Article 1: Mortgage Delinquencies at FHA Show Slowdown
Article 2: Why the FHA Isn’t Out of the Woods Yet
Article 3: A Fresh Look at Rent vs. Buy
Article 4: Realtors Want Congress to Tweak Tax Credit Timeline
Article 5: Commercial Deals Abound but Loans Are Scarce
Article 6: Jumbo Loans Easier to Find
Article 7: Why Americans Get Ripped Off on Mortgage Loans
Article 8: Delinquent Loans Plateau at High Level
Article 9: Fifteen-Year Mortgage Hits a Record Low
THE REAL ESTATE REPORT:
INTERNET EDITION
June 7, 2010, 10:00 AM ET
Mortgage Delinquencies at FHA Show Slowdown
BY NICK TIMIRAOS
The government agency that backs home loans may have some good news for taxpayers.
Home mortgages insured by the Federal Housing Administration are falling into delinquency at a slower rate than they have in the past. If the trend is maintained, it could help the government agency avoid a taxpayer bailout.
In April, nearly 8.5% of loans backed by the agency were 90 days or more past due. While that was still higher than a year earlier, April marked the third consecutive month in which delinquencies, which peaked at 9.4% in January, declined.
The FHA figures come amid other signs ...
DEVELOPMENTS:
June 7, 2010, 10:57 AM ET
Why the FHA Isn’t Out of the Woods Yet
By Nick Timiraos
In today’s WSJ we look at how, in a surprising development, mortgage defaults have fallen for three straight months at the Federal Housing Administration.
If that trend holds, the agency could avoid burning through its cash reserves, which are estimated to fall sharply over the coming years. Still, the FHA’s commissioner, David Stevens, says “there’s plenty of room for caution.”
Indeed, the FHA is by no means out of the woods. If the economy weakens or home prices slide again, the agency could see significant losses because it has a much bigger exposure to housing today than it did when the housing market tanked three years ago.
Even if the FHA’s improvement continues, it’s possible that this year’s annual audit could show that the agency is still running low on cash, or worse, that it is insolvent. Here’s how: Every fall, an independent auditor estimates the value of the agency’s reserves after accounting for expected losses. If the home-price forecast used to predict those cash flows takes a bearish view of future home prices, then those models could signal that the FHA will run out of money, absent any new business.
Right now, the FHA’s financial performance is ahead of the forecasts made last fall. For the first six months of the fiscal year, which began last Oct. 1, the FHA has paid out $6 billion on defaulted loans, down from an estimated $8.7 billion in loan losses. But that forecast assumed a 6.5% price decline that hasn’t materialized. If that price decline has been delayed into the future, but not avoided, then that could spell problems for the FHA during this year’s annual review.
The FHA doesn’t lend money directly to borrowers but instead insures lenders against losses on loans that meet certain standards. It collects a fee for that backing and has traditionally been self-funded. The New Deal-era agency didn’t loosen its standards during the housing boom, and its market share plunged to 2% in 2006.
But the collapse of the subprime-mortgage market in 2007 followed by tougher underwriting criteria at mortgage-finance giants Fannie Mae and Freddie Mac in 2008 swelled the volume of loans headed to the FHA, which has become one of the last sources of low down-payment loans. The agency is on track to match last year’s record haul of 1.8 million loan guarantees, and it backed nearly half of all home-purchase mortgages in the first quarter.
“Having FHA do this much volume is a sign of a very sick system,” Mr. Stevens told an audience of mortgage bankers last month. “This is a market purely on life support, sustained by the federal government.”
Nearly two-thirds of FHA borrowers that took out loans over the past year have less than 5% equity in their homes, illustrating the risks that just a 5-10% decline in home prices could have on the agency’s reserve funds.
Critics say the agency is doing no favors to taxpayers or new homeowners by providing relatively easy loan terms. “Insofar as the FHA was encouraging people to buy homes in bubble markets that were not deflated, that’s not good for the FHA and you didn’t help the homeowner,” says Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank.
But Mr. Stevens says the current crisis would have been much worse if the agency hadn’t played a large role. Calls for the FHA to withdraw liquidity from mortgage markets aren’t credible “when you look at how little capital there is in the market today,” says Mr. Stevens. “Anyone who wants to say, ‘It was irresponsible to finance homes in 2009,’ that’s a pretty extreme statement.”
