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States Act to Stem Foreclosure Scams

by Alexandra Zega

RISMEDIA, May 30, 2008-(MCT)-For people about to lose their homes to foreclosure, the advertisements are like a lifeline: “WE BUY HOUSES FOR CA$H,” or “Refinance Your Mortgage! And Receive a 7 Day Vacation.”

These so-called mortgage-rescue companies promise that for fees of about $1,000 to $2,500, they can negotiate loans with providers to get owners lower monthly payments. Or they offer deals that suggest homeowners temporarily deed their homes to the company or a third party, theoretically to allow the homeowners time to get back on their feet financially.

But in some cases, these “solutions” have turned out to be far worse than the problem.

At a time when the subprime mortgage crisis has caused a record number of homeowners to enter foreclosure, scam artists have made a bustling industry of preying on people’s desperation to save their homes.

States are leading the effort to help homeowners avoid these scams; at least 18 states have laws banning foreclosure-rescue scams by limiting some of practices that lead to them, and six of them-Idaho, Maine, Nebraska, Oregon, Virginia and Washington- enacted laws just this year, according to the National Conference of State Legislatures. A similar bill is now on the desk of Florida Gov. Charlie Crist (R).

The measures include giving homeowners a few days to cancel their contracts with these companies without penalty, requiring that a homeowner receives at least 80 to 82% of a house’s fair market value if it’s sold and requiring a written contract, which may even designate the size of type it contains.

“You’ve got to let the word get out there that we’re not going to tolerate preying on people who are at the bottom of despair,” said Washington state Rep. Patricia Lantz (D), who sponsored her state’s bill. “This is a deterrent to the worst of the worst.”

Before this year, Maryland already had a law that targeted foreclosure scams, but during the recent legislative session, the state enacted the country’s toughest statute: a ban on all rescue transactions that involve homeowners signing away the deeds to their homes.

Only Washington, D.C., which acted this year, and Massachusetts have similarly stringent rules. The Bay State permanently banned for-profit foreclosure-rescue transactions through a regulation issued by the attorney general.

Legitimate foreclosure rescue services are often nonprofits and don’t normally charge upfront fees; also, homeowners usually come to them seeking help.

The scammers, on the other hand, find potential victims by combing through public records to see who is in danger of being foreclosed. Then they bombard them with calls or direct-mail solicitations that sometimes look like letters from a government agency. One company that operated in Idaho sent out notices to homeowners falsely claiming that their homes were “scheduled to be sold at auction” and instructing them to call the company. In some cases, consultants have even shown up on owners’ doorsteps to drum up business.

In one type of scam, a consultant demands an upfront fee of $1,000 or more to negotiate with the loan provider on the owner’s behalf for a more affordable loan, but then the company does little or nothing. Besides being $1,000 poorer, the owner also has lost valuable time he or she could have used to work out a plan with the provider.

April Charney, an attorney at Jacksonville Area Legal Aid in Florida, said she has a client who paid $1,200 to HomeSavers USA to help her work out a deal with her loan provider. The company-which in February reached an agreement with the Illinois attorney general to stop operating in that state-took the money and then did little to help the client. Now Charney is trying to negotiate to get the $1,200 applied to her client’s mortgage.

“Instead of having that money applied to her mortgage arrears, which might have brought her current, it just sunk her further in the hole,” Charney said.

In another common rescue scheme, the foreclosure consultant convinces a homeowner to sign over the home’s title, either to the consultant or a third party. The homeowner remains in the house and pays rent, believing that he is buying time to get back on track and that the consultant will eventually sell the home back to him again.

But in some cases, the rent charged to the homeowner is even higher than the mortgage payments. If the homeowner can’t pay, he’s evicted. Or the consultant refinances the house, often multiple times, draining the equity.

Sometimes, property owners don’t even know they have given away their homes. In Florida, many of the victims of this scam are elderly, uneducated or don’t speak English, said Carolina Lombardi, a staff attorney at Legal Services of Greater Miami Inc.

“They’re literally tricked. They sign a stack of papers with no concept they’re signing a deed. They think they’re refinancing,” she said. “Or they know they’re signing their deed, but they’re told, ‘we’re just holding this for you until you establish you can improve your credit.’ They’re desperate, and it seems reasonable.”

Without laws against rescue scams, prosecutors can go after the perpetrators by claiming they violated deceptive-advertising statutes, but the threshold for proving fraud is high. Additionally, when the scammer produces a stack of contracts the victims have signed _ even if the owners were deceived about what they were signing _ prosecutors have no case against the rescue consultants.

