Hot Mortgage Deals

The HAMP program has finally started to get some momentum and provide a substantial amount of troubled homeowners with a way out of foreclosure. Unfortunately, this help seems to be too little, too slow, and too late. However, one must accept that steps are being made and that although not all targets have been met, significant progress is finally occurring.

Let’s look at the hard data.

-       After over a year since the program started 168,000 households now have permanently modified mortgage. This represents an increase of over 50,000 from January 2010 and 100,000 from December.

-       There 92,000 trial modifications in the final stages before a permanent modification. According to Treasury the average saving for each homeowner is around $500.

This is good news, and it is certainly a help to those that have been fortunate enough to benefit from it. However, the truth is that it is a drop in the bucket when compared to the 6 million + troubled homeowners that are behind in their payments and are at risk of foreclosing on their mortgages.

When the program started it was hailed as the most aggressive plan the Government was enacting to control the housing crisis. Over a year later only a million people have entered the program, a far cry from the four million households the program set out to help.

A words batter has started over these claims. The Treasury is now claiming the goal was to provide help to 4 million homeowners not make sure they actually got it. If you accept this interpretation, HAMP is between 35 to 45 percent of the way to achieving its goal. Of course, critics claim that the Treasury is simply moving the goalposts.

What is even more worrying is how the borrowers that enter the program are being treated. Valparaiso University School of Law carried out some interesting research on the HAMP program and discovered that although 66% of all borrowers in the trial stage made all their payments, less than 25% have received a permanent modification to their mortgage. The reason for this is lack of paperwork and the loan modification limbo created by the complex and lengthy red tape.

Nevertheless, the Government remains confident, and a Treasury Department spokeswoman has claimed the rate of loan modification completions will rise in the next few months.

Another scary fact is that the number of people entering the program is actually slowing down. In February 73,000 signed up, which represents only half the number of homeowners that did so in October and November.

In conclusion, although the Government is starting to make a substantial dent in the number of homeowners it is offering help to; it is a far cry from the objectives the program set out to meet.

Related posts:

1. Treasury Moves The Goal Posts of HAMP and Lowers Expectations for the Loan Modification Program.
2. Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories
3. Loan Modifications Are Going To Be Simpler, What Do You Need Now?

Related posts:

1. Treasury Moves The Goal Posts of HAMP and Lowers Expectations for the Loan Modification Program.
2. Loan Modifications Latest Figures, Limbo, Trial Purgatory And Other Horror Stories
3. Loan Modifications Are Going To Be Simpler, What Do You Need Now?

Hundreds of thousands of troubled homeowners who are making lower mortgage payments on a trial basis are at risk of being kicked out of President Obama's foreclosure-prevention program.

Citigroup will suspend foreclosures and evictions for 30 days, giving 4,000 at-risk borrowers a break during the holiday season, the company said Thursday.

A government program designed to help at-risk homeowners refinance their mortgages is struggling, even as conventional mortgage refinances have surged in response to historically low interest rates.

Some unemployed homeowners at risk for foreclosure could get a temporary break on their mortgage payments under a plan being pushed by the FDIC.

Obama Mortgage Plan, Pays For Paying Your Mortgage
Home mortgage aid plans are hard to design. Because of how the ideologies behind open market and social responsibility are polarized no matter what you do with a mortgage aid plan pretty much half the nation is going to disagree with you.

Obama’s new mortgage plan is not perfect, not even his closest aides will say that. Its strongest opponents will point out that the new mortgage plan does not really cover for homes that have seriously dropped in value in the last months/years. Most of the families in trouble live in homes that have lost serious value, so there is a question mark in how effective this mortgage modification plan is going to be.
However the new plan has managed to incentivize the payment of mortgages and their previous modification so that it is worthwhile for banks and borrowers. This might not be enough to tip the scales on the millions of households that are at risk of losing their home this year but then again, it might.

