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Loan Modification programs like HAMP were set up with the goal of providing financial stability to the housing industry. A crippled Real Estate market affects everyone, even people who are not struggling with their mortgages. Neighborhoods get run down, house prices drop, and house service provides like builders, plumbers, electricians and pool cleaners also feel the pinch.

The numbers show that loan modifications and the programs that promote them are not providing the solution hoped for. Could house flippers provide the stability that lenders, servicers and the government have failed to deliver?

First, what is a house flipper? It is an investor that buys a home with the sole purpose of quickly reselling it. This practice is often restricted on homes that have received some kind of government subsidy. House flipping is an industry in its own right. Investors are always looking out for bargains they can quickly resell. During the housing boom everybody was doing it. Even rookies that had never bought a house before were making a profit from buying a house making some small (or large) improvements and selling it again. Now, deep in the financial and housing crisis it is certainly not a game for amateurs. However, professional are doing just great, in fact they are making more of a profit than ever before.

House flipping is one of the few housing sectors that are still booming. On a national level the number of flipped homes increased by 19%, and there is still time for this figure to grow even more before the end of the year.

House flipping has often been considered a scourge of the housing industry, made up of ruthless investors out to make a profit from troubled borrowers. Now, many hail them as financial heroes that are injecting much needed cash into homes and neighborhoods hard hit by the crisis. This practice is also helping to clear out properties from moribund housing markets that are suffering from the raise in foreclosures.

House flipping also generates business for carpenters, builders and other home service providers that are contracted to clean up old homes in need of maintenance. It has also created new jobs like that of a “runner” or a “driver”, who are used to check out homes that are going to be auctioned off and inform potential buyers if they are occupied, what condition they are in,  what the neighborhood is like, and other relevant information.

Such are the benefits of house flipping to the housing market that the Federal Housing Authority is considering a one year waiver on anti-flipping regulations. This will allow buyers to purchase foreclosed homes form owners that have owned the property house for less than 90 days. This will help first time buyers get their hands on renovated properties at lower prices.

Could this be a case of digging our way out of a financial crisis by helping people make money instead of just passing on handouts? Granted house flipping will not help troubled borrowers keep their homes, but it might help the housing market recover faster and reduce the negative effects of the current housing crisis.

Related posts:

1. My Loan Modification Failed, How Soon Can I Buy A New Home After A Foreclosure
2. Loan Modifications: Travesty or Social Responsibility
3. Unemployment Home Loans, Are They A Real Alternative To Loan Modifications

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It is hard to believe that three years have gone by since the housing market took a dive drowning with it millions of American homeowners. So what is the situation now? Have we hit rock bottom? Are the Administration’s measures starting to work?

Let us start with the good news. There are now over one million homeowners benefiting from temporary or final loan modifications. Admittedly, most of them are still in the trial period, but nevertheless, the Administration has made an effort to ‘encourage’ lenders and servicers to make an effort, sometimes by using a carrot and other times by brandishing a big stick. Another good newsbyte is that the rate of troubled homeowners, people behind on their payments, is dropping.

Also, new measures are being carried out as we speak. Just a few days ago Obama announced another program to avoid foreclosures. The program included offering $1.5 billion to housing agencies in California and four other states. These states have been especially hit by a fall in house prices making loan modifications harder to qualify for. This new program aims to provide these hard hit states with extra flexibility that will allow them to provide the help troubled homeowners need.

Unfortunately the good news is over. The bad news is that nearly 3 million homes are going through foreclosure and 4.5 million will do so this year according to conservative estimates. Another problem is that the figures we have may not even be telling the full story. Experts say that lenders have an estimate of 1.7 to 7 million homes in a shadow list of foreclosed home they are yet to put for sale. This fudges our foreclosure figures.

High foreclosure rates do not only affect the owners, it also lowers the price of homes in the neighborhood and cripples the economy as a whole. The question many are asking and we have discussed widely in this blog is how much should the government help. It is a fact that many borrowers overstretched their budgets to breaking point; these cannot and should not be bailed out. However, the fact remains that loan modification trial and completed number should be higher.

