Hot Mortgage Deals

If you ask a question about a complicated subject like loan refinances you want a simple answer that gives you the information you need not one that creates more questions. This is the goal of this series of articles here at www.blownmortgage.com.

Loan Refinance Question 4.) How do I know if a refinance under HARP (Home Affordable Refinance Program) is actually going to help me out?

This is a great question. Not all loan refinances are profitable. Many people have worked hard to get a loan refinance approved to later find out that the monthly payments have barely dropped or even raised while the principal (total amount borrowed) has actually increased, increasing the interest paid and the length of the loan. In other words if you get the wrong loan refinance it could actually cost you money instead of helping you out.

The key as always is to understand how the game is played. The advice is free and simple to follow so you should be fine as long as you follow the advice you are given by reputable sources and not dubious companies that promise to “save” your house, lower your interest rate, get loans waivered and of course cure cancer.

Ask for a “Good Faith Estimate” and a Truth in Lending Statement. These two disclosures will help you see your new interest rate, mortgage payment and the amount you will pay over the life of the payment, the real cost of your loan.  Armed with these figures you can now compare them with your current loan terms. You can request your current terms from your mortgage provider if you have lost them.  If there is no improvement then a loan refinance is probably not for you.

However make sure you take into account more subtle benefits than straightforward lower monthly payments. For instance even if there is little change in your monthly payments but you change your mortgage from an adjustable rate loan (ARM loan) to a fixed rate loan it could be worth your time. Fixed rate loans provide more security, taking away the risk of rising interest rates or interest only payments that increase the overall cost of your loan.

Loan Refinance Question 5) What happens if I owe more than my house is worth? Can I still qualify for a refinance under HARP?

Yes, up to a certain point. The whole point of the HARP program is to enable homeowners whose homes have dropped in value take advantage of the current lower interest rates. The important thing is that your primary mortgage (the mortgage that has first bidding rights if your foreclose) is less than 125 percent of the current market value of your house (sorry sentimental value doesn’t count here).

Let’s illustrate: If your mortgage is worth 99,000 dollars but your house is worth 80,000 dollars you are eligible for a loan refinance on the requirement of house value because 99,000 is just under  125% of 80,000 (which would be $100,000).

Related posts:

1. Loan Refinance Simple Answers to Important Questions
2. Mortgage Refinancing For Underwater Borrowers Now Available
3. Mortgage Modification Sponsored By The Government, What Is Harp

Related posts:

1. Loan Refinance Simple Answers to Important Questions
2. Mortgage Refinancing For Underwater Borrowers Now Available
3. Mortgage Modification Sponsored By The Government, What Is Harp

Desperation is not the best state of mind to make good financial decisions. Loan Modifications are no exception. The situation of many homeowners is becoming so desperate many will jump on to pretty much any scheme they feel has a chance of saving their home whatever the consequences.

This of course is perfect breeding ground for the scum of finance, con artists that prey on desperate homeowners to dupe them from their hard earned cash and only worsen their sad situation.

Mimic and camouflage
One of the methods these companies use is to mimic the advertising and appearance of government schemes that are designed to help homeowners. For instance loan modification companies will include the word “HOPE” in order to mimic the name of the Obama Administration’s mortgage aid program.

These organizations will also advertize themselves as licensed public service offices. This way they camouflage themselves as nonprofit organizations when they are not. In order to do this they will open their radio and tv adverts with claims of being a public service. This form of camouflage is very effective. Often when loan modification companies cold call private homes the homeowners think they are speaking with a federal institution or a nonprofit organization and speak to them as such. This creates conflicts of interest where the loan modification companies without scruples can take advantage of.

Promises, promises
Another technique of loan modification scams is to promise the moon and deliver nothing. Consumers are promised incredible loan terms that end being just that, incredible. Of course before the outrageous claims of low mortgage interest rates and reduced monthly payments are seen for what they are homeowners often pay high fees for which they get little if anything in return. Sadly they often lose their homes.

The number of loan modification scams is surprising.Since February the FTC has filed 19 cases of mortgage and loan modification scams. The specific scams change from claim to claim but the basics are the same. Outrageous claims of loan modification success rate, sometimes of 95% and more.
These companies will exact their fees from monthly installments from the homeowners or as an upfront payment equal the mortgage payments of one month. In many States, like Maryland, this is actually illegal.

