Rates WILL Rise a Good Reason to Buy Now?

This article is related so can be considered as a follow up to the last article “If You Don’t Buy a House Now, You’re Stupid or Broke. The answer to that question is… Well that it really depends on you and your debt to income ratios and ability to repay and previous repayment history of debt.

Lenders are subject to extreme scrutiny at the moment. Above average defaults can have drastic consequences and no lender is immune. This has led to over the top caution and excessive documentation and underwriting requirements.

It is what it is, so we’ll have to deal with it and only deal with mortgage reps on top of their game and don’t make promises they can’t keep!

FYI Rates continue to be at or near historic lows.

Given the eternal optimism that is inside all of us we believe the low rates are here to stay (or go lower yet) but think again.  The writing is on the wall for higher rates next year!  With the Fed buying approx 80% of all mortgage loans now, they will stop doing this by March, and there are few other buyers at current price and interest rates.

As the Federal Housing Administration (FHA) considers  raising the minimum credit score requirement for new borrowers to reduce risks to the single-family insurance fund, Fannie Mae (FNM: 1.04 +13.04%) has increased the minimum borrower credit score from 580 to 620.

Brian Faith, a Fannie Mae spokesperson confirmed the minimum hike, adding that the adjustment reflects a careful analysis of borrowers’ ability to repay their mortgage obligations over the life of the loan.

Faith said “Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period.”

Fannie also reduced the allowable debt-to-income (DTI) ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure.

Faith said that “high DTI ratio loans also have higher levels of serious delinquency. “In other words if you have a lot of debt and keep stacking it on with new cars, credit card bills and other investments and leveraged to the hilt, maybe you shouldn’t be buying a home until you pay down some of that debt first.

It’s not enough to help borrowers buy a home – we must also ensure that they can stay in the home over the long term. Repeat business through ill-gotten gains is rare, immoral and unethical, at least in my book.

Contact us today for a free consultation to see if home ownership may be in your future.

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Some Banks No Longer Cooperating in Short Sale Process

Everyone knows about the 700 Billion dollar bailout for the banks in the U.S. but who was is it suppose to benefit?

The premise was that this would help free up the flow of money from lenders so that people can get mortgages again and purchase homes from the people in troublesome foreclosure situations in the process clearing up that problem.

So what's going on now? What happened? Business as usuall, Greed taking over and hurting the small guys while the banking industry still remains tight with its lending practices.

I've been noticing a frightening trend lately among the banks just recently after the bailout which is just starting to build momentum.

Since the banks are now hurting less with a lot more cash in their pockets due to the huge cash infusion to them, they are no longer as willing to work with home owners play ball to help the banks sell their houses in lieu of a foreclosure via the short sale method. Citi Bank seems to be one the trend setters in this arena leading the charge in holding home sellers accountable to still pay back the loans for a house they already lost or are losing, wish the banks would have been held accountable like. I guess that is a one way road where only the banks will benefit.

So where are all the safeguards Nancy Peloci the Speaker of the United States House of Representatives was bragging about which would help the home owners out there? Looks like Nancy Peloci and the democratic house are looking to spend 150 Billion more, will they be accoutable to whom they are giving these infrastructure, energy and other grant money to?

The banks are now figuring since home owners are hurting bad enough to sell their homes through a short sale and willing to walk away with nothing, the banks are taking it a step further and not allowing the process to continue at the last minute unless the home seller agrees to sign a personal loan guarantee that they will still pay back so much money from the loan even after they no longer have the house.!!!!

I'm working with a divorced couple who's credit is shot due to their differences and the house which neither of them live in any longer, yet they are holding up their end of the bargain with the banks and maintaining the property and doing what is necessary to allow an easy sale to a new buyer.

What's wrong with this picture?

Wasn't that 700 Billion dollars suppose to help the home owners who are hurting and allow banks assistance so they can be more willing to lend money to new home buyers?

The banks are taking advantage of the bailout and letting greed take over once again. Where are the safeguards?

In one instance I am speaking of most recently Citi Bank is the 2nd lien holder who is normally willing to walk away with one or two thousand dollars vs. the alternative of a foreclosure by the 1st lien holder and getting nothing.

I had an attorney who is a short sale specialist tell me this morning that this is rare but he has seen it before and it is becoming more of a trend as the banks become more stable. They are less willing to work with home owners sell their homes without demanding a personal loan guarantees and in the process making it no longer worth it for home sellers to cooperate. It takes a lot to close the sale on a home especially those in need of work in order to obtain a certificate of occupancy. I don't forsee home sellers will be as willing to do repairs or upkeep on a property they are losing and will still need to pay a mortgage back for in addition to coming up with money for a rental to move to.

Despite Bush's bill called the Mortgage Forgiveness Debt Relief Act of 2007 to prevent 1099'ing and taxing sellers on the forgiven debt as a result of a pre-foreclosure sale, home owners selling in these types of short-sales worked great until now because now the banks are unwilling to cooperate.

If this type of practice becomes more relavant I suspect we will be seeing a lot more foreclosures in the near future. This is not good news for home sellers facing this type of situation because the banks are pulling the last piece of hope from under sellers wishing to get a fresh start like the banks are, only without the government cash infusion.