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BofA Offers Help to Homeowners Underwater

Real Estate Home Blog — Mon, 05 Apr 2010 10:10:09 +0000

With hopes of encouraging more participation from homeowners in programs of modification, the Bank of America now has a brand new approach on modifying loans that are extremely underwater.
First, it looked at principal forgiveness when modifying adjustable-rate and subprime mortgages that qualified for the NHRP. These also had to meet the most basic qualifications of the Home Affordable Modification Program.

This approach focuses on mortgages that are extremely underwater and have high delinquency rates, most of all Pay-Option ARMs and subprime loans.

The Bank of America has seen a lot of homeowners that owe a lot more on mortgages than on what their homes are actually worth but are reluctant to accept solutions that focus merely on the payment without balance reductions from their loans.
When it comes to these mortgage modifications, the Bank of America is going to take principal reduction into consideration to reach reasonable payments that are equal to around 31% of the household income. If it is a necessity to get extra savings to reach that target of payment, a reduction of interest rates will also be taken into consideration.
Under this new approach, the qualified homeowners will get an offer of interest-free principal forbearance, which can become forgiven principal – a result of up to 30% in loan principal balance reduction.

For the initial three years, the forgiveness installments will be set to a level of 20%. In the last two years, this amount will rely on the property’s updated value to make sure that the LTV won’t go below 100% because of principal forgiveness.
Earned principal forgiveness can help homeowners

Aside from this new approach, the Bank of America has also started to provide two other sustainable and reasonable payment solutions when it comes to certain Pay-Option ARMs.
If negative amortization is the case, they will think about offering up HAMP modification to get rid of negative amortization and to forgive some of the amounts for principal reductions. If pending Pay-Option ARM recasts appear to increase the monthly payments of a customer, however, a preemptive modification which gets rid of negative mortgage amortization and changes it to a completely amortizing market rate loan might be taken into consideration.
The latest NHRP components will come about next month and they are expected to offer up improved solutions to principal reduction to around 45,000 customers that qualify for the HAMP modification. This would result in around a total of $3 billion of reduced principal.

February Foreclosures High

Real Estate Home Blog — Sat, 03 Apr 2010 10:07:26 +0000

In February, St. George’s rates of foreclosure went up compared to its rates last year.

St. George’s foreclosure rate among existing mortgage loans stands at 4.19% for February, 1.88% higher than last year’s 2.31%. In fact, the overall activity of foreclosure in St. George stands higher compared to the national rate of foreclosure, which stood at 3.17% this February – a difference of 1.02%.

The rate of mortgage delinquency in St. George has also gone up. In the month of February this year, 11.13% of all mortgage loans happened to be at least 90 days delinquent as compared to the 6.11% of last year – a 5.02% increase.

Foreclosures do not appear to be a problem is Rancho Santa Fe as the Rancho Santa Fe real estate market continues to remain strong.

Rates of Unsold Homes Finally Going Down

Real Estate Home Blog — Tue, 23 Mar 2010 15:33:20 +0000

It has been said that a small foreclosure surge will not significantly effect the sales of homebuilders this year because home sale inventory and new construction have fallen quite far below average levels in a lot of cities. Although it would be preferable not to have any more supplies come through foreclosures, a bit more will not totally hurt the markets.

After the housing boom collapse, foreclosures ended up soaring, which produced a glut in a lot of markets and sent home prices down. This resulted in homebuilders struggling to entice buyers into their homes instead of the discounted homes owned by banks. However, recent steady sales in a lot of markets ravaged by foreclosures have slowly sent down the amount of these homes in today’s market.

Additionally, a lot of banks slowed down the process of foreclosure, occasionally choosing to modify mortgage loans at risk. This also ended in less bank-owned properties in the market.

Naturally, the last thing anybody would wish to see is a flood of foreclosures, as predicted by economists who stated that it would happen if borrowers that have option-ARM mortgages choose to default in the near future. A lot of their loans are scheduled for resets, which could possibly trigger big increases in monthly payments.

This does not mean that marketplace concerns should be forgotten. Naturally, risks do exist that are very real and they should never be shoved aside for anything.

Mortgage Modifications Double in December 2009

Real Estate Home Blog — Sun, 31 Jan 2010 17:01:34 +0000

After months of pressure given to mortgage servicers and banks, the administration of Obama has finally reported some improvement on its program in reducing payments of mortgage to get rid of foreclosures.

The amount of loan modifications that were recently made permanent has doubled since the end of December 2009. Plus, many more trial mortgage modifications have also been approved to become permanent, too.

Although mortgage servicers seem to have picked up the pace in turning 3-month trial modifications permanent, the amount of these permanent modifications remain low when compared to when the trials actually began.