State attorneys general are often the driving force pushing for their states’ laws. Massachusetts Attorney General Martha Coakley’s (D) in September bypassed the Legislature and issue a regulation banning for-profit rescue transactions under the state’s consumer protection act. An attorney at Florida Legal Services said her group had futilely tried to get a law enacted for years, and this year’s bill passed only because it was proposed by Attorney General Bill McCollum (R).

Illinois Attorney General Lisa Madigan (D) saw early on the looming problem posed by rescue scams. The Legislature there passed a bill she drafted in 2006, which gives homeowners five days to cancel a rescue contract and requires rescue firms to pay the homeowner at least 82% of the fair market value if he or she cannot buy back a home after signing the deed away.

“These people are parasites, and they are attacking the people who are already desperate and who are vulnerable,” she told Stateline.org. “It’s the worst financial scam that we’ve seen perpetuated against homeowners.”

Since the law’s enactment, Madigan has reached a settlement with at least one company, HomeSavers USA, that bans it from operating in the state, and her office has 12 current lawsuits against rescue schemes.

At the same time, she has seen a drop in activity. “A lot of these individuals and companies that were running these scams have left Illinois. It’s not beneficial for them,” Madigan said.

Other states’ attorneys general have also been targeting the foreclosure rescue consultants.

In March, Idaho’s attorney general reached an agreement with one company to stop doing business in the state. The Washington state attorney general got Foreclosure Assistance LLC to agree to refund about $75,125 to 200 customers, though the $300 to $500 each victim will get is far less than the $1,200 to $1,500 each one paid the company.

© 2008, Stateline.org
Distributed by McClatchy-Tribune Information Services.

On a personal note: If you are facing foreclosures speak to a Realtor you can trust and has experience. I have a whole team to help homeowners in these difficult times. I work with an experienced attorney and a professional loss mitigator. And our services are free of charge. We have helped many distressed homeowners avoid foreclosure. So, get the facts and ask questions. - Alexandra Zega, Realtor - 508 662 6047

 

 

12 Myths about Credit Reports

by Alexandra Zega
Here's a look at 12 common credit report myths and what the truth really is:

1. Paying my debts will make my credit report instantly pristine.
2. I must give permission for a company to see my credit report.
3. Credit counseling always destroys my credit score.
4. Canceling credit cards boosts my score.
5. Too many inquiries hurt my score.
6. Checking my own credit report harms my standing.
7. FICO scores are locked in for six months.
8. I don't need to check my credit report if I pay my bills on time.
9. All credit reports are the same.
10. A divorce decree automatically severs joint accounts.
11. Bad news comes off in seven years.
12. I can always pay someone to fix or repair my credit.

From Bankrate.com

 1. Paying my debts will make my credit report instantly pristine.
A credit report is a history of your payments, not just a snapshot of where you are at the moment, says Maxine Sweet, vice president of public affairs for Experian, one of the three major credit reporting agencies. As the author of the popular Web column "Ask Max," she continuously reminds people that you can't change the past.

2. I must give permission for a company to see my credit report.
It's scary, but the fact is that unless it's for employment purposes, your signature or consent is irrelative.

3. Credit counseling always destroys my credit score.
Attending a credit counselor's debt management program is not considered negative in the scoring models.

"We don't want consumers to consider credit counseling to be detrimental to their FICO scores," says Craig Watts, public affairs manager at Fair Isaac Corp., the company that developed the FICO score.

However, if the credit counselor negotiates a lesser contractual obligation, the lender decides how it wants to report that. So if your $500 monthly payment is refigured for $300, the creditor may either legally report that as $200 in arrears every month or reward you for not filing bankruptcy by reporting the account as up to date.

"As long as the accounts are delinquent and not brought up to date, it will be viewed negatively by lenders," says Deborah McNaughton, owner of Professional Credit Counselors and author of "The Get Out of Debt Kit." However, she says, "if everything is current, whether it's a home loan or not, they're not going to view it as negative. The FICO scores are not affected by it." The credit score system ignores any reference to credit counseling that may be in your file.

Although credit counseling does not by itself influence your credit score, it is apparent on the report that you've been through, or are currently in, counseling -- and that is something individual lenders may not like. Or they might never know.

"If they looked manually at your credit report and saw that debts were being repaid through a debt management program, they probably wouldn't open a new account for you," Sweet says. Of course, "you shouldn't be opening a new account if you're in a debt management plan."

However, most lenders these days will never see your actual report.

"They don't look at reports manually anymore," Sweet says. "Some small creditors might, but most of any size use automated scoring systems of one model or another."

Once you've successfully emerged from credit counseling with your formerly tattered credit pieced back together, the history of consistent payments is what matters the most. "Even mortgage lenders will work with consumers who have successfully gone through debt management counseling and will work to get them a mortgage," McNaughton says.