JUNE 3, 2010, 9:52 A.M. ET
A Fresh Look at Rent vs. Buy
"Why on Earth would you buy down here when you can rent?" asked a friend of mine in Miami Beach not long ago. "Buying is so over."
He promptly moved to Manhattan for work reasons–and bought a $1 million loft on the Upper West Side.
Note the typical behavior. People want to buy when prices are up, and turn more wary when they've collapsed. Logically it makes no sense. Research out Thursday adds some hard numbers.
Real estate website Trulia.com has looked at major real estate markets across the country and asked: Is it cheaper to buy, or to rent?
By Trulia's math my friend was moving in exactly the wrong direction.
Rent in Manhattan: Home prices there are way too high, says Trulia. (Ditto San Francisco.)
Buy in Miami. And Phoenix. And Las Vegas. And most of the other places that have been flattened by the crash. Homes there are cheap compared to rents.
The cross-over point is about 15 times annual rent, the company believes. In other words, as a rough rule of thumb, homes are probably fairly valued in a city when they cost about 15 times a year's rent. So, for example, if you're paying $10,000 a year to rent a place, think twice about buying a home that costs more than $150,000. Dean Baker, economist at the Washington, D.C. think-tank The Center for Economic and Policy Research, came to a similar conclusion in research on the subject in recent years. Fifteen times is the historic average, he said.
So what's the multiple in New York right now?
About 32 times, says Trulia. The average two-bedroom condo or townhouse in New York city costs about 32 times as much to buy as it does to rent. Other major markets over 20 times include Seattle (24 times), San Francisco (22 times) and Portland, Ore. (22 times).
On the other hand Miami list prices are now about eight times annual rents, says Trulia. Phoenix is about 10 times and Las Vegas about 11.
Trulia's data need to be taken with some caveats.
Trulia looked at list prices rather than actual transaction prices, so its figures for prices may be too high.
Furthermore drawing the cut-off point at 15 times rents may be on the low side.
Mr. Baker, in conversation yesterday, said that figure assumes that you're only going to stay in your home for the typical seven years. If you stay a lot longer, he says, the transaction costs of buying and selling become less and less important. That makes owning more attractive.
Nonetheless the Trulia analysis seems directionally correct. Work done by the C.E.P.R. last year came to similar conclusions: Namely that markets like New York and the California coast remained expensive compared to rents, while the hardest hit markets now look cheap.
And Trulia's research emphasizes two points that are absolutely spot on.
First, homeowners need to look first and hardest at present cashflow. The cult of homeownership made no sense. If renting is much cheaper than buying, think seriously about it.
Second: The markets that have fallen the furthest now look like good places to buy, while those that seem to be "safest" aren't. As the saying goes: There is no such thing as a "safe" investment, merely one whose risks are not yet apparent. It's a principle that a lot of people forget time and again.
Brett Arends at wsj.com
June 2, 2010, 2:42 PM ET
Realtors Want Congress to Tweak Tax Credit Timeline
By Nick Timiraos and Dawn Wotapka
The real-estate lobby wants Congress to extend the amount of time that potential home buyers have to complete transactions that qualify for the $8,000 federal home-buyer tax credit.
To qualify for the tax credit, buyers had to sign purchase agreements by April 30. Those buyers have until the end of June to close on those sales, and anything that closes after that wouldn’t get the tax credit.
The problem, says the National Association of Realtors, is that many of those signed contracts are on foreclosures and short sales, where the lender allows the house to sell for less than the amount owed to the bank. Those transactions take longer than normal to process, and there’s some concern that many sales may not actually close in time.
“There could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems,” said Lawrence Yun, the trade group’s chief economist, in Wednesday’s report that showed a 6% surge in pending home sales during April.
The NAR and its members are asking Congress for flexibility with the June 30 deadline, but it is unclear when—or even if—something would happen. (The National Association of Home Builders says it is not asking for a deadline tweak.) Congress would have to pass such a measure quickly, which is no easy task. One possibility would be to attach the extension to a piece of legislation that’s already winding its way through both chambers.
Last week, Congress went into the Memorial Day recess without completing a bill to authorize new funding for the USDA’s rural development loan program, which lets some home buyers tap 100% financing. Supporters of that program have been pushing for more funds for several weeks.
Without a last-minute reprieve, all would-be buyers can do is push for the different parties to close the deal in time.
