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Second mortgages become obstacles to loan modifications

March 16th, 2010

The CEOs of four major banks - Citigroup, JPMorgan Chase, Wells Fargo and Bank of America - have been approach by House Financial Services Committee chairman Barney Frank, D-Mass. The purpose of this communication is to encourage them to work with the Treasury Department to address second mortgages that have become an obstacle to modifying troubled first liens. These four banks hold $452 billion of second mortgage. 

Rep. Frank says many investors are willing to accept losses on principal writedowns to prevent foreclosures. But, unfortunately, these seconds have become a "principal obstacle" to the majority of modifications. "The second liens in many cases are not worth anything," Rep. Frank said. "At the point at which they acknowledge it, the bank's capital could be negatively affected," the chairman said. Rep. Frank said officials at Treasury, FDIC and HUD are trying to figure out how to deal with the accounting issues. 

In continued effort to help those struggling to keep their houses, they also are exploring incentives - such as giving second-lien holders a stake in the future appreciation of a property.

One key issue to remember here, is that if you're having difficulties, check with a mortgage lender to see if there are options you haven't considered or may not be aware of. There are a variety of programs - one which might be a great fit to address your specific needs.

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Reviewing the numbers

March 9th, 2010

There are two major number categories being discussed in the mortgage industry right now - the FICO score and downpayment percentage for FHA loans. The Federal Housing Administration commissioner is requesting that the nation's largest mortgage loan originators to loosen their underwriting standards. The intent is to make it possible for more minorities to qualify for government-backed single-family loans.

In 2008, many top ranked lenders established a minimum credit score of 620 when subprime borrowers refinanced into FHA loans. Though this move reduced the loan defaults, and improved the performance of FHA loans overall, the commissioner is now suggesting that lenders reconsider the FICO scores. His reasoning is that the "difference in approval rates for African-Americans and Latino borrowers between 580 and 620 is significant." 

Another number that is being considered is the downpayment percentage. Congress is pressuring FHA to increase the current 3.5% downpayment requirement to 5%. The belief is that the increase would negatively impact the opportunity for "good families" to buy a home.

The purchase of a home is most often the largest investment you will make, so be sure to work with an established, trusted mortgage lender.

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The 6 biggest mistakes refinance shoppers make and how to avoid them

March 2nd, 2010

Subtle changes in the way you approach mortgage shopping, and even small differences in the way you structure your mortgage, can cost or save you literally thousands of dollars and years of extra mortgage expense.

By learning the "6 Biggest Mistakes Refinance Shoppers Make", Grandview Home Loans can help you eliminate the chances of making a critical error and save you thousands of dollars on your mortgage. 

1: Don't shop by just Interest Rate alone.

The lowest rates do not always mean the best mortgage loan.

2: Not shopping around.

There are many sources of mortgage loans. It is a mistake to go to the one that is most convenient or that was recommended by a friend without checking the rates and terms offered elsewhere.

3: Understand Your Reasons for Refinancing.

Some people refinance simply to reduce their interest rate. You should be aware that simply reducing your interest rate is not always to your advantage.

4: Be aware of your new interest rate.

Make sure that you save enough to justify the process of refinancing.

5: Should I Consider an Adjustable Rate?

Adjustable rate mortgages or “ARM’s” can be very helpful in assisting people into the housing market. They can help minimize your monthly payments. However, one should exercise caution as they are made for people with specific needs.

6: Not All Mortgage Brokers are the same.

You want your refinance to be accomplished with as little hassle and in the shortest period of time. Ask your mortgage broker details of their services and performance guarantees. 

Discuss these issues with your mortgage company. For additional information regarding these 6 items…

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Rich folks with money to play with

February 23rd, 2010

Sometimes, many people just wish someone would come along with tons of money to give away. Wouldn't this be a wonderful thing when you just can't seem to get ahead? You just can't seem to become part of the American Dream - owning your own home!

Well, Gordon Albrecht of FCI Lender Services might have the answer in "private money." And so we all ask, "Where do I sign up?"  To everyone's dismay, Albrecht and other participants won't divulge who is fronting the money.

"It's private money for hard-situation loans," he says. These undisclosed investors are movie stars, entertainers, professional athletes, successful businessmen who have from $1 million to $20 million to play with. The privacy is understandable, considering the mayhem that could occur.

So what brought private lending to fruition? The primary reason is that the subprime lenders are gone. The credit crunch is still here. These loans are used mainly for a quick-fix solution, those that don't fall within the guidelines of "regular" mortgages. For example, someone who was recently divorced and a few months behind on the mortgage would be a good candidate. These are called "situational loans." 

