Archive for the 'Mortgages & Finance' Category
Is Your Landlord Headed Into Foreclosure?
April 2nd, 2009 categories: Central Connecticut News & Information, Mortgages & Finance, Real Estate Market
One of the stories reported on regularly these days is tenants facing eviction due to foreclosure of the property they’re living in.
Tenants are going about their business, paying their rent and all of a sudden, they’re served with eviction papers. Fannie Mae has put an end to this practice with their homes, which I agree is unfair, but their policy has other consequences I find distasteful.
But what about tenants whose landlord’s mortgage isn’t backed by Fannie Mae? RealtyTrac.com just announced that they are offering a service to help tenants monitor whether the home they’re living in is falling into foreclosure.
For $24.95/year, tenants can be notified by RealtyTrac.com.
Not a bad idea but if you have the time and don’t want to pay $24.95/year, you can call your town clerk or visit their office and ask to look at the property records for your home. You’re looking for evidence that a lis pendens has been filed, which is usually filed pretty early on in the foreclosure process.
You may also want to check to see if your landlord owes a higher amount on the property than what it’s likely worth (check the town’s most recent appraisal also on record). If the mortgage recorded is much higher, that could be a red flag that your landlord is in trouble.
You May Also Enjoy Reading:
CT Cities Avoid Forbes List of Next Foreclosure Capitals
Just How Did We Get Into This Mortgage Mess?
Head Over Heels by Go-Gos
Do you dig real estate news, tips and advice? Sniffing around for pet-related information in Connecticut?
Get Unleashed - the blog that’s helping to find homes for people and pets.
| Discussion: 5 Comments »
Take the Money and Run - Is it Time to Refinance?
December 22nd, 2008 categories: Mortgages & Finance
Last week, 30-year mortgage rates dropped to their lowest in decades and mortgage lenders are seeing a huge spike in refinance applications as a result. According to the Mortgage Bankers Association weekly survey last Wednesday, 30-year fixed rates averaged 5.18% with 1.13 points. Also read MarketWatch.
One of the mortgage blogs I read regularly, The Mortgage Reports Blog, suggests that people considering a refinance should take the money and run, predicting that mortgage rates will actually rise in the next 30 days, not decrease further.
‘To the tuned-in rate shopper, sharp drops in mortgage rates are signals to buy, not signals to “start shopping”.’
And I’ve been getting e-mails from Connecticut-area lenders all week with news on their programs and the rates are pretty darn good in some cases. It all depends on your credit, your current rate and how long you plan to stay in your current home.
I don’t know what rates will do in the next few weeks but the gettin’ seems pretty good about now.
And for home buyers, CHFA’s rate is now 5.25%. Go on, take the money and run.
| Discussion: 4 Comments »
Another Bad Idea from From Fannie Mae - Tenants Can Stay in Foreclosed Properties
December 16th, 2008 categories: Investors/Landlords, Mortgages & Finance, Real Estate Industry
From the people who brought you the massive boom in subprime and Alt-A mortgages and the predictable crash that followed, comes one more equally bad idea:
Allow Fannie Mae (the government) to become a landlord to thousands of tenants and thereby delaying or preventing the sale of properties altogether. The size and scope of this decision won’t be as large or devastating as the aforementioned but it’s just as poorly thought-out.
Who will buy a foreclosed home with tenants in it?
Buying a home with tenants in place is a catch-22. While you may be getting paying tenants, you are also trusting the person who placed the tenants (the same person, by the way, who just got foreclosed on) to pick qualified, responsible people to live in your investment.
What if the landlord in buying to live in the property or wants to place their own tenants or raise rent? Will Fannie Mae agree to then evict tenants or does the new owner have to take on this additional financial burden?
Who will maintain the property while tenants are in it for months or possibly longer?