But don’t spend that downtime shopping. Incurring additional debt can raise red flags with the lender, possibly derailing a deal at the last minute.
“We do see it happen where [buyers] qualify and then they go out and buy a new car,” says Brent Anderson, vice president of investor relations with Meritage Homes. “All of a sudden they don’t qualify anymore.”
Readers, do you think Congress should extend the closing deadline?
Nick and Dawn at wsj.com
JUNE 3, 2010
Commercial Deals Abound but Loans Are Scarce
By EMILY MALTBY
Real-estate prices are enticingly low in many areas of the country, prompting business owners to pursue sweet deals on storefronts, manufacturing facilities and other commercial properties. But because banks remain wary of commercial real-estate loans, landing financing to make such a purchase can be time consuming and tedious.
Compared to peak prices in October 2007, commercial property values are down 42%, according to Moody's Investors Service Inc. Price index reports compiled by Moody's and Real Capital Analytics Inc. show that as of March 2010, the cost of industrial and office space fell 32% in the last two years. Retail space also plummeted 28%.
"There is excess space, which opens an opportunity for small firms," says Bill Dunkelberg, chief economist at National Federation of Independent Business, a Washington advocacy group. "You won't see prices like these for a long time."
Some owners are heeding the call. Randy Scheidt, who heads the legislative subcommittee of the National Association of Realtor's commercial division, says that he is noticing business owners "feeling more comfortable with the future" and weighing whether "such an acquisition would be fiscally prudent."
But the tight credit environment is making it difficult for entrepreneurs to secure those loans. "What is so different today versus 2006 is the underwriting scrutiny," says Mr. Scheidt. "It's not unusual for [the loan process] to take an additional 30 to 60 days."
Eliot Boyle, owner of U.S. Metals LLC in Denver, decided last year to move his sheet-metal roofing and siding business to a new facility. Lease rates in the area were steady, but commercial spaces for sale on the market were falling. "We thought this was a good time to take advantage of how well we were doing and how poorly the real-estate environment was doing," he says.
After preparing his business plan, he visited five banks and was turned down by four. The remaining lender, Bank of the West, which had previously worked with Mr. Boyle, issued him a Small Business Administration loan to buy a $680,000 building. The price for the space —a 50%-larger facility—had dropped 40%.
The process took longer than anticipated and closed one day before the scheduled move. The delays, says Mr. Boyle, stemmed from the bank's requirement of additional environmental reports and other due diligence.
"All those appraisals showed that…if the bank needs to move fast and has to liquidate the building quickly, it can do that," says Mr. Boyle.
"The approval timelines are really not that different than they were in the past," says Jim Cole, spokesperson for the San Francisco-based Bank of the West. "Appraisals take the same amount of time and, as always, environmental reports can take longer than expected."
Many banks taking extra precaution before issuing commercial mortgages are reeling from those kinds of losses and are wary of putting more of those loans on their books. According to a Real Capital Analytics' study of Federal Deposit Insurance Corp. and bank data, the default rate for commercial real-estate mortgages rose to 4.2%, amounting to $45.5 billion, for the first quarter of 2010. That's the highest default rate since 1992.
Commercial real estate loans have really hurt community and regional banks, which are key lenders to small businesses. They hold just more than half of bank-issued commercial mortgages and their portfolios are likely to hurt for some time. The default trend is expected to continue through 2011, when it may hit 5.4%, before abating, according to Real Capital Analytics.
Although the commercial real estate market has shown some tentative signs of life in the early months of 2010, there is little transparency about the value of many properties, says Sam Chandan, chief economist at Real Capital Analytics. Appraisals help determine price, he explains, but commercial property values are supported by other transactions in the area.
To overcome the credit challenge, experts say entrepreneurs can make themselves more attractive by submitting sound financial plans that back up their income projections and intent to repay the loan. Borrowers with solid credit histories and established bank relationships are more likely to get a loan.
Mr. Chandan says newer businesses can still land financing if they can bring equity to the table, especially if the borrower wants to purchase a vacant property that the bank is holding. But, he cautions, "lending standards have tightened considerably, so it will be challenging."
Emily Maltby at wsj.com
APRIL 30, 2010
Jumbo Loans Easier to Find
Getting a jumbo mortgage is becoming a little easier for home buyers in the New York area.
