tag:blogger.com,1999:blog-85498835498088845822024-02-06T23:10:12.271-05:00NJ HELOC HeavenThis blog's purpose is to document the local excesses from the housing bubble era.NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.comBlogger615125tag:blogger.com,1999:blog-8549883549808884582.post-64205020632540559712009-07-30T14:20:00.002-04:002009-07-30T14:27:45.382-04:00Banks Make More $$ Not Modifying Mortgages<!-- AddThis Button BEGIN -->Just when we thought we understood what was going on we find that banks are taking advantage of their investors. Well, they do not call them banksters for nothing. There is a great article titled <a href="http://blogs.reuters.com/felix-salmon/2009/07/30/mortage-servicers-perverse-incentives/">Mortgage servicers perverse incentives</a> from Reuters Blog that illustrates how lenders make money by not negotiating. This bundle comes from the investors. Let's take a look -<br /><br /><div class="entry"> <p></p><blockquote><p>Last month, I <a href="http://blogs.reuters.com/felix-salmon/2009/06/29/why-is-it-so-hard-to-modify-a-mortgage/">wondered</a> whether banks’ seeming <a href="http://www.nytimes.com/2009/06/29/business/29loanmod.html?ref=business&pagewanted=all">inability</a> to effectively modify mortgages was a function of “greed on the part of the banks — that while they pay lip service to the idea of modifying mortgages, they actually make more money by being recalcitrant and obstructive and unhelpful.”</p> <p><br /></p><p>It turns out that the <a href="http://www.nytimes.com/2009/07/30/business/30services.html?_r=1&ref=business">answer</a> is yes, it is — and the NYT’s Peter Goodman has chapter and verse:</p> <blockquote> <p><br /></p><p>Many mortgage companies are reluctant to give strapped homeowners a break because the companies collect lucrative fees on delinquent loans.</p> <p><br /></p><p>Even when borrowers stop paying, mortgage companies that service the loans collect fees out of the proceeds when homes are ultimately sold in foreclosure. So the longer borrowers remain delinquent, the greater the opportunities for these mortgage companies to extract revenue — fees for insurance, appraisals, title searches and legal services.</p> </blockquote> <p><br /></p><p>In a <a href="http://www.nytimes.com/2009/07/30/business/30serviceside.html?ref=business">sidebar</a>, Goodman examines the case of a mortgage servicer, Countrywide, which refused to let Alfred Crawford sell his house for $620,000 in settlement of mortgage debts exceeding $800,000. The latest offer on the house is now just $465,000, and still no short-sale is being allowed.</p> <p><br /></p><p>In the meantime, <span style="font-weight: bold;">Countrywide is paying itself lots of fees — fees which will ultimately come out of the pockets of the investors who bought the mortgage-backed bonds which Crawford’s loan was bundled into. The minute that Countrywide allows the house to be sold, that fee income dries up.</span></p><br /></blockquote><p>The claim is that lenders are looking out for investors. But if you read the whole post you will see that the lenders are really just looking out for themselves. That is why short sales do not work out. That is why foreclosures seem to lag on and on. The lenders are able to extract every penny out of the situation as possible. How is the housing plan going to compete with that?<br /></p> </div><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com1tag:blogger.com,1999:blog-8549883549808884582.post-80754844847781424562009-07-23T09:22:00.002-04:002009-07-23T09:26:50.775-04:00Bake Sales for Mortgages<!-- AddThis Button BEGIN -->We have heard it all now. A bake sale for raising the mortgage money. We are just surprised no one has thought of it first. Or maybe they did and did not know how to generate publicity for it. But we do think that $40 for an apple cake is a bit expensive. Maybe it is just us. But it raised enough for a local <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Teaneck</span> woman to save her property. In this Associated Press article titled <a href="http://www.google.com/hostednews/ap/article/ALeqM5h0VsD8Cd6tU_pLYsQBpsduMC8m9wD99JF5QG0">NJ woman's bake sale helps make mortgage payment</a> gives us the details. Let's take a look -<br /><br /><blockquote>New Jersey woman's bake sale has helped her forestall foreclosure.<p><br /></p><p>Angela Logan raised the $2,559.54 due Sunday under a federal program to help homeowners in financial trouble.</p><p><br /></p><p>The divorced mother of three sons in <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Teaneck</span> wanted to sell 100 "mortgage apple cakes" at $40 each. But as of Tuesday, she had more than 500 orders, including one from <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Hong</span> Kong.</p>...<p><br />Logan tells The Record of Bergen County she won't stop baking until people stop ordering.</p></blockquote><p></p><br />It sounds like she may have next months mortgage payment as well. Now lets see a review of the cakes...<br /><br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-62776711431849858522009-07-21T11:04:00.002-04:002009-07-21T11:29:31.168-04:00Sub Primers in Charge of Mortgage Mods<!-- AddThis Button BEGIN -->Since the sub prime mortgage market has died the formers employees need to do something. So what better than starting mortgage mod companies to try to work out the loans that they sold a few years ago. Who knew the loans better, right? They already know the lenders that they sold the loans to as well. Plus they are making money in the process. So it must be a win-win situation, at least for the ex sub prime employees. For those that bought the loans a few years ago it sounds more like a lose-lose situation. They are paying the mods money to still lose their house anyways. And what are the new mod employees doing to help the poor folks facing foreclosure? Why laughing at them! That is what just happened in California according to this New York Times article titled <a href="http://www.nytimes.com/2009/07/20/business/20modify.html?pagewanted=1&_r=1&partner=rss&emc=rss"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">Subprime</span> Brokers Back as Dubious Loan Fixers</a>. Let's take a look -<br /><br /><p></p><blockquote><p>By Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Soussana</span>’s own account, his customers fared less happily. He specialized in the exotic mortgages that have proved most prone to sliding into foreclosure, leaving many now scrambling to save their homes. </p><p><br /></p><p>Yet the dangers assailing Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Soussana</span>’s clients have yielded fresh business for him: Late last year, he and his team — ensconced in the same office where they used to broker mortgages — began working for a <a href="http://topics.nytimes.com/your-money/loans/index.html?inline=nyt-classifier" title="More articles about loans.">loan</a> modification company. For fees reaching $3,495, with most of the money collected upfront, they promised to negotiate with lenders to lower payments on the now-delinquent mortgages they and their counterparts had sprinkled liberally across Southern California.</p><p><br /></p><p>“We just changed the script and changed the product we were selling,” said Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_3">Soussana</span>, who ran the Los Angeles sales office of Federal Loan Modification Law Center. The new script: You got a raw deal, and “Now, we’re able to help you out because we understand your lender.”</p><br />Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Soussana</span>’s partners at <span class="blsp-spelling-error" id="SPELLING_ERROR_5">FedMod</span>, as the company is known, were also products of the formerly lucrative world of high-risk lending. The managing partner, <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Nabile</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Anz</span>, known as Bill, previously co-owned Mortgage Link, a California <span class="blsp-spelling-error" id="SPELLING_ERROR_8">subprime</span> lender, now defunct, that once sold $30 million worth of loans a month.<br /><br />...<br /><br /><span class="blsp-spelling-error" id="SPELLING_ERROR_9">FedMod</span> is but one example of how many of the same people who dispensed risky mortgages during the real estate bubble have reconstituted themselves into a new industry focused on selling loan modifications.</blockquote><br /><br /><br /><br />And of course there is a <span class="blsp-spelling-error" id="SPELLING_ERROR_10">Mozilo</span> involved - Angelo <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Mozilo's</span> nephew.<br /><br />This company figured out how to work the system the best ways possible. Get a lawyer in charge so they could charge up front fees. Once they got the money they did little else - even pay their employees!<br /><br />The article is long but it does a great job of portraying the build-up and downfall of the company. Definitely worth the read. And worth remembering not to pay someone, anyone, up front to modify your mortgage!<br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-41636826230772547632009-07-17T09:21:00.002-04:002009-07-17T09:26:26.210-04:00Foreclosure Summary<!-- AddThis Button BEGIN -->We knew that yesterday's numbers were bad, overall. But reading a summary of the numbers makes things seem even worse. This New York Times article titled <a href="http://economix.blogs.nytimes.com/2009/07/16/foreclosures-rise/">Foreclosures Rise</a> puts thing into perspective. Let's take a look -<br /><br /><p></p><blockquote><p>One in 84 American housing units received at least one foreclosure filing in the first half of the year, according to <a href="http://www.realtytrac.com/ContentManagement/PressRelease.aspx?channelid=9&ItemID=6802#statetable">RealtyTrac</a>, the online marketplace for foreclosure properties.</p> <p>Altogether, that makes for a total of 1,905,723 foreclosure filings — default notices, auction sale notices and bank repossessions — reported on 1,528,364 American properties in the first six months of 2009. Compared to the same period last year, the number of total foreclosed properties rose nearly 15 percent.</p> </blockquote><br /><br />No green shoots in this direction. And not for some time to come. Almost 2 million homes in distress. With unemployment numbers still rising. And since there is a lag time from when people stop paying their mortgage to when the default notices start this will continue to rise for some time. <br /><br />Gloomy indeed!<br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-14592350002055820962009-07-16T08:56:00.003-04:002009-07-16T09:11:36.209-04:00Foreclosures Down in NJ but Up Nationally<!-- AddThis Button BEGIN -->Another round of foreclosure numbers are out. A sign of good news for New Jersey but nationally the news remains grim. First let's take a look at the national numbers from <span class="blsp-spelling-error" id="SPELLING_ERROR_0">MSNBC's</span> article titled <a href="http://www.msnbc.msn.com/id/31930813/ns/business-real_estate/">Foreclosures up 15 percent in the first half of 2009</a> -<br /><br /><br /><blockquote>The number of U.S. households on the verge of losing their homes soared by nearly 15 percent in the first half of the year as more people lost their jobs and were unable to pay their monthly mortgage bills.<br /><br /><p class="textBodyBlack"><span id="byLine"></span>The mushrooming foreclosure crisis affected more than 1.5 million homes in the first six months of the year, according to a report released Thursday by foreclosure listing service <span class="blsp-spelling-error" id="SPELLING_ERROR_1">RealtyTrac</span> Inc.<br /></p><p class="textBodyBlack"><br /></p><p class="textBodyBlack">The <a itxtdid="10721148" target="_blank" href="http://www.msnbc.msn.com/id/31930813/ns/business-real_estate/#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;" classname="iAs" class="iAs">data</a> show that, despite the Obama administration’s plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation’s housing woes continue to spread. <span style="font-weight: bold;">Experts don’t expect foreclosures to peak until the middle of next year. </span><br /></p><p class="textBodyBlack"><span id="byLine"></span><br /></p><p class="textBodyBlack">...