One company, Integr8tive, is offering these privately-funded, star-backed loans. They will extend credit to individuals with Debt to Equity ratios as high as 60%. That sounds great, but they also must have at least 20% down a minimum 700 FICO score. Obviously not easy requirements to meet - but wouldn't it be great to know that one of your favorite professional football players just might be investing in you?

If you don't meet the criteria above, contact Grandview Lending. We will treat you like a star!

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When you're in too deep - a more permanent solution

February 23rd, 2010

Often, at some time in one's life, they face financial hardship. These tough financial times most often affect mortgage payments because they are usually the largest debt incurred, and the highest monthly payment people face. My first suggestion is to always talk to your lender - the mortgage professional cannot help you if they don't know your situation.

The suggested fixes in my previous blog can often help save your home during short-term circumstances. However, if you are shortchanging financial goals - such as saving for retirement - that's a sign it might be time to rethink what you are doing. Instead, try the following strategies to avoid having your home wreck your finances.

If you've already trimmed your budget as thin as possible, you may need to consider more drastic moves.

  • If you have both a variable-rate home equity line of credit and a primary mortgage, you may save hundreds of dollars a month by refinancing into one new fixed-rate loan that ropes in both balances. A $200,000 fixed-rate mortgage at 6 percent, plus a $100,000 Home Equity Line of Credit (HELOC) at 9.25 percent, works out to total monthly costs of about $2,230.Roll that entire $300,000 into a 30-year fixed-rate loan at today's rates and your payment will be approximately $1,800 ... a savings of about $450 a month. That will quickly offset the cost of the refinance. 
  • Consider refinancing if your credit has improved or you simply didn't get a good deal the first time around. If you currently have a 15-year mortgage or are more than 10 years into a 30-year loan, stretching out the payments will save you money now, though you'll pay more interest in the long run.
  • If refinancing isn't a solution and you think you might not be able to make your monthly payment, call your lender immediately and ask about a temporary reduced payment schedule, known as forbearance.

The last thing a lender wants is to foreclose; they run the risk of losing money. Keep in mind that your lender isn't obliged to give you a break, but you have a good chance if you can prove financial need and have a plan to get back on track. And you'll avoid a ding on your credit score.

Unfortunately, there are times when no amount of budgeting and strategizing will alleviate your housing stress, it's time to consider moving on. The good news is that if you have owned your home for several years, you may still be able to sell at a profit. This will also keep your credit rating intact and position you to own another home in the future.

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If you're in too deep - a temporary solution

February 16th, 2010

We provide industry news to help keep you up to date on what's happening in the mortgage industry. This information will assist you in making the proper decision regarding your specific situation. Of course, it's always imperative to speak with a mortgage professional to discuss your individual needs. Some of these decisions include when to move up, stay put, downsize, refinance, take out a 2nd mortgage, etc.

However, it's frequent, especially in these economic times, that people face a different issue with the cost of their mortgage - what if you're in too deep? Then what?

If you're among the many homeowners now straining under the weight of a too-big housing payment, the worst thing you can do is ignore the problem. 

The best thing you can do is size up your situation. Is the housing stress you are facing the result of a:

  1. short-term problem (i.e., layoff or healthcare costs)? or...
  2. more fundamental problem such as a miscalculation of what you could afford?

If the stress is temporary, the solution could be as simple as rethinking your spending. Review your past 6 months of bank and credit card statements. What adjustments in spending can you make? Some suggestions are:

  • cancel health club memberships
  • skip a vacation
  • lower the cost or eliminate gift-giving
  • eat at home more often
  • scrutinize your entertainment expenses

Look at the other side of the coin and think how you can increase your income. One option would be to reduce your withholding, which will increase your take home pay. A part-time, temporary job is also another avenue to consider to get you through this temporary financial crunch.

The effort you place could be the answer to saving, rather than losing, your home.

If your situation is more permanent, the solutions are much different. These options will be discussed in our next post.

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Extra! Extra! Read all about it!

February 9th, 2010

I'm sure you've noticed many recent headlines about mortgage fraud, mortgage lender "misdeeds" and even arrests. It seems it's in the newspapers, on television, and on line. Even links are presented on Facebook and Twitter informing of the issues this country currently faces. If you haven't been aware of these issues, here are a few examples to bring you up to speed:

Defendants Arraigned in Suffolk County Mortgage Fraud
Two Indicted in Mortgage Fraud Scheme
Arrests Made in Alleged Orange County Loan Mod Scam

After Audit, HUD Office Files Charges Against Georgia Lender

N.J. Lender Subpoenaed by HUD, Stops Funding

So why would a mortgage lender bring this up? Because we believe it makes sense to do your due diligence when preparing to sign a contract - a contract/loan that will most likely be the largest investment you'll ever make. 