Another problem is the high re-default rates. These rates show some of the inadequacies of the current loan modification system. Studies show that re-defaulting rates are lower when the principal balance of the loan is trimmed or reduced. Unfortunately most loan modifications simply extend the term of the loan or reduce the interest rate.

What can the government do? Extra incentives for lenders and servicers might just make them weight for the next best deal, instead of focusing on providing fast loan modifications now. An idea that has been thrown around that seems promising is to give bankruptcy judges the power to write down mortgages like they can write down other kinds of debt. It is very likely that this would increase the interest rates of new loans to reflect the increased risk of loan balance reduction. However, it would provide a good incentive for lenders to negotiate reasonable loan modifications before a judge tells them to.

Related posts:

1. Loan Modifications Are Going To Be Simpler, What Do You Need Now?
2. Loan Modifications No Match For Rising US Foreclosures.
3. Loan Modifications No Match For Rising US Foreclosures.

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Loan Modifications do not seem to be the solution Government hoped it to be. It is having some success, over 650,000 trial loan modifications, but the floodgates of foreclosure risk homes are not even close to being closed. Of the 650,000 trial loans only 1,711 borrowers got a permanent loan modification. Many experts predict that few of the trial loan modification will work long term and that most troubled borrowers will ultimately foreclose on their homes.

This bleak outlook has made Government and Federal Agencies look elsewhere to provide alternative options to loan modifications. One of these options, Deed for Lease, we mentioned last week and we are going to take a second look at it.

This option which has been kicked around in the nationwide housing crisis debate was finally taken on by Fannie Mae which has started to offer leases of up to 12 months when other avenues to keeping families in their homes, like loan modifications are unsuccessful.  Some like Dean Baker, co-director of the Center for Economic and Policy Research see it as a great step forward in Government policy.

So will Dead for Lease, renting your own home be a viable option for struggling homeowners?

It is certainly an interesting idea. On one level it could be seen as a win-win option for pretty much everybody, at least in certain circumstances.

Win-win, because struggling homeowners get a chance to stay in their home when it has been settled that they can’t afford their mortgage but can afford the market rent of their home. It would also be good news for the neighborhoods struggling homeowners live in as it would avoid the drop in house prices foreclosed ridden neighborhoods are characterized by.

Even lenders may find this option appealing as an alternative to selling properties at cut rate prices. Lenders could turn landlords for as long as the market takes to turn around when they could sell the properties.

However few are predicting an avalanche of copy cat programs following Fannie Mae’s Deed for Lease program. Why? Two main reasons stand out.

1)      Legal liability. Once a bank turns landlord he acquires responsibilities towards his tenants, the previous homeowners. The tenants could demand work being carried out on their home if there are cases of mold, Chinese drywall or other hazards in the home.

2)      Banks are lenders not landlords. Most business like to stick to what they do best and not get into others types of business. As Chase spokesman Tom Kelly is reported to have said: “We’re not really equipped to be landlords”.  Lenders in the U.S are sitting on nearly half a million repossessed homes. The operation required to manage leases on such a volume of homes does not seem attractive to many lenders at this moment. Most prefer to dump the properties on the market even if it is a buyer’s market and prices are very low.

Fannie Mae has subcontracted landlord management duties to another country but it is doubtful other companies will follow suit.

3)      Leasing properties is often not as profitable as selling, especially when your business is not geared to managing a rental operation.

These reasons would indicate that Deed for Lease will not be a big deal in the mortgage market, at least for now. However there is no reason it won’t take off later on. There are many examples of housing policies starting small with federal housing agencies (like Fannie Mae) and then exploding to take nation and industry wide importance. A good example of this are loan modifications.

Many economists predict that loan modifications will not stop the avalanche of foreclosures caused by an ever increasing rate of unemployment and a nationwide drop in home prices. This might provide a chance for more attention to the idea of renting homes back to previous owners if the market is so saturated selling is no longer a viable option.

