Service members with a Freddie Mac-backed mortgage and who are released from active duty through 2011 have some breathing room in terms of foreclosure.

The government-sponsored mortgage loan purchaser announced Friday that its servicers will stop foreclosures for at least nine months for eligible service members. The goal is to help service members who are struggling to make payments get back on their feet.

“Our military make sacrifices every day to protect our homes and families,” Anthony Renzi, executive vice president of Single Family Portfolio Management at Freddie Mac, said in a news release. “This small act will protect financially troubled service members when they return from active duty by giving them more time to work with their lender to stay in their home.”

The temporary foreclosure stay only applies to military members whose mortgages are owned by Freddie Mac. The company doesn’t issue loans to individual borrowers. Instead, it purchases mortgages on the secondary market.

Service members who are in need of a financial lifeline should contact their mortgage servicer immediately.

The announcement comes on the heels of a mortgage relief measure from Fannie Mae earlier this fall.

Fannie Mae said in September that it would cut back or simply suspend mortgage payments for up to six months for military families hit by financial hardship after the injury or death of a service member.

Service members with VA loans can also contact their nearest regional VA loan center to discuss mortgage relief options.

To learn more, service members can visit Freddie Mac’s page on special options for service members.

Homeowner’s insurance is a mandatory part of the home-purchasing process.

It’s also one of the least considered.

Lenders require prospective borrowers to secure a home insurance policy to cover at least the value of their mortgage. Homeowner’s insurance isn’t included in the mortgage, which means buyers are on their own to get coverage.

But what usually happens is the lender points the borrower to a specific insurance company (typically because there’s a referral relationship in place). The vast majority of borrowers, bent on finishing the home-buying process, jump on that first contact in a rush to move forward.

And that’s not exactly a recipe for savings.

The reality is it’s important for borrowers to take a little time to comparatively shop and get insurance quotes from multiple sources. You can get a free insurance quote from a host of reputable websites and aggregators, including NetQuote and InsureMe.com.

Granted, it’s probably the last thing hurried borrowers want to do with a home purchase in sight. But parsing through multiple quotes and creating some competition can save homeowners more than $1,000 per year, depending on the policy.

In fact, one of our loan officers recently purchased a home. He solicited five quotes for homeowner’s insurance and found a range of $500 from the lowest to the highest, all for the same scope of coverage.

And it’s not just a money thing — getting multiple insurance quotes can also lead to better terms and coverage plans.

In the end, your lender’s suggested insurer might have the best deal. But you won’t know until you start asking around.

That extra $50 or $90 you could save every month in homeowner’s insurance costs could knock off a decent chunk of your mortgage through additional payments to the principal balance.

Image: woodleywonderworks

For a while now I’ve been ranting and raving to everyone that will listen about the gross failure of the HAMP (Home Affordable Modification Program) program and lenders’ inability and incompetence with regard to actually helping homeowners to stop foreclosure.

Over the duration of the last year and a half The Treasury Department has threatened, begged, cajoled, et. al. major lenders in hopes that they will finally stop using Making Home Affordable Trial Modifications as their own personal forbearance agreements, and actually grant loan modifications.

People are getting peeved, and Congress has now stepped in and found that of the original target of helping 3 – 4 million homeowners through HAMP, lender’s are going to fall very, very short at a measly 700,000 – 800,000 homeowners helped.  So they’ve issued a big report and Treasury especially is in big trouble.

Wait lets back track a minute.  How did we get in this predicament?  And why is The Treasury Department in hot water?  Let’s backtrack to the start of HAMP and take a look at what happened.

Banks are in big trouble and need money bad.  They’ve sold the Country down the river in neat little packages marked “AAA” Rated Mortgage Backed Securities (supposedly as safe as Government Bonds), and now of course don’t trust each other enough to pass these overrated packages to each other so they’re no longer “liquid”.  So Uncle Sam steps in to prevent a depression and cuts Wall Street a nice big check.

