mortgages

A proposed rule intended to prevent the kind of reckless lending and borrowing that heaped so many toxic mortgages into the marketplace in recent years has alarmed some groups, who argue the unintended consequences could worsen the nation’s housing troubles.

The plan would require homeowners to make down payments of at least 20 percent of the cost of a home.

Barry Zigas, director of Housing Policy for the Consumer Federation of America in Washington, D.C. said recently, “It’s a good thing to have more equity in your house, but it’s not a good thing for the federal government to set a 20 percent down payment as the gold standard of mortgage underwriting.”

As proposed, the 20 percent down payment requirement, which grew out of the Dodd-Frank regulatory overhaul enacted in July, would not apply to all residential mortgages.

It is intended to apply to mortgages banks plan to package as mortgage-backed securities to sell to investors. If lenders do not require a borrower to make the 20 percent minimum down payment, the financial institutions would be required to hold at least 5 percent of the value of the loan on their books, a move to make sure they, too, would lose if a loan goes bad.

Groups that oppose the proposal say banks will either decide not to lend money to people who don’t have 20 percent or will charge higher interest and fees to offset the bank’s cost of holding the 5 percent reserve.

It is unclear how soon the rule would impact the housing market, if it is approved. Most home loans in this country are insured by federal agencies, such as Federal Housing Administration with its 3.5 percent down payment. Those mortgages would continue to be exempt from the 20 percent requirements.

The new rule establishing guidelines for the Qualified Residential Mortgage rule would be a complete pendulum swing from the days of easy credit, which gave birth to mortgage innovations that fueled the housing boom.

The 5 percent risk retention rule would make sure that if lenders did not require borrowers to put 20 percent down, the lender would still have a stake in the loan being repaid.

Some analysts are convinced that if the rule is approved, home prices could decline and more people with homes underwater — the houses are worth less than the owners owe — will walk away, creating a bigger overhang of unsold properties.

What do you think? Will a minimum 20 percent down rule cripple the already fragile housing market? We’d love to hear from you. Sound off by clicking the comment link below. Your email address will never appear on our website or shared with any third parties.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Fewer Americans are having trouble paying their mortgages now compared to a year ago, according to a new Harris Interactive poll.

About 22% of those surveyed last month said they had difficulty making their mortgage payments, down from 29% a year earlier. Additionally, 21% of respondents believed they were “under water” on their mortgage, meaning the outstanding balance is higher than the home is worth, according to the report. That’s down three percentage points from last year.

The findings seem to reflect an improving job market, with more jobs and lower unemployment. March’s unemployment rate fell to 8.8% from 8.9% in February while the U.S. economy added 216,000 jobs, the U.S. Labor Department said recently. In March 2010, the unemployment rate was 9.7%.

But the news isn’t all good. Another reason for the decline in struggling homeowners is that some of those who had been having trouble keeping up their payments last year have since sold or lost their homes through foreclosure. Of those polled, 66% said they had a mortgage, down from 69% in Harris’s year-ago survey.

After all, the U.S. housing market is still in flux. The median home price is February was $156,100, down 5.2% from a year earlier, while so-called distressed homes — houses sold at a discount — accounted for 39% of February sales, according to the National Association of Realtors.

“These findings are consistent with other Harris Poll data on the economy that show a very modest, but, still painfully slow, recovery from the recession,” Harris Interactive said in a statement. “Many millions of people are still hurting badly even if the numbers are slightly better than they were last year.”

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

You wouldn’t think of paying an extra 50 grand for that new house. But if you’re not careful, you might waste that much on the mortgage…

Have questions about mortgage shopping? We’d love to hear from you. Just click the comment link below and ask away. We’ll get back to you here with answers.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

A reverse mortgage loan is one in which a finance company buys the equity in a home. While the homeowner is alive, the company will make monthly payments to the owner. The homeowner may alternatively opt to receive a lump sum payment. After the homeowner passes, moves, or sells the house, the loan becomes due. The home does not have to be paid off to get a reverse mortgage loan, but it usually requires a good deal of equity.

These loans provide a way for senior citizens to take equity out of their home without selling the home. This has the benefit of allowing them to live a better life without the stress of financial obligations; at least regarding the mortgage. It gives them more money on which to live, and maybe enjoy some things they might not otherwise be able to afford. When the loan comes due, such as at the death of the homeowner, the house is sold and the loan is paid. In that case, the heirs receive any additional monies. If the loan is larger than the sale amount, the lender absorbs the loss.

There are pros and cons regarding reverse mortgage loans. They are expensive to initiate, costing nearly twice as much as traditional loans. Additionally, the loans create compounding interest. The borrower makes no monthly payments, so the interest is essentially added to the principal. The next month, interest is due on the higher amount of principal. These loans can be quite confusing, and a deceptive finance company can make the confusion even worse. Caution is advised, as is an attorney and counseling before making a commitment to a reverse mortgage.

Overall, if properly handled, reverse mortgage loans can be great for the elderly; they can be life changing. They are certainly not for everyone, though. Each person has a unique situation which must be taken into consideration before initiating one of these loans.

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.

Divorced homeowners stuggling with the task of removing a former spouse’s name from the mortgage after buying out his or her equity stake in the marital house may think refinancing is the only choice.

There is another, little-known option that could possibly help you avoid refinancing and its costs, which generally run 3 to 6 percent of the outstanding loan principal. You simply ask your lender to remove the former spouse’s name, leaving the loan note in your name only.

Not all lenders or mortgage servicers offer this option, known as release of liability. The lenders and servicers that do will most likely run a separate credit check on you — requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal. If you are “under water,” and owe more on the mortgage than the home is currently worth, this process is not an option.

Most divorce settlements stipulate one of two outcomes for marital property. Either the house must be sold, or the person wanting to keep the property must buy out the other’s share, usually within months of the date of the settlement, and get the other party’s name off the mortgage — either through refinancing or a release of liability — typically within a year.

Under the second option, the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house’s title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage.

Having the name removed protects the credit of both parties, actually. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, your former spouse’s credit could be hurt.

Lenders or servicers typically charge $300 to $1,000 to execute a release of liability and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days.

Qualified borrowers not accorded the release they are asking for should consider telling their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage — at another lender. In such cases, the servicer might agree to do it.

Have you, or someone you know, been through this situation during or following a divorce? We’d love to hear the outcome. Were you or the other known party successful in getting the spouse removed from the mortgage? Use the comment link below to send us your comments…

Home and Commercial Inspections in the Columbia SC area is our specialty! Every year we help hundreds of clients save tens of thousands of dollars, by responsibly finding and exposing conditions that threaten property, value and safety. To learn how we may be able to serve you, please click and read, or call 803-261-5810.