed over so that he could position himself to negotiate and get paid. All the while the home would be sold to a buyer at slightly below market and for Bobby’s trouble he would get nothing but would obtain an agreement from the lender not to sue for a deficiency judgement and would avoid a foreclosure proceeding. Bobby thought about it for a minute and asked, “Well why couldn’t I do that for myself?” He received a blank stare back from Frederick then he responded, “Well I’m a better negotiator.” Bobby grabbed Frederick by the arm and showed him the door. Bobby gave Frederick some parting words “Look I’m sure you’re a good negotiator but you’re not as motivated as I am going to be and I’m certainly not going to quit claim my house over to you.” “So see ya and don’t bother coming back!”

Bobby was not operating in a vacuum. He had been researching the sale prospects ever since he had interviewed the Realtors for comparative market studies. One of the Realtors, Ralph had touched on the “short sale” aspects of selling the home and had indicated that he had successfully negotiated three “short sale” situations to gain a sale on a reduced basis and free up the owner from any further obligation. Bobby had been reviewing some horror stories written up in the local paper about persons or companies extracting up front fees from homeowners in the process of a foreclosure and it turned out to be an out and out rip off. Other “investors” got the homeowner to sign a quit claim deed over and then would get the homeowner to move out to do some sort of “creative financing”. In some cases the “investor” would rent the property out and garner three or four months of rent plus deposits and security and ride it all the way into foreclosure with the homeowner and the tenant getting ripped off. A few “investors” would negotiate a “short sale” with the lender and would then flip it to a new buyer.

With time ticking away, Bobby called Ralph the Realtor to come over right away with the plan of selling the property on a “short sale” basis and put this nasty business in the rear view mirror. Ralph laid out the plan. To lay the groundwork to go at the lender, Bobby would need to prepare a tight and accurate family budget to prove to the lender that there was zero blood in the turnip to be squeezed. Bobby shared with Ralph the entire loan documents, the mortgage note, mortgage, mortgage statement with all the contact numbers and account number. Ralph completed an updated sales market analysis and made recommendations to Bobby on how to position the home to sell quickly. Bobby had not made any mortgage payments for the past four months and had limited funds to move to other living quarters with his sons, Brian and Mitchell. Ralph wanted Bobby and the boys to pack up immediately and remove all clutter from the closets and garage. A $50 storage unit was rented to store the stuff that was going to be kept. A garage sale was scheduled to sell all items not to be retained and raise a few bucks. Ralph and Bobby discussed freshening up the entryway with fresh paint and painting the master bedroom with a more neutral shade, which had a wild color and would be a distraction for most buyers. The carpets were shampooed and foodspots removed. Some potted flowers and plants were purchased at a local flea market to pick up the front of the house. In the meantime, Ralph was in contact with the lender and was engaging them with the “short sale” proposition. The lender already had three or four Broker Price Opinions in hand to further bracket the price. After a week of negotiations, Ralph received a verbal agreement from the lender to proceed on the sales plan. Ralph would receive nothing and would assign over all escrows for taxes and insurance. Ralph and Bobby checked with a local Real Estate Attorney to make sure they were avoiding any current and future land mines.

With the property spiffed up and clutter now in storage, the home was in good condition to show. In the agreement with the lender, the net to the lender would include a buyer incentive to pay up to $5,000 of buyer’s closing cost and prepaids. The listing price was set at 5% less than comparable properties with seller help on the closing costs. Ralph, got Bobby and the boys to go ahead and move into a townhouse apartment complex that was close to the boy’s school and Bobby’s work with the apartment community offering a move in special waving the deposit with one month free. The garage sale had generated just enough money to make it happen. Bobby was a good salesman, and in spite of everything was continually meeting his quota numbers and was on track to earn a bonus in a few months.

At the second open house, Ralph had an offer, which was a few thousand less than the list price. The incentives of buyer paid closing cost and prepaids were making a big difference. The buyers had already been pre-qualified with a mortgage lender letter in hand and were ready to close in two weeks. The fact that this home was vacant and immediate occupancy was possible made a big difference in the sales process. After a few days, the lender accepted the terms and took a little more of a hit to their bottom line net. Even though they had lost $40,000 other lender’s statistics show that in this current market place the loss could have been in the $60,000+ range without someone like Ralph getting involved and time running on and on.

Bobby had done his homework and after being assaulted with a parade of “investors” and “foreclosure specialist” then settled on a known professional, Ralph the local Realtor who had demonstrated his skills from prior experience. Anyone facing this foreclosure situation it is not uncommon to be filled with emotion and cloudy thinking.
To gather all the facts, consult with market experts that have a license to protect and then coupled with seeking legal advice will go a long way of solving this situation. Open and continuous communication with the lender will serve to make this an easier experience. There are many lenders acting in a proactive way to keep homeowners in their homes IF it can be done. In Bobby’s case, he could only sell and get out. When a “short sale” is not possible, a deed in lieu of foreclosure, or just walking away is better than having the Sheriff set one’s stuff to the curb. That may be the “Ultimate Reality Show Experience”.