</p><p class="textBodyBlack"><span id="byLine"></span><span style="font-weight: bold;">More than 336,000 households received at least one foreclosure-related notice in June, according to the foreclosure listing firm’s report. That works out to one in every 380 U.S. homes. </span></p><p class="textBodyBlack"><span id="byLine"></span><br /></p><p class="textBodyBlack">...</p><p class="textBodyBlack"><span id="byLine"></span>On a state-by-state basis, Nevada had the nation’s highest foreclosure rate in the first half of the year, with more than 6 percent of all households receiving a filing. Arizona was No. 2, followed by Florida, California and Utah. Rounding out the top 10 were Georgia, Michigan, Illinois, Idaho and Colorado. </p><p class="textBodyBlack"><span id="byLine"></span></p><br /></blockquote><p class="textBodyBlack">Those are some grim numbers. That coupled with the projections that foreclosure will not peak for another year is very ugly economic news. </p><p class="textBodyBlack"><br /></p><p class="textBodyBlack">Now on to one sign of good news locally; a Star-Ledger article titled <a href="http://www.nj.com/business/index.ssf/2009/07/new_jersey_foreclosure_rate_fa.html">New Jersey foreclosure rate falling</a>. Let's take a look at how the Garden State is fairing - </p><p class="textBodyBlack"><br /></p><p></p><blockquote><p>Initial foreclosure filings on New Jersey homes have fallen through the first half of 2009, and government programs are getting some of the credit.</p><p><br /></p> <a name="more"></a><p><span style="font-weight: bold;">Foreclosure activity has dropped up to 30 percent across the first half of the year compared with the same period the previous year</span>, according to data being released today by <span class="blsp-spelling-error" id="SPELLING_ERROR_2">RealtyTrac</span>, a private company that monitors foreclosure data. The company watches activity across a number of stages of the foreclosure process.</p> <p><br /></p><p>Initial foreclosure filings in the first five months of the year fell nearly 20 percent, according to the New Jersey Judiciary, although May data was not complete.</p> <p><br /></p><p>...</p> <p style="font-weight: bold;">Still, industry watchers think the state's foreclosure rate is falling for a number of reasons: New Jersey was not as exposed to the plague of <span class="blsp-spelling-error" id="SPELLING_ERROR_3">subprime</span> mortgages as other states, Trenton and industry groups have been pushing foreclosure prevention programs and home prices have not fallen as much here as in other areas of the country.</p>...<br /><br /><p>There are mixed opinions about whether the numbers will stay lower than last year or whether foreclosures will come back up.</p><p><br /></p> "It's hard to tell at this point what's going to happen," said James <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Silkensen</span>, the co-president of the New Jersey Bankers Association. "We're certainly hopeful it will be a continuing downward slide."</blockquote><br />One interesting part of the article not above is that the state's foreclosure counseling programs are reporting that they are as busy as ever. Perhaps that is a good thing - people are aware and proactive. Fighting to keep their property or at least not lose it to foreclosure is much better than the walkaways or people feeling so beat down by the system they are apathetic. <br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com2tag:blogger.com,1999:blog-8549883549808884582.post-10475921121062696142009-07-14T12:19:00.003-04:002009-07-14T12:30:18.391-04:00Mixed Messages<!-- AddThis Button BEGIN -->Citizens get such mixed messages. Do not get in debt. But spend, spend spend. Consumers need to spend to get us out of the recession. But you need to save for a rainy day. And you need to have enough to get by, pay your full monthly mortgage payment and a little more. These mixed messages thrust on us can be very confusing. So we get some good news that consumers are now saving - but this is also bad news since it means consumers are not spending, huh. So says this article from Brookings Institute titled <a href="http://www.brookings.edu/opinions/2009/0714_saving_burtless.aspx">Economic Fears Lead to a Surge in Household Saving</a>. Let's take a look -<br /><blockquote><br />For many years, economists and other experts have bemoaned American consumers’ unwillingness to save. <span style="font-weight: bold;">Now Americans are saving once again, and observers worry that too much saving translates directly into too little consumer demand. </span>Was consumer saving too low in the past and, if so, why? Is it now too high?<br /><br /><br />The personal saving rate has soared in recent months. As a percentage of disposable income, the 6.9% rate recorded in May was the highest rate in over 15 years. According to the national income and product accounts, personal saving in 2007, the last year before the start of the recession, was $57 billion. In the January-March 2009 calendar quarter, the annual rate of personal saving was $464 billion, an eight-fold increase. In May 2009, the rate of personal saving rose still further, reaching an annual rate of $769 billion, nearly fourteen times the annual saving rate in 2007.<br /><br /><br />It may seem puzzling that personal saving would soar at a time of surging unemployment and falling wages and profits. U.S. consumers are worried, however, that their private incomes could fall still further in the future. Even Americans who hold secure jobs have experienced a dizzying drop in wealth over the past 18 months. Since reaching a peak in 2007, household net worth fell almost $14 trillion, a drop of more than one-fifth. The huge loss in wealth has induced many consumers, including those with secure incomes, to cut back on buying in order to bring their consumption back into line with their long-term ability to spend.<br /><br /><br />...<br /><br />In the second half of the 1990s and much of the current decade the ratio of U.S. household wealth to household income was rising in spite of the fact that households were saving very little of their incomes. If capital gains on your home and in your stock market portfolio are doing so much of the heavy lifting, why should you make any consumption sacrifice to add to your savings? Asset price deflation turned capital gains into huge capital losses over the past 18 months. Households now need to save in order to rebuild their wealth holdings.<br /><br /><br />A second contributor to low household saving in the past two decades was a series of innovations in consumer and mortgage lending. The wider dissemination of credit cards made it easier for households to borrow without any collateral. Innovations in mortgage finance made it easier for people with poor credit records to buy a home and for people with good credit histories to borrow on their home equity. These innovations relaxed borrowing constraints that once limited households’ ability to obtain loans when they were temporarily short of funds. Households saw less reason to accumulate or maintain a stash of liquid savings for emergencies. But the financial crisis has cut off many households’ access to credit. If they want to protect themselves against future financial emergencies, households must accumulate precautionary savings. In a future emergency they may not be able to rely on credit cards or home loans to tide them over.<br /><br /></blockquote>If your house value was increasing by double digits every year why save. Many of us felt rich just owning a house. While that wealth that we felt was just an illusion the debts we owed were real. And now, to many of us, they are painful. But the big problem is this push to live within our means but spend every penny we have. But since on a personal level saving is good - on a national level this level of saving is not so good. Our advice is to worry about the personal levels only...<br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-79300962853741641082009-07-13T12:45:00.003-04:002009-07-13T12:56:39.741-04:00NJ Mortgage Mod Scams<!-- AddThis Button BEGIN -->Getting into trouble with your mortgage is bad enough, but then getting ripped off in the process of trying to straighten it out is even worse. We hear story after story of people falling for scams. Yesterday in The Record, in an article titled <a href="http://www.northjersey.com/business/realestate/Lending_nothing_but_woe.html">Lending nothing but woe</a>, they try to help people steer clear from some of the more common scams. This article is helpful due to the focus on NJ specific issues. Let's take a look -<br /><br /><p></p><blockquote><p>[I]t’s not even legal under New Jersey law to charge for loan modification work.</p> <p><br /></p><p>State and federal regulators have cracked down, saying these companies often:</p><p><br /></p><p></p><ul><li>Falsely suggest they are linked to the Hope Now Alliance, a federally sponsored program of free mortgage counseling by non-profit agencies.</li><li>Charge fees to help clients modify their loans.</li><li>Fail to get mortgages modified, as promised.</li><li>Refuse to give clients refunds.</li></ul><br /> <p>Any request for payment is a big red flag.</p><p>"I try to tell people: Do not pay anybody," said Shirley Robertson, a housing counselor with the Paterson Task Force.</p>... <p>Under state law, only non-profit social service and credit counseling agencies can serve as "debt adjusters."</p> <p>...</p>According to the FTC, homeowners struggling with their mortgages should avoid any company that:<br /><br /> <ul><li>Guarantees to stop the foreclosure process, no matter what the homeowner’s circumstances.</li><li>Instructs homeowners not to contact their lender, lawyer or credit or housing counselor.</li><li>Collects a fee before providing any services.</li><li>Accepts payment only by cashier’s check or wire transfer.</li><li>Encourages homeowners to lease their home so they can buy it back over time.</li><li>Tells homeowners to make mortgage payments directly to the company, rather than the lender.</li><li>Tells them to transfer the property deed or title to the company.</li><li>Offers to fill out paperwork for them.</li><li>Pressures homeowners to sign paperwork they haven’t had a chance to read thoroughly.</li></ul></blockquote>Pretty clear and straight forward advice. Hopefully this will get out there enough so that the people in need can get hold of it. Unfortunately it was in the Real Estate section - the section people often read when looking for properties but not really the go to place when you want to hold onto your current property. Maybe a front page type of story would get the info to the right people.<br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-41278184734080794962009-07-11T07:18:00.000-04:002009-07-11T07:18:00.630-04:00July's Loan Mod Meeting<!-- AddThis Button BEGIN -->So we now that the new housing plan is working about as good as the old housing plan (Hope Now) which means that it is not working. So a meeting will be convened on July 28 where Treasurer <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Geithner</span> and HUD secretary Donovan will discuss (read force) the top 25 mortgage lenders to adopt modify mortgages. This article from the New York Times titled <a href="http://www.nytimes.com/2009/07/11/business/11nocera.html?_r=1">From Treasury To Banks, an Ultimatum on Mortgage Relief</a> discusses some of the details. Let's take a look -<br /><br /><blockquote>... Thursday night when I was shown a <a href="http://graphics8.nytimes.com/packages/pdf/serviceletter.pdf" title="read the letter">letter</a> that the <span class="blsp-spelling-error" id="SPELLING_ERROR_1">administration</span> had just sent out calling for yet another big meeting at Treasury with yet another sector of the financial industry. Signed by Treasury Secretary <a href="http://topics.nytimes.com/top/reference/timestopics/people/g/timothy_f_geithner/index.html?inline=nyt-per" title="More articles about Timothy F. Geithner.">Timothy <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Geithner</span></a> and Shaun Donovan, the housing and urban development secretary, the letter demanded that <span class="blsp-spelling-error" id="SPELLING_ERROR_3">representatives</span> from the top 25 mortgage <span class="blsp-spelling-error" id="SPELLING_ERROR_4">servicers</span> assemble in Washington on July 28. It is likely to be every bit as painful for them as that <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Paulson</span> meeting last October was for the bank C.E.O.’s.