4. Canceling credit cards boosts my score.
Open accounts spells available, potential debt, so better to close them, runs the legend. But experts agree that most creditors want to see at least two or three pieces of active credit to prove you can manage debt responsibly.

And, Watts chimes in, those unused cards lying in your jewelry box aren't wreaking havoc with your score.

"The myth is that they look ominous to potential lenders," he says. "Reality is that paying your bills on time and not being overextended is more important than having $5,000 worth of available credit on a card you're not using. We continue to evaluate this 'open to buy' statistic, and we simply don't find it falling into one of those highly predictive areas."

On the other hand, extremes never look good. Opening one charge account occasionally to take advantage of a 10 percent offer is negligible. Going wild and signing up for five during the holiday season probably would invite a decreased score, he says.

5. Too many inquiries hurt my score.
Once upon a time, this statement was true. But get with the times -- in this millennium, the credit agencies recognize a shopping mind-set when they see one. If a batch of mortgage or car loan inquiries arrives within 30 days, it doesn't count at all, Watts says.

"Outside that 30-day period, if we locate a mortgage or car inquiry that occurred 180 days ago, and then see more mortgage- or auto-related hits in the accompanying 14-day window, we err on the consumer's side and still assume she's shopping for one item," he says.

"We really feel like we are capturing the true consumer experience and not holding it against them for being an aggressive or smart rate shopper."

Furthermore, there's no such thing as some fixed number of points associated with these inquiries, Watts says.

"Inevitably when a consumer or a lender evaluates a credit file, they think this item must be worth 20 points, this is worth 100 points," he says. "In reality we design the FICO scoring model so that each credit report item is given a reasonable or statistically valid number of points."

In English, that means FICO is designed to predict the likelihood that you'll fall seriously behind in repaying one of your creditors within the next two years. Some things have predictive value and some don't. Inquiries fall in the middle.

"They're not incredibly predictive, so they're in the model but they don't drive the boat," Watts says.

6. Checking my own credit report harms my standing.
The reporting agencies distinguish between soft and hard pulls. When Target calls to check before issuing its line of credit, the agencies chalk that up as a hard pull and it counts against your score. Personal requests and credit counselors -- if they do it correctly, so insist on this as part of your agreement terms -- fall under soft pulls, which do not reflect negatively on the evaluation.

Using a company that promises credit reports as a perk can turn this myth into a self-fulfilling prophecy, however, McNaughton says.

Because they are merchants in disguise, their freebie costs you. Citizens must go directly to the three bureaus if they want a soft pull. Ditto FICO.

"Pulling your credit scores is quite empowering," says Watts. "You have a choice: You can either be very aggressive with your credit management and pull your score with some regularity or take a more passive approach once a year to see how all those credit cards are actually doing."

7. FICO scores are locked in for six months.
Fair Isaac Corp.'s models are dynamic, meaning that your FICO score changes as soon as data on your credit report change.

"When we calculate a score, for all intents and purposes it then goes away and is recalculated the next time someone pulls your file," says Watts.

8. I don't need to check my credit report if I pay my bills on time.
When the Consumer Federation of America and the National Credit Reporting Association analyzed credit scores in the summer of 2002, they discovered that 78 percent of the files were missing a revolving account in good standing, while 33 percent of files lacked a mortgage account that had never been late. Twenty-nine percent contained conflicting information on how many times the consumer had been 60 days late on payments.

"There can be a lot of other activity going on that you don't have any clue about," McNaughton says.

In her experience, 80 percent of all credit reports have erroneous information ranging from a wrong birth date to accounts you never applied for.

9. All credit reports are the same.
Way wrong. These days, most creditors across the country do report their information to all three major agencies: Equifax, Experian and TransUnion.

But "that was not true in the past," Sweet says.

And, because they are separate companies, the speed in which they update records isn't necessarily equal.

Additionally, the agencies use inquiry activity to update your address, phone numbers, employment status and the like. Because creditors typically pull only one company's report, it's possible that, say, TransUnion doesn't show your current address.

According to McNaughton, she's never seen a client yet for whom all three reports spit out the same records and scores.

10. A divorce decree automatically severs joint accounts.
The judge may have rubber-stamped your plans to divide credit card, car and house payments, but that carries absolutely no legal weight with the creditors themselves, Sweet says.

"We see so many people who, a year or two after the divorce, are just outraged and hurt because their credit report reflects their ex-spouse's missed payments," she says.

Unfortunately, at that point, they are helpless to erase the damage.

