Various Forms of Assistance for Responsible Homeowners

The latest effort of the Obama administration to assist the housing market is aimed at homeowners with solid credit and is making on-time payments on their mortgages but is unable to refinance because they own underwater homes in falling markets.

President Obama is set to announce his plan in Nevada, a primary state that he hopes to win in 2012. Since the peak of the housing market bust, the prices of home in Nevada fell by 53%. In the metro area of Las Vegas, the prices decreased by 59%. It has been reported that there has been no refinancing activity for borrowers who are underwater in the area. The president’s plan is designed to change this.

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A series of changes that will lighten the load of responsible borrowers at the moment will be announced. This is to help them take advantage of the good mortgage rates at present. According to the new regulations, homeowners with good credit who has missed a payment for a period of one year can still be considered as a responsible current borrower.

The advice of the administration officials is that the homeowners will no longer be requested to get an appraisal or required to undergo a full credit check. According to the official, if the payments have been current, it is already the lender who owns the risk. They also plan to get rid of the so called risk based fees that are currently charged on bad credit homeowners. This will raise the benefits of refinancing and eliminate hassle.

The administration official informs the CNN that they have been working out and coordinating the issue with FHFA and the banks. Then, the FHFA will contemplate on the proper guidelines and inform banks about them by November 15. Homeowners can start applying for the refinancing until after the 15th of November.

Between the present days until the 15th, the FHFA can think of including another category of homeowners in the plan. It is possible that the changes will be extended to bad credit homeowners who have home equities and have been current in their payments.

A government official shares that plans are continuously made to address the larger housing problems that affect the entire market. These will be announced in the future.

Previously, the administration already announced the forbearance for homeowners for up to one year if they lost their jobs. This allows homeowners to delay mortgage payments while unemployed.

Related articles

• Refi plan: If homeowners win, someone else loses (sfgate.com)

Various Forms of Assistance for Responsible Homeowners

The latest effort of the Obama administration to assist the housing market is aimed at homeowners with solid credit and is making on-time payments on their mortgages but is unable to refinance because they own underwater homes in falling markets.

President Obama is set to announce his plan in Nevada, a primary state that he hopes to win in 2012. Since the peak of the housing market bust, the prices of home in Nevada fell by 53%. In the metro area of Las Vegas, the prices decreased by 59%. It has been reported that there has been no refinancing activity for borrowers who are underwater in the area. The president’s plan is designed to change this.

A series of changes that will lighten the load of responsible borrowers at the moment will be announced. This is to help them take advantage of the good mortgage rates at present. According to the new regulations, homeowners with good credit who has missed a payment for a period of one year can still be considered as a responsible current borrower.

Image via Wikipedia

The advice of the administration officials is that the homeowners will no longer be requested to get an appraisal or required to undergo a full credit check. According to the official, if the payments have been current, it is already the lender who owns the risk. They also plan to get rid of the so called risk based fees that are currently charged on bad credit homeowners. This will raise the benefits of refinancing and eliminate hassle.

The administration official informs the CNN that they have been working out and coordinating the issue with FHFA and the banks. Then, the FHFA will contemplate on the proper guidelines and inform banks about them by November 15. Homeowners can start applying for the refinancing until after the 15th of November.

Between the present days until the 15th, the FHFA can think of including another category of homeowners in the plan. It is possible that the changes will be extended to bad credit homeowners who have home equities and have been current in their payments.

A government official shares that plans are continuously made to address the larger housing problems that affect the entire market. These will be announced in the future.

Previously, the administration already announced the forbearance for homeowners for up to one year if they lost their jobs. This allows homeowners to delay mortgage payments while unemployed.

Related articles

• U.S. throws lifeline to underwater homeowners – Reuters (news.google.com)
• Refinancing plan for US mortgages (bbc.co.uk)

With the historically low rates, different financial institutions such as mortgage servicers, credit unions and banks are doing everything to encourage you to refinance. Before choosing one, make sure to know how long it will take.

Wells Fargo is sending out solicitations through mail showing the difference in their customers’ payments when they decide to refinance to a lower rate and shorter term loan.

Chase is going a little further than Wells Fargo. They are providing their customers with one day air informing their customer that they promise no closing costs and no appraisal for refinancing.

Advantis Credit Union offers their clients a 10-year mortgage that has a low interest rate of 3.29%. It has already given out 200 of this loan type since the month of January.