If anything does help to tip the scales on the current crisis is to make it attractive for homeowners to pay their mortgage as well as reducing it’s principal and making it affordable on a monthly basis. Let’s face it, if your home is under water (it is worth less than what you owe on it) and there is no prospect of prices going up and you are struggling to pay the mortgage you might be inclined to cut your losses, give up and let the home go. Of course if someone is willing to give you some extra incentive to pay your mortgage and make it affordable, you might just give it a try.
What incentives does the Obama Mortgage Plan offer?
There are two main benefits or incentives homeowners that are in the red can take advantage of.
1)    Once their mortgage has been modified and monthly payments begin the Treasury will pay an incentive for every mortgage payment a borrower pays on time that goes to pay the principal balance of the loan(The cash you actually borrowed, not the interest). This is interesting because it will help reduce the length of the loan and the amount of interest paid on it. Over a five year period this “incentive” could help reduce the principal on the loan by $5,000. Reducing the principal of the mortgage has of course even greater repercussions as years go by. If you have a 15 year mortgage and you reduce your principal by $5,000 in the first five years you will be actually saving yourself over $3,000 in interest by the end of your mortgage.
2)    There is a trial period of three months before any modification is permanent. During those three months the homeowner must pay his mortgage on time. If he does he gets $1,000 from the government every year for next three years. If the mortgage isn’t paid on time there is no deal.
These are not huge benefits but they are something and they might just help people start thinking in a different way and help people dig themselves out of financial trouble.

Related posts:

1. Fed study: Obama mortgage plan should give money to borrowers, not banks
2. The perfect plan for refinancing your mortgage
3. Obama’s Mortgage Refinancing Aid, Who Really Benefits

Related posts:

1. Fed study: Obama mortgage plan should give money to borrowers, not banks
2. The perfect plan for refinancing your mortgage
3. Obama’s Mortgage Refinancing Aid, Who Really Benefits

Despite the governments efforts to provide loan modifications for individuals and families in financial difficulties that are at risk of foreclosing on their loans the mortgage aid seems to be moving too slow for all the families to benefit from it.

This has made many experts to question why banks are moving so slowly to take advantage of a program that is designed to help both the borrower and the lender. The idea is that mortgage modifications benefit both borrowers and lenders as they allow banks to receive payments they would not get if the mortgage foreclosed in a buyers market where the security (normally the house itself) is in negative equity.

However recent research quoted in today´s Washington Post indicates that this only holds true with a certain kind of borrower, the type of borrower that truly can´t pay the monthly mortgage payments at the current level but would be able to pay them if the monthly payments were reduced. This is only one of three types of borrowers though. It seems that with the other two types of borrowers, loan modifications are just not cost effective.

These two types comprise:

1) Borrowers that are in such financial strife that no loan modification or mortgage refinance is going to help in the long run, ultimately they are going to have foreclose their loan.

2) Borrowers that can meet the payments even though this might mean serious financial difficulties, even losing their life savings.

Banks and lenders have little incentive to help either of these demographics of borrowers.

To illustrate imagine if you were a lender, a bank or even a private company that provided loans for a profit. Obviously you demand some sort of security to protect your investment in case the borrower cannot or will not pay, this could be  jewelry, thee deeds of a property or a car. Then one day the borrower tells you he is going through financial hardship and needs a break in his payments, a reduction in his debt or his monthly payments. However you realize that this borrower is not going to be able to pay his loan whether you help him now or not. Negotiating with him now is just going to cost you money in time, work and whatever reduction or break you provide for his loan. On the other hand you could simply foreclose his loan and claim the security without losing nearly as much. What would you do?
Even the kindest philanthropic can see the negative incentive that such a lender would have to actually negotiate a solution with the borrower.

Could  this explain why loan modifications are moving so slowly despite the huge incentive programs the government is providing to encourage loan modifications on mortgages that risk foreclosure.

It seems that Obama´s administration has also seen this flaw in their system and is currently negotiating with banks for further incentives for the provision of loan modifications to the most vulnerable borrowers.

Related posts:

1. Monday’s Blame Game: Dirty, Dirty AEs.
2. What Is A Home Loan Modification
3. How Do Banks Profit From Mortgage Modifications

Related posts:

1. Monday’s Blame Game: Dirty, Dirty AEs.
2. What Is A Home Loan Modification
3. How Do Banks Profit From Mortgage Modifications

With interest rates likely to rise, locking into a fixed-rate loan may make sense right now.

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.