Relief

In the usual case, disaster relief from mortgage investors falls into six possible categories:

1. Suspend mortgage payments for several months.
2. Reduce the payments for several months.
3. Waive penalties and late fees against borrowers with disaster-damaged homes.
4. Quickly releasing insurance money to help borrowers repair homes.
5. Create longer loan modification plans in severe situations.
6. Temporarily discontinue reporting delinquencies caused by the storm to credit reporting agencies.

While these are the forms of relief which Fannie Mae and Freddie Mac will be offering, relief is not automatic. You must apply to your loan servicer — the company that collects the monthly mortgage payment — for assistance. Also, generally, you must live in or near the spill zone, which generally means homeowners in Louisiana, Mississippi, Texas, Florida and Alabama.

Freddie Mac

Under the Freddie Mac forbearance program, mortgage servicers can suspend mortgage payments for up to three months or reduce payments for up to six months. Servicers may recommend to Freddie Mac forbearance for up to twelve months in situations which are especially difficult and drawn out..

In addition, Freddie Mac says servicers “must not accrue or collect late charges from the borrower during a short-term forbearance or any subsequent repayment plan period if the borrower is paying according to the forbearance agreement.”

Fannie Mae

Fannie Mae says “servicers may immediately suspend or reduce mortgage payments for borrowers whose properties or income are negatively impacted by the Gulf oil spill.” Notice the term “may” — there is no “must” in the policy.

Under its “Special Relief Measures” policy, Fannie Mae servicers “may suspend or reduce a borrower’s payments for up to 90 days while the servicer determines the nature and extent of the impact the disaster is having on the condition of the property or on the borrower’s financial condition. At the conclusion of that assessment, servicers have additional flexibilities to evaluate the appropriate loss mitigation alternative based on a case-by-case determination, including an additional three months of forbearance, a loan modification or other customized solution.”

As with Freddie Mac, relief is not automatic. You must contact your servicer if you have been impacted by the BP oil spill.

Other Lenders

Most borrowers do not know who owns their loan, in part because loans are frequently bought and sold. If your loan is not owned by Fannie Mae or Freddie, or if you do not know who owns your loan, contact your servicer anyway. Other loan owners may also have forbearance programs in place.

As an example, CitiMortgage has “announced a foreclosure suspension program for CitiMortgage-owned mortgages in coastal areas hard-hit by the oil spill in the Gulf of Mexico. The aim of this program is to allow distressed homeowners to remain in their homes during these uncertain times as the Gulf communities respond to the oil spill and its economic repercussions. During the three-month suspension, effective June 17 through September 17, 2010, borrowers with first mortgage loans owned by CitiMortgage and who meet certain other criteria will not be subject to foreclosure sales or foreclosure notifications. While CitiMortgage does not own all of the loans it services, the company hopes to help as many borrowers as possible with this initiative.”

“CitiMortgage

Mortgage Loan Relief For BP Spill Victims is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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I’m not so sure Ozzie and Harriet were off the mark. Ownit closed in December 2006.

Ozzie and Harriett — the Nelsons of early TV — didn’t do too badly. The Nelsons were a prototypical one-wage earner household. They no doubt financed their home with an afforable fixed-rate loan. The mortgage choices then available were pretty much limited to VA, FHA and conventional financing with 20 percent down, financing that usually came from a local savings & loan association.

Today’s mortgages might well have confused the Nelson’s — they certainly confuse a lot of current borrowers. How could one explain the joys of interest-only financing or option-ARMs to visitors from the 1950s? What would they think of such ideas as negative amortization, interest rates based on LIBOR movements (a European index that did not then exist) and monthly payments that might double in a few years?

The Nelson’s lived in a country that was the world’s largest producer of cars and steel and by far the largest producer and exporter of food, but let’s not idealize the ’50s — schools and neighborhoods were segregated; women were relegated to a second-class status; businesses and colleges openly discriminated against Jews; lenders engaged in redlining; there had never been a Catholic president; the Korean war had ended — and the Vietnam war loomed ahead. But at least in the sense of real estate and mortgages, things were understandable.

The worry at the start of 2007 is that the market for subprime loans is less stable then investors would like and perhaps not so understandable. For instance, a 2006 study by Friedman Billings Ramsey found that default rates for adjustable subprime loans originated in 2005 were “15.4% and 6.3% higher than the default rates of those originated in 2003 and 2004, respectively.” (See the June 2006 MarketPlus Report from FRB for details.)

Well sure, you might think, interest rates reached record lows in the summer of 2003. As rates have risen so have foreclosures.

Not quite. Yes, interest rates have risen since 2003 but the Friedman Billings Ramsey study found that most of the subprime loans (74.9%) were 2/28 hybrid adjustables — that is, financing where the payment stays the same for the first two years of the loan term. “Hence,” says the report, “most of the adjustable-rate subprime loans originated in January 2005 will not reset at the earliest until January 2007.”