Bobby and the boys, six months after the sale are doing ok and the ex-wife is sending some child support. Bobby’s bonus came through and the process of rebuilding his credit history is underway. Little league and karate classes continued for the boys and school was going pretty good as well. Bobby was thankful that he had researched and called Ralph. It was the answer for this situation and Bobby and the boys were able to get on with their lives. Note: A knock at the door may not be an opportunity for owners.

Dale Rogers
http://www.brokencredit.com


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Dale Rogers is a thirty-year mortgage veteran and frequent contributor to the Broken Credit Blog. The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending.

www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/loans/achieve-a-bad-credit-auto-loan-without-signing-your-life-away.html http://www.articletrader.com/finance/loans/achieve-a-bad-credit-auto-loan-without-signing-your-life-away.html Fri, 20 Apr 2007 00:00:00 -0500 Lenders have special financing options for those with bad credit; they usually look for some type of collateral, such as money down, or a trade in (car that’s paid off, or has positive equity). The amount of money down that you put towards your auto loan is extremely important this may determine your approval for the loan. Ultimately, the more money down the less the risk for the bank, the lower the interest rate, and greater chance of approval. Special financing options are usually to the benefit of the consumer, which is why it’s offered. This is an opportunity to rebuild ones bad credit and prove themselves credit worthiness to the banks, and lenders. Of course with bad credit, it typically ends up costing you more than the vehicles actual value. Unfortunately, that’s part of a bad credit auto loan, or any other type of loan, mortgage, credit card, etc. But in the end it’s up to you to rebuild, and reestablish your own credit, which will ultimately benefit you in the long run.
Debt to income ratio is another important factor lenders use to determine your credit worthiness. A lower debt to income ratio is always preferred, along with a decent credit standing. A low debt ratio indicates your ability to handle more debt, enabling you to get better interest rates, meaning more opportunities from different banks. In some cases this may allow you to provide less money down or collateral. Although it’s in your best interest to have more collateral if possible, with a low debt to income to get the lowest rates to essentially save more money.
Time on the job is an essential part of getting an approval with the banks, not only does it help your credibility, it may determine the final approval. The longer one has been on the job, the more it benefits, along with income being a variable. This gives credibility to the individual, giving less risk to the bank. Someone with a two-year job history is most likely to get an approval than someone who’s been working less than a year. It shows stability to the lender, proving stable income, and the ability to pay the car. The lender doesn’t want to see this car get repossessed, the less the risk, the more opportunities for an approval. This should also be verifiable income, the bank may ask you to provide your most recent paycheck stubs for final approval along with proof of residence.
Bad credit financing isn’t as hard as most people make it to be. Getting an auto loan with a FICO score less than 620 is easy to achieve, even if you’ve had a bankruptcy! The amount of money down is a huge factor along with credit; its always a possibility to get an auto loan. Whether it may be the help of a friend, or relative co-signing, putting large down payment, or even your work history, it can be done with bad credit or even no credit. In the end you will have a car, along with reestablished credit, increasing your FICO score, enabling you to get much better rates in the near future, proving your credit worthiness!

Dale Rogers
http://www.brokencredit.com


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Dale Rogers provides valuable information to the Broken Credit Blog. He's an expert on bad credit, no credit loans, helping people achieve their dream of buying a new car or home. The Broken Credit Blog is a free site created to assist the public with information on credit repair, responsible lending.
www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/mortgage/lenders-get-aggressive-to-help-borrowers-that-are-at-default-status-on-their-mortgages.html http://www.articletrader.com/finance/mortgage/lenders-get-aggressive-to-help-borrowers-that-are-at-default-status-on-their-mortgages.html Tue, 17 Apr 2007 00:00:00 -0500
Now the “old” forbearance has been modified to become even more flexible. Mortgage companies, with the current inventory of unsold homes, do not want to foreclose and end up taking an even bigger hit when and if the home sells after foreclosure. The writing has been on the wall for many lenders in this past year, work out the loan or eat huge losses. If someone is in the home and making payments, it can soften the massive write-downs that will follow in this extremely soft market.

