US Home Value Continue to Fall

The financial net worth of homes and of individuals in the United States has decreased dramatically to $ 66,740 in 2010 from the $102,844 from 2005. The Census Bureau has recently realized the crisis that is currently facing the nation, according to their findings: there has been a 35% decrease in the net worth during the years between 2005 and 2010.

These findings also pose as warning to the financial status of many US citizens for their total capitals have fallen. The cause of this decline is not a mystery at all to the agency. These causes are the tremendous economic depression that occurred in the nation in 2008, and rapid increase in the total number of households in the nation.

The prices of houses have declined in the market and this triggering economic turmoil such as problems in banks to massive unemployment of citizens. In fact, the cost of owning a house is cheaper compared to debt in mortgages and loans; the value of stocks and other assets have also fallen behind housing.

The census of the government was able to measure the problem in numbers; however there is another report from the Federal Reserve whose findings are opposed to the data they gathered. The data exists for about a year and a half now, but they include the problems that are hovering over the investors and consumers.

According to CoreLogic, 11 million of the mortgages and that is equivalent to twenty three percent of the loans in homes in America are charged with fees above the real value of the house. The value of stocks however, has been a little better compared to how it was in 2010.

The Survey of Consumer Finances which is released by the Federal Reserve in three year intervals contains the latest analysis of the finances of families in the country.

Decrease in Mortgage Debt of Americans

During the first quarter, home equity increased to $6.7 trillion, which is the highest level in four years. This is because homeowners have paid their principal by benefitting from the low borrowing costs to refinance their loans. Based on data from the Federal Reserve, the increase of 7.3 percent was the biggest leap in over 60 years.

According to Richard DeKaser, the deputy chief economist at Parthenon Group in Boston, the increase is the greatest indication that the housing loan debt of Americans is starting to lessen. Moreover, data from Freddie Mac, a government-owned mortgage buyer, shows that one half of the refinanced mortgages during the fourth quarter decreased in loan size.

In addition, as former chairman of the American Bankers Association’s Economic Advisory Committee, DeKaser said that there has been a significant change in the enthusiasm of homeowners to have housing debt. In particular, when the market was thriving, a mortgage was considered as leverage, but it is considered a risk at present.

Based on a study conducted by the Fed released in the previous week, homeowner equity was 41 percent of US residential property value during the first quarter, and this also takes into account homeowners who do not have mortgages. It was during the third quarter of the year 2008 when the homeowner equity share was as high as 43 percent.

In 2007, residential mortgage debt was at its highest at $10.6 trillion, and becoming twice as much in six years. After that, it has decreased to 7 percent because there was a decrease of 23 percent in the value of all residential property.

DeKaser believes that the decline in mortgage debt was because of a fear factor. The bursting of the housing bubble still has one of every 15 people having no job and has convinced a few borrowers the importance of being thrifty. DeKaser adds that people are concerned of declining home prices and the economy as well.

Rent to Own, Lease Option to Buy Gives Buyers Time to Improve Credit

ReMax True Advantage’s agent Ezell, has been working with various clients pertaining home loans and provided them with great deals with reasonable prices. According to her, the current financial crisis prevents people from buying houses, but with the new rent-to-own terms, they have both the time to clear their credit and own a house.

The houses that Ezell sells allows the client the right to refuse to purchase the house they will rent, they will be required however, to pay an option fee which is 2 percent of the total price of the house if ever it were to be bought.

The number of houses sold is now waning compared to the last two years. Most of the landlords that Ezell deals with are very much willing to sell their properties but due to the fact that there are too many homes in the market and very little interested buyers, leasing the property is their best option at the moment.

Aldo Aguirre a military member, is selling homes and also open to rent to own terms. According to him, it is beneficial for military members such as himself to rent to own a house. His job requires him to move from place to place and he must rent or sell his house once he is based elsewhere.

He currently owns a house in North Carolina under a rent-to-own deal, he says it has been very beneficial for himself and his buyer. The contract expands within 2 years and both parties would have to agree on a price for the house for its expected market value after 2 years’ time.

In these terms, Mr. Aguirre is getting payments from rent which takes care of the house’s mortgage and at the same time, the client takes care of the lot. The rent-to-own contracts are very popular to a buyer who are interested to buy a house but currently lacks the financials to purchase it.

Get a FHA Loan and Get Your Dream Home

The federal loan of the government was intended to give citizens the finances they need to get a house despite their low salary and bad credit. Banks would often deny these people‘s request for loan due to the fact that they are unsure if they would be able to pay back loans.

FHA mortgages are one of the government’s ways of helping these potential clients to get loans in financing their everyday necessities. But since the United States had suffered from a recession in 2008, the project was greatly affected and not all of potential clients were able to qualify for the program.

So how does one know if he or she is an eligible candidate for the FHA loan? Well first, let us review why the program was initiated. The Federal Housing Administration is a project headed by the United States Department of Housing and Urban Development. In 1934, the program was initiated to prevent home lenders from being broken due to a home renter’s inability to pay rents on time.

This program allows the government to intervene in the customer lender mortgages if the client goes default in his or her payment. The program has been effective in its function and it now has about 34 million mortgages that it has settled over the 78 years of its existence.

But this started to get harder when 2008 came. The FHA loan was harder to qualify for since the agency had to be stricter to their customers. But now since the economic crisis is finally starting to lift off again, the FHA is starting to approve mortgages again but not all banks are willing to go with the approval even if the individual fulfills the minimum requirement of the agency.

But what are the guidelines that must be comply by the applicants? First, the credit score of the applicant must be at least 580, those who have scores in between 500 and 579 the agency will give a mortgage of 90 percent or lesser of the total price of the house.

CFPB Getting Points on Mortgage Points and Fees

Since the foundation of the Consumer Financial Protection Bureau, it has been conducting surveys and collecting feedback from consumers about how they view their current credit card deals, student loan providers or how they are affected by compulsory settlement cases.

Currently, the agency is trying to get the say of customers on mortgage points and fees. The company wants to make customers understand what they are paying for and have knowledge about the different deals financial intermediaries are offering.

Here are some of these policies and perks that are being pushed by the CFPB that the institutions must follow. A policy that makes certain customers who pay discount points get a minimum reduction from the interest rate. If for example a borrower would pay a discount point to get lower interest rates, the customer will be charged depending with his credit worthiness. A discount point causes 1 percent of a borrower’s total fee, so if the loan costs $500,000 then every point will cost you $5,000.

Another policy is one that requires lenders to ask customers if they want to avail a no-discount-point loan. Another policy proposed by the agency is not to allow origination fees that would vary on the loan’s amount.

The bureau also plans to collect mortgage fees and to find out the experiences and damages for mortgage lending originators, those people who take the information from people who want a loan.

Currently, theoriginations follow different protocols that are under the state and federal rules of the country. The CFPB is thinking of implementing rules that would make all the agencies follow the same standards. They would be thoroughly investigated for irregularities and fraud.

The bureau also plans to implement rules similar to what the Federal Reserve Board has. These rules would be helpful in preventing originators from charging higher amounts for the loan to generate money.

If ever these new proposals from the agencies are imposed then it will be great news for all borrowers and it will ensure safety and equity for the whole industry.