<p><br /></p><p>The subject of the meeting is going to be loan <span class="blsp-spelling-error" id="SPELLING_ERROR_6">modifications</span>. <span class="blsp-spelling-error" id="SPELLING_ERROR_7">Specifically</span>, the government is going to be asking — in none-too-friendly fashion — why the nation’s big <span class="blsp-spelling-error" id="SPELLING_ERROR_8">servicers</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_9">aren</span>’t doing more to modify loans for homeowners who are in danger of defaulting on their mortgages. Back in the spring, after all, they all signed onto the <span class="blsp-spelling-error" id="SPELLING_ERROR_10">administration</span>’s new Making Home Affordable program, which uses a series of incentives — not the least of which is $1,000 to the <span class="blsp-spelling-error" id="SPELLING_ERROR_11">servicers</span> for every mortgage they modify — to help keep people in their homes and prevent <span class="blsp-spelling-error" id="SPELLING_ERROR_12">foreclosures</span>.</p><p>...</p><p>So far, however, the results have been <span class="blsp-spelling-error" id="SPELLING_ERROR_13">disheartening</span>. As of July 6, according to some internal Treasury data I was given a peek at, a total of 131,030 mortgages had been modified under the program, on a three-month trial basis (the Obama program calls for three-month trials before the new loan terms are locked in). That may sound good — but it’s a drop in the bucket compared with those 3.5 million potential <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">foreclosures</span> this year.</p><p>...</p><p>Many <span class="blsp-spelling-corrected" id="SPELLING_ERROR_15">institutions</span> also are reluctant to do large-scale mortgage <span class="blsp-spelling-corrected" id="SPELLING_ERROR_16">modifications</span> because they will hurt the balance sheets. After all, if a loan is modified, the bank has to take a write-down on the portion of the loan it is swallowing. If lots of loans are modified, that means a lot of write-downs. </p><p>...</p><p><span style="font-weight: bold;">Sure, foreclosure ultimately costs the bank more money than a <span class="blsp-spelling-error" id="SPELLING_ERROR_17">modification</span> would. But <span class="blsp-spelling-error" id="SPELLING_ERROR_18">foreclosures</span> these days take a long time — as much as 18 months in some states. And all that time the banks can keep the loans on their books at inflated values. Daniel Alpert, the managing partner of <span class="blsp-spelling-error" id="SPELLING_ERROR_19">Westwood</span> Capital, calls this practice “extend and pretend.”</span> In fact, he said, he has been hearing that banks <span class="blsp-spelling-error" id="SPELLING_ERROR_20">aren</span>’t even willing to conduct so-called short sales anymore. Those are sales where the borrower asks the bank to sell the house for whatever it can get, and the bank in turn lets the borrower walk away from the loss that results from the sale.<br /></p><p></p></blockquote><br />Will anything really change? Or will foreclosure keep rising or will lenders try to re-write the loans. We can not see many ways the government can force this onto the lenders. So it is really just a wait and see...<br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-64534227663314260992009-07-08T08:40:00.003-04:002009-07-08T08:55:57.031-04:00Not Making Payments<!-- AddThis Button BEGIN -->Apparently the number of HELOC that have payment delinquencies is increasing. With rising unemployment rates we can expect this number to continue climbing. And with allowing HELOCs just for having some equity in the home, as during the bubble, there were many people who could never really afford their lines in the first place. <br /><br />More delinquencies also means more loss and write-off for the banks. The big question is what are the lenders breaking point. They already have government funds propping them up - but will that be enough? Probably not for some. So let's take a look at this Washington Post article titled <a href="http://voices.washingtonpost.com/economy-watch/2009/07/delinquencies_on_home-equity_l.html?hpid=news-col-blog">Delinquencies On Home-Equity Loans, Credit Cards Hit Historic Levels</a> -<br /><span style="font-weight: bold;"><br /></span><p></p><blockquote><p>Delinquencies on home-equity loans and credit card payments hit record highs in the first quarter of this year, according to data released today by the <strong>American Bankers Association</strong>.</p> <p><br /></p><p>Home-equity loans were one of the major culprits of the current crisis. To recap: Cheap credit caused a housing boom in the first part of this century. Skyrocketing home values led homeowners to take out home-equity loans -- essentially, treating their homes like ATMs -- to buy consumer products. Then, when home values started flattening then falling, it all collapsed, debt upon debt.</p> <p><br /></p><p>According to the American Bankers Association, delinquencies on home-equity loans climbed to 3.52 percent from 3.03 percent in the fourth quarter of 2008, with late payments on the loans jumping to a record 1.89 percent.</p>...<p>This is even worse news: It means people are living off their credit cards with 28 percent interest rates now that their home-equity loans have run out.</p> <p><br /></p><p>This is why smart people are skeptical that the U.S. is in a real recovery. Many believe there's more bad news to come until unemployment starts dropping and home prices stabilize.</p></blockquote><p></p><br />Things are interconnected - if people are not working they can not pay their bills - including HELOCs. We wonder were the new historic highs will be. Close to 5%? Maybe more? <span style="font-weight: bold;"><br /></span><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-82297945800718693472009-07-07T08:36:00.005-04:002009-07-08T08:40:15.034-04:00Reverse Mortgages By The Numbers<!-- AddThis Button BEGIN -->We have always felt that Reverse Mortgages were another type of gambling with the future. Especially when the homeowner is young, well young for taking the RM, say in their 60s. Who knows what the future will hold and how long they will live. Through the RM program we are encouraging seniors to take all their savings now and pay a hefty price for doing it. Sure it will be great if their short term needs are met or they live even better than before, but what is the cost. Finally we found someone who ran some of the numbers in this article from The Northern Star titled <a href="http://www.northernstar.com.au/story/2009/07/07/reverse-mortgages-can-shake-the-foundations/">Reverse Mortgages Come With Danger</a>. Yes this is from an Australian paper, it appears not many in the US actually acknowledge the problems with reverse mortgages. Let's take a look -<br /><br /><div id="storyBody" style="font-size: 13px;"> <p></p><blockquote> <p>The idea behind reverse mortgages is that older homeowners can cash out part of their home's value, with the funds received either as a lump sum, a series of cash payments or a combination of both. The money can be spent however the homeowner chooses, be it to buy a new car, take a holiday or simply meet living expenses.</p> <p>...</p> <p>A strong point of appeal with reverse mortgages is that no repayments are required until you sell the property or die. However, interest is charged from day one, so it doesn't take very long for the overall debt to escalate, potentially outpacing the increase in your home's value.</p> <p><br /></p><p style="font-weight: bold;">To see just how quickly the debt can snowball, let's say that a retiree aged 65 takes out a reverse mortgage, receiving an initial lump sum of $50,000 at the start of the loan, with a further $500 a month paid for the first five years. By the time the homeowner is in his or her mid-80s, the debt plus interest will have grown to $400,000.</p> <p><br /></p><p>The mounting debt may alarm family members, but it should also concern our homeowner. </p> <p><br /></p><p><span style="font-weight: bold;">That is because around 50</span><span style="font-weight: bold;" class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">pc</span></span><span style="font-weight: bold;"> of both men and women currently aged 65 have a 50</span><span style="font-weight: bold;" class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">pc</span></span><span style="font-weight: bold;"> chance of living to their mid-80s.</span><br /></p> <p><br /></p></blockquote><p></p> </div>What is going to happen to the 80 year <span class="blsp-spelling-error" id="SPELLING_ERROR_2">olds</span> with no equity left? Their savings depleted so they can buy their <span class="blsp-spelling-error" id="SPELLING_ERROR_3">grandchildren</span> ice creams? Which is what some are suggesting -<br /><br /><p></p><blockquote><p><a href="http://www.charlotteobserver.com/business/story/790380.html">Meg Burns, director of the <span class="blsp-spelling-error" id="SPELLING_ERROR_4">FHA's</span> office of single-family program development, said she's heard only positive feedback.</a></p><p><a href="http://www.charlotteobserver.com/business/story/790380.html"><br /></a></p> <p><a href="http://www.charlotteobserver.com/business/story/790380.html">“One of the things you hear all the time is how this program made a really big difference in their lifestyle, just in little things, like now they can take their <span class="blsp-spelling-error" id="SPELLING_ERROR_5">grandchildren</span> to get ice cream,” Burns said.</a></p></blockquote><p></p><br />How great will that work out in the end? Sure it feels good now but if it costing seniors their savings and really costing about double due to all the fees and interest how good will that really taste?<br /><br />We are also wondering about the clause to keep up the property. How is the homeowner going to keep up the property in their 80s when they have no equity for maintenance? And how are we going to evict people whose houses are in disrepair but their Reverse Mortgage requires the house and property to be maintained? If these are not maintained properly the value will decline. The problem is already messy, and the strong push for Reverse Mortgages will make things even messier.<br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-30300966025322803242009-07-06T09:53:00.005-04:002009-07-06T10:10:36.055-04:00Renters Market<!-- AddThis Button BEGIN -->More good news for renters - it's a renters market. There is a glut of apartments in Jersey and many landlords are willing to negotiate in order to rent their space. While some parts have not changed, people still need first months rent and a hefty deposit. Also going in with knowledge of a credit score is a good start. But for other things like rent price and terms landlords are willing to negotiate. Things like lowering the monthly rent, allowing pets and throwing in other perks are apparently taking place. This article from The Record titled <a href="http://www.northjersey.com/realestate/Its_a_renters_market_so_shop_around.html?c=y&page=1">It's a renters market; so shop around</a> describes the current action in the rental world. Let's take a look -<br /> <blockquote><p><br /></p><p>A recent survey by Rent.com, an online rentals search site, found a number of signs that the recession is affecting the apartment market, including:</p> <p><br /></p><p>* A larger percentage of tenants searching for two- and three-bedroom apartments — apparently a sign that people are living with roommates or relatives to cut housing costs.</p> <p><br /></p><p>* A larger percentage of tenants using search terms like "bad credit apartments" or "no credit-check apartments," apparently because their credit records are not as clean as they'd like.</p> <p><br /></p><p>* Visits to more Internet apartment sites, apparently because tenants now have a larger inventory of apartments to choose from.</p> <p><br /></p>...<p>Apartment vacancies are up, for several reasons. For one thing, there's a larger supply of properties because of building, especially near the Hudson River, during the housing boom. In addition, many homeowners who have failed to sell their homes are renting them out instead.</p> <p>At the same time, rising unemployment rates mean fewer people are looking for apartments. For example, recent college grads struggling to find work are now more likely to live with their parents than to get places of their own, as they might in a healthier economy.