Divorcing parties must contact the creditors and either close current accounts or have the booted name sign a letter of consent for this action. And assuming certain debts isn't a unilateral decision on your part, says Sweet. Creditors typically do a credit check on your name and if they don't deem you financially stable enough to assume that $30,000 car loan, for instance, they won't agree to remove the other person.

11. Bad news comes off in seven years.
Some of it does. Chapter 13 (reorganization of debt) disappears seven years from the filing date. But if you filed Chapter 7 bankruptcy (exoneration of all debt), the window is 10 years from the filing date.

On the good-news side, accounts in bankruptcy can be deleted seven years after the date of your first missed payment, so those individual pieces may disappear before the word "bankruptcy" on your report. And if you pay off or close an account that had no delinquencies or problems, it, too, remains on the record for 10 years rather than the previous seven, say Experian experts. Again, this means positive information hangs around longer, as a consumer benefit.

12. I can always pay someone to fix or repair my credit.
Yes, you can clear up erroneous information posted to your account, such as a repossessed car that you didn't purchase in the first place, but if you paid your Sears bill three months late in 1997, that's a hard fact.

Companies claiming to fix your credit deliver on their promises by generating a flood of dispute letters to the credit reporting agencies, which in turn ask the creditor to verify or document the entry. If they cannot, the listing must come off at that time. But if the creditor later does verify or document it, the agency slaps it right back into the file after 30 days.

 

The ‘Keys’ to Stability in Today’s Market

by Alexandra Zega

RISMEDIA, May 28, 2008-Fannie Mae recently announced its Keys to Recovery initiatives, which is a part of the organization’s efforts to prevent foreclosures, support counseling efforts, and provide market stability in the wake of the housing and mortgage market downturn.

The initiatives are geared toward helping struggling borrowers stay in their homes, assisting prospective home buyers with home purchases, and stabilizing impacted communities. Here is a summary:

Keys to Recovery Initiatives

Fannie Mae’s Keys to RecoveryTM initiatives are geared toward providing liquidity, stability, and affordability to the housing and mortgage markets for the long term, and includes steps to keep struggling borrowers in their homes, assist prospective home buyers with home purchases, and stabilize communities impacted by the mortgage market downturn.

The initiatives include:

1.) A new refinancing option for Fannie Mae “underwater” borrowers that will allow for refinancing up to 120% of a property’s current value;
2.) A renewal and expansion of the company’s partnership with State Housing Finance Agencies (HFAs) to provide $10 billion in financing for qualified, first-time home
buyers;
3.) In partnership with Self-Help, a new initiative that allows families in hard-hit communities to reside in foreclosed properties on a rent-to-own basis; and 4) pricing for new jumbo-conforming loans that will be flat to conforming for portfolio asset acquisition through the end of the year.

Refinancing “Underwater” Borrowers

With home prices declining in many areas of the country and lending standards tightening as a result of the ongoing turmoil in the housing finance system, many borrowers find themselves with mortgages that exceed the value of their homes and are locked out of refinancing into safer loans that would allow them to sustain their mortgage payments.

In order to assist borrowers whose home equity is “underwater,” reduce foreclosures, and support sustained homeownership, Fannie Mae will purchase refinanced loans the company owns for up to 120% of the current property value provided the borrower is current with their mortgage payments.

HFA Investment

HFAs exist to provide affordable homeownership and rental housing opportunities within their states. The majority of HFA single-family business is for first-time home buyers who have received borrower counseling and down payment and/or closing cost assistance from the government.

Fannie Mae has maintained a long-term agreement with the National Council of State Housing Agencies (NCSHA) to purchase loans generated by the HFAs. The company is renewing and expanding its agreement with NCHSA to purchase up to $10 billion in HFA loans by the end of 2009. In addition, the company will provide access to low down payment mortgage products at competitive prices, resulting in more advantageous financing opportunities for first-time home buyers.

Neighborhood Stabilization

In order to minimize the neighborhood impact of foreclosed properties, Fannie Mae will support an initiative with Self-Help in partnership with local nonprofits to purchase foreclosed homes in hard-hit neighborhoods.

The nonprofits would acquire and rehab the properties, and then sell them to qualified borrowers or enter into a customized lease-purchase agreement. The initiative will be geared toward borrowers who have the income to qualify for the home purchase, but need additional time to improve creditworthiness. Participants choosing the rent-to-own option would be granted up to five years to qualify for the mortgage and receive extensive credit counseling during the lease period.

Jumbo-Conforming Loans

Following passage of the Economic Stimulus Act of 2008, Fannie Mae is temporarily able to purchase loans greater than the conventional-conforming loan limit of $417,000. In certain high-cost areas as designated by HUD, the company is able to purchase jumbo-conforming loans up to $729,750 in the continental U.S. The company is now accepting deliveries of 15-year and 30-year fixed-rate (FRM), and certain adjustable-rate (ARM), jumbo-conforming mortgages.