If you're considering purchasing a new or refinancing your current home, we encourage you to do your homework. The same goes for any other type of transaction that includes your residence (home equity, reverse mortgage, etc.). Check out the mortgage company. Ask friends and neighbors for referrals. "Interview" a few before making your decision.  
  
And when you're ready for that next loan, we'll be happy to assist you. Honestly, ethically and in your best interest.

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Saving, spending and giving

February 2nd, 2010

Since I am in the "mortgage business", I often find myself in discussions regarding money. Credit scores, interest rates, payment plans, investments ... the list goes on. There are so many variables, so many issues, so many person-specific "things" that we all need professionals to guide us when making high-dollar decisions. I am grateful for the opportunity to serve as one of those advisors.

But not all money topics are complicated. I'd like to introduce you to a very simple book, titled Three Cups. This book was developed by Tony Townsley, a gentleman from our Parish at Saint Maria Goretti. He presents the importance of having 3 cups and using each of those cups for saving, spending and giving.  

My son, who is in 4th grade, and I are using Three Cups which was given to him at school at the beginning of Lent. The book has provided a great way for us to go through Lent and to talk about the importance of sharing our gifts with others, saving for our future and spending wisely on our needs today. It has also given my son and me a focal point for discussions about the money he receives on birthdays, for chores and so on. I would recommend this book as a great tool that can help all of us live and teach our faith ... with our wallets. 

Visit the website to learn more about Three Cups and to read others' stories how they've used the book as a roadmap for teaching financial responsibility.

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Further declines in home prices expected

January 26th, 2010

With housing prices and interest rates down, many people are wondering if now is a good time to be a first-time home buyer or upgrade to a "better" home. The tax advantages are certainly one reason to consider purchasing now. 

Looking at the housing market, First American CoreLogic and its LoanPerformance Home Price Index states that further declines in home prices, driven by distressed sales, are expected in the early months of 2010. This will be followed by a recovery this spring, but that is now projected to be much smaller and to occur later than previous forecasts stated.

If your're thinking of upgrading, be sure to factor in the fact that your house, along with most others, has also declined in value. Though you might get a "great deal" on the one you want to purchase, the person buying yours is probably also getting a "great deal" as well.

Besides the cost of the house, the mortgage interest rate is another factor to consider. According to a recent Freddie Mac Primary Mortgage Market Survey, the rates are currently around 5%. These rates are quite inviting. Just to provide a comparison, during the inflationary times in the 70's, mortgage rates were in the low teens. It wasn't unusual for people to pay 13%!

This could be the right time for your to make your move. Consider all the issues - tax incentives, interest rate and the declining values in the housing market. Talk to a trusted mortgage professional; they will help you sort through all the issues and guide you on this major financial decision.

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Mortgages and helping others - it all ties together

January 20th, 2010

We've all heard the saying, people buy from people. This is true, whether it's a product, service or a mortgage. We want to know the person we're dealing with. This develops a trust level that a company logo can't begin to create.

Therefore, along with mortgage knowledge, I will also share some of my personal life - topics that will help you get to know me. Yes, partly because (hopefully) you'll know me well enough to trust me with your next mortgage, and then I can get to know you as well. But also because my other life, outside of the business world, might also serve you through areas of interest or of assistance for you or someone you know.

In December I introduced you to Anna's House. A Community Service Center in Indianapolis, Anna's House was created to serve people in need. Lucious Newsom and Anna Molloy worked together for years to inspire people to care for the hungry and the needy. In this 2005 photo, Lucious, right, and Anna, second from right, pose during the groundbreaking ceremony for Anna’s House. Charlie Caito, left, and Leo Stenz, two loyal supporters of Anna’s House, participated in the groundbreaking ceremony. (Photo Source: The Criterion Online Edition) 

One of the reasons I feel called to Anna's House is that our daughter has skeletal dysplasia, as Anna did. A different type of dysplasia that Anna had but in the same family of dwarfism. We have created a CaringBridge website and wanted to share this great organization. CaringBridge is a free, nonprofit web service that connects family and friends to share information, love and support during a serious health event, care and recovery. This site has been very helpful for us, as we keep friends and family up to date; their comments in the journal are a great source of comfort for us.

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