Things were going ok for Jim and Terri until the auto accident that put Jim out of work and laid up with a broken leg and a disc problem. What savings they had were burned through in less than a month. The auto insurance covered very little of the medical bills and Jim’s insurance at work carried a sizable deductible. The biggest challenge came for their family when Jim was not able to work for what was predicted for six months. The luxury items were the first to go. Because Jim was upside down on his car that was totaled there wasn’t enough insurance settlement to pay for the debt. Jim was still on the hook for the difference and monthly payments were being demanded by the auto finance company. Jim’s attorney shared that there might be a chance for some type of settlement until he discovered the driver of the other car that had caused the accident was not insured due to a recently lapsed policy. The insurance carrier was not going to pay anything. Jim’s attorney, a high school buddy, was going after the assets of the at fault driver but it would take some time to even begin the process. Jim and Terri had worked hard for five years to buy their first home and were just getting ahead when the auto accident occurred. With several months passing, the young couple was not able to pay even the minimum payment of their four credit cards. The mortgage payment had not been made for the past three months. The phone was now ringing off the hook for medical collections, the auto finance company and the mortgage company was now threatening to foreclose. Terri took a part time job in addition to her full time job as an office manager at a collection agency. She knew that game inside out. With two kids it was becoming very clear that bad things were under way and if something didn’t happen to turn the situation around, her family would be moving back into a small apartment again with trashed credit to boot.

Fortunately, Jim and Terri’s families were close by and could help out with babysitting while Terri worked. Both of their parents were of modest means and not able to offer any financial help but were happy to pitch in with the kids and some of the maintenance work around the house. Jim was flat on his back with recovery time many months down the road. Jim had the phone close to his bed and he had been screening telephone calls for bill collectors and such. On a Friday, Jim received a call from the mortgage company that held their loan and at first Jim was going to ignore it. Jim figured he had quite enough “gut calls” for the day. The caller was in the process of leaving a message on the answering machine and was going on at length over the details of a plan from the mortgage lender that would help Jim and Terri get back on their feet. In the middle of the message, Jim lifted the phone and spoke with the caller. It was a friendly voice. Jim spent almost an hour on the phone with explaining his situation and sharing the tale of woe and their streak of bad luck. The caller’s name was Toby and after the conversation concluded, he suggested he would call back by Monday and would give Jim and Terri a concrete proposal to try and mediate the mortgage short fall. After Jim hung up, he could only wonder if anyone could help him out of this financial mess. Sure enough, Toby called back Monday with a proposal. Toby explained his mortgage company decided to be very proactive with customers who had fallen behind and found it in their best interest to try and bridge the gap between their current situation and possible foreclosures. Another hour was spent going over Jim and Terri’s family budget just to determine the short fall and rank what items could be quickly cut to generate a better monthly cash flow. At the conclusion of the call, Toby suggested that if Jim and Terri could tighten up their budget and eliminate in the short term, cable, cell phones, eating out, sell the one remaining car that had some equity and get a transportation vehicle the bank would substantially help with the payments. This would allow Jim and Terri to bridge to a time when Jim could get back on his feet and return to work. Since the loan in question was an FHA loan, the lender was going to advance an interest free loan in the amount equal to twelve months of principal and interest payments including taxes and insurance. This was made possible by the lender making a “partial claim” to the FHA insurance fund, that is borrower funded, to help Jim and Terri get back on their feet. This was not a gift. Every penny would need to be paid back down the road. When borrowers use the FHA program they normally pay 1.5% of the mortgage amount up front called the UFMIP (Up Front Mortgage Insurance Premium) plus they pay .5% of mortgage amount spread out among monthly payments. The bulk of these insurance premiums are by and large used for foreclosure actions. Loans that are insured by FHA pay the lender the difference of the foreclosure sale and the loan balance plus costs. This can be 25% to 30%+ loss for FHA. The thinking here by FHA is that if they can extend a hand and get these folks back on their feet in say a years time, it would be saving FHA a ton of money. This proactive approach is showing positive results. Jim and Terri seized on the proposal and in time were able to work out their financial situation and Jim was able to return to work. FHA was made whole in time; the credit card companies cancelled the accounts and agreed to take smaller payments for as long as necessary to get them settled at a reduced nominal interest rate. Terri was a good negotiator. Jim’s attorney was able to get a judgment and squeeze enough money out of the ticketed driver and get some funds from the uninsured motorist fund. This allowed Jim to payoff the “up side down” portion of the totaled vehicle with enough additional cash to buy an older pick up truck with the remainder monies. Terri was able to give up her part time job and the family slowly pulled themselves up by the bootstraps and they got back on their feet. The trailing medical bills were negotiated down after several over charges were discovered and a low monthly payment was set up. All in all, Jim and Terri considered themselves lucky in that the mortgage company stepped forward to offer a workable plan to save their home. It could have gone the other way very easily.