In order to bolster liquidity in the jumbo-conforming market and help reduce rates for jumbo-conforming mortgages in high-cost areas, the company will now:

• Price new jumbo-conforming loans flat to conforming for portfolio asset acquisition through the end of the year. This means that although jumbos are not TBA-eligible, we will be pricing them as if they were.

• Allow for cash-out, jumbo-conforming loan refinancings.

• Expand loan-to-value (LTV) criteria for jumbo-conforming purchase loans and limited cash-out refinancings.

• Offer expanded jumbo-conforming FRM and ARM options.

HomeStay

The company’s Keys to RecoveryTM efforts build on Fannie Mae’s HomeStay® initiative announced last year.

The company is working with lenders, loan servicing companies, and policy makers to respond to the housing and mortgage market crisis with a goal to minimize the impact on families and communities by preventing foreclosures, supporting counseling efforts, and providing market stability.

Through HomeStay®, since the beginning of 2007, the company has:

• Helped more than 200,000 at-risk homeowners refinance into safer loans or work out their loans, including nearly $28 billion in refinancings for subprime borrowers.

• Provided more than $10 million in grants - and hundreds of employee volunteer hours - to support foreclosure prevention counseling and workshops since the housing crisis deepened last year.

• Worked with loan servicers to emphasize work-outs for delinquent loans, instituted attorney incentive fees for workouts, provided HomeSaver AdvanceTM loans that allow borrowers to catch up on their delinquent mortgage payments, deployed staff to work on-site with our largest servicers, and made dozens of operational changes and enhanced servicer authorities to allow for easier modifications and work-outs.

• Supported HOPE NOW initiatives and public policies to give at-risk and delinquent borrowers a better chance to afford their mortgages.

National Down Payment Policy

On May 16, 2008, the company announced a new, single down payment policy in all communities across the nation for conventional, conforming mortgages the company will purchase or guarantee. Starting with loan applications taken on June 1, 2008, Fannie Mae will accept up to 97% loan-to-value ratios for conventional, conforming mortgages processed through its Desktop Underwriter® automated underwriting system, and 95% loan-to-value ratios for loans underwritten outside of Desktop Underwriter, in all geographic locations in the United States.

This new national down payment policy will supersede the “Maximum Financing in Declining Markets Policy” Fannie Mae adopted in December 2007, which required higher down payments in markets where home prices are declining. The new policy now equalizes down payment requirements across the country, regardless of local market conditions.

4 Must-Know Mortgage Guideline Changes

by Alexandra Zega

RISMEDIA, May 13, 2008-Fannie Mae recently announced four key initiatives that will have a huge positive impact for home owners and buyers. “When Fannie Mae changes their policies and procedures, it has a wide-spread impact on homeowners,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. “This is because over 60 percent of US home mortgages are securitized, meaning that they are owned by investors like Fannie Mae and Freddie Mac who issue bonds on the bond market using these mortgages as collateral.”

The four changes are:

1. Fannie Mae will allow borrowers to refinance up to 120% of their home value if they are currently paying their mortgages on time.

“This is a huge positive development for responsible homeowners who are faithfully making their payments, but simply find themselves in a negative equity situation due to declining real estate values,” said Nicholas.

2. Fannie Mae is renewing and expanding their partnership with the state Housing Finance Agencies to provide $10 billion in financing for qualified first-time home buyers.

“This is important because it gives first time home buyers access to more financing options, thereby increasing the amount of eligible buyers in the marketplace,” Nicholas said.

3. Fannie Mae is teaming up with the Self-Help Credit Union, one of their long-time partners, in order to help families in hard-hit real estate markets get into foreclosed properties through a rent-to-own program.

This will stabilize communities by enhancing the options available to renters.

4. Effective immediately, Fannie Mae will buy new jumbo-conforming loans at the same price that they buy other conforming loans throughout the remainder of 2008.

“This is an enormous benefit for mortgage borrowers in high cost areas who have been largely disappointed with the persistently high rates on jumbo loans,” said Nicholas. As part of the much touted Economic Stimulus Package of 2008, limits on jumbo mortgages were increased from $417,000 to up to $729,750 in high cost areas. “The reality of the situation is that these higher loan limits have not really been effective because Fannie Mae has charged higher interest rates and fees on these loans versus traditional conforming loans at or below the $417,000 limit,” said Nicholas. The new rules abolish this pricing difference, and allow jumbo-conforming loans to priced exactly the same as traditional conforming loans. “These low interest rates expire at the end of 2008, so now is a perfect time for borrowers in these higher-priced markets to buy homes,” said Nicholas.