Who at Fannie Mae is going to be taking the inevitable 2 AM toilet is backed-up calls? Who is going to replace the smoke alarm batteries? Of course, they’ll hire a property management company but who at Fannie Mae knows anything about managing property management companies? Property management companies will be salivating at the opportunity to rip-off, I mean, work with Fannie Mae.
How will agents schedule showings?
Showing rental properties with tenants is hard enough, never mind when they’re mad. Setting up a typical showing for an occupied rental property goes like this: call the office 2-3 days prior to showing, the office calls tenants who almost never call back to confirm, the listing agent calls the owner to get them to call the tenants and then a showing is scheduled for one floor only. 50% of the time, the tenants still claim to not know about the showing and sometimes refuse to let agents in.
Now imagine that you have tenants who are disgruntled (Fannie Mae is now the landlord and probably not all that responsive) or who are nervous that the house may be sold to someone who can evict them (Fannie Mae may not call them back but at least they won’t evict). Who will agents call to get in? With so many homes on the market, I think investors will just pass these properties by knowing they’ll be a headache.
Will tenants trash the home and make it worth even less?
Bank-owned properties are targets of theft and vandalism when they’re vacant but does Fannie Mae actually think this will end when they allow tenants to remain? Tenants will know that no one is watching the store. Use your imagination.
The End Result
Investment properties owned and managed by Fannie Mae will be harder to sell and therefore, worth less, and will then negatively impact the value of surrounding properties. Fannie Mae will mismanage properties, tenants will not be happy with Fannie Mae as their landlord and some will purposely destroy or vandalize properties.
I want to be optimistic but I fear that this bad idea will sound like a good one to other lenders (or worse, legislators) which will only compound the problem.
What’s the alternative?
I think it’s unfair to demand that tenants leave their home with little notice. However, if Fannie Mae can find the tenants after the foreclosure to evict them, can’t they find them before the foreclosure and notify them at least 30 days before the actual foreclosure is to take place?
And if the tenants can’t find housing prior to the foreclosure, Fannie Mae would then give them an additional 30-day grace period before it begins the eviction process. The reality is that eviction, at least in CT, takes several months so the tenants would have that additional period to find housing.
Fannie Mae should pay for moving costs, any additional rent if tenants can’t find an apartment for the same rent, and should pay the new landlord directly for the security deposit (since the previous landlord isn’t going to give it back).
Fannie Mae should stick to the time honored and tested tradition of being in the business of real estate lending, not real estate investment.
| Discussion: 9 Comments »
CHFA Mortgage Rate Falls to 5.5%
September 12th, 2008 categories: Mortgages & Finance
I used to report weekly on the CHFA rate but the rate doesn’t change often enough or by much.
This week, though, the rate dropped to 5.5% and it hasn’t been this low in a while.
If you want to buy a house in Connecticut and qualify, 5.5% is a pretty darn good rate. And the rate gets a lot better if you buy within the Manchester Pilot Homeownership Program where the rate is 5.25% and slightly higher for teachers, military and police, or 5.35%.
CHFA Income Limits - $81,000 for 1-2 person households, $93,150 for 3+ in most of Hartford county
CHFA Sales Price Limits - $301,500 for most of Hartford county
For related posts:
Closing Costs Vs. Prepaid Items
New Housing Bill’s Impact of Home Buyers
Five Things Every Home Buyer Should Know About Mortgages and Mortgage Lenders
| Discussion: No Comments »
The New Housing Bill’s Impact on Home Buyers
August 1st, 2008 categories: Home Buyers, Mortgages & Finance
I just finished reading the massive housing bill passed by the Senate and some analysis of the bill. Called the Housing and Economic Recovery Act of 2008, the legislation contains a lot more than the plan to “rescue hundreds of thousands of homeowners facing foreclosure,” some of it impacting future homebuyers.