Lenders have recognized that the “bottom line strategy” of trying to work with borrowers who are in trouble pays off. From specially trained customer service representatives, like Toby, who are engaged counselors and not just adversaries. A customer service representative armed with tools like forbearance plans, to reworking old loans to new loans, to FHA, Fannie Mae, Freddie Mac, all pitching in to help resolve and mitigate any salvageable financial situations. The borrowers will need to make an effort to meet the lender half way and do what they need to do to keep their home. For any homeowner, financial disaster can be just a car crash away. Fortunately, lenders are now stepping up their efforts to help families in trouble with paying their mortgage. Again, bottom line, the lender and the borrower can win.

Dale Rogers
http://www.brokencredit.com


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Dale Rogers is a thirty-year mortgage veteran and frequent contributor to the Broken Credit Blog. The BCB is a free website created to assist the general public with information about credit repair and responsible mortgage lending.

www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/less-than-1%25-of-identity-thieves-are-prosecuted-what-are-the-chances-of-beating-a-ring-of-scammers.html http://www.articletrader.com/finance/credit/less-than-1%25-of-identity-thieves-are-prosecuted-what-are-the-chances-of-beating-a-ring-of-scammers.html Fri, 13 Apr 2007 00:00:00 -0500
Feeling the heat of legitimate enforcement agencies worldwide something sinister may be under way. The online chat rooms serving as the clearinghouse for credit card scams may be moving their server access to Iran and out of reach of Internet sleuths trying to chase the perpetrators of credit card thief and identity theft. The stakes of the game are getting higher.

What’s consumers to do to protect themselves from this devastating assault? When it happens ones credit history can be totally destroyed and will require hours and hours to even begin to unwind the events to win back the consumers good credit. Police reports need to be filed immediately to form a basis of the case deflecting blame to the culprit where it belongs rather than the consumer. Every time a consumer uses the Internet their IP Address (Internet Protocol Address) is exposed to those who may wish to do them harm. It is possible to pinpoint a consumer’s location and thus reveal even more information that may be used to build a credit file to support efforts to defraud and scam.

The free online government site on new credit card scams is bulging with different wrinkles on old con schemes. A consumer has a permanent mark tattooed on their forehead as a “mark” screaming “Come and get me.” A consumer can do everything to protect themselves and yet a scammer is able to come in the back door and gains access to a consumers information by someone hacking into mainframes or other means outside the realm of normal protection.

What is a consumer to do to erect defenses against this stealth enemy? Limiting the number of cards would be a good start. Having a bevy of credit cards with little or no balances is asking for trouble. A caution here, if a bunch of cards are closed out all at once, it can plummet the credit scores. So over a year’s time one could shed the extraneous cards without adversely impacting the credit scores with all other things being equal. Obtaining a card with say a $500 limit would be good for online purchases to limit the liability. Even though there is a $50 loss limit on many cards, if a scammer opens a card in your name and a consumer does not find out about it for several months, the arm wrestling will begin with the credit card issuing company. One defaulted card can precipitate a case of “universal default” where all the other credit cards will have their interest rates accelerated to the full legal limit. A great 7.5% rate card could be accelerated to say 25% with one single 30 day late on a scammed card. It will take months and months to unwind and in the meantime a consumer’s credit scores are adversely impacted and this single action spills over to all the other credit criteria.

Services such as “PayPal” and such can offer a layer of protection. Even here, there are scams imitating the real company to gain personal information to perform a rip off. Many scams imitate the consumer’s bank to “verify” their personal information to perpetrate additional scams. Mailbox pilfering have been replaced by scalping data from mainframe penetration to access personal information on multiple consumers. Firewalls need to be toughened and hardened against such infiltration. Even more serious events happen for consumers when the employee’s laptops are stolen with millions of personal information allowing credit card rip-offs. Many of these forays turn out to be inside jobs with someone within the company selling the records.

Some how, some way, there must be a way to encrypt a consumer’s data either by requiring eye scans, finger print or other devices to squash the scammers. In the meantime, it’s up to the consumers to protect themselves. If a consumer has much to lose, accounts must be checked for any unusual activity, a post office box might be utilized to prevent credit card rip-offs. In addition, there are several credit card fraud insurance companies are willing to offer protection against this peril for a premium and provide personnel and attorneys if necessary to fight against fraud and clean up the credit card history. Consumers, have protection against auto accidents, fire and hazard perils, workman’s compensation, job loss protection and even pre-paid legal. With this great exposure to loss and credit history destruction this can offer a level of protection to consumers whom might be exposed to dramatic financial losses. Like any insurance a consumer must make a good faith effort to minimize losses. Like leaving the car keys in the ignition with a running motor and the door open, invites a crime. In another case, if all the doors and windows are left open in the home which by its very action may invite a burglary. A consumer has to make a minimum effort to protect their information, but it is good to have a layer of protection from an insurance company just in case.