Loan modification schemes adapt to the times and the news. Whatever is new and exciting in the loan modification industry is good bait for the next scam. For instance the new federal Home Affordable Modification Program has had plenty of airtime, loan modification companies will use words and expressions that attach them to these programs and that way some of the interest and trust generated by the government is transferred to the loan modification company.

Related posts:

1. Loan Modification Scams: Oregon AG Comes To The Rescue
2. Loan Modification Mogul Sued For Duping Desperate Homeowners
3. Loan Modification Consultants sued for scamming desperate home owners.

Related posts:

1. Loan Modification Scams: Oregon AG Comes To The Rescue
2. Loan Modification Mogul Sued For Duping Desperate Homeowners
3. Loan Modification Consultants sued for scamming desperate home owners.

Home loan modifications have been presented as the silver bullet that will kill the evil wolf scaring the living daylights out of investors and homeowners. The government does seem to be willing to place its money (or own money) where their collective mouth is. The White House has invested $75 billion of our hard earned bucks into the Making Homes Affordable with the hope that it will prevent 3 to 4 million Americans from losing their home to a bank foreclosure.

Unfortunately the plan is not exactly burning rubber and is off to a slow start. At the moment only 9% of eligible homeowners are taking advantage of the loan mod plan and have modified their loan terms. The government is not happy with these figures and have begun to pressure and arm-twist banks and lending institutions to get their finger out and start modifying. In a recent report the government named and shamed banks that were not pulling their corporate weight behind the mortgage modification program and are not facilitating the modifications borrowers need.

Why is this the case? Why are banks so slow to act?

There are various reasons, most of which we have already discussed in articles here at blownmortgage.com. These include:

1)    Banks are not currently set up for loan modifications. They are set to sell loans and then collect the payments not reduce principals and reduce interest.
2)    The large volume of loan mod applications in such a short period of time.
3)    Lack of information and understanding about the program and how it works.
4)    Mortgage backed securities.

Why mortgage backed securities?

Mortgage backed securities are products like futures and stocks companies can buy or sell. Obviously just like with the purchase of the stocks of a company the purchase of mortgage backed securities provides the owner with a say on how the mortgages are managed.

This is well illustrated by the story of many homeowners that cannot modify their loans because the company that has bought a security backed by their mortgage will not allow them. For instance Wells Fargo may say no to a loan modification you request even though they don’t own your mortgage.

This is caused by ambiguous rules and a rather shady web of interests and ownership. This is rather sad because it means that the group that is more likely to need help, those whose mortgages were sold or used as a security cannot receive the loan modification they need to stabilize their situation.

Related posts:

1. S&P to Downgrade Coming to Alt-A Mortgage Backed Securities
2. The Fate of Mortgage Backed Securities
3. Obama Mortgage Plan Why So Slow

Related posts:

1. S&P to Downgrade Coming to Alt-A Mortgage Backed Securities
2. The Fate of Mortgage Backed Securities
3. Obama Mortgage Plan Why So Slow

Not long ago I decided that following the home loan modification (as discussed at loan modificationfix.com) plan of Obama’s could be a good barometer on how well his Administration is doing on all fronts. The term itself has quickly become an Administration staple, for bettor or worse, much like ‘war on terror’ was associated with George W. Bush.

If the news is any indicator, things are not going too smoothly. It turns out that there are sharks, people who have took off their predatory lending masks and revealed the evil that is show through loan modifications. In fact, it is hard to find a loan modification article where the title does not include the word ’scam’ at some point.

Amidst all of the allegations and lawsuits though lies a reassuring fact; they aren’t getting away with it this time. At least, they are not getting away with it like before.

The Federal Trade Commission and states nationwide are hitting the loan modification businesses and foreclosure princes riding in on their chariot horse where it counts, the pocketbook.

The state of Washington Attorney General Tob McKenna has this to say, “Housing Crisis 2.0 has launched an attack on financially strapped homeowners,” McKenna said. “With so many borrowers looking for an opportunity to refinance or modify their loan terms, it’s not surprising that we’ve seen a new crop of deceptive business practices and operators looking to make an easy buck.”

Is this a case where a few bad apples spoil the bunch? In a word, yes, and in relation to the subprime mortgage debacle (as it was happening, not after) the negative press is bordering on insane. Although, it is needed, a reasonable fear can now be stated that the bad press could be hurting those who really need a home loan modification but are afraid to do so.