</p> <p><br /></p></blockquote><p></p>We wonder if the larger units are due to roommates or families living together. If a family can not buy a house they will be looking at the bigger apartments. We wonder if anyone tracks the rental units - who is renting for how much.<br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-17343927959766507322009-07-02T16:51:00.003-04:002009-07-02T18:13:13.592-04:00Expanding the Obama Housing Plan<!-- AddThis Button BEGIN -->Since the housing market is still falling, there is hope that expanding the plan will slow the pace of foreclosures. It may help some. But the big problem now is the ripple affect from unemployment levels. In addition, for all the controversy about the original housing plan, it had very little impact. This article in the US News titled <a href="http://www.usnews.com/articles/business/real-estate/2009/07/02/obamas-housing-rescue-expands-6-things-to-know.html">Obama's Housing Rescue Expands: 6 Things to Know </a>describes the loosing of some of the rules. Lets take a look at the first five -<br /><br /><div class="body"> <p></p><blockquote> <p><strong>1. Fannie/Freddie only</strong>: Despite the higher loan-to-value ceiling, the original framework of the program remains in tact. For example, only borrowers with loans owned or guaranteed by government-controlled housing finance giants Fannie Mae or Freddie Mac can participate. At the same time, borrowers need to be current on their mortgage to qualify.</p> <p><strong><br /></strong></p><p><strong>2. Falling prices, less equity</strong>: The expansion of the qualification parameters comes as the real estate market continues to erode. Home prices in 20 major metropolitan areas fell by more than 18 percent in April from a year earlier, according the Case-Shiller home price index. Among other things, sliding home prices suck equity out of homes. Because of plunging values, more than a fifth of American homeowners were considered "underwater"—meaning they owe more on their mortgages than the property is worth—in the first quarter of this year, according to Zillow. This evaporation of home equity threw sand in the gears of the administration's refinancing initiative. That's because the original terms of the program precluded borrowers with mortgages exceeding 105 percent of their home's value from participating. But by expanding the loan-to-value cap to 125 percent, even borrowers who are significantly underwater will be eligible to refinance through Uncle Sam.</p> <p><strong>3. Efforts </strong> <strong>so </strong> <strong>far</strong>: When it rolled out the initiative earlier this year, the Obama administration said the refinancing program could reach up to 5 million homeowners. <span style="font-weight: bold;">But in its release yesterday, HUD acknowledged that only "tens of thousands" of refinancings have occurred so far</span>.</p> <p><strong><br /></strong></p><p><strong>4</strong><strong>.</strong> <strong> Expanded reach</strong>: The new standards could make up to 2 million additional borrowers eligible to refinance through the program, according to the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. "This program could assist many homeowners who otherwise would have difficulty refinancing due to declining house prices," FHFA Director James Lockhart said yesterday.</p> <p><strong><br /></strong></p><p><strong>5</strong><strong>. Mortgage rate</strong> <strong> hurdle</strong>: But not all of those 2 million additional borrowers will end up refinancing. Some won't meet other program requirements, such as being current on their loan. But it's the recent upward trend in mortgage rates that represents perhaps the biggest threat to the program's success. Refinancing applications surged last fall and winter, after the federal government engineered <a id="KonaLink2" target="undefined" class="kLink" style="text-decoration: underline ! important; position: static;" href="http://www.usnews.com/articles/business/real-estate/2009/07/02/obamas-housing-rescue-expands-6-things-to-know.html#"><span style="color: rgb(0, 84, 151) ! important;font-family:Georgia,";font-size:15;" ><span class="kLink" style="color: rgb(0, 84, 151) ! important;font-family:Georgia,";font-size:15;" >mortgage </span><span class="kLink" style="color: rgb(0, 84, 151) ! important;font-family:Georgia,";font-size:15;" >rates</span></span></a> of below 5 percent. But as bond traders became rattled by sharp increases in government spending, they sent yields on 10-year treasury notes—which fixed mortgage rates typically tack—skyward in recent months. As a result, mortgage rates surged, hitting 5.81 percent on June 11, according to HSH.com.</p><br /></blockquote><p></p> </div>We are surprised that the housing plan has made such a small impact. But just like Hope Now really did not make much of an impact. Sometimes it seems like nothing will stop the downward spiral other than hitting the actual bottom. <br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-66215529921536495282009-07-01T08:50:00.002-04:002009-07-01T09:04:06.361-04:00Protecting Consumers Against Lenders<!-- AddThis Button BEGIN -->The Obama administration is looking to start a regulating agency protecting Americans regarding various financial instruments such as home loans, pay day loans, credit card fees as well as others. If it does half of what it promises we are off to a good start. Which means the lending industry is trying to kill the agency upon proposal. When your income is based on excessive fees there is little incentive to reduce them. And since the bubble burst we are seeing new and interesting ways to add the excessive fees to consumers. The new agency is described in this New York Times article titled <a href="http://www.nytimes.com/2009/07/01/business/economy/01regulate.html?_r=1&ref=business">Banks Balk at Agency Meant to Aid Consumers</a>. Let's take a look -<br /><blockquote><br /> <p>The Obama administration fired an opening shot on Tuesday, sending Congress a detailed, 150-page proposal for an agency that would set new standards for ordinary mortgages, restrict or prohibit risky loans, investigate financial institutions and enforce new laws aimed at protecting credit card customers.</p>...<p>The industry’s heated reaction presages an intense lobbying battle that is already beginning. Opponents include <a href="http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline=nyt-org" title="More information about Morgan, J. P., Chase & Company">JPMorgan Chase</a> and <a href="http://topics.nytimes.com/top/news/business/companies/wells_fargo_and_company/index.html?inline=nyt-org" title="More information about Wells Fargo & Co">Wells Fargo</a> as well as thousands of regional and local banks that have close ties to lawmakers in every part of the country. But the opposition could also include countless mortgage lenders and independent mortgage brokers. </p>...<p>“We know the optics are bad,” said Scott Talbott, vice president for government affairs for the Financial Services Roundtable, a trade association in Washington. “If you are against a consumer regulatory agency, then everybody will say you’re against consumer regulation.”</p><p>...</p><p>It would give the new agency marching orders to set standards for traditional mortgages, and the agency would have the authority to demand that lenders offer those kinds of loans or give consumers the chance to opt out of riskier products.</p><p>It would also give the new agency the power to restrict or prohibit mortgages that come with hidden fees and steep penalties for borrowers who pay the loan off early. It would also be empowered to interpret and enforce the new credit card law that Congress passed last month, aimed at restricting banks from arbitrarily raising interest rates. </p><p>It would also have examiners, much like existing bank regulatory agencies, who would have the authority to go into specific institutions, issue subpoenas and scrutinize their practices, demand changes and seek penalties.</p></blockquote><br />While some may argue against any new regulations - we would argue that any industry that is powerful enough to take the country requires some oversight. <br /><br />Hopefully the proposal does not get watered down. <br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-67224947216302324832009-06-29T11:18:00.003-04:002009-06-29T11:26:54.451-04:00Trying for Resubordination<!-- AddThis Button BEGIN -->One big problem for many trying to refinance is that HELOC and HELs will not resubordinate. If there is no resubordination there can be no refinancing. This is a big problem for those looking to lower their rates. Instead of having the extra cash, the second line makes the budget that much tighter. The LA Times has an question-answer section that addresses just this issue. The post is titled <a href="http://www.latimes.com/business/la-fi-montalk28-2009jun28,0,5664794.column">Keep after your home equity line of credit lender when refinancing your mortgage</a>. It seems that with enough pressing you can do the seemingly impossible - get the lender to resubordinate! Let's take a look -<br /><br /><b></b><blockquote><b>Dear Liz: </b>I'm in a potentially bad situation with my home equity line of credit. I'm trying to refinance my primary mortgage and would save nearly $150 a month. But the HELOC lender is dragging its feet on agreeing to a subordination. If the lender doesn't agree, I lose the deal. I'm wondering why the lender does not believe it to be in its interest to help when I am trying to improve my financial situation. Can you give me some insight into the line of thinking here?<br /><br /><b>Answer: </b>Unfortunately, many would-be refinancers are in your uncomfortable position. They have a second mortgage, such as a home equity line of credit, on their property. These loans are known as "seconds" because the lender is in second position to be paid off when the home is sold, after the primary lender has been paid.<br /><br />For a refinance to proceed, these HELOC lenders have to agree once again to be subordinated into second position. Some lenders balk because they don't believe their borrowers have sufficient equity to cover both loans (even though, as you note, a lower payment on the first mortgage could make it more likely that the borrower could make payments on the second).<br /><br />But a bigger problem seems to be lack of staff and lack of priority. Lenders are so busy trying to meet the demand for refinancing that other concerns, including subordination, often fall to the bottom of their to-do list.<br /><br />That means you have to be extremely vigilant if you don't want your refinance deal to fall apart. Call your new lender and your HELOC lender every few days to track the progress of your subordination. If there are problems or missing paperwork, promptly address those issues.<br /><br />If your rate lock is within two to three weeks of expiring and your subordination still hasn't been approved, call your HELOC lender and politely ask that your request be given top priority.<br /><br />If you can't get through to the subordination department's main line, ask the phone reps if there is a fax number or e-mail address you can use. If all else fails, take your problem to the bank's chief executive. You'll find the name and address online.</blockquote><br /><br />Too bad we did not know this a few months back! We wonder if this really works, or if they just drag things out long enough so your rates expire. And with the rising rates this can be a race against time...<br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-11391122152904783472009-06-26T12:07:00.005-04:002009-06-26T12:19:59.382-04:00People Like Bubbles<!-- AddThis Button BEGIN -->During the last two decades bubbles became the norm. We learned not to just live with bubbles, but expect and like them. The bubble became normal and comfortable. When one bubble popped we just turned to a new bubble. When the tech bubble exploded we propped up a housing bubble. And what euphoria the bubble brought. We were rich and could afford to live in luxury - the fact that it was borrowed and not affordable was secondary. In this article in <span class="blsp-spelling-error" id="SPELLING_ERROR_0">MSNBC</span> titled <a href="http://www.msnbc.msn.com/id/31566143/ns/business-motley_fool/">Uh-Oh, Here We Go Again?