Summarizing, with less than 1% of identity thieves ever being prosecuted this world-wide problem must be elevated to nothing less than the equivalent of a mugging or strong armed robbery. Where countries are being used, as a sanctuary for identity thieves such as Internet cafes’ then there must be diplomatic engagement with resulting foreign aid offsets against losses perpetrated from that foreign country. If the server being used by these scalawags is moved to rouge countries it will make enforcement even tougher. There must be a price to be paid for such outlaw activity. The ghosts of “Butch Cassidy” and the “Sundance Kid” have found new life on the Internet. A consumer needs to be vigilant and aware of their credit information or credit challenges will follow. A layer of insurance protection might be a needed tool in protecting a consumers credit history and financial reputation. A clean credit history means everything in getting the best terms and interest rates for any credit purchase or refinance. Keep a sharp eye out.

Dale Rogers
www.brokencredit.com


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Dale Rogers provides valuable information to the Broken Credit Blog. He's an expert on bad credit, no credit loans, helping people achieve their dream of buying a new car or home. The Broken Credit Blog is a free site created to assist the public with information on credit repair, responsible lending.
www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/mortgage/if-vince-lombardi-ever-addressed-members-of-the-mortgage-industry-his-message-may-have-been-back-to-basics.html http://www.articletrader.com/finance/mortgage/if-vince-lombardi-ever-addressed-members-of-the-mortgage-industry-his-message-may-have-been-back-to-basics.html Tue, 10 Apr 2007 00:00:00 -0500
The autopsy of this debacle will be debated for years to come as lenders and banks will be sorting through the debris left by this wildfire. This is not an exclusive club relegated to just the mortgage industry. All industries have had their turn. From life ending safety mining practices, to Three Mile Island melt down, the Enron debacle, Union Carbide and the Indianian incident leading massive deaths, to the Love Canal poisoning, to Derivative financial fiasco, insider trading, SEC scandals, all across the gamut of business. When things like this happens, the facts eventually are revealed through investigation and discovery with some sort of conclusion being formulated. Those at fault are dealt with and those who may have broke the laws of our society are prosecuted with some even being convicted. On the surface no deaths have been reported as a direct cause of this mortgage fiasco however, many lives have been adversely affected. Divorces, financial ruin, bankruptcies, credit destruction and medical problems grounded in stress may have their roots in having been touched with one of these mortgage products that has worked directly against a families budget.

Originally, savings and loans were the main lenders in the mortgage industry with available funds being driven by savings from depositors. No available savings many times meant there wouldn’t be any mortgage loans available. When Fannie Mae and Freddie Mac were set up, the liquidity problems were resolved as “good” mortgages were bundled and sold as mortgage backed securities on Wall Street. Later on the subprime (persons with less than stellar credit or provable income) market used the concept of securitizing mortgage back securities albeit with subprime paper with much higher risk. Recently, high foreclosure rates sent shock waves through the financial markets and investors turned their back on buying these subprime mortgage portfolios. With no where to sell the originated loans, a litany of subprime lenders found it necessary to close their doors or seek bankruptcy protection. Now the industry in this segment possesses extreme “radio activity” with few wishing to touch them. Not all of this mortgage paper is bad, just a higher percentage than previous experience. Many of the Option ARM mortgage products are being converted, where they can, to a fixed rate mortgage. With the market slumping in real estate values, many owners are upside down in their properties and owe more than the property is currently worth. Eventually, the values will come back in many areas. It’s not bad everywhere, but those that had unusual spurts of appreciation may have fallen back in many areas of the country. Principles of supply and demand are at play here. Too many dollars chasing too few properties drive the prices up and too few dollars chasing too many properties drive prices down. Currently, there is an abundant inventory with too few buyers looking at them.

It’s a great time to be a buyer who knows what they are looking for and has the wherewithal to do it. Choices are many and seller motivation is high. A buyer can get a great deal right now.