For more information, visit www.CMPSInstitute.org

RISMEDIA, May 12, 2008-The Bush Administration has put in place responsible solutions to help American families stay in their homes and avoid foreclosure, U.S. Department of Housing and Urban Development Deputy Secretary Roy A. Bernardi said today. Delivering the keynote address at the Federal Home Loan Banks Annual Directors Conference, Bernardi highlighted President Bush’s responsible plan to strengthen the economy and help homeowners by allowing HUD’s Federal Housing Administration (FHA) to be “a good safeguard against foreclosure.”

“This is the time for vision and prudence. We must give the American people real solutions to the housing crisis, not multiply problems. The Bush Administration favors responsible, specific efforts to save homeowners and allows FHA to be a central part of any lasting solutions,” Bernardi said.

In August 2007, FHA modified its refinancing program to help creditworthy homeowners who missed payments after their teaser rates reset. Since then, more than 170,000 families who are current and past due on their home loans have refinanced with FHASecure, FHA’s refinancing product. The number of single family mortgages endorsed by FHA has effectively doubled over the last year, Bernardi said. In the first quarter of 2008, FHA endorsements totaled more than 237,000, which is a 100 percent increase over the same period last year. Homeowners refinancing from the exotic subprime market to FHA are saving approximately $400 a month on their new mortgages.

Earlier this month, the Bush Administration announced additional administrative steps to extend FHA opportunities to troubled homeowners. Using its current regulatory authority, FHA will assist homeowners who are struggling with their current mortgage payments who have no other way to refinance their loans as their homes lose value.

FHASecure will extend assistance to borrowers in subprime adjustable rate mortgages who were late on up to three consecutive monthly mortgage payments or at three different times over the previous twelve months. FHA will allow lenders to voluntary write-down outstanding principal mortgage balances and insure, which will provide an equity cushion and protect taxpayers against risk.

“Expanding FHASecurein this way is a good idea,” Bernardi said. “Borrowers will reduce their principal payments and keep their homes. Lenders will avoid taking a more significant loss at foreclosure. Neighbors will avoid vacant homes in their neighborhood, depressing their home values. And localities will keep a viable tax base to fund community health, schools, and other valuable services. The changes we have made with FHASecurewill help us reach about 500,000 homeowners in total by the end of this year.”

Bernardi also highlighted President Bush’s stimulus package, which will make a positive difference in the mortgage market by temporarily increasing FHA’s loan limits. For the rest of 2008, FHA is able to insure mortgages in higher-cost states and help homeowners hold on to their houses. The new loan limits were announced in March, and the affects of the program should be seen in the coming months.

“The reaction to the new, temporary loan limits should again explain the need for immediate passage of FHA Modernization, which we have urged for two years. Congress needs to make this important bill an immediate priority over other housing proposals that are under consideration. As a first order of business, a good FHA Modernization bill must be sent to the President,” Bernardi said.

The Bush Administration’s proposal to modernize FHA has bipartisan support. Introduced two years ago, this legislation would help hundreds of thousands of homeowners access safe, affordable FHA-backed mortgages by increasing FHA’s loan limits, making downpayment requirements more flexible, and introducing fair pricing of insurance. The House and Senate have passed different versions of this legislation, but have not reconciled their differences and sent the President a final bill.

Bernardi also warned against proposals in Congress that “put us on a slippery slope, rapidly moving in the direction of a federalization of the mortgage industry.”

“Americans don’t want to pay for the risky financial behavior of others. And they don’t want to make the Federal government the lender of last resort, with the private sector dumping bad loans on FHA and the taxpayers themselves. We must not harm our economy through solutions that further erode the foundation of the nation’s housing market, hurt homeowners who are meeting their mortgage obligations, or prolong the correction,” Bernardi said.

Finally, Bernardi said the mortgage industry, in cooperation with the Bush Administration, has stepped forward and pro-actively implemented workouts to help homeowners avoid foreclosure, but there is still more work to do. With more subprime loan interest rate resets expected, Bernardi urged the industry to have “a strong and effective response that will quickly help to stabilize housing prices.” Yesterday, the HOPE NOW Alliance announced that mortgage servicers have provided nearly 1.4 million loan workouts since July 2007 for homeowners with prime and subprime mortgages. This includes 503,000 homeowners in the first quarter of 2008.

“I believe that Congress and the Administration can forge a strong working partnership on housing. There is some common ground which should be explored and extended. I will continue to try to convince our lawmakers that we need wisdom, not over-reaction. We must give the American people real solutions to the housing crisis, not multiply problems,” Bernardi concluded.