Related posts:

1. Loan Modification Alternatives: Is Renting Your Home A Viable Option
2. Loan Modification Alternatives: Short Sale Your Home
3. $75 Billion Making Home Affordable Loan Modification Program Gets To Work

Related posts:

1. Loan Modification Alternatives: Is Renting Your Home A Viable Option
2. Loan Modification Alternatives: Short Sale Your Home
3. $75 Billion Making Home Affordable Loan Modification Program Gets To Work

Loan Modifications do not seem to be the solution Government hoped it to be. It is having some success, over 650,000 trial loan modifications, but the floodgates of foreclosure risk homes are not even close to being closed. Of the 650,000 trial loans only 1,711 borrowers got a permanent loan modification. Many experts predict that few of the trial loan modification will work long term and that most troubled borrowers will ultimately foreclose on their homes.

This bleak outlook has made Government and Federal Agencies look elsewhere to provide alternative options to loan modifications. One of these options, Deed for Lease, we mentioned last week and we are going to take a second look at it.

This option which has been kicked around in the nationwide housing crisis debate was finally taken on by Fannie Mae which has started to offer leases of up to 12 months when other avenues to keeping families in their homes, like loan modifications are unsuccessful.  Some like Dean Baker, co-director of the Center for Economic and Policy Research see it as a great step forward in Government policy.

So will Dead for Lease, renting your own home be a viable option for struggling homeowners?

It is certainly an interesting idea. On one level it could be seen as a win-win option for pretty much everybody, at least in certain circumstances.

Win-win, because struggling homeowners get a chance to stay in their home when it has been settled that they can’t afford their mortgage but can afford the market rent of their home. It would also be good news for the neighborhoods struggling homeowners live in as it would avoid the drop in house prices foreclosed ridden neighborhoods are characterized by.

Even lenders may find this option appealing as an alternative to selling properties at cut rate prices. Lenders could turn landlords for as long as the market takes to turn around when they could sell the properties.

However few are predicting an avalanche of copy cat programs following Fannie Mae’s Deed for Lease program. Why? Two main reasons stand out.

1)      Legal liability. Once a bank turns landlord he acquires responsibilities towards his tenants, the previous homeowners. The tenants could demand work being carried out on their home if there are cases of mold, Chinese drywall or other hazards in the home.

2)      Banks are lenders not landlords. Most business like to stick to what they do best and not get into others types of business. As Chase spokesman Tom Kelly is reported to have said: “We’re not really equipped to be landlords”.  Lenders in the U.S are sitting on nearly half a million repossessed homes. The operation required to manage leases on such a volume of homes does not seem attractive to many lenders at this moment. Most prefer to dump the properties on the market even if it is a buyer’s market and prices are very low.

Fannie Mae has subcontracted landlord management duties to another country but it is doubtful other companies will follow suit.

3)      Leasing properties is often not as profitable as selling, especially when your business is not geared to managing a rental operation.

These reasons would indicate that Deed for Lease will not be a big deal in the mortgage market, at least for now. However there is no reason it won’t take off later on. There are many examples of housing policies starting small with federal housing agencies (like Fannie Mae) and then exploding to take nation and industry wide importance. A good example of this are loan modifications.

Many economists predict that loan modifications will not stop the avalanche of foreclosures caused by an ever increasing rate of unemployment and a nationwide drop in home prices. This might provide a chance for more attention to the idea of renting homes back to previous owners if the market is so saturated selling is no longer a viable option.

Related posts:

1. Loan Modification Alternative: Is Renting Your Home a Good Option
2. Loan Modification Alternatives: Short Sale Your Home
3. Loan Modification Alternatives: Wells Fargo Interest Only Loans

Related posts:

1. Loan Modification Alternative: Is Renting Your Home a Good Option
2. Loan Modification Alternatives: Short Sale Your Home
3. Loan Modification Alternatives: Wells Fargo Interest Only Loans

After three years of slumping house prices, the end of the real estate bust may finally be in sight. Home sales are rising, inventories are shrinking, and most economists believe values nationwide will hit bottom in the second half of the year -- but not before falling another 5% to 10% first.

