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.”
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.
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…