OSU Federal Credit Union has a raffle program that allows anyone who refinances their home, credit card or vehicle to join. The program will be giving out three cash prizes amounting to $1000 each.

Mentioning these different solicitations does not mean that they are right for you. Make sure that you compare the balance of your present loan and the overall interest payments with any possible cost of refinancing such as closing costs, interest payments and appraisal fee for the entire duration of the loan.

Even if there are long-term advantages of paying your debt in full, do not disregard the impact of a higher payment in your cash flow every month. You do not want to be forced in a cash crunch that will push you to sell your home in a struggling housing market.

Moreover, check around as much as you can. In the past year, many customers of major banks complained that their refinancing was slow. By looking at all your possible options, you can save money on lower fees and rates and you can find a lender that can quickly approve your loan.

Related articles

• Refinancing mortgages could get easier (sfgate.com)
• Lack of equity can derail attempt to refinance mortgage (thefairclothteam.wordpress.com)

The Impact of Mortgage Default in a Credit Score

Credit scores really matter.

This is the reason why many homeowners who realize that they may lose their homes primarily worry about how it will impact their credit scores.

Homeowners can allow their homes to be foreclosed and their scores will be affected for 7 years. Another option is to have a deed as a foreclosure substitute wherein the home is given to the lender in exchange for the loan’s cancellation but this also results to a negative credit score.

Getting out of a mortgage through short selling the home is also a way to get rid of the house. In this option, the owner sells the house in a lesser price compared to the amount of his or her loan. This is also bad for the credit score.

A recent report from RealtyTrac Inc. showed that there is a 19% increase in the rate of preforeclosure transactions for quarter one and two of the present year. This rate oftentimes includes short sales. The data shows that short sales accounted for 12% of the total housing sales in quarter two. This is a rise from the 10% rate during the same time in the past year.

But is a there a specific order by which the ever-present system in credit scoring considers a short sale better than a foreclosure or a deed instead of foreclosure?

In case a person with a history of mortgage problem applies for a loan in the future, some lenders might look at a short sale as a better record compared to a foreclosure. However, the scoring system used in determining credit looks at the defaults as equally unpleasant.

Bradley Graham, FICO’s scores product management senior director, said that according to the examination of information that lenders communicate with credit bureaus about mortgage defaults, the weight of the different types of default are almost always equal in determining credit risk in the future.

Related articles

• How to Rebuild Your Credit After a Foreclosure or Short Sale (mint.com)

They lost their homes, they do not have a credit card to use and they are paying for a more expensive rent compared to their mortgage payment.

The decline of the housing market had a tremendous effect on almost all races. However, the most severely hit are the black Latino groups. This led to a decrease in the rate of homeownership to its lowest state, shows the new data of the 2010 Census.

Around 36% of blacks still have their own homes. But this is lower than the 40% rate of homeowners in their population in 2000. For the Latino group, the homeownership declined to 47% from the 49% from way back in 2000.

On the other hand, whites have a 67% ownership while Asians at 62%. This is an increase from its rate in the past decade.

Almost all races experience an increase in the rate of homeownership during the boom of the housing market and the doubling of home values between 2001 and 2006. But, in the following housing bust, it changed as the whites and Asians suddenly lost a lot of what they had already gained. As for Blacks and Latinos, they almost lost everything they had gained and even more.

The reason for this is that the number of blacks and Latinos who took out subprime loans during the housing boom were higher. The loans were taken because they were able to afford it and they wanted to take advantage of the housing boom for any price, said a number of real estate experts. Moreover, Traditional loans which are safer required plenty of upfront cash. The loans which basically had low rates of interest suddenly increased in the following years which led to a consistent number of foreclosures.

But, almost six interviewed experts said that the lenders and mortgage brokers in a few cases aimed for blacks and Latinos to obtain subprime loans in order for them to earn money from higher rates of interest and lending charges. As proof of this claim, they determined studies that show how lenders oftentimes sold the subprime loans to most Latinos and blacks who were eligible for less expensive traditional loans.

The results of this have been devastating. A lot of minorities lost their most important property. Plenty of homes in neighborhoods where most minorities live can be purchased with the price of a car. Moreover, bad credit combined with the struggling economy have caused the unemployment rate and income reductions to continuously increase in the groups of Latinos and blacks.

85% of whites are now more likely to own a home compared to blacks and 45% compared to Latinos.