Jumbos in the tri-state area are mortgages that exceed $729,750, the limit set to receive government backing or for lenders to sell the loans to mortgage-finance giants Fannie Mae and Freddie Mac. Since the mortgage crisis, banks haven't been eager to make large loans without federal protection, so the market for such mortgages suffered, crimping sales of expensive homes.
But more lenders have been stepping up their offerings of jumbo loans, even though most of the large mortgages will stay in the lender's portfolio. "The rust has slowly been shaken off as banks re-learn how to do portfolio lending," says Keith Gumbinger of HSH Associates, a financial publisher based in Pompton Plains, N.J.
The New York region is benefiting from having a large array of financial institutions that make loans--from national lenders and investment firms to credit unions and smaller banks. That means even though the crisis has made credit guidelines more stringent, "there is definitely more money available," says Melissa Cohn, president of brokerage Manhattan Mortgage Co.
Some banks, like Hudson City Savings Bank, a thrift based in Paramus, N.J., and Astoria Federal Savings, a Queens, N.Y., lender, have long had a hand in the jumbo market and didn't retreat when private money fled as the credit crisis worsened. Together, the two regional lenders accounted for nearly 6% of all jumbo lending in the country last year, according to Inside Mortgage Finance.
Astoria's jumbo lending volume doubled in the second half of the 2009 from the first half, according to Inside Mortgage Finance, even though it reduced its maximum loan limit to $1.5 million, from $2.5 million.
Bigger banks have also gradually increased jumbo offerings. On Monday, Citigroup Inc. will drop rates to around 5.6% on 30-year fixed-rate jumbo mortgages with down payments of at least 25%. "There are a lot of really good buyers who are underserved today, particularly in high-end markets like California and New York," said Sanjiv Das, chief executive of Citi's mortgage unit. He says the bank hopes lower rates will help "energize" those housing markets.
At J.P. Morgan Chase & Co., jumbo activity increased in every quarter last year, according to Inside Mortgage Finance. A lending official says the bank is reducing minimum down payments to as low as 20% in markets where prices appear to have bottomed.
Credit unions have also become a popular jumbo outlet. "They certainly filled the void locally...You used to never see a credit union do mortgage lending," says Guy Cecala, publisher of Inside Mortgage Finance.
Long Island's Teachers Federal Credit Union offers jumbo loans up to $1.5 million with 20% down, while Bethpage Federal Credit Union will make loans up to $2.5 million, though it requires a 45% down-payment on those loans.
Meanwhile, rates on jumbo loans have also fallen to their lowest levels in years. Last week, the average 30-year fixed-rate jumbo loan carried a 5.76% rate, just above the all-time low of 5.55% in June 2003, according to HSH Associates.
"Hybrid" adjustable-rate mortgages that carry a fixed rate for the first five years are now as low as 4.25%, down from 5.25% one year ago, says David Adamo, chief executive of Luxury Mortgage Corp., a mortgage bank in Stamford, Conn.
"The availability of money has improved and the price of that money has improved," says Mr. Gumbinger of HSH. "No one would characterize it as great, but slowly but surely, things have been getting better."
Indeed, underwriting standards are still very tight, with most lenders requiring minimum credit scores of 740 and down payments of at least 20% for loans up to $1 million and 30% for loans up to $2 million.
And until those standards relax, analysts say that a modest improvement in mortgage lending might not have a big effect on sales on a market that depended heavily on easy lending during the bubble.
"You don't have 35-year-old investment bankers putting 10% down on $4 million apartments," says Jonathan Miller, president of New York appraisal firm Miller Samuel Inc. "That knocks a large group of people out of the pool."
Nick Timiraos at wsj.com
April 29, 2010, 2:39 PM ET
Why Americans Get Ripped Off on Mortgage Loans
By James R. Hagerty
You might think that Americans would have learned over the past few years that home mortgages can be dangerous products, to be approached warily, only after careful study and consideration. You would be wrong.
Americans spend twice as much time shopping for cars than they do for home loans, Zillow.com reported Thursday. An online survey of 2,729 adults commissioned by Zillow found that on average they spent five hours choosing a mortgage, compared with 10 hours for a car and four hours for a computer. Nearly a third of the respondents devoted two hours or less to choosing a mortgage.
“Mortgages continue to be something that most people don’t want to spend time thinking about,” said Stan Humphries, chief economist for Zillow, a real estate information firm.