The numbers of loan modifications, foreclosures and bankruptcies we are dealing with in this credit crisis are so large they are too often hard to understand and digest. A good solution is often to downsize and see if more sense can be put into smaller models. A good model for the United States is California, the fourth economy in the world and one of the hardest hit states in the United States credit crisis. House prices have free fallen but mortgages remain the same. This has eaten up most of people’s equity leaving  homeowners owing more on their homes than they are worth. Not exactly an incentive to pay your mortgage.

The sad thing is that while only 16% of eligible homeowners have received a trial loan and the vast majority of troubled homeowners are desperately trying to save their homes unscrupulous people try their best to make a profit from other people´s misery.

This is illustrated by the 1,340 open investigations into loan modification scams while last year there were only 10 in August 2008. It is quite depressing that people are willing to make a business from robbing borrowers from their last reserves of relocation cash.

This growth in loan modification investigations has caused 330 desist and refrain orders just in the past year, up from the average 80 to 100 orders last year. As depressing and upsetting as these numbers are it is not surprising that when 225,000 homes foreclosed in the State of California last year budding entrepreneurs with varying sense of morals and business ethics show their ugly faces.

For many of these scam artists, orders of desist and refrain are simply an inconvenience that they must endure in order to do business. Current economy projections estimate this situation will continue for at least 2 years, time during which homeowners will continue to be victimized.

One of the reasons for this is that real estate agents are struggling to find work and many are reinventing their career by offering loan modification services. Last year 185,000 people took the real estate licence exams in California alone while this year 25,000 are projected to apply. That is still one real estate agent for every 54 adults in California. Such a concentration of real estate agents is bound to create a pretty competitive work environment where agents are willing to bend and break rules.

The good news is that states like California are projected to make a comeback soon. In fact estimates predict that Orange County houses will increase in value by 9.5% by next year.

The only solution when the economic atmosphere is so charged and there are such an abundance of con artists is to get smart and learn how to avoid getting cheated by unscrupulous loan modification agents.
The best advice is always to contact the government and apply for personalized (and free ) advice on the best course of action for you and your family.

Related posts:

1. California trys to deter loan modification and foreclosure rescue scams
2. California Cuts Off New Century
3. Loan Modifications and FHA Refinance What Is The Deal

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Imagine you're a mid-level executive living in Grayling, Mich., the "Canoe Capital of the World."

Has The Mortgage Refinancing Season Ended

Mortgage refinancing has become as exciting as watching the stock market. The once droll and wonderful (for home owners) business of seeing interests remain pretty much stable while house prices increased with any sign of stopping has been exchanged for the much more exciting activity of seeing how low the interest rates can be dropped and how far the Government can bend back to lower them further.

This has created an excellent opportunity for those conservative people that were boring and smart enough to save when everybody was spending of being prudent when prudence seemed pointless, because if you have cash now and an excellent credit score you could get the deal of your life. With 30 year interest rates at historical lows you could buy the house of your dreams for around 4.25%.

This window of opportunity is of course not the main outcome the Government is working towards although it may very well prove to be a benign side effect that can further contribute to jump start the credit and housing industry.

The main issue Government is trying to deal with when lower is as we mentioned to incentivize the buying of new and built homes while giving home owners that have fallen in financial difficulties the possibility of renegotiation their mortgages at a more advantageous rate of interest. If a family renegotiates their mortgage wisely the significant drop in interest rates could mean the difference between affording the monthly mortgage payments and not.  For those home owners that are not in any particular financial strife it can mean paying off the mortgage sooner or financing the purchase of a car or a home improvement on the interest drop.

However the fear for those that are planning to modify their loans  or are in the process of getting their paperwork or credit in order is that they will miss the train. That the Government’s incentives will work raising interest rates and closing the window of opportunity that currently exists.