Thankfully that big check had a couple of strings attached, one being HAMP.  HAMP = Making Home Affordable, a program designed to help deserving and needy homeowners to modify their loans and save their homes.  The idea was HAMP was going to stop 3-4 million foreclosures and end the crisis, helping things get back to normal, and of course these grateful lender’s were going to participate.

I guess this is as good a place as any to note that HAMP in a nutshell = Submit documents, qualify, 3 month trial modification to make sure you can actually afford the payment, permanent modification.  In that order and pretty straightforward, right?

Well, most major lenders didn’t (and still don’t) want to modify the majority of the loans in their portfolios because financially it didn’t (doesn’t) make sense.  Maybe they purchased the loan from another failing bank at 10 – 20 cents on the dollar, maybe there’s equity in the home.  Maybe they simply don’t trust delinquent borrowers to cough up that mortgage payment each month.  Maybe money’s tight, lender’s aren’t as liquid as they’d like, and they’d rather loan money at prime rates to prime borrowers, rather than lower interest rates to 2-3% (or less) for homeowners that, prior to the mortgage crisis, would have been termed “sub-prime”.  Maybe the lender’s “loss mitigation specialists” are underpaid, undertrained, or just plain lazy.  Maybe your loan modification request was denied because your “negotiator” had a killer headache.  Lot’s of maybes.  Lot’s of reasons why lender’s don’t want to modify.  So hardly anyone is getting into “Trial Modifications”.

So the Treasury Department and the Obama Administration call in these big banks for a meeting.  And another meeting.  And another meeting.  And there’s a lot of talk and finger pointing and finally Treasury says “Ya know what, we’re gonna see more people in Trial Modifications, or else.”

The lenders are a little scared.  What are they going to do?  The investors that hold itty bitty portions of each mortgage backed security don’t want to agree to modify loans in accordance with HAMP guidelines, and the lender’s themselves already have enough “maybes” to not want to modify…

And then one of these itty bitty bankers got a very big idea.  Why not place homeowners into the Trial Portion of the HAMP program, sucker them out of say 3 months, 6 months, heck why not an entire year’s worth of payments and then later cite exactly why they don’t qualify for a permanent modification if it doesn’t make sense for the lender to modify?

It’s funny how when a lender is 100% aware and sure they will lose money on a foreclosure they will bend over backwards to modify the loan, regardless of who the investor is, how much of a headache the negotiator may have (one particularly awful BofA “loss mitigation specialist”), or even whether it fits into HAMP guidelines (I’ve seen modifications of investment properties under HAMP?!).

And here we are almost present day.  Well, Congress is a little peeved because lots of “constituents” – the people that voted for them like you and me are calling, calling, calling and complaining because they’re not getting permanent modifications.  Finally Congress decides to do a little investigating.

Well, the sleuths over at Congress discover that neither Treasury or the Lenders have been doing their job (really mostly the lenders) but in order to avoid bad public opinion this Oversight Committee decides to particularly blast The Treasury Department:

While HAMP’s most dramatic shortcoming has been its poor results in preventing foreclosures, the program has other significant flaws.  For example, despite repeated urgings from the Panel, Treasury has failed to collect and analyze data that would explain HAMP’s shortcomings, and it does not even have a way to collect data for many of HAMP’s add-on programs.  Further, Treasury has refused to specify meaningful goals by which to measure HAMP’s progress, while the program’s sole initial goal – to prevent 3 to 4 million foreclosures – has been repeatedly redefined and watered down.  Treasury has also failed to hold loan servicers accountable when they have repeatedly lost borrower paperwork or refused to perform loan modifications.  Treasury has essentially outsourced the responsibility for overseeing servicers to Fannie Mae and Freddie Mac, but both companies have critical business relationships with the very same servicers, calling into question their willingness to conduct stringent oversight.  Freddie Mac in particular has hesitated to enforce some of its contractual rights related to the foreclosure process, arguing that doing so “may negatively impact our relationships with these seller/servicers, some of which are among our largest sources of mortgage loans.” Treasury bears the ultimate responsibility for preventing such conflicts of interest, and it should ensure that loan servicers are penalized when they fail to complete loan modifications appropriately. (View the full report here: http://cop.senate.gov/documents/cop-121410-report.pdf)

Ok, so Congress has effectively placed the burden on Treasury.  Reading through the Report they’ve also done their homework, hitting everything from the importance of free counseling for homeowners to targeting re-default rate so lender’s cant use it as much as a factor in denying modifications, and even looking more closely at what Treasury can and should be doing regarding holding Lenders as well as Fannie Mae and Freddie Mac accountable for botched modification requests.