</a> discusses the bubble ideology - the good and the bad. Let's take a look -<br /><br /><blockquote>There's been a lot of talk about how lax lending standards helped blow up the housing bubble. Talk about short memories and logic disconnects, though; apparently Massachusetts Congressman Barney Frank and New York Representative Anthony <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Weiner</span> are trying to pressure <b><strong>Fannie Mae</strong></b> (NYSE: <span class="blsp-spelling-error" id="SPELLING_ERROR_2">FNM</span>) and <b><strong>Freddie Mac</strong></b> (NYSE: <span class="blsp-spelling-error" id="SPELLING_ERROR_3">FRE</span>) to lighten up a little and relax condo lending practices. Um … I think we've seen this disaster flick before.<br /><br />...<p class="textBodyBlack"><span id="byLine"></span>When the dot-com bubble popped with few Internet start-up survivors, a mild recession followed. The questionable answer was low interest rates and that brand-new inflating bubble to replace the old one, which certainly helped with that whole "mild" part (although you might <a itxtdid="9003429" target="_blank" href="http://www.msnbc.msn.com/id/31566143/ns/business-motley_fool/#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;" classname="iAs" class="iAs">call</a> that instead a temporary fix).</p><p class="textBodyBlack"><span id="byLine"></span><br /></p><p class="textBodyBlack">Flash forward, and people were using their homes as <span class="blsp-spelling-error" id="SPELLING_ERROR_4">ATMs</span> and gorging on debt like home equity <a itxtdid="9033730" target="_blank" href="http://www.msnbc.msn.com/id/31566143/ns/business-motley_fool/#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;" classname="iAs" class="iAs">lines of credit</a> and wallets bulging with credit cards from the likes of <b><strong>Visa</strong></b> (NYSE: V), <b><strong>MasterCard</strong></b> (NYSE: MA), and their <a itxtdid="9325959" target="_blank" href="http://www.msnbc.msn.com/id/31566143/ns/business-motley_fool/#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important; background-image: none; padding-top: 0pt; padding-right: 0pt; padding-left: 0pt;" classname="iAs" class="iAs">banking</a> partners, and this helped pump up our entire economy (and government tax revenues and stocks) artificially. Everyone from <b><strong>Starbucks</strong></b> (<span class="blsp-spelling-error" id="SPELLING_ERROR_5">Nasdaq</span>: <span class="blsp-spelling-error" id="SPELLING_ERROR_6">SBUX</span>) to <b><strong>Toll Brothers</strong></b> to banks like <b><strong>Bank of America</strong></b> (NYSE: <span class="blsp-spelling-error" id="SPELLING_ERROR_7">BAC</span>) (and its acquisitions Countrywide and Merrill) all bubbled up, too. And of course, many corporations -- a high-profile example might be <b><strong>Sirius <span class="blsp-spelling-error" id="SPELLING_ERROR_8">XM</span></strong></b> (<span class="blsp-spelling-error" id="SPELLING_ERROR_9">Nasdaq</span>: <span class="blsp-spelling-error" id="SPELLING_ERROR_10">SIRI</span>) -- also gorged on debt in so-called good times, which as we can see, all probably <em>seemed</em> reasonable when everyone was doing it … until the party stopped.</p><p class="textBodyBlack"><b><strong></strong></b><br />Our economy needs to correct and our culture needs to get past the speculative, artificial, bubble-hungry mindset that we've relied on for too long, where easy credit gave too many people just enough rope to hang themselves with.</p><p class="textBodyBlack"><span id="byLine"></span>...</p><p class="textBodyBlack"><span id="byLine"></span>Hold on to your hats, folks. This news sounds like a red flag indicating that a lot more mistakes could be made that could put us right back on the path to future disaster, making the same mistakes again while calling them the solutions. Free market policies may frighten a lot of people, but politicians' meddling into the economy complete with short-term "fixes" to charm voters and the public are really bad medicine for what ails us.</p></blockquote><p class="textBodyBlack"></p><p class="textBodyBlack"><br /></p><p class="textBodyBlack">When the bubble became the norm, the norm appears to inflate a new bubble. Push condo loans. Push reverse mortgages. Get that bubble money flowing again. Just hope there will be a new bubble to inflate in the future...<br /></p><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-52232959511252470172009-06-25T09:03:00.004-04:002009-06-25T09:17:24.219-04:00Wealth, Housing and Spending<!-- AddThis Button BEGIN -->When the value of housing stock shot up anyone who owned property felt wealthy. People's net worth doubled over a few years for people who bought early in the bubble. And the lenders were reminding you that your equity was your money and you knew how to use it best. Why let it just sit there when you could use it and become even wealthier. The Wall Street Journal has had some recent analysis of the housing bubble onto spending. Today's contribution is from the University of Chicago, Booth School titled <a href="http://blogs.wsj.com/economics/2009/06/25/guest-contribution-housing-bubble-fueled-consumer-spending/">Housing Bubble Fueled Consumer Spending</a>. Let's take a look at their findings -<br /><span style="font-weight: bold;"><br /></span><p></p><blockquote> <p>The painful process of household de-leveraging follows a historically unprecedented rise in household debt. From 2000 to 2007, household debt doubled from $7 trillion to $14 trillion, with debt related to housing responsible for 80% of the increase. By 2007, the household debt to GDP ratio reached its highest level since 1929.</p> <p>...</p> <p>Findings in <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1397607">our research</a> suggest the exact opposite: the rise in house prices from 2002 to 2006 was a main driver of economic growth during this time period, and the subsequent collapse of house prices is likely a main contributor to the historic consumption decline over the past year.</p> <p>...</p> <p><span style="font-weight: bold;">[In our survey], we find striking results: from 2002 to 2006, homeowners borrowed $0.25 to $0.30 for every $1 increase in their home equity.</span> Our microeconomic estimates suggest a large macroeconomic impact: withdrawals of home equity by households accounted for 2.3% of GDP each year from 2002 to 2006. Figure II illustrates the sharp increase in household leverage for homeowners living in inelastic cities.</p><p><br /></p><p>A concern with our interpretation is that there are inherently different economic conditions in inelastic versus elastic housing supply cities that may have been responsible for the borrowing patterns we observe. However, several facts suggest that this is not a valid concern. First, inelastic cities do not experience a stronger income growth shock (i.e., a larger shock to their “permanent income”) during the housing boom. Second, the increase in debt among homeowners in high house price growth areas is concentrated in mortgage and home equity related debt. </p><p><br /></p><p>Third, renters in inelastic areas did not experience a larger growth in their total debt. Finally, the effect of house prices on homeowner borrowing is isolated to homeowners with low credit scores and high credit card utilization rates. These “credit-constrained” households respond aggressively to house price growth, whereas the highest credit quality borrowers do not respond at all.</p> <p><span style="font-weight: bold;"><br /></span></p><p><span style="font-weight: bold;">Our results demonstrate that homeowners in high house price areas borrowed heavily against the rise in home equity from 2002 to 2006. </span>We also provide evidence that real outlays were a likely use of borrowed funds.<span style="font-weight: bold;"> Money withdrawn from home equity was not used to buy new homes, buy investment properties, or invest in financial assets. In fact, homeowners did not even use home equity withdrawals to pay down expensive credit card debt!</span> These facts suggest that consumption and home improvement were the most likely use of borrowed funds, which is consistent with Federal Reserve survey evidence suggesting home equity extraction is used for real outlays.</p></blockquote><p>And the survey says that people used their homes as ATMs to finance a lifestyle that they could not otherwise afford. Did we really know how to spend our money best? It seems not...<br /></p><span style="font-weight: bold;"></span><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-54660734464565204872009-06-24T10:38:00.004-04:002009-06-24T10:55:04.117-04:00Another HELOC Is Filed<!-- AddThis Button BEGIN -->Last week we featured the <a href="http://njhelocheaven.blogspot.com/2009/06/let-heloc-lawsuits-commence.html">Kimball case</a>, where a California small business owner had her HELOC line closed - with the bank (WAMU, JP Morgan Chase) claiming that the property value declined, but an on-site appraisal revealed the property was 1.5 times the banks value. When her HELOC was arbitrarily closed down, she claims that it damaged her business.<br /><br /><br />Well, we know have word that there is a new case coming before the courts. This time the suing party had the lender shut their line down due to changes in income. The Schulken's (the party suing) states that their has been no change to their income so their line was arbitrarily shut down. This is another case involving a small business owner, who relied on their equity to run their business. When the line was closed the business suffered. This article at the PR News Channel titled <span style="font-weight: bold;"></span><a href="http://www.prnewschannel.com/absolutenm/templates/?a=1459&z=4">JPMorgan Chase and WAMU Face More Lawsuits Over Home Loan Recalls</a>. Let's take a look -<br /><br /><span style=";font-family:Verdana,Helvetica,sans-serif;font-size:78%;" ><span style="font-size:8;"> </span><blockquote><span style="font-size:8;"></span><p><span style="font-size:8;">The suit alleges that Chase and WAMU had no reasonable basis to conclude that their borrowers’ finances had in fact declined and that the banks broke their written promises to provide customers with two weeks' notice to substantiate their incomes before taking such action.</span></p> <p><span style="font-size:8;"><br /></span></p><p><span style="font-size:8;">The suit was brought on behalf of Jeffrey and Jenifer Schulken who allege that their HELOC account was suspended due to a supposed inability to pay the loan. But the couple – who run their own small business – continued to earn the same amount of money and never missed a payment.</span></p> <p><span style="font-size:8;"><br /></span></p><p><span style="font-size:8;">Although federal regulations permit account suspensions when a customer’s financial circumstances adversely changes, such action requires both a material change in a borrower’s financial situation and the creditor’s reasonable belief that the borrower will not be able to repay the HELOC account as agreed. </span></p> <p><span style="font-size:8;"><br /></span></p><p><span style="font-size:8;">The <a href="http://www.prnewschannel.com/pdf/Schulken_v_Chase_%20WAMU.pdf" target="_blank">lawsuit</a> alleges that Chase and WAMU had no such basis here. </span></p> <p><span style="font-size:8;"><br /></span></p><p><span style="font-size:8;">“The Schulkens did everything right. They work hard, pay their bills, and have always honored their relationship with Chase/WAMU,” says attorney Jay Edelson, whose law firm, KamberEdelson LLC, represents the Schulkens. “What the banks did to them, and countless others, is simply not right.”<br /><br />...</span></p><p><span style="font-size:8;">The second lawsuit, filed this week by Sherman Oaks attorney David Parisi, is brought on behalf of Garden Grove resident Michael Walsh. Mr. Walsh alleges Chase and WAMU reduced his credit limit after claiming his home had significantly declined in value. In addition to challenging the banks’ use of a faulty AVM, the Walsh case further takes issue with the banks' practice of freezing HELOC accounts based on lower declines in value than those permitted under the federal Truth in Lending Act.</span></p></blockquote><p><span style="font-size:8;"></span></p></span><br />We saw this coming over a year ago. The big question is how long this will drag out. But contracts were signed and agreements made. The lenders can not void the contracts just because of changes in the current economic environment. If there are problems with the contracts that is one thing, but just cancelling the contract because it was a stupid contract to make 5 years ago will not fly.