If rising interest rates aren’t doing it, then why then the rash of subprime foreclosures?

FBR looked at subprime foreclosure rates in 361 metropolitan statistical areas and found that 95 had particularly steep default rates. The reason: slowdowns in areas dependent on auto manufacturing, weak labor markets in New England and Golf Coast areas still reeling from hurricanes Katrina and Rita.

If you remove these 95 metropolitan statistical areas from the mix you find, according to FBR, that default rates increased from 4.16% in in July 2005 to 5.84% in July 2006. An increase, but not as bad as a superficial figures suggest.

It’s just a guess, but I would suggest that those fiscally-conservative folks from the ’50s might look at the FBR survey results and map out a mortgage investment program that looks something like this:

If I’m a mortgage investor I’d look at rising subprime default rates and say more risk means I need more interest. That, of course, is a problem given that subprime rates are already steep. Can the market absorb higher subprime rates without steeper default levels?

I’d stay away from areas with especially high default rates — that would unfortunately mean less financing for the metropolitan statistical areas where the need for mortgage capital is especially accute.

I’d look ahead and wonder about areas that have high levels of interest-only and option ARM activity. FRB reports that in the first six months of 2006 more than a quarter (25.8%) of the loans in California allowed negative amortization. In the same period interest-only financing was remarkably popular (or necessary) in Charlottesville, VA (47.1%), Ventura, CA (46.3%) and Santa Cruz-Watsonville, CA (45.7%).

I’d wonder what would happen with those 2/28 hybrid adjustables, the ones that will begin resetting in big numbers in this month. Does anyone seriously think that higher interest rates will not compound subprime problems?

The Nelsons may not have had home computers, electronic games or DVDs, but each month they could easily pay their steady mortgage bill. For a growing number of homeowners, that’s not a bad deal.

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Published originally by RealtyTrac.com during January 2007 and posted with permission.

Should We Bring Back Ozzie & Harriet Loans? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Bigger homes, of course, require more dollars to buy, finance, refinance, insure, heat, air condition, and carpet. The equation is bigger homes = bigger mortgages — and we all know how bigger mortgages impact monthly payments.

It’s not just that we have more interior area, we have also packed more features into today’s houses including, says the NAHB, whirlpool bathtubs, gas fireplaces, gourmet kitchen appliances, state-of-the-art home security systems and low-maintenance exterior materials, make new homes more comfortable and livable than ever. Also, homes built today are also more energy efficient. In fact, new homes are about twice as energy efficient as new homes were just 20 years ago.”

In most communities you can almost date the housing stock by the size of local palaces. The trend seems to be massive footprints on small lots — an approach which creates a lot of interior square footage with little exterior space to maintain.

At a time when there is a strong need for affordable housing, huge and expensive homes are virtually required by the economics of land acquisition. You can’t build small and cheap in most metro areas because the cost to acquire and develop property is so great. In addition, zoning ordinances and minimum lot sizes assure an effective housing shortage in many areas — thus a major reason for rising prices.

People with large holdings and big incomes have choices while those on the cusp of subsistence do not. The failure of our housing market is that we are very good at plans, restrictions and zoning — and not so good at affordable housing. We’ve taken the reward motive out of affordable housing because builders in many communities cannot profitably-construct cheap homes and still meet zoning requirements.

But less expensive homes are possible, sensible and necessary. Smaller lots combined with smaller homes can certainly be built — if allowed. And such homes can easily work for many households: Just look at the typical home sizes from five decades ago — and then look at the number of occupants per house. According to the Census Bureau, the average household had 3.37 people in 1950 — and 2.56 people in 2007.

What we have now are fewer people per household and cavernous, echo-filled structures in which they are housed. This makes little sense in terms of land usage, energy consumption, environmental issues or cost.

Today we increase home values by limiting supply, a better approach would be to increase home prices by enlarging the pool of qualified buyers. We’d have more buyers if we had more affordable housing, homes that can appreciate in value and allow owners to build equity, increase household wealth over-time and re-enter the marketplace as move-up buyers.

As an owner it’s in your self-interest to want the largest possible pool of move-up buyers, a group that represents some 60 percent of the existing home marketplace. Increase the number of move-up buyers and your home is likely to sell faster and for more money. The catch is that you can’t have move up-buyers unless they have properties to replace — thus the need for affordable housing.

Community planning today favors the upwardly mobile, the already settled, growing congestion and a numbing architectural sameness. We are using land regulation to limit affordable housing at the very same time we claim that affordable housing is an attractive and desirable goal — except where we live.

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Published originally by Realty Times on October 24, 2003 and posted with permission.

Mega Homes Versus Real Estate Sanity is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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