Should we worry?
If we are to trust the Mortgage Bankers Association’s chief economist the answer is no. Jay Brinkmann the MBA’s chief economist predicts that in the next the current interest rates should hold for the next six to seven months. That is music to the ears of home owners that see how their loan modification and mortgage refinancing procedures take more than they expect or is experiencing delays in getting to the closing table.
If you are wondering who to thank for the drop in interest rates thank the Uncle Sam for investing so heavily in Banks, providing cheap money for banks to invest in insured loans and mortgages.

The sobering question is how long can this continue for, the short to mid-term may be safe but can this continue in the long term? It can’t if you listen to Dan Cutaia, president of Fairway Independent Mortgage Corp who recently said at an MBA’s conference: “The government can’t keep printing money and buying mortgage backed securities forever”.

Historically the secondary housing market has been a meeting place for investors and borrowers where offer and demand created its own prices and conditions. The government has modified the “natural” state of things by using its muscle to provide the money few are willing to invest.

What will happen in the long term is a bridge we have yet to cross, however if you are currently in the market to refinance or buy a home don’t worry you will not miss train, low interest rates are here to stay, for now.

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2. Do’s and don’ts of mortgage refinancing.
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Requirements to Qualify For An Obama Mortgage Refinance Loan

Are you in trouble with your Mortgage, Loan or would just like to take advantage of the current Government’s desire to give borrowers a break on their mortgage? If that is the case you are far from alone. Although exact figures are hard to come by because a tracker system is yet to be completed, tens of thousands of people are queuing up to sign up for Home Refinance Aid packages. As often is the case with attractive programs and offers the Devil is in the detail of actually qualifying for the Home Loan aid.

This blog aims to simplify the jargon for you and give you the “simple” facts on how to qualify for the Mortgage and Home Loan refinance aid the current administration is offering.
You must owe between 80% and 105% of your mortgage.

This has been a rather hot potato as many analysts believe that it is overly conservative and not very realistic when you take a look at the “typical” borrowers that are struggling with their monthly payments. This is the case of “underwater” borrowers that owe more than the value of their home and are well above the 105% bracket. In fact last Wednesday the Obama administration increased this bracket to 125%.

Nevertheless some commentators suggest that up to 26% of mortgage owners qualify in the United States based on this requirement alone. The same study revealed that 25% of home borrowers fall into the “underwater” category and will not qualify for refinance aid under this plan. This is too bad for areas that have been specially affected by the Real Estate crisis like California where house prices have dropped by up to 40%.

Your loan must be backed by Fannie Mae or Freddie Mac.

You have a two in three chance of falling into this category around 60% of all United States home loans are backed by Fannie or Freddie. However most of us don’t know if that is the case or not. The fastest way to find out is to phone your loan provider.
Have a “conforming” mortgage.

What does “conforming” mean? It means a loan that is below the maximum set by the refinance aid program. In many areas the ceiling on refinance aid is set at $417,000. A special allowance is provided for high cost areas like New York, San Francisco and similar areas where the maximum is around $625,000. This is still rather restrictive for high cost areas like San Francisco where the average loan is closer to $725,000.

Do you qualify under these requirements? Whatever you think is the answer, if you need aid would recommend you contact your loan provider and ask for their professional opinion. The Mortgage Refinance program is constantly changing and expanding to include as many borrowers in need as possible.

The best advice you can follow is to start by getting your paperwork together before you contact your loan provider. This means putting together a file with your your driver’s license a copy of your Social Security card, two of your most recent pay stubs, your most recent mortgage statement, the past two years of your W2s, and past two months of bank statements from all accounts. This will speed up your request and allow your loan providers to have an accurate picture of the kind of customer you are and if you qualify.

Related posts:

1. Mortgage Refinancing For Underwater Borrowers Now Available
2. Fed study: Obama mortgage plan should give money to borrowers, not banks
3. Crummy credit? The secret question that can save you $10,000 (or more) on your next refinance

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