For the first time in a long time I’m beginning to think that maybe the Foreclosure Crisis is finally coming closer to an end.  Call me cautiously optimistic.

I’m interested to hear your thoughts — Do you feel Treasury has dropped the ball?  Should Congress have been taking a more proactive effort and if so at what time should they have targeted the HAMP program?  Since inception?  Have you been placed in a Trial Loan Modification only to be later rejected from getting a permanent modification (and did your loss mitigation specialist have a headache that day…)?  I’d like to hear your story — so comment freely below!

If you are some sort of Veteran, VA loans can be an excellent way to purchase your new home.  What is great is that if you are buying a home that could be upgraded in regards to energy savers, you can certainly do this with your VA loan. It is called a VA energy efficient mortgages. Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEM’s. And the Veterans Administration added this to their arsenal of VA loans.

Energy efficient loans can be very effective, unless you are having an energy efficient home built.  If you have an older home, it probably won’t be up to current standards, which could cost you hundreds of dollars monthly.

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Explaining how Energy Efficient Mortgages work for VA loans?

On Va loans, it can be increased up to $6,000 in energy costs without the approval by the VA, as long as the lender thinks the improvements are reasonable. If the costs are over $6,000, it must be supported by an increased valuation in an equal amount.  Here are the different levels of increases.

Directly from the VA handbook, the mortgage may be increased :

• up to $3,000 based solely on the documented costs
• up to $6,000 provided the increase in monthly mortgage payment does not exceed the likely reduction in monthly utility costs, or
• more than $6,000 subject to a value determination by the VA.

The buyer may wish to contact a person or a firm to show such energy improvements. As I mentioned in my FHA post, you can also contact your local utility company for these services.

Acceptable energy efficient improvements, but are not limited to :

• solar heating and cooling systems
• caulking and weather stripping
• furnace efficiency modifications limited to replacing burners, boilers, or furnaces designed to reduce the firing rate or to achieve a reduction in the amount of fuel consumed as a result of increased combustion efficiency, devices for modifying flue openings which will increase the efficiency of the heating system, and electrical or mechanical furnace ignition systems which replace standing gas pilot lights
• clock thermostats
• new or additional ceiling, attic, wall and floor insulation
• water heater insulation
• storm windows and or doors, including thermal windows and or doors
• heat pumps
• vapor barriers

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Reminder : There are special and certain tax credits both nationally and locally. For tax purposes, there is a $1,500 tax credit until the end of the year. Not sure if the government is going to extend this. There are also state credits and sometimes credits given by your utility companies. Just be careful though, because sometimes you have to use those they recommend when doing the energy inspection report.

Keep in mind, the VA energy efficient loans are a little different than FHA energy efficient loans when calculating what the amount of energy costs that are allowed to be financed. And these EEM’s for VA loans can be used for both purchasing a new home or refinancing your current home.

Please consult Part 1 for the chart, giving you an idea of your monthly savings if you add $6,000 of costs onto your mortgage regarding the energy efficient mortgages.

Energy Efficient Mortgage Series

Energy Efficient Mortgages – EEM loans – Part 1 of 2 – FHA loans going ‘Green’

Energy Efficient Mortgages – EEM loans – Part 2 of 2 – VA loans going ‘Green’

If you happen to live in a home that has a party wall, chances are when it comes to refinance if you don’t have a party wall agreement, it may come up as an issue.

But it doesn’t have to be — it really all depends on the lender … and sometimes more importantly the title company!