For more information, visit: http://www.hud.gov/news/speeches/

10 Red Flags for Home Buyers

by Alexandra Zega

RISMEDIA, May 5, 2008-The average home buyer views at least 10 homes over an eight week search so it isn’t practical to get a professional inspection of every house they tour. FrontDoor.com, a new real estate website powered by HGTV, comes to the rescue pointing out things to look for in your own pre-inspection that will help identify potential problems before calling in the pros.

FrontDoor.com’s Top 10 Red Flags for Home Buyers

1) Mass Exodus from the Neighborhood

Don’t let a home’s curb appeal keep you from glancing down the street. Are there several other homes for sale? Are nearby businesses boarded up or vandalized? Get the scoop from the neighbors. If everyone else wants to leave the street, maybe you should, too - before you’re stuck with a bad investment.

2) Mediocre Maintenance

Three layers of roofing and gutters with plants growing in them are signs the owners aren’t big on maintaining their home. What else did they neglect?

3) Foundation Failures

Check out the yard grading. If the yard slopes towards the house, it could cause water to run down the foundation walls or into the basement, which will be costly to repair. Scour the foundation for damage. Bulges or cracks bigger than 1/3 inch can mean the house has serious structural issues.

4) Bad Smells - Inside or Outside

Take a big whiff of the air inside and outside the house. Do you smell anything funky? If you can’t smell anything but the huge baskets of potpourri all over the house, this could be a red flag.

5) Faulty or Old Wiring

While you’re probably not an electrician, make sure all the switches and outlets in the house function properly. Flickering lights, circuits that don’t work and warm or hot outlets or faceplates are all symptoms of wiring problems.

6) Fresh Paint… on One Wall

New paint can really spruce up drab walls, but it can also hide bigger problems, like water damage, mildew or mold. If the room smells strange or if you see stains or saggy walls or ceilings, have an inspector look for mold and leaks.

7) Locked Doors and Blockades

Ask about any rooms that are “off limits” during your home tour, and arrange to see them later if you’re interested in the house.

8) Foggy or Non-Functioning Windows

Check for water in between double-paned windows and make sure all the windows are functional.

9) Structural Walls or Floors have been Removed

Sure you love the open floor plan, but was the house always open or did the homeowners renovate? If they removed a load-bearing wall without adjusting the framing, it can shift weight to other parts of the house. Hire a structural engineer if you think any renovations are questionable.

10) Bugs!

No one wants a house with a pest problem - be it roaches, mice or worst of all, termites. Be on the lookout for unwelcome creatures as you tour the house. Even if no foes pop out while you’re there, consider a separate termite inspection if you’re thinking of purchasing the property.

The Bottom Line

Always get a professional inspection for the house you choose to buy. Skipping a home inspection is not a good way to cut costs. You’ll end up paying more in the long run when problems arise.

Please Email me with your comments and suggestions. Have a wonderful week.

AlexandraZega@remax.net

Bankrate: Mortgage Rates Nudge Higher

by Alexandra Zega

RISMEDIA, May 2, 2008-Fixed mortgage rates inched upward for the third week in a row, with the average conforming 30-year fixed mortgage rate rising to 6.16%. According to Bankrate.com’s weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.36 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing is now 5.71%, while the average jumbo 30-year fixed rate nosed up to 7.35%. Adjustable mortgage rates were no exception, with the average 5/1 ARM rising to 5.96% while the average 1-year ARM soared to 6.96%.

The turmoil that was so prevalent in credit markets earlier in the year has given way to smoother waters in recent weeks. Accordingly, fixed mortgage rates have been comparatively placid in contrast to the wild gyrations seen during the first quarter. Mortgage rates are closely related to yields on long-term government bonds. Short of a crisis in the credit markets, the Federal Reserve is expected to hold off from further interest rate cuts. But mortgage rates could still be volatile in the weeks ahead.

Additional signs of economic weakness, such as another poor employment report for April, would likely push mortgage rates down. Inflation is a risk as well, and could propel rates higher in the weeks ahead.

Mortgage rates have been on a wild ride since the beginning of the year. The average 30-year fixed mortgage rate was as low as 5.57% in January, meaning that a $200,000 loan would have carried a monthly payment of $1,144.38. In February, the average 30-year fixed rate got as high as 6.41%, which meant the same $200,000 loan would have carried a monthly payment of $1,252.32. Today, with the average rate at 6.16%, a $200,000 loan would mean a monthly payment of $1,219.75.
SURVEY RESULTS

30-year fixed: 6.16% — up from 6.11% last week (avg. points: 0.36)
15-year fixed: 5.71% — up from 5.70% last week (avg. points: 0.39)
5/1 ARM: 5.96% — up from 5.92% last week (avg. points: 0.44)

Bankrate’s national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For more information, visit http://www.bankrate.com/mortgagerates

 

RISMEDIA, May 1, 2008-The Bush Administration has put in place solutions to help American families stay in their homes and avoid foreclosure, U.S. Department of Housing and Urban Development Deputy Secretary Roy A. Bernardi said this week. Delivering the keynote address at the Federal Home Loan Banks Annual Directors Conference, Bernardi highlighted President Bush’s responsible plan to strengthen the economy and help homeowners by allowing HUD’s Federal Housing Administration (FHA) to be “a good safeguard against foreclosure.”