If the mortgage industry is to find its way out of the weeds the process is already under way by implementing the old basics of mortgage lending. Lower Loan To Values (LTV), lower Debt To Income Ratios (DTI), more Appraisal Reviews with say 3 month range of comparable sales. It will be back to basics for many lenders if they want to have a chance to garner favor with any would be portfolio buyers of their originated mortgage products. One of the low point product offerings was encapsulated in mortgage product known as “Stated Fixed Income”. Someone on a fixed pension and say social security would state their income, in many cases way above the actual, putting an extreme strain on a “Fixed Income” budget. Many of the limitations on NO DOC, NO RATIO, Self-Employed Stated Income, Stated Wage Earner (W-2), Option ARMs with low starter rates of 1% or so with negative amortization have already been tightened and cut back.
The future days for these whacko esoteric loans are numbered. There is a mortgage clean up under way. Much like the “Valdez Oil Spill Incident” there is much work to be done to work out the mortgage portfolios that have current non-performing loans. The good news is that over 90% of the portfolios are performing in the subprime niche AND like mortgage products are not being currently originated. Borrowers who can see the handwriting on the wall are refinancing many loans that had major built in feature traps and timed land mines. An example of this would be 2/28 ARMS that are fixed for two years then go up dramatically. Or the Option ARMs moving from 1% minimum payments rates while accruing interest at 7.5% all the while the mortgage goes up to say 115% of the original mortgage amount. Payment shock soon follows with radical increases. These troubled loans will be worked out through selling, short sales, foreclosures, refinances to fixed rate loans and eventually things will improve. It will be a long road with many bumps but is necessary for the mortgage business to find itself out of the weeds. Fortunately, it’s a great time to refinance, if the value is there, as the rates are very low at the moment.

As Vince Lombardi would say, “This is a football”. The mortgage industry must take a long look in the mirror and get back to the basics. To start, all aspects of the mortgage origination process and programs to turn it inside out to ferret out all the problem areas and products that are turning mortgage industry on its ear. The loans with a “wink”, the “stated programs” = “liar loans” and the other mortgage programs that will blow up in the consumer’s face down the road must be eliminated. It’s all about getting back to basics of “blocking”, “tackling” and “running”. For mortgages it’s focusing on the products, underwriting, origination and finally selling into the secondary market. Right now, what the mortgage industry is selling no investor is buying. Laws of business, change to conditions or die. The remaining lenders left standing are so busy that underwriting is backed up a week or two. The industry needs to get back to the basics of the business by originating products that are beneficial to consumers and to financial health of the secondary market. Both will benefit.


Dale Rogers
www.brokencredit.com


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Dale Rogers is a mortgage expert focusing on solutions in this dynamic real estate marketplace. Seller Helps Buyer is a free website where sellers who are willing to offer 'unique seller financing options' and 'closing cost assistance' are meeting every day and helping one another to buy and sell homes. Seller Helps Buyer is the only website of its kind and the wave of the future.

www.sellerhelpsbuyer.comf

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/credit/finally-%91suitability-test-arrives-at-the-mortgage-industrys-gate-how-bad-does-it-have-to-get.html http://www.articletrader.com/finance/credit/finally-%91suitability-test-arrives-at-the-mortgage-industrys-gate-how-bad-does-it-have-to-get.html Fri, 06 Apr 2007 00:00:00 -0500
Who then speaks for the mortgage borrowers when the ether wears off and the customer finds themselves up to their “chinney chin chins” in a financial tornado the likes of which Pacos Bill would have a hard time riding for eight seconds. Mortgage products such as 2/28 (fixed for two years than adjusts every 6 months), 3/27 (fixed for three years then adjusts every 6 months), NO DOCs, NO RATIO, Stated Wage Earner, Stated Self-Employed, Option ARMs with heavy built in margins may stack the deck from the beginning against the customer. In all many cases this loan product will almost guarantee rapid rate increases and mortgage failure down the road. When a loan officer is setting across the desk from a borrower who fits perfectly into one of these esoteric mortgage products how much thought goes into the after effects of signing up for one of these less understood mortgage programs. In the electronic age, the online application has very little customer interaction and interview other than e-mails and perhaps the old standby, the telephone. So with the customer acquiescing with some of the offered programs the downside risks may not be sinking in to the cranium of the borrower, “hey, this could destroy my family down the road.” The focus at the time may be more on “what’s the monthly payment?” A lender and mortgage broker role in looking at “suitability” for the borrower is a proven weak point in the process.

When a stock investor’s take a position in a mutual fund whatever the risk factor the fund is just looking at booking the shares. It’s left to NASD and the brokerages to gage “suitability”. If a stock broker does a sloppy job with “suitability” the customer sues and usually collects and NASD may suspend a stock broker to do business OR render sever discipline with fines and such. There really is no such trigger mechanism in the mortgage industry other than after the horse is well out of the barn. In this case, the secondary financial markets are doing it for the originators. Statements like: “Hey, we are not buying those products anymore. Our experience has shown that these are extremely risky loans that result in foreclosures and bad business.” So in a position as a buyer of mortgages in the secondary market, originators are being conditioned to throttle down and restrict extending these loans products as being loans treated as “persona non grata” guests. Previous to the major mortgage turn down originated portfolios were commanding 103% to 106% range of face values as a premium over and above paid to the originating lenders. To keep the flow going, where cash is king, many lenders established warehouse credit lines based on originated business. This would insure the lender could “table fund” the loan through the warehouse line and thus stay liquid to make other loans. Delivery of the funded loan would be packaged up with other loans and forwarded it to the institutional buyers as mortgage backed securities. As this plays out, the securitized portfolio buyers are dictating the tune on customer “suitability”. This is totally backwards from the stock market business level of control of “suitability” and appears vested in the end buyer of the security instrument.