Hello, First Time Homebuyer Tax “Credit”
Don’t get too excited, the tax credit is more like an interest free loan. According to CCH, a company that analyzes tax code and legislation for tax service providers,
“The housing act gives first-time homebuyers nationwide a temporary refundable tax credit equal to 10 percent of the purchase price of a home, up to $7,500 ($3,750 for married individuals filing separately) The credit begins to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).The credit is effective for homes purchased on or after April 9, 2008, and before July 1, 2009. Unlike other credits, however, the first-time homebuyer credit must be repaid in equal installments over 15 years, essentially making it an interest-free loan from the government for most qualifying homeowners.”
Additional Property Tax Deduction
Taxpayers who don’t itemize their income taxes will be able to take a property tax deduction of up to $500 for individuals or $1,000 for families. Taxpayers who itemize get to deduct more of their property taxes.
Goodbye, Seller-funded Downpayment Assistance and Gift Programs
According to the National Assocication of Realtors, the bill
“…codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members.”
In 2007, 35% of all FHA-backed mortgages used some type of downpayment assistance which is a huge increase over previous years and a sign that people just couldn’t save enough money for a downpayment on their own.
Programs such as Nehemiah and AmeriDream would be disallowed but governmental entities, like CHFA who offer Downpayment Assistance Program (DAP) loans to borrowers, would still be permitted.
FHA has long argued that the default rate is much higher with borrowers who get downpayment assistance. FHA Commissioner Brian Montgomery earlier this year stated that, ”data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments.”
Big Changes to FHA
FHA minimum downpayment increased from 3% -3.5%.
Possible increase in FHA fees - HUD Secretary Steve Preston has indicated that FHA may have to increase its fee of 1.5% since Congress refused to allow FHA to implement risk-based pricing. In order to handle subprime borrowers and their associated risks, FHA was set to implement risk-based pricing which would have charged people with better credit less (1.25%) and those with worse credit more. Now, everyone suffers.
Loan limits were also increased to up to 115 percent of local area median home price, with a $625,500 cap.
Who’s Getting Rescued?
From Oct. 1, 2008 through September 2011, homeowners facing foreclosure MAY be able to refinance their loan to an FHA-backed, 30-year, fixed rate loan. The following conditions must be met for people to qualify:
The program is available only to individuals living in their only homes. The mortgage must have originated before Jan. 1, 2008, and the borrowers’ debt-to-income ratio must be above 31 percent as of March 1, 2008. The debt-to-income ratio is figured by dividing the borrowers’ monthly mortgage payments (including principal, interest, taxes and insurance) by their monthly income.
Borrowers must agree to “share” future equity with the government. Specifically, if the home is sold within a year the government gets all the profit. The government’s share of the profit declines over five years, ending at 50 percent—in other words, if the home is sold after five years, the homeowner and the government split the profit 50-50.
Borrowers must demonstrate their ability to repay the new loan.
The mortgage owner (generally a bank or other financial services corporation) has to agree to write down (reduce) the principal on the existing loan. The new principal amount will be 90 percent of the home’s current value.
Borrowers do not need to be in default, but he or she must be able to prove that he or she will not be able to keep paying the existing mortgage and they must attest that he or she is not deliberately defaulting just to obtain lower payments.
All other loans against the home must be retired, including home equity loans or lines of credit.
Borrowers may not take out another home equity loan for at least five years unless the purpose is to pay for needed home maintenance or repairs.
The total debt on the home can not be any more than 95% of the home’s appraised value.
If Connecticut is any indication, the plan will probably only save a small percentage of the people facing foreclosure. In December of 2007, CT through CHFA rolled out its CT Families program to refinance at-risk mortgages. Since inception, 66 homeowners refinanced out of an estimated 18,000 subprime loans written in our state.
Many people are arguing that the biggest beneficary of this part of the bill will be Bank of America who recently aquired Countrywide, the largest issuer of loans for homes in foreclosure.
Do you dig real estate news, tips and advice? Sniffing around for pet-related information in Connecticut? Get Unleashed - the blog that’s helping to find homes for people and pets.
| Discussion: 1 Comment »