“This is the time for vision and prudence. We must give the American people real solutions to the housing crisis, not multiply problems. The Bush Administration favors responsible, specific efforts to save homeowners and allows FHA to be a central part of any lasting solutions,” Bernardi said.

In August 2007, FHA modified its refinancing program to help creditworthy homeowners who missed payments after their teaser rates reset. Since then, more than 170,000 families who are current and past due on their home loans have refinanced with FHASecure, FHA’s refinancing product. The number of single family mortgages endorsed by FHA has effectively doubled over the last year, Bernardi said. In the first quarter of 2008, FHA endorsements totaled more than 237,000, which is a 100% increase over the same period last year. Homeowners refinancing from the exotic subprime market to FHA are saving approximately $400 a month on their new mortgages.

Earlier this month, the Bush Administration announced additional administrative steps to extend FHA opportunities to troubled homeowners. Using its current regulatory authority, FHA will assist homeowners who are struggling with their current mortgage payments who have no other way to refinance their loans as their homes lose value. FHASecure will extend assistance to borrowers in subprime adjustable rate mortgages who were late on up to three consecutive monthly mortgage payments or at three different times over the previous twelve months. FHA will allow lenders to voluntary write-down outstanding principal mortgage balances and insure, which will provide an equity cushion and protect taxpayers against risk.

“Expanding FHASecurein this way is a good idea,” Bernardi said. “Borrowers will reduce their principal payments and keep their homes. Lenders will avoid taking a more significant loss at foreclosure. Neighbors will avoid vacant homes in their neighborhood, depressing their home values. And localities will keep a viable tax base to fund community health, schools, and other valuable services. The changes we have made with FHASecurewill help us reach about 500,000 homeowners in total by the end of this year.”

Bernardi also highlighted President Bush’s stimulus package, which will make a positive difference in the mortgage market by temporarily increasing FHA’s loan limits. For the rest of 2008, FHA is able to insure mortgages in higher-cost states and help homeowners hold on to their houses. The new loan limits were announced in March, and the affects of the program should be seen in the coming months.

“The reaction to the new, temporary loan limits should again explain the need for immediate passage of FHA Modernization, which we have urged for two years. Congress needs to make this important bill an immediate priority over other housing proposals that are under consideration. As a first order of business, a good FHA Modernization bill must be sent to the President,” Bernardi said.

The Bush Administration’s proposal to modernize FHA has bipartisan support. Introduced two years ago, this legislation would help hundreds of thousands of homeowners access safe, affordable FHA-backed mortgages by increasing FHA’s loan limits, making down payment requirements more flexible, and introducing fair pricing of insurance. The House and Senate have passed different versions of this legislation, but have not reconciled their differences and sent the President a final bill.

Bernardi also warned against proposals in Congress that “put us on a slippery slope, rapidly moving in the direction of a federalization of the mortgage industry.”

“Americans don’t want to pay for the risky financial behavior of others. And they don’t want to make the Federal government the lender of last resort, with the private sector dumping bad loans on FHA and the taxpayers themselves. We must not harm our economy through solutions that further erode the foundation of the nation’s housing market, hurt homeowners who are meeting their mortgage obligations, or prolong the correction,” Bernardi said.

Finally, Bernardi said the mortgage industry, in cooperation with the Bush Administration, has stepped forward and pro-actively implemented workouts to help homeowners avoid foreclosure, but there is still more work to do. With more subprime loan interest rate resets expected, Bernardi urged the industry to have “a strong and effective response that will quickly help to stabilize housing prices.” Yesterday, the HOPE NOW Alliance announced that mortgage servicers have provided nearly 1.4 million loan workouts since July 2007 for homeowners with prime and subprime mortgages. This includes 503,000 homeowners in the first quarter of 2008.

“I believe that Congress and the Administration can forge a strong working partnership on housing. There is some common ground which should be explored and extended. I will continue to try to convince our lawmakers that we need wisdom, not over-reaction. We must give the American people real solutions to the housing crisis, not multiply problems,” Bernardi concluded.

For more information, visit http://www.hud.gov.

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