The program offers up incentives for mortgage services in order to lower monthly payments for troubled homeowners, but critics state that this program has not done enough to stop the foreclosure tide. A more significant response is definitely required; that much is clear. But does enough political will actually exist that can force banks into modifying loans?

The administration acknowledges the need to do more and has goals of meeting a target of four million in modifications by the year 2012. They also promise to ensure that the program will run right and eventually stabilize the market of housing.

Originations of Mortgage are Dropping

Real Estate Home Blog — Sat, 23 Jan 2010 18:54:22 +0000

It seems that residential mortgage originations are going to drop by 40% this year – the lowest in an entire decade – as the demand for home refinancing drops along with rising rates of mortgage.

Lenders are going to underwrite $1.28 trillion for home loans, compared to the $2.11 trillion of last year; this would be its lowest amount since 2000′s $1.14 trillion.

Although brand new purchase originations may rise a bit from last year’s $742 billion to $776 billion, refinance originations are seen dropping from $1.37 trillion from last year to a mere $502 billion.

Rates of interest are also expected to go up after the Federal Reserve stops purchasing securities backed by mortgage at the end of March while 30-year fixed rates are seen to rise to 5.8% this year, 6.2% next year and 6.5% the year after that.

Despite this rise in rates, mortgage bankers see a heightened housing demand as unemployment drops, economic growth keeps going and financial systems stabilize.

Housing starts appear to rise to annual paces that are seasonally adjusted, while complete sales of homes that were previously owned are seen to rise, as well. Prices seem flat this year after dropping by 4.1% in 2009, while 2011 prices are seen to rise by 2.8% and 5% the year after that.

The economy is expected to grow by 2.7% by the end of this year instead of the expected 0.2% contraction last year. It has also been stated that this will encourage the production of brand new kinds of mortgage security guaranteed by the government that government-chartered, privately owned entities of mortgage-credit guarantors would back.

Real Estate Fraud in New Jersey

Real Estate Home Blog — Sat, 23 Jan 2010 18:49:06 +0000

A man named Wayne D. Puff ran a big Ponzi scheme that was fueled by subprime mortgage free-flowing money and was recently sentenced to 18 years in prison, while ordered to pay out around $100 million to his victims. His was one of the largest real estate frauds in the history of New Jersey.

From 1998 to 2005, 1,200 investors nationwide gave hundreds of millions to his company and he was able to draw in investors through advertisements of guaranteed 15-20% in returns from his real estate business of buying, reselling and renovating.

From offices all over New Jersey, Puff worked with appraisers that pumped up the values of real estate and mortgage brokers that fudged applications. Properties got flipped to investors at incredibly high prices without them realizing it, costing them $55 million and sending hundreds of properties in New Jersey into legal hell.

Puff was arrested two years ago, though he only pleaded guilty last year with ten other co-conspirators. Tons of his investors, a lot of which were senior citizens, stated that most of their life savings were lost. When Puff appeared in court, he promised to repay every single one of his victims.

Fed Emergency Loans are Still Low

Real Estate Home Blog — Tue, 12 Jan 2010 23:29:46 +0000

Recently, banks have borrowed a bit more from the emergency lending program of the Federal Reserve. Almost a billion dollars more were averaged in daily borrowing last week compared to the week before, but these levels are still quite low.

With the slight improvement of financial conditions, banks have chosen to scale back their overall use of the emergency discount loan of the Federal Reserve. The peak of this particular crisis hit $110 billion that was borrowed daily by banks, showing how serious trouble was becoming in obtaining loans via regular channels of the private market. Such banks only pay .5% on emergency loans.

During its peak early last year, the Federal Reserve held around $350 billion worth in commercial paper. Recently, however, banks have not made any use of individual programs of commercial paper, which were made to improve the overall availability of important financing needed for paying supplies and salaries in the short term.

Additionally, banks have cut back on loans in the short term taken from the Federal Reserve’s program of term auction credit, which recently averaged around $76 billion, just as it did the week before. This is significantly lower compared to last year’s $406.8 billion average.

However, even with these reductions, the balance sheet of the Federal reserve, which broadly tracks the lending of the central bank, still stands at $2.2 trillion – more than twice the level before this crisis. This balance sheet proves just how much effort the Federal Reserve has taken for economic stability.

Under one of these programs, the Federal Reserve wants to try to purchase $1.25 trillion when it comes to mortgage securities in two months. Their latest reports have shown that the central bank currently holds around $908 billion in securities.

Several officials of the Federal Reserve state that weak economies could warrant a program expansion past its recent schedule end in March, though some argued that the program would get scaled back because of the improvement within financial and economic conditions to date.

The purchase program of mortgage security is made to keep rates of mortgage low and attractive, as well, in order to help improve home sales to get the market of housing out of its slump.