In all, prosecutors nationwide filed 189 legal actions last Wednesday against loan modification “helpers” accused of milking desperate (some of have already proven to be gullible) homeowners who want to make mortgage payments affordable. 23 states in all are getting in on the fun.

While the ‘189′ number is quite daunting, it does not accurately reflect the thousands of consultants who are doing things the right way. It also does not reflect the thousands of 200,000+ homeowners who have thus far participated in the affordable mortgage restructuring fun. But it does reflect an mortgage industry that will never rid itself of scum.

So maybe all of this does not actually mean incompetence by the Obama Administration. Maybe they are simply leveraging the media to help desperate homeowners realize what though too-soon have forgotten; that sharks patrol these water and without appropriate research and caution, they will take advantage.

I suppose for the victims the new saying would go something like this:

If you fool me once on with my original homeloan shame on you. If you fool me again when trying to restructure shame on you again.

Personal responsibility seems void. The Obama plan is meant to bail out homeowners who have gotten themselves in a pickle but it can’t save the kids who won’t stop repeating past mistakes. They can’t continue to bail out the folks who got themselves in trouble to begin with and eventually the people, who knew how to borrow to begin with, won’t put up with the bailouts any longer. Sure, foreclosure is the worst possible ending but a life void of personal responsibility is the worst type to try and save.

Related posts:

1. What Is A Home Loan Modification
2. What To Look For In A Loan Modification
3. Loan Modification Help: Get Your Loan Modification Approved

Related posts:

1. What Is A Home Loan Modification
2. What To Look For In A Loan Modification
3. Loan Modification Help: Get Your Loan Modification Approved

A balloon mortgage is one in which monthly payments are made for a pre-determined period of time, with the balance of the loan paid in full at the end of the loan term. Like an ARM, interest rates on a balloon mortgage are typically lower than on a fixed rate mortgage and this makes the monthly payments on a this type of mortgage are very low and affordable. Balloon mortgage loans are calculated to amortize over a longer period than the due date of the balloon. A balloon, or lump sum, payment is required at the maturity of the loan to completely pay off the remaining principal. Therefore its important to keep in mind that the terms on a balloon mortgage are insufficient to completely amortize the loan.

Balloon mortgages can, and often do, contain a contractual opportunity to refinance at prevailing rates when the balloon payment is due. If the balloon mortgage loan has the option to be refinanced when the initial period expires, it will be called a convertible balloon mortgage. Some balloon mortgages come with “reset” clauses that provide for the original lender to reset the loan terms so that the loan is fully paid off in the remaining twenty three to twenty five years. The advantage of a balloon loan with a reset is that the loan payment will remain constant for the remaining life of the mortgage. The disadvantage is that the borrower is subject to the then current rates. If you are unable to convert or refinance the balloon mortgage, you may be forced to sell your home to make the loan whole. However, for the initial period of the loan, the interest rates on a balloon mortgage are usually a little lower than a comparable Adjustable Rate Mortgage.

Alternatively, with a fixed-rate mortgage you’ll have the benefit of knowing exactly what your monthly payments will be for the entire term of the loan. Because few people have the funds to fully pay off the balance due at the end of the balloon term, when using a balloon mortgage as the instrument of financing, the borrower should be concerned about future interest rates because they will be subject to them when the loan matures. However, most people that take out balloon mortgages assume that they’ll be moving within the term of the balloon period or that they will be eligible for a more attractive loan at the end of that period. Many people also use balloon mortgages to get that larger dream house. This strategy can, in fact, be fairly risky and a borrower should consider the market risk against the benefit of a larger home. Again, at the end of that period, the borrower must pay off the loan in full – this is the “balloon” payment. For example, a 7 year balloon calculated to amortize over 30 years will have low payments for 7 years and then the remaining balance will be due.

Before borrowing it’s important to consider whether you already have too much debt, whether you will be able to service the debt if you refinance at the end of the balloon period (or pay the balance), the risks associated with the current real estate market, and other factors as well. While it can be fairly easy to make the monthly payments on a balloon mortgage, it is very important to consider that there could be difficulty in managing the terms of the loan once it matures. In the current climate, fixed-rate mortgages are definitely the “loan of choice” for homeowners seeking a refinance mortgage, but if all the factors are considered and risks weighed, a balloon mortgage can be a viable alternative. Loan programs vary depending on the borrower’s credit, closing costs vary from state to state, work with your loan officer to get a proper estimate when you apply for your loan.