Party Wall Definition
When getting an FHA loan, a party wall or common or shared wall is a wall that is located on or at a boundary line between two adjourning structures or parcels of land. A “Party Wall Agreement” is an agreement that identifies ownership and responsibilities between the owner of attached dwellings and parcels of land who share a “party” wall.

Party Wall Ownership: Who Owns A Party Wall?
A party wall is used by the owners of both properties and each share equally in the ownership of his/her portion of the wall. I usually see party walls most frequently in attached dwellings or row housing, but it also may be common where a shared driveway exists on both properties and where a shared wall fence exists.

Party Wall Requirements
A copy of the agreement, if one has been drawn, is usually not required to close a loan, unless the title insurer takes exception to it in the title policy. If the title insurance company takes exception, then chances are that you are going to need to provide a copy of the existing agreement or an agreement must be drawn between the owners. Generally speaking, any kind f legal binding agreement between the parties will be sufficient.

Now.

Practically speaking, if you have a party wall as part of your property but no party wall agreement in place, when it comes time to refinance …

It puts a damper on the party.

If you’re 62 or older and in the market for a reverse mortgage, take notice.

The almighty Consumer Reports sent out a stark warning about the home loans earlier this week, calling them both “very risky” if homeowners didn’t understand the complicated terms and a “last resort for seniors who want to stay in their homes and have no other alternatives to supplement their income.”

Not very good press for the loans, which were recently touted by none other than the Fonz.

Per The Truth About Mortgage:

The publication noted that many marketers of reverse mortgages, otherwise known as Home Equity Conversion Mortgages (HECMs), engage is “questionable sales tactics” and make misleading claims to minimize the associated risk of these types of loans.

The report also found that many mortgage lenders that sell reverse mortgages cross-promote products that homeowners may not need, including long term care insurance and annuities.

Senior citizens also happen to be very susceptible to misleading marketing, so the danger is two-fold.

The report called for better oversight of the reverse mortgage market along with new consumer protections for borrowers.

Reverse mortgages allow homeowners aged 62 or older to pull equity (cash) out of their owner-occupied homes without taking on a monthly mortgage payment.

However, borrowers still have to pay for taxes and insurance, and failure to do so has led to a rise in foreclosures – in fact, as of March, a staggering 20,631 reverse mortgage loans were in default.

If you think a reverse mortgage may be right for you, be sure to do plenty of research and consult a mortgage professional first to avoid any potential pitfalls.

(photo: zzzack)

Failure to communicate is one of the greatest reasons for complaints in any transaction.  Truly it makes no difference what type of transaction is conducted if expectations and important facts are not properly conveyed the end result can be disappointment or worse. With mortgages it can be even more crucial due to the often higher anxiety levels especially for first time home buyers or owners under some form of financial pressure.

Mortgage industry insiders who use terms in their daily life which are only used near the time of closing of a home loan can be guilty of tossing out words without a simple explanation to the client. Examples daily heard in a mortgage office may be acronyms like DTI – debt-to-income ratio which in itself needs a short explanation. Another may be approved versus qualified.

One of the most sensitive factors going to the closing table to consummate a home loan involves how much money a client is bringing to the closing. Unfortunately there have been, and still are, several bad actors who love to use the terms “no closing costs”. The harsh reality is there is no such loan. Every loan has closing costs and every home owner or home buyer in one way or another pays those closing costs. Until attorneys, appraisers, processors, couriers, title agents, and several others are willing to work for free there will always be closing costs and the seller, owner or buyer will always pay them.

Deciding to use the terms “no cash to close” would be accurate in those cases where no closing costs are touted. It is possible, in many cases of refinance or purchase, to have a closing with the mortgagor bringing little or nothing to the closing table. It works by a combination or choice of several opportunities to use funds resulting from the transaction to cover those costs.

• “Overages” from the sale of the loan or the spread between the interest rate charged and the cost of the money to the lender or broker.
• “Adding back” or “rolling in” the closing costs to the new loan amount.
• Government funded down payment programs
• Seller contributions to the costs of the loan

Another important fact to note is the down payment is not regarded as a cost of the loan and therefore is not considered a part of the closing costs but is included in the cash to close. This is often confusing when industry insiders use the term closing costs and do not explain what closing costs are in relationship to cash to close. Additionally any cash required to close the loan must be sourced and seasoned according to the guidelines of the particular loan being used to fund the transaction.