<br /><br />We will be watching for more lawsuits coming. Don't be surprised if this happens in all 50 states...<br /><br />(h/t Steven for the link)<br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-52048769098728495292009-06-23T09:47:00.003-04:002009-06-23T09:58:10.288-04:00The State of the Nation's Housing Reviewed<!-- AddThis Button BEGIN -->When will the housing bust reach bottom? How far down will the prices fall? Will we have any equity left when all this happens? Good questions that even our best and our brightest at Harvard are pondering. TIME Magazine brings us a good synopsis of <a href="http://www.time.com/time/nation/article/0,8599,1906469,00.html">Harvard University's Joint Center for Housing Studies </a><i><a href="http://www.time.com/time/nation/article/0,8599,1906469,00.html">The State of the Nation's Housing 2009</a>. </i>The entire paper is 44 pages, so far all we have read is this abbreviated version. So let's take a look - . <p><b></b></p><blockquote><p><b><br /></b></p><p><b>Highlight Reel:</b></p> <p>• <i>On the danger of using home equity to pay off non-home debt:</i> "A recent Federal Reserve report estimates that of the trillions of dollars in real home equity cashed out between 2001 and 2007, homeowners used $874 billion to pay off non-mortgage debt—in effect rolling consumer debt into their home loans. Unlike consumer debt, mortgage debt cannot be discharged through personal bankruptcy." <span class="see"></span></p> <p><br /></p><p>• <i>On the generation that could help:</i> "[T]he echo-boom generation is replacing the far smaller baby-bust generation in the young-adult age group. Indeed, the echo boomers are entering their peak household formation years of 25-44 with more than 5 million more members than the baby boomers had in the 1970s. The echo boomers will help keep demand strong for the next 10 years and beyond, bolstering the markets for rentals and starter homes."</p> <p><br /></p><p>• <i>On how housing challenges affect the overall economy:</i> "[H]ome equity fell by $2.5 trillion in real terms in 2008 and nearly $5.9 trillion (or 43 percent) from the 2005 level. The loss of housing wealth caused consumers to curtail cash-out refinances and pull back on spending, knocking an additional 0.9 percentage point off economic growth last year, according to Moody's Economy.com."</p><p><br /><span class="see"></span></p> <p>• <i>On why incomes are looking paltry:</i> "Real median household incomes in all age groups under 55 have not increased since 2000. In fact, for the first time in at least 40 years, there is a chance that the real median household income for these age groups will be lower at the end of the decade than at the start."</p> <p><b>The Lowdown:</b></p> <p>If the numbers and news about home prices, unemployment, foreclosures and the sub-prime mortgage crisis have blurred your vision and made your ears bleed over the past year, this report will help boil it all down to what's essential — and it'll also throw in some graphic elements if you're more of a visual learner. But don't expect any groundbreaking information. Since the center is research-based, much of what it has published in the "State of the Nation's Housing" has been reported or analyzed before. The report does, however, offer some interesting insights into how the so-called "echo-boomer" generation could play a vital role in boosting the housing market. But like many economy- and housing-related projections, these figures are just forecasts. If anyone really knew when the housing market will bottom out or reach its peak, there would be no reason to speculate. </p> </blockquote><p><b><br /></b></p><p>Will the echo boom save the housing crisis and bring us back to prosperity? If not, who or what will? This is actually an annual report. <a href="http://www.jchs.harvard.edu/publications/markets/son2009/son2009.pdf">Here </a>is a link to the full report. We will take a look and if there is anything substantial we will report back.<br /></p><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-84583347103026599772009-06-22T07:59:00.005-04:002009-06-22T08:24:45.926-04:00A Reverse Mortgage to Save a Business<!-- AddThis Button BEGIN -->If you can not get a <span class="blsp-spelling-error" id="SPELLING_ERROR_0">HELOC</span> for your business and are over 62 why not try a reverse mortgage. That apparently is a new school for funds. Hopefully it will not catch on. It reminds us of that old saying - if yo find yourself in a hole, stop digging. But taking a reverse mortgage out to fund a business sounds more like if you find yourself in a hole, dig faster. A hole one will never get out of is pretty much what this sounds like. And when they decide to stop digging they will be trapped for good.<br /><br />The article that brings us this lovely story - The Charlotte Observer's <a href="http://www.charlotteobserver.com/business/story/790380.html">Hope, worries over reverse mortgages</a> - also reminds us about the independent counseling regarding reverse mortgages. We would love to find out more about this. How much counseling, how long, what is discussed, does the homeowner just have to show up and sit through some <span class="blsp-spelling-corrected" id="SPELLING_ERROR_1">spiel</span>, or do that actually have to process the information and answer questions? Are all the trainings the same - some required format - or can the interested party just show they know something and finish the program. If any reader has been through this counseling send us a short note about what happened, thanks. Now let's get into the story -<br /><br /><p> </p><blockquote>[C]<span class="blsp-spelling-error" id="SPELLING_ERROR_2">ritics</span> say [reverse] mortgages, though just a niche of the larger industry, are a ticking time bomb and have some parallels to <span class="blsp-spelling-error" id="SPELLING_ERROR_3">subprime</span> mortgages: They are complex and hard to comprehend, and they may be useful for a small number of sophisticated borrowers who understand the risks but dangerous for those who don't. <p><br /></p><p>Doris Simmons, 69, of Indian Trail, says she carefully considered the downsides of a reverse mortgage and decided it was her best option when the recession started to hurt her business.</p> <p><br /></p><p>She's heard all the objections, like the critics who say you can usually get more money by selling your house. “Not in today's economy,” she replies, and she doesn't really want to move anyway. Her house has been in the family for 50 years and brings memories of her children.</p> </blockquote> <p><br /></p><p>Does Ms. Simmons realize that her Reverse Mortgage is based on the same value as the selling price would be. It is not like her house will be worth more taking out a reverse equity rather than selling it...<br /></p><p></p><blockquote>... <strong> </strong><p><strong></strong></p>Last year, Simmons fell behind on her house payments, which were about $550 a month. Though she'd bought the house years ago, she still had a payment because she'd taken out a home-equity loan in the late 1990s for business improvements. <p><br /></p><p>She heard about reverse mortgages from a Bank of America representative who was helping with the home-equity loan. She'd also heard about them on TV and was skeptical, but met with a housing counselor anyway and eventually decided it was the best option. It's been a double gain: It eliminated her house payment, and gave her extra income to catch up on bills.</p> <p><br /></p><p>The reverse mortgage hasn't solved all her problems. She still worries about when traffic will pick up again at Old Timers.</p> <p><br /></p><p>“It saved me for the time being,” Simmons said. “Now I've got to worry about saving my business.” </p></blockquote><p></p><p></p><br />Reading stories like this seems like 2004 all over again. Lenders pushing loans that give them hefty profits. People thinking they understand the sophisticated loans when very few probably really do. People financially in a hole, digging deeper.<br /><br />We left it out here, but in the article we have Meg Burns, director of the <span class="blsp-spelling-error" id="SPELLING_ERROR_4">FHA's</span> office of single-family program development proclaiming the virtues of reverse mortgages since now seniors can bring their <span class="blsp-spelling-corrected" id="SPELLING_ERROR_5">grand kids</span> out for ice creams. Yeah, you can not afford a few ice cream cones without a reverse mortgage but can understand the complexities of it after a few hours of independent counseling? Pretty scary times coming for RM holders...<br /><br /><br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script><br /><!-- AddThis Button END -->NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com2tag:blogger.com,1999:blog-8549883549808884582.post-57967873595100594822009-06-21T11:12:00.001-04:002009-06-21T11:55:03.531-04:00The Luxury of Plywood in RandolphIs this the upgrade? Or a foreclosure special? Boy the neighbors must love this - how to drive the neighborhood properties down with one visit to Home Depot. Maybe we can get some cinder blocks for the car next door and really enhance the areas value.<br /><br />We have not done an example in a while - thought one was due. And what better way to make a comeback then with example that illustrates everything that was wrong with the housing bubble. Renting from the bank through no money down and using a piggy back loan - check. Serial refinancing to cash out an accumulated equity - check. Using more and more exotic loans - starting with a fixed 30, moving to an ARM with a balloon payment and ending up Interest Only ARM - check kind. This homeowner never got the to the Option ARM, foreclosure happened first. But, unlike previous examples this time we are left with a plywood door - wonder what the interior looks like. Well, let's take a look at today's example -<br /><br />Here is the property -<br /><br /><div style="text-align: center;"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3iVJ_YxoYr3Ll8-Bv3ka9tv-kOdtjgkQW1NKQr-jw33QDZ272qXWx39s1NBR46oUnY1FbEbmiLisU49RViotd3zZr_2iGtW8ZZiiF2-XgWvxAgCkYWys06H_7VDutqylZ4uQ8COi6lyQ/s1600-h/4+birchwood+randolph.jpg"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3iVJ_YxoYr3Ll8-Bv3ka9tv-kOdtjgkQW1NKQr-jw33QDZ272qXWx39s1NBR46oUnY1FbEbmiLisU49RViotd3zZr_2iGtW8ZZiiF2-XgWvxAgCkYWys06H_7VDutqylZ4uQ8COi6lyQ/s400/4+birchwood+randolph.jpg" alt="" id="BLOGGER_PHOTO_ID_5349623768181531778" border="0" /></a>Front of the property complete with a brand new plywood entrance! All the luxuries<br /></div><br />Here is the property info -<br /><table class="ldpPropFeatures" border="0" cellpadding="0" cellspacing="0"><tbody><tr><td><br /><ul><li>Status: Active</li><li>County: Morris</li><li>Year Built: 1951</li><li>3 total bedroom(s)</li><li>2 total bath(s)</li><li>2 total full bath(s)</li></ul></td><td><ul><li>7 total rooms</li><li>Style: <span class="blsp-spelling-error" id="SPELLING_ERROR_0">CapeCod</span></li><li>Basement</li><li>Basement is Finished, Walkout</li><li>2 car garage</li><li>Attached parking</li><li>Heating features: Radiators - Steam,Oil</li></ul></td><td><ul><li>Exterior construction: Vinyl Siding</li><li>Roofing: Asphalt Shingle</li><li>Approximate lot is 75X150</li><li>Approximately 0.26 acre(s)</li><li>Lot size is less than 1/2 acre</li><li>Utilities present: Septic, Well Water, Electric Service</li></ul></td></tr></tbody></table><br />Here are the financials -<br /><ul><li>The property was purchased in January 2006 for $335,000.</li></ul><ul><li>The original mortgage at time of purchase was for $251,250 with Lancaster Mortgage Bankers.</li></ul><ul><li>On the same day a second mortgage was opened for $83,750 also with Lancaster Mortgage Bankers.</li></ul><ul><li>In July 2006 the property was refinanced with cash out for $380,000 using an ARM with a balloon payment with Long Beach Mortgage.</li></ul><ul><li>In February 2007 the property was refinanced again with a cash-out for $391,000 using an Interest Only ARM with American Wholesale Lender.</li></ul><ul><li>The foreclosure process started in March 2008 with the filing of a <span class="blsp-spelling-error" id="SPELLING_ERROR_1">Lis</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Pendens</span>.