One of the main players in this mortgage fiasco has been Merrill Lynch. A warehouse line is based on a certain level of reserves maintained by the originating lenders. When the “$2.00 window” closed at Merrill Lynch then margin calls were made to the lenders to substantially increase their reserves. When the lenders could not sell their wares, all the originated pools were being sold somewhere at prices in the 98% to 95% or less range where instead of making money were losing money on every loan. Added with the margin calls from the likes of Merrill Lynch and like a row of cascading dominos, many lenders closed their doors and filled bankruptcy protection. In many cases, secondary mortgage buyers acquired the lenders, for better or worse, to protect any further loses coming by way of the warehouse loan deficits. As the fall out from mortgage foreclosures on many of these high-risk loans with built in rising rates continues it will take years to work through these troubled loans. If a borrower can, there is a current rush to refinance at a fixed rate to prevent any future increases. In some cases where the borrowers are “upside down”, owing more than the property is worth, time and appreciation may be the only allies in turning this increasing rate into a fixed rate loan.

This has been a harsh fix of the “suitability” test. Where the secondary market shuts down the origination of these “left field products” in the eyes of many in the industry. Many of these products will go by the wayside. After the 1929 stock market crash where margin limits were reeled in on stock accounts. Likewise, the concept of “interest only” mortgage and loans were suspended as no payments were being made on the principal. Now, some 70+ years later it came back. It went away for a reason. These other loan products tempered with risk may also go by the wayside.

So what is a borrower to do. Perhaps back to basics. Fully documented loans, higher down payments, and the return in some markets of FHA, VA and programs like My Community where there is a real emphasis on credit counseling and meeting minimum housing ratios. Family budgeting also will receive heavy emphasis where first time homebuyers are concerned. Collections may need to be paid and settled and not ignored by lenders. For the short term at least, these loan products may get kicked to the curb. Mortgages like the NO DOC, NO RATIO, STATED WAGE EARNER (W-2), STATED FIXED INCOME (persons on Social Security and such), 2/28 ARM LIBOR INDEXED BASED LOANS, 3/27, STATED SELF EMPLOYED, OPTION ARMS WITH LOW START RATES AND NEGATIVE AMORTIZATION all may be under heavy review and examination. One thing for sure, many of the “$2.00 Windows” is closed to betting on any of these loans by the financial markets. These ponies are finishing out of the money bringing up the rear and out of the race. “Persona No Grata”.

In the meantime, lenders and brokers who continue to show the rosy like Annual Percentage rates and scenarios that have low interest rate increase projections that tend to lull borrowers into a false sense of security are part of the problem not the solution. Rather, worse case scenarios can be selected within the loan origination software bringing home the message to borrowers that this “left field loan” can blow up in their face down the road causing severe financial hardship. Credit histories can be destroyed and make take years to rebuild. A few of the more sophisticated buyers know exactly what they are doing with a Negative Amortization loan and are putting the difference to work in their businesses and other ventures. Those people, unfortunately are far and few between. Anyone considering any of these loans will need to gather all the information and plan budgets very carefully and should be relegated to a status of last resort. There are other options that can bring better results on a long-term basis.

Dale Rogers
http://www.brokencredit.com


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Dale Rogers is a rapid rescore mortgage expert who contributes his credit repair and mortgage knowledge regularly to the Broken Credit Blog. Broken Credit Blog hosts the internet's #1 credit repair seminar. All are welcome to gain free knowledge on how to improve their credit score and obtain the lowest mortgage rates available in the market.

www.BrokenCredit.com

Source: http://www.articletrader.com ]]> http://www.articletrader.com/legal/the-%91porkmeisters-cloaked-in-secrecy-ply-their-trade-of-separating-tax-payers.html http://www.articletrader.com/legal/the-%91porkmeisters-cloaked-in-secrecy-ply-their-trade-of-separating-tax-payers.html Thu, 29 Mar 2007 00:00:00 -0500
China recognizing the power of the Internet has restricted its use and has even developed its own system. With a host of Internet monitors trying to get their arms around any communication that will show their government in a bad light is censored. The Chinese are now mastering the online power of satire where if you can’t read between the lines, then your not understanding the writers drift. The cat is out of the bag in China. The Internet is America’s only hope that the Bloggers in China can marshal enough support to prevent their country from taking a wrong turn. The same hope remains for America. The Blogashere and other online activity in the Internet will bring all the governing bodies under close scrutiny for all to see. An informed electorate is America’s hope. Truth eventually will come out. Having all congressional bills and budgetary items online with ALL the sponsors named will point the brightest and most focused stage spotlight to the proponents of pork. Operating in darkness shields the “Porkmeisters” from scrutiny.