When shopping for a loan with at least three lenders, which you should always do, make sure you are aware of the difference between their closing costs and how much money you will need to bring to the closing table. Less is not always better.

Down payment assistance programs are still widely available in my State of California but you wouldn’t know it unless you really looked.  As a company that makes a concerted effort to use these programs, I can speak from experience and hopefully help improve your chances of getting accurate information about the assistance that might be available to you.

Down payment assistance programs many times seem like urban legend, you’ve heard they exist or at lead did exist at some point but finding a lender that aggressively promotes these programs is sometimes difficult.

The top 3 reasons why your lender doesn’t want you to get down payment assistance

1. 1.  Only specific “approved” lenders are allowed to process down payment programs.
2. 2.  Compensation to the lender is dictated by the down payment assistance program.
3. 3.  Down payment assistance programs require specialized knowledge.

Let’s start with number 1 – Not always, but many times a lender has to be specially approved to offer down payment assistance programs.  I have many times encountered situations where a home buyer was told (lied to) that no down payment assistance was available because the lender they were speaking to did not want to lose the opportunity to get the business.

I guess there’s no surprise that commission only lender types would do and say almost anything to earn your business – but withholding information that would benefit you, the buyer, at the expense of the sales person is a deception of the worst sort.

Number 2 is another fun topic - Most down payment assistance programs are designed typically to help low to moderate income home buyers afford to purchase their first home.

In addition to the many other guidelines and restrictions associated with these programs is the compensation the lender is allowed to receive.

A lender’s compensation on these programs should not deter the lender from offering the program, but unfortunately it sometimes does.

Number 3 is actually a pretty important factor that is not any fault or a knock on the lender.

Down payment assistance program guidelines change quite often vstate ary significantly from one program to another.  It’s almost a full time job trying to keep up on all the different qualifying guidelines, restrictions and requirements – not to mention the fact that many times the money available for these programs is very limited and does not last very long.

Down payment assistance IS AVAILABLE, but expect to do most of the homework yourself.

4 Tips and Tricks for finding down payment assistance programs

1. Start looking on the City or County website.  These Government sites are usually pretty cluttered and difficult to find information.  The most common place I find down payment assistance programs is under “Departments” and then look for “Housing” or “Community Services”.  These programs can be buried pretty deep in the site because they are only offered for a short time while funding is available.  Don’t forget to check your State website for State-wide programs as well – State programs most often are perpetually funded and easier to qualify for.
2. Look for the approved lender list, or the lender guidelines.  Many times the lender does not have to require special approval and the only restriction is that the first mortgage loan meets requirements (usually 30 year, fixed rate).
3. Read the qualifying guidelines.  Most down payment assistance programs have the underwriting / qualifying guidelines on the site.  If there are restrictions or requirements in additional to normal qualifying guidelines (which there almost always are) it will be documented somewhere on the program site.  Look for downloadable PDF’s and links to qualifying guidelines.
4. Once you find a lender you want to work with, ask for a list of references from buyers that have used the program.  Just because a lender is on a list does not mean that they have used the program.  I run into this quite often.  Ask for references, make sure the lender is familiar with the processes and procedures for applying for and receiving the assistance.

I will leave you with this.  Down payment assistance programs require a little bit more time and homework from everyone involved.

Have the expectation that you will have to do most of the homework yourself and you will be better for the effort.  If you are familiar with the program guidelines and availability of the program before you contact a lender, you are protected from being misinformed or misled which will save you time, money and sanity!

Get Educated – Be Empowered

Home Mortgage Interest Deduction -

Wikipedia defines it this way – A home mortgage interest deduction allows taxpayers who own their homes to reduce their taxable income by the interest paid on the loan which is secured by their principal residence.

Eliminating MORTGAGE INTEREST DEDUCTION which has been around since 1894 could be a fatal blow to the fragile Housing market

Let me ask you a question and please answer as honestly as you can.

