Luxury Homes Archives – Refinance – Mortgage Refinancing Rates And Information

The Good Side of Loan Modification’s Failure, A Buoyant Foreclosure Market

March 9th, 2010 No comments

Despite the Government’s best efforts and greatest intentions the wave of foreclosures continues to increase. The borrowers that are now defaulting on their mortgages and not qualifying for loan modifications are no longer people with subprime loans and bad credit rating. The fastest growing demographic in foreclosures are prime borrowers with prime loans that have lost their jobs and cannot afford any kind of deal on their mortgage.

This is a tragedy for the millions of families that face losing their homes. However there is a flip side to the crisis in the housing market. The flip side is that the foreclosure market is doing great. More and more buyers with cash in their pockets are looking for bargains among the millions of homes that are going through a foreclosure.

Many have the idea that the only homes that are on the foreclosure market are located in crime-ridden areas and are run down shacks. This is simply not true, during economic crisis like the one we are now going through all kinds of homes can be found, from beachfront luxury homes to shacks in the ghetto.

There is another myth a serious buyer must forget about as soon as possible. You are not going to find a great property selling at pennies on the dollar. Sometimes you can find amazing deals but this is probably because there are other circumstances that reduce the value of the home besides being on the foreclosure market.

However, you can get some great deals and discounts. A typical discount is probably around 5% less than the market value, although you can sometimes pay up to 30% or 40% less.

If you are savvy enough, this could only be the beginning of your savings. If you buy the property from the lender you could ask/demand for some of the buying costs to be waivered. If you ask nicely you might even get a discount on the interest rate or a break on the down payment.

Buying a home, whether on the foreclosure market or not, is a huge investment for most of us. It is therefore worth us spending some time doing our research and due diligence before we spend tens or even hundreds of thousands of dollars.

The foreclosure ball begins to roll when a borrowers falls behind on mortgage payments. A homeowner that loves his home will try his best to keep his home, making some payments, looking for a loan modification, or any other measure he can. However, if the home still forecloses the chances are that maintenance has not been carried out for some time on the home. Include the costs of bring maintenance up-to-date in your investment research.

What this might include will depend on the property. Some just need some gentle manicuring, while others have underlying structural damage that is prohibitively expensive to fix. It is true that homes in need of some tender lover and care will come at a discount, but it is important to make sure you can afford the cost of providing it.

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Is Strategic Foreclosing The Best Loan Modification For You

November 19th, 2009 No comments

Last week I received a very interesting comment on one of my articles on loan modifications. The comment claimed that for most underwater borrowers (homeowners that owe more on their property than it is worth) a “strategic default” is smartest way to go.

I had some months ago written an article claiming along similar lines that in many cases foreclosure is the only logical conclusion when homeowners had overspent on their homes and could no longer afford the overpriced luxury homes they had unwisely bought at the crest of the housing boom.

Readers response ranged from claims that greedy buyers had it coming and deserved to lose homes they should never had bought to angry comments from people that felt my cold perspective was detached from the real plight of homeowners.

Opinions on the issue of loan modifications typically polarize to these two opposite views. 1) That loan modifications are an unwelcome intervention to the “natural” forces of free market and 2) that “saving” troubled homeowners is the responsibility of Government and the god given right of homeowners.

The comment I mentioned above intertwined these two views in an arguably “immoral” but very pragmatic perspective that you will hate or love.

The proposition is that if done smartly a foreclosure can provide a clean slate for troubled homeowners that can’t realistically save their homes. Banks won’t like this option but homeowners need to care for themselves, banks certainly do so. These are the steps our anonymous commentator suggests, with some gentle editing:

1) Let the lender foreclose. During this time you will of course not have to pay your mortgage payments.

2) Just before your property is to be sold declare bankruptcy. This will wipe out all liability for the mortgage debt, if this is an issue in your state, eliminate all other unsecured debt and in the process buy you a few more months to move and during which you can save your mortgage payments towards your move.

3) Start rebuilding your life. The market is a mess now anyway and most likely will continue like this for several years. Your credit will be destroyed by the bankruptcy and will appear on credit reports for 7 to 10 years but during this time you can rent while your credit scores improve. In two to three years you could have a decent credit score if you don’t get into more trouble. After only 2 years of a bankruptcy you can qualify for loans that allow for persons who have had a foreclosure/bankruptcy, like FHA for example.

Editors note: Bankruptcy laws have tightened up a bit so this “advice” might be underestimating how many years you will be unable to take a loan and the annoying detail that the government will be pretty much running your financial life for you for years after declaring bankruptcy.

This option is not a great one for loan modification agents, as they don’t get any money out of it but might be a good option for some troubled homeowners.

I must say that I don’t feel this option is a responsible or moral way of dealing with debt but it is another option. Unfortunately the credit culture we live in moves people to spend money they don’t have on things they don’t need. The idea that all that waste can be made to disappear with a convenient bankruptcy does not seem fair. However there are many homeowners that have fallen into dire straits without being irresponsible because of unemployment and the drop in house prices.

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Will Jumbo Loan Refinancing Stage A Comeback

July 16th, 2009 No comments

Will Jumbo Loan Refinancing Stage A Comeback
It is hard to feel bad for millionaires and billionaires when there is enough misery going about in the real estate market to keep everyone in tears.

However there is no denying that foreclosures have respected neither class nor wallet size with jumbo mortgages being shredded with foreclosures all over the place in what some have called the million dollar home massacre. Houses that only some months ago were priced at $3 million are now struggling to be sold at $1 million with some streets having dozens of luxury home on sale.

Has the time for large mortgages on luxury homes come to a sudden end?
Although this sector is feeling the flak as much as any other sector there might be light at the end of the tunnel for jumbo loans. Why should I care you might ask? Well as the saying goes rich women (and men) are only pitied by their psychologists but the health of jumbo mortgages might be a serious indicator of the health of the economy as a whole which is kind of interesting to all of us.

To illustrate this, note how the largest jumbo lenders are Bank of America, Wells Fargo, JPMorgan Chase and Citigroup. The share of the total mortgage market dropped from 14.3% in 2007 to 4.4% in the last quarter of 2008. For some companies the percentage of their portfolio invested in jumbo mortgages is even higher, take for instance ING Direct, 40% of their mortgages are jumbo mortgages. In the U.S the jumbo mortgage market alone was worth $100 billion last year, now that is important to all of us if we are part of the economy, which like it are not we are.

So what is the news for this important sector of the housing industry?

Up to now the drop in interest rates that lower cost loans were enjoying hadn’t really affected jumbo mortgages as banks and lending institutions clammed in shock and made jumbo mortgages expensive and very difficult to obtain. But interest rates are predicted to drop for this sector making it easier to buy a house worth $1 million or more as interest rates drop at more affordable levels as banks view them as a better and better asset for their portfolio.

The interest rates are still much higher than complying mortgages (complying as in loans guaranteed by the a federal mortgage agency). For example jumbo loan interest rates is now at 6.63% in comparison to the 5.07% for a conforming mortgage.
Interest rates drop but requirements tighten.

Even though jumbo mortgages will be cheaper they won’t necessarily be easier to get. Banks have been bruised by the credit crisis and are very careful who they lend to. Jumbo borrowers will have to Glatt Kosher in order to qualify for a jumbo mortgage with credit scores in the neighborhood of 700, 20% minimum downpayment and 3 to 6 months payments in savings.

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