If a project is so weak and without merit and the only way for its passage is to stick it on the trailing tail of a bigger bill than that is just so lame and impotent. Yes earmarks and “secret endorsements” lead to runaway spending. Since the line item veto was struck down the executive branch has little option but to rattle the sword and veto the entire bill and hope that it there are not enough additional votes to over ride the veto. Otherwise, Presidents would need to hold their nose and sign it any way. Perhaps it is time to make another effort to take another run at putting the line item veto in place with hopes of getting a better play with the Supreme Court. Until then, we are left to try and shine a light on the budgetary and legislation enactment by putting everything online and let the public see exactly who is doing what. Parading ones voting record and actions can only help to mute the abuses that are currently under way.

There are huge challenges ahead for America in the Social Security and Medicare sectors that need adjustments NOW. Additional taxation will further burden the middle Americans who have enough on their plate as it is. The Fair Tax or other tax alternative may give the financial income to not only fund these needed programs but eat away the swelling national debt and make America competitive on the world stage. One major benefit would be to remove the need for any lobbyist looking to buttonhole an elected official to get their client a tax loophole. No corporate or individual taxes would do away with pork-laden bills and stealth riders, as there would not be any IRS code to modify. The safety net for low income families will offset any increase to the family budget for a national sales tax and have built in protections against additional burdens to the lower income segments. This program can make a lot of sense but will be fought tooth and nail by all the special interests protecting their little corners of the world. Term limitations could put a dent into the “Career Politicians” where pay backs and back scratching are the rule. Having fresh faces each term would be a learning curve for each with no long-term memory to resource of who is owed what favor. Fresh ideas, fresh approaches with new points of view. That is the base of attraction for Barak Obama. Thus far, appears untethered to special interests and is outside of the old party machine. Obama has shown the ability to reach across the aisle to Senator Tom Colburn, the biggest thorn in the “Porkmeister’s” side to put the budget and bills on the Internet for ALL to see. It will take fresh thinking and fresh ideas with a flow of fresh blood. America was founded based on a “can do” attitude. Lately, the country is reeking with negativism and frankly its becoming tiresome. When lawmakers are below attorneys in the polls the electorate are on to them. Changes must come. Special interests must be put aside and some new “Mr. (Ms.) Smiths Must Come To Washington”.

If the tough issues are not addressed soon, families will be increasingly under financial pressure with their very credit and financial foundations at stake. Things have to change. Unfortunately, the situation many times needs to get really bad before it gets better. With enemies trying to destroy our way of life, we must become strong again from within. A return to looking at making the tax system fair and removing much of the special interest lobbying efforts to grab a loop hole at the tax payers expense would be a good start. The Fair Tax could do just that. Will this be an easy sell? No way! It will be tough to do. It will impact the “Porkmeisters” and many of the lobbyists trying to buy influence. Term limits with real limited campaign budgets will broaden the citizen pool with people who want to compete on the basis of ideas not how much cash they can raise. When some campaign budgets approach the governmental budgets of some countries, it’s time for a change. It now is a campaign of exclusion for lack of a large cash stash to run for office. After the term is up, the elected “new blood” needs to go back to work where they were making a living before. No where was this valued citizenry participation meant to be a “life time calling”. Serve the term, do great work and go back to work. No full retirement for part time effort that has not measured up, representatives need to pay Social Security just like other Americans, no special parking spaces, nothing. To serve in an elected capacity is a privilege not another entitlement. Serve one term and go home and get back to work and encourage others to run and serve. Pass it on and keep it going. Definitely, becoming a “Porkmeister” and all that it brings with it is not the goal. Making America a better country needs to be the only goal through positive and innovative thinking and bringing in fresh blood to the fray. Limiting campaign spending, reducing term limits, passing the Fair Tax, bringing back the line item veto, putting the budget and bills on internet with ALL sponsors being identified will be a good start. Will the real America please stand up.


Dale Rogers
http://www.brokencredit.com


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Dale Rogers provides valuable information to the Broken Credit Blog. He's an expert on bad credit, no credit loans, helping people achieve their dream of buying a new car or home. The Broken Credit Blog is a free site created to assist the public with information on credit repair, responsible lending.
www.BrokenCredit.com

Source: http://www.articletrader.com ]]>