</li></ul><ul><li>The property is currently an <span class="blsp-spelling-error" id="SPELLING_ERROR_3">REO</span> listed with a realtor for $307,900.</li></ul><ul><li>The property taxes for 2008 were $5314.17.<br /></li></ul><br /><br />The perfect bubble buyer - no money down AKA renting from the bank. Then we have the wonderful piggy back loans to remove that unwanted <span class="blsp-spelling-error" id="SPELLING_ERROR_4">PMI</span> surcharge. Oh the bubble was grand! Within 6 months of purchasing the property $45,000 was extracted through a refinance with a cash out. Did the money go to fix up the property or did it go other places?<br /><br />Where ever the money went it disappeared fast - since 7 months later another cash-out <span class="blsp-spelling-error" id="SPELLING_ERROR_5">refi</span> took place, this time extracting another $11,000. With this loan the owner realized that paying into the principal was just too expensive so they opted for an interest only payment. Now that is really just renting from the bank - no money invested, no equity building up other than through natural market forces (which happened to start going in the opposite direction at this time).<br /><br />Within just over two years the owner refinanced 3 times, extracted $56,000 of equity of out the property and then lost the property. Not bad to live in a house for a couple of years while generating an income of approximately $28,000 of income per year in the process.<br /><br />The property owner probably made about 9 payments until the mortgage (rent money) was delinquent and a <span class="blsp-spelling-error" id="SPELLING_ERROR_6">lis</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_7">pendens</span> was filed, which ended up in foreclosure. Now the property is for sale for $83,100 then the last <span class="blsp-spelling-error" id="SPELLING_ERROR_8">refi</span> and $27,100 less than the 2006 purchase price. Adding in the standard realtor's commission and the lender will lose at least $101,574 if the property sells for the full purchase price. Plus all of the other costs, which are numerous.<br /><br />For those interested in purchasing today's plywood special, if they are able to put 20% down and received a 30-year fixed at today's <a href="http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx"><span class="blsp-spelling-error" id="SPELLING_ERROR_4"><span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">Bankrate</span></span></span></span> </a>rate for Randolph, NJ averaging 5.875% the monthly payments would be $1563.55. Adding in the property taxes and the monthly payments would be about $2006.40 per month - plus utilities and insurance.<br /><br />For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using the <a href="http://www.goodmortgage.com/calc_pmi.htm"><span class="blsp-spelling-error" id="SPELLING_ERROR_10">GoodMortgage</span>.com</a> that includes the <span class="blsp-spelling-error" id="SPELLING_ERROR_5"><span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_11">PMI</span></span></span></span> charges and the new rate, a potential new buyer is only able to put down 5% or $15,395. The monthly mortgage payment would be $1730.28, plus a <span class="blsp-spelling-error" id="SPELLING_ERROR_6"><span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_12">PMI</span></span></span></span> of $190.13, and the taxes of $442.85 totaling $2363.26. And for a buyer who puts only 3% down - the mortgage would be $1766.70, <span class="blsp-spelling-error" id="SPELLING_ERROR_7"><span class="blsp-spelling-error" id="SPELLING_ERROR_8"><span class="blsp-spelling-error" id="SPELLING_ERROR_8"><span class="blsp-spelling-error" id="SPELLING_ERROR_13">PMI</span></span></span></span> now $258.84 the taxes stay at $442.85 for a total monthly payment of $2468.39. Plus utilities and insurance of course.<br /><br />Note - Our summer schedule is very unpredictable right now, so we will post these when we can. Enjoy them when they come!<br /><br /><a href="http://www.addthis.com/bookmark.php?v=250" onmouseover="return addthis_open(this, '', '[URL]', '[TITLE]')" onmouseout="addthis_close()" onclick="return addthis_sendto()"><img src="http://s7.addthis.com/static/btn/lg-share-en.gif" alt="Bookmark and Share" style="border: 0pt none ;" width="125" height="16" /></a><script type="text/javascript" src="http://s7.addthis.com/js/250/addthis_widget.js?pub=xa-4a3e51a60b95d17c"></script>NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-23335829485099730662009-06-19T08:39:00.005-04:002009-06-19T09:59:17.118-04:00Some Interesting Alternatives to a Reverse MortgageFinally some more articles warning about the equity loss involved with a reverse mortgage. We see this as basically taking a gamble against the future. Option ARM takers gambled that housing prices always went up and the accumulation of deferred interest would be less then the increase in the value of the home. Whether they were aware of the gamble or not is another story - but that was the big gamble with the Option ARMs. And we are almost on the verge of an epic wave of Option ARM foreclosures.<br /><br /><br />So the new product to gamble one's life savings is being pushed - the Reverse Mortgage. This article at Nurido.at (who is this - they seem to be everywhere?) titled <a href="http://www.nurido.at/news/a-reverse-mortgage-is-a-costly-option-to-use-your-home-equity-123574.html">A Reverse Mortgage Is A Costly Option To Use Your Home Equity</a> sums up some of the problems and provides some alternatives. Let's take a look -<br /><br /><p></p><blockquote> Unless your home is continually appreciating at a good clip, it won’t take long until there’s little of no equity left as a legacy when you die or move out. This is what makes reverse mortgages so costly to you and you’re loved ones. <p><br /></p><p>If leaving a legacy is not an issue and you’ve the health to live on your own for 10 or more years, then a reverse mortgage may be a reasonable option for you. But if you want to leave a legacy, consider alternative ways to access the value of you home for income. Here are a few:</p> <p><br /></p> <p>Renting a portion of you home: If your home has extra bedrooms you may want to rent a room out for the income it can bring you. You may even consider borrowing a little for creating an in-law apartment for renting. This allows you to remain in your house yet use it to create some income. You may find local programs that allow you to borrow cheaply for the renovation needed.</p> <p><br /></p> <p>Sell Your Home to Your children: Your children can pay you a monthly payment toward ownership of your house. You could arrange that you’d have a right to live in it as long as you live. What better way to have your cake and eat it too - leaving all that equity to your children for the payments made to you.</p> <p><br /></p> <p>Sell Your Home And Pay for an In-law at your child’s house: Here, you’ll have to move out of your home, but you get to live with your children, increase the value of their home, and have money from your home sale that you can live on -and leave as a legacy.</p> <p><br /></p><p>Sell and Buy-down: Again, you have to move out of your home, but if you buy down to a condo much better adapted to your age and needs, your extra equity from you home sale can perhaps supply sufficient income for you to live on. You may want to buy a life annuity with it too.</p> <p><br /></p></blockquote><p></p><p>Because basically after all the fees involved with a reverse mortgage there may be nothing left after 10 years or so.<br /></p><p><br /></p><p>The selling point (from lender/broker) is the same with HELOCs during the bubble - it is your money and you are smart enough to use it wisely. Until we found that people were using HELOCs like ATMs - paying for vacations, eating out, the latest in entertainment and fashion, etc., etc.</p><p><br /></p>How many people taking reverse mortgages will end up in the same bought as the HELOCers? Extracting all the equity early and left with nothing down the road...<span style="font-weight: bold;"><br /></span>NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-77719648292171617112009-06-18T09:15:00.004-04:002009-06-18T09:35:19.769-04:00Americans reducing debtHere is a big story that Americans are reducing debt. We wonder about the hows and the whys. Are Americans reducing debt because their home equity line has been cut-off? Their credit cards closed or reduced? Perhaps the fact that lenders are reducing the amount they are willing to lend out a part of it. During the bubble their were rumors of children and pets receiving credit card offers. Now people have to fight to get any credit. And monitoring one's credit score is a part-time job. This Gallop Poll titled <a href="http://www.gallup.com/poll/120938/Americans-Deleveraging-One-Three-Reduced-Debt.aspx">Americans Deleveraging: One in Three Has Reduced Debt</a> forgets to mention that almost one in for is increasing their debt. Let's take a look at the report -<br /><br /><blockquote>Gallup Poll trends show Americans continuing to cut back on debt. In a May 29 survey, 31% of Americans say they have decreased their total outstanding debt over the past six months -- essentially the same as the percentages who said this in April (32%) and March (34%). Only 23% of consumers increased their debt in May, also not much different from March and April. <p align="center"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg35Q9-VjvvOvIJ6SqYJMQllvY8Qrq13ik8vU7JsSIOfp2BQyzS1QH41NkxceBVesB6Fiq0SwZFDz66XAn0Sc-n7oSU8Jr9Xaux6MRX3qKXn2yHqlSMPN5Q2O0jtPhqbm4vdMecVDVLG3E/s1600-h/Gallup+Debt+6+months.gif"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 243px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg35Q9-VjvvOvIJ6SqYJMQllvY8Qrq13ik8vU7JsSIOfp2BQyzS1QH41NkxceBVesB6Fiq0SwZFDz66XAn0Sc-n7oSU8Jr9Xaux6MRX3qKXn2yHqlSMPN5Q2O0jtPhqbm4vdMecVDVLG3E/s400/Gallup+Debt+6+months.gif" alt="" id="BLOGGER_PHOTO_ID_5348659830973722114" border="0" /></a></p> <p><strong><br /></strong></p><p><strong>Many Americans Say Now Is a Bad Time to Borrow</strong></p> <p>Over the past three months, almost half of Americans have consistently indicated that now is a "bad time" to borrow, including May's 46% "bad time" reading. At the same time, the 19% in May who say now is a "good time" to borrow is typical of such sentiment since March. While many on Wall Street are talking about a thaw in credit-market conditions, those on Main Street do not seem to perceive this.</p> <p align="center"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtDRMdtk2ei_P5DvW0KKleWP8cC1BIcVjO1rrKqPMTYvJ67lPZrHLr85tFR_0dWyfFgythHO-GfjnmakW3CEnnrZO8u8NAM9_QSnxiaqvOoPFr91NzSvD7NxS9LG9v_ZHnJOwNtEL0BOk/s1600-h/Gallup+time+to+borrow.gif"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 243px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhtDRMdtk2ei_P5DvW0KKleWP8cC1BIcVjO1rrKqPMTYvJ67lPZrHLr85tFR_0dWyfFgythHO-GfjnmakW3CEnnrZO8u8NAM9_QSnxiaqvOoPFr91NzSvD7NxS9LG9v_ZHnJOwNtEL0BOk/s400/Gallup+time+to+borrow.gif" alt="" id="BLOGGER_PHOTO_ID_5348659592662491474" border="0" /></a></p> <p><strong><br /></strong></p><p><strong>Many Worried About Making Their Monthly Payments</strong></p> <p>The percentage of Americans saying they are worried about keeping up with their monthly payments over the next six months reached 25% in May -- up from 20% a month ago and 23% in March.</p> <p align="center"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_YHDQOFYEha49w6wwmd9bjhyF7r6mXc0xNOgCGz0sLgF6bR-leWgBI1RzXMGTT9g5mMXRaDxu55oMhAEm7nEwqcRSUdFOb89ciCMIBzco5aneCiU7Vt-mRpDoc9OzL9Mulef3V1RNXOQ/s1600-h/Gallup+Worry+about+payment.gif"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer; width: 400px; height: 214px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi_YHDQOFYEha49w6wwmd9bjhyF7r6mXc0xNOgCGz0sLgF6bR-leWgBI1RzXMGTT9g5mMXRaDxu55oMhAEm7nEwqcRSUdFOb89ciCMIBzco5aneCiU7Vt-mRpDoc9OzL9Mulef3V1RNXOQ/s400/Gallup+Worry+about+payment.gif" alt="" id="BLOGGER_PHOTO_ID_5348659596769955346" border="0" /></a></p><br /></blockquote>The survey has an error of ±3 percentage points - so the debt reduction could be as low as 28% with the debt increased as much as 26% - perhaps not that great of a difference. It would also be interesting to know where the debt reduction was taking place - in super bubble states or equally across the country. And did the debt levels reduce among people who lost income (either lost their job totally or still employed but with substantially less income).