Would you swim in a pool of hungry sharks? Would you stand in front of a charging bull? Would you jump from a bridge into shallow water? Would you play chicken with a freight train headed directly at you? You must be thinking these are trick questions huh? Follow along please….

Hypothetical here –> Let’s say the President put you in charge of ending the housing crisis. Would you eliminate the mortgage interest deduction allowed by the IRS since 1894?

Now that is a crazy thought isn’t it? Who in their right mind would want to eliminate the biggest deduction come tax time for millions of American Homeowners. Not to mention the effect it would have on a fragile housing sector where many experts predict foreclosures to rise, where property values continue to decline and strategic defaulters are no longer stereotyped. Come now,  who in the world would consider eliminating the mortgage interest deduction?

Why Would Home Prices Keep Declining?

Proposals from a White House commission to dramatically slash the federal budget deficit include ELIMINATING MORTGAGE INTEREST DEDUCTION. And to make matters worse, other cost cutting recommendations include Cuts in Social Security Benefits and Defense Spending.

The mortgage interest deduction is the largest tax break for millions of American Homeowners, reducing their tax bill by hundred or even thousands of dollars. And how do you think the housing market is taking this? The National Association of Realtors claims “the Mortgage Interest Deduction (MID)  is vital to the stability of the American housing market and economy”. To read the full press release from the NAR – click here. Bob Toll, Chairman of the National Association of Home Builders, calls the proposal “selfish“. Toll also thinks the odds of the proposal getting passed are “zero to negative five”. NAHB has launched a website which they say separates the myths about the MID from reality.

As a Mortgage Banker in Maryland, a State where property values in many parts of the state have taken a big hit, I believe eliminating this tax deduction to be similar as standing in front of a charging freight train. I realize recent statistics point to upward ticks in the economy but let me tell you something. Take it from someone who pulls credit, looks at income and has their finger on the pulse of home values every single day. If the housing market is getting any better, (I don’t really see it nor believe it), the overall health of housing values could be categorized as “fragile” at best.

The engine that drove home sales not too long ago, the housing Tax Credit for New Homebuyers, seems to be a complete 180 degree turn around from the proposed MID. I can understand why NAR and NAHB are up in arms regarding eliminating the Mortgage Interest Deduction.

Share your thoughts about the proposal and let us know how a change would effect you.

Recently Listed — A Simple Definition:

“Recently listed” refers to the situation where someone may have had their property listed for sale, the property didn’t sell and now are trying to refinance the property.  Lenders have guidelines regarding recently listed properties – and each lender will have different (but similar) guidelines about recently listed properties.

Recently Listed— An Expanded Definition:

Many people who try to sell their home decide at some point to take their home off the market for one reason or another.  When interest rates are low, sometimes they decide something similar to “well, if I can’t sell it – maybe I can just refinance and get a lower payment”.  If you find yourself in this situation, be sure to ask your loan officer about the recently listed guidelines at their company.

Generally speaking, here are a few common recently listed guidelines:

• If you want to refinance with cash out, you are going to have a longer waiting period from when the property was no longer waiting to be sold.  A “normal” time may be as long at 180 days.
• If you refinance with no cash out, just want to get a lower interest rate – a common waiting period is 30 days.
• Depending on what type of loan (FHA loan, Conventional loan, etc.) the recently listed waiting period may be different.
• The underwriter will pay particular attention to the appraisal.  It must not be listed for sale and will need to verify that the listing has been withdrawn or expired.  A second appraisal may be requested or required.
• The underwriter will look carefully at evidence that you are currently occupying the property.
• A letter of explanation stating that you intend to occupy the property and outline a reason that you were trying to sell the house – and why now you are applying for a refinance.

If you have recently listed your home for sale, but have taken it off the market and are now applying for a refinance – it isn’t impossible to get done, but it is important to be informed about possible things the underwriter wouldn’t normally scrutinize as closely.

Recently listed.

Things change – just be ready to explain why when refinancing a property you tried to sell but didn’t.