<br /><br />The report also notes that while there may be green shoots on Wall Street the concern about keeping up with payments indicates that nothing has sprouted yet on Main Street. It also warns about the greet shoots turning brown - yes, it really does note that! Sounds like pretty good analysis to us.<br /><br />One last point - we wonder how this would look as compared with historical data. During the bubble what did the numbers look like? And how did they look pre-bubble?NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-86936544575433511962009-06-17T07:52:00.004-04:002009-06-17T08:04:40.851-04:00Where is the Recession At?Everyday we seem to hear about the green shoots. Shouts that the recovery is here. The recession is over. The recession is over. Then some hard numbers come out and everyone stops to ponder where exactly we are on the road to recovery. Are we past the turning point? Or is this just a lull and everyone is getting very comfortable? One argument often made is that since there has been no real fundamental changes to the banking system that we are not on the road to out of the recession. This week US News gives us an article titled <a href="http://www.usnews.com/blogs/flowchart/2009/06/16/4-ways-to-tell-when-a-real-recovery-has-begun.html">4 Ways to Tell Whether A Real Recovery Has Begun</a>. Let's take a look -<br /><br /><div class="body"> <p></p></div><blockquote><div class="body"><a name="read_more"></a> <p>The danger of hyping a technical recovery is that it will arrive, with much fanfare—but fail to make ordinary consumers feel better off. Many economists, for example, are predicting that the recession will officially end by this summer or fall. The only problem is that when a technical recovery begins, a lot of companies fail to get the memo. They don't play along; they keep payrolls lean and maybe even continuing to lay off workers. So to guard against false optimism, here's how to tell when a real recovery is finally kicking into gear:</p><p><br /></p> <p><strong>Unemployment improves.</strong> The single best indicator of the health of the economy is the job market. People who have lost their job, or worry that they might, obviously hoard their money and don't spend. That spells doom for an economy driven by consumer spending, as ours is. But once it's clear that jobs are coming back, consumers are more likely to relax and open their wallets.</p>... <p><strong>Housing prices stabilize. </strong>This has become a mantra by now: For the economy to get healthy, housing prices must stop falling. Problem is, the houses haven't been listening.</p> <p><br /></p><p>Housing matters for two reasons: It represents a big chunk of the economy, and it's the largest single repository of Americans' household wealth. With prices falling, buyers are scarce, since nobody wants to buy an expensive good today if it's going to be worth less tomorrow. With few buyers, all the other economic activity that swirls around real estate—remodeling, appliance and furniture sales, relocation services—is depressed. Homeowners are worse off, too, because the value of one of their vital assets is eroding.</p>...<p><strong><br /></strong></p><p><strong>Household wealth increases. </strong>The housing bust and the volatile stock market have hammered the traditional investment tools that most Americans use, causing epic declines in the wealth of Americans. Since 2006, <a target="_new" href="http://www.federalreserve.gov/releases/z1/Current/z1.pdf">household net worth</a> has declined by about $12 trillion, which equates to about $107,000 of lost wealth for each of America's 112 million households. That's partly because of the 40 percent plunge in the stock market since October 2007 and partly because of the steep declines in real estate values.</p> <p>...</p> <p><strong><br /></strong></p><p><strong>President Obama stops fudging on the economy. </strong>There's still a lot that could go wrong, and Obama knows it. Yet part of the president's job is to reassure skittish Americans, even as his economic lieutenants are fighting battles in the war room. That's why Obama has been making <a target="_new" href="http://www.bloomberg.com/apps/news?pid=20601068&sid=a5aNc0xKDnRM">half-hearted pronouncements</a>, like saying that the economy shows "some return to normalcy" and that "we expect there'll be some stabilization of the economy." Virtually all of Obama's remarks on the economy contain modifiers and future tense and a not-quite-there-yet quality, since he'll blow his own credibility if he tries to convince Americans that they're better off than they actually are. When Obama starts hedging less, be happy. That will signal better days. Finally.</p> </div><!--/comments-readall--> <div class="comment-holder"> <a name="3095187"></a></div></blockquote><div class="comment-entry"><p><br /></p><p>Well - there we have it. And by these 4 signs - unemployment, housing value stabilization, personal savings, and political posturing - we still have a long way to go. Sounds like a few more years. Maybe by that time lending institutions will have made fundamental changes to take care of that measurement as well.</p></div>NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com1tag:blogger.com,1999:blog-8549883549808884582.post-86573487638503926182009-06-16T11:53:00.000-04:002009-06-16T11:53:00.764-04:00Credit Scores and your HELOCWhile we really do not like the control that the credit scores have over people's lives. It is like mysterious black box that can affect almost every aspect of people's lives. The credit scores can affect how much you pay for everything, influence the home purchase or rental, even getting a job. <br /><br />We have, in the past,<a href="http://njhelocheaven.blogspot.com/2009/03/credit-games.html"> hoped for some type of regulation for the credit score industry</a><a href="http://njhelocheaven.blogspot.com/2009/03/credit-games.html">. </a>Since different lenders can supply <a href="http://njhelocheaven.blogspot.com/2009/02/foreclosure-and-short-sales-impact-on.html">different standards for the same activity</a>. Or people can have their credit score dinged through absolutely none of their own doing. And do not even get us started on the complexities of trying to fix something that is wrong with a credit score - it can easily become a full time job. <br /><br />Now we see that you have to play HELOC games so as not to ding your credit score. Open your HELOC for 3 times the amount you plan to use or watch your credit score get hit. In this article titled <a href="http://www.orlandosentinel.com/features/lifestyle/orl-livrealestate0615061509jun15,0,3101045.story">Treat delicately before tapping HELOC - it could damage your credit </a>from the Orlando Sentinel we see the complexities involved. Let's take a look -<br /><em class="dropcap_large"></em><em class="dropcap_large"></em><br /><blockquote><br />I have heard from some of my sources who work for credit card companies that the federal government is requiring lenders and creditors to have cash on hand equal to, in some cases, 40 to 50 percent of the credit that has been extended in the form of available credit on a credit card, or a home equity line of credit (HELOC).<br /><br />...<br /><br />For example, if you have a credit card that you haven't used in 12 months, the lender may close it or reduce the amount of total available credit. We're hearing from thousands of Americans who have had their home equity lines of credit reduced or closed. Not only does this make it difficult to access the credit you've so carefully preserved, but it will also tarnish your credit score.<br /><br />...<br /><br />If you don't take money out of your credit line, you may be one of those who ends up having the credit limit cut and later regret that you didn't take the money out when you could. But taking a sizable amount of money without the means to pay back the funds can put you in a precarious situation.<br /><br />Let's think about how this would play out: If you tap 80 to 90 percent of your line of credit, you will hurt your credit score at least a little. But if your credit line is cut substantially, that too might hurt your credit score, as you'll have less available credit.<br /><br />Optimally, you'd never tap more than 25 to 30 percent of a line of credit ... Anything more than that could lower your score a little, depending on other factors in your credit history. But since you might actually need the cash, it's better to take it now rather than want it later and not be able to get it.</blockquote><br />The credit score is a messy area - and it is probably getting messier with the economic downturn. It is in desperate need of standards and regulation. Having access credit but not using it could harm your credit. Use your credit - but get the amount available reduced also harms your credit score. Not having enough credit activity or history also affects your credit score. It all seems so counter intuitive. But that is the way credit scoring works. <br /><span style="font-weight: bold;"><br /><br /></span>NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0tag:blogger.com,1999:blog-8549883549808884582.post-78773678557016077602009-06-16T08:53:00.003-04:002009-06-16T09:08:36.434-04:00Reverse Mortgage as Last ChoiceWhen their are no other options on the table perhaps a reverse mortgage may work. But for many people this option will take all future options off the table. Reverse mortgages are just another option to drain equity. With the continued downward spiral in home values their may be no equity for homeowners if and when they decide to sell. We many several people who see their properties as their retirement nest eggs. But since reverse mortgages can let healthy 62 year-<span class="blsp-spelling-error" id="SPELLING_ERROR_0">olds</span> extract a large portion of their equity now it can easily cause trouble down the road. Over at CBS News in an article titled<a href="http://www.cbsnews.com/stories/2009/06/15/earlyshow/contributors/main5089947.shtml"> Reverse Mortgages" "Loan of Last Resort" </a>their is a warning of trouble that reverse mortgages may cause. Let's take a look -<br /><br /><!-- sphereit start--> <blockquote>It's a last resort for many Americans who are strapped for cash, but <a href="http://www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm" class="link">reverse mortgages</a> are a way to make ends meet for an increasing number of homeowners.<br /><br /><b><i>...</i></b><br /><br />[<b><i>Early Show</i></b> financial contributor <b>Vera Gibbons] </b>said about 10,000 reverse mortgages are being done each month, because homeowners need the cash. <br /><br />"They've lost a lot of money in the stock market," she said. "...They need the cash infusion."<br /><br />Gibbons said people who can't get a loan or refinance due to the credit crunch are finding their way around it with a reverse mortgage, which have no income requirements.<br /><br />...<br /><br />Gibbons said many seniors are funding their retirement with a reverse mortgage because they need the cash infusion. <br /><br />"This is a loan of last resort," Gibbons said. <!-- sphereit end--><span style="font-weight: bold;">"People have exhausted the options, and can't rent the house or sell it or downsize...so they're doing this." </span></blockquote><br />Have people really exhausted all their other options? Just like we did with <span class="blsp-spelling-error" id="SPELLING_ERROR_1">HELOCs</span> and <span class="blsp-spelling-error" id="SPELLING_ERROR_2">HELs</span>? Or are they taking the easy, short-sighted, dead end road to financial misery. Kind of like Option ARM holders. Looks good initially but their will be problems down the road. Very messy, very complex with a brand new set of problems.<br /><br />There are warnings that reverse mortgages will cause a wave of financial problems and hardships in the future. We agree. Money will be lost. People who think they are hurting financially now probably will get hit much harder in the future. <br /><br />The article also notes the maintenance requirements on the properties. But if there is no money left who will be for the maintenance. And what level of maintenance. Will most of these properties be fixer-uppers or tear-downers in the future? With little to no money for upkeep left, probably.NJHHhttp://www.blogger.com/profile/14960316007304106542noreply@blogger.com0