Of course, only an economist could find that even faintly surprising. Most people find it fun to look at shiny new cars and take them for test drives. Vroom, vroom! Reading through the fine print of loan contracts and trying to figure out what would be a fair price for title insurance and an appraisal–well, slightly less diverting.
Even if you do want to shop wisely for a mortgage, that isn’t easy to do. You can’t just pick the lowest rate because the lender offering the lowest rate might have the highest fees. And one lender’s loan doesn’t necessarily have the same terms as the similar-sounding loan from the bank or broker next door. You need to look at a bunch of factors, and at the end of it you won’t necessarily know which combination is best.
Moreover, you might be told on Monday morning that your rate will be 5%. When you come back to lock in the next morning, however, the lender may tell you that the market has moved (as it does constantly) and now your rate is 5.25%. Do you have time to go back to all the other lenders and check what they’re charging today? Or are you so eager to refinance or seal your home purchase that you’ll just sign on the dotted line?
In fact, many lazybones simply go to one lender–the one recommended by a friend, Realtor or home builder–rather than doing their own research.
At the beginning of this year, new federal rules mandated a standard three-page “good faith estimate” of mortgage fees and terms that is supposed to make it easier for consumers to compare offerings of different lenders. Opinions are mixed on whether this new form is helpful or confusing.
Lenders, for their part, always say they are eager to improve “financial literacy” so consumers can make better choices. But do they really want to make it easy for consumers to shop for mortgages? I’m skeptical. If consumers could easily compare one lender’s terms with another’s, profit margins on home mortgages would go down.
By James R. Hagerty at wsj.com
MAY 20, 2010
Delinquent Loans Plateau at High Level
Troubled Mortgages Edged Up to 14% in Past Year, but New Cases Fell; People Stay in Homes Much Longer Before Foreclosure
The number of American households behind on mortgage payments appears to have reached a plateau at a high level as the economy recovers, a survey showed Wednesday.
At the same time, people who fall behind on their mortgages are staying in their homes longer as banks struggle with huge volumes of calls for help and with the complexities of federal and state foreclosure-prevention programs.
Diane B. Robertson of Oldsmar, Fla., said she had to stop making mortgage payments around the end of 2008 after a drop in her income. She said her lawyer advised her "to just sit tight because you may be sitting there for two years." Seventeen months later, foreclosure proceedings are under way, but Ms. Robertson is still waiting to be evicted.
The Mortgage Bankers Association, a trade group, reported that 14% of mortgage loans on one-to-four-unit homes were 30 days or more delinquent or in the foreclosure process as of March 31. That represents about 7.3 million households. The rate was 12% a year earlier.
Becky Mehaffey gardens in her yard in Marysville, Wash., on Wednesday. The Mehaffeys are 15 months delinquent on their mortgage but haven't been evicted from their home.
The portion of borrowers between 30 and 60 days overdue—mostly representing newly delinquent homeowners—declined to 3.45% as of March 31 from 3.77% a year earlier.
Jay Brinkmann, chief economist of the MBA, said the number of borrowers falling behind has dropped modestly partly because of recent job growth.
Even so, around 2.6 million households were 90 days or more overdue but still not in the foreclosure process, which can take more than a year, the MBA said. In some cases, the process is extremely slow: About 153,000 borrowers were 18 months or more overdue and still awaiting the start of foreclosure proceedings as of April 30, according to LPS Applied Analytics. That's up from 30,000 a year earlier.
Homeowners typically can stay in their homes nine to 12 months without making any payments, said Aaron Horvath, a senior vice president at Springboard Inc., a nonprofit counseling service based in Riverside, Calif.
Josh Zollinger, owner of Orange Coast Realty in Mission Viejo, Calif., said some of his clients have gone two years without paying. Some homeowners extend their free stays by seeking loan modifications shortly before their homes are due to be auctioned, he said.
Distressed borrowers are staying put for long periods, partly because the federal government has leaned on banks to offer lower payments to avert as many foreclosures as possible, a time-consuming process. New laws in some states also require banks to take more steps to determine which borrowers might be rescued. Further slowing the process, many banks still don't have enough capacity to handle all the requests from borrowers for help.
"There is a certain triage that takes place," Mr. Brinkmann said. "In some cases, it's: 'We'll get to you when we can get to you.' "
In Florida, Ms. Robertson said she had been struggling to live on Social Security payments of $554 a month since her alimony was cut off. She said she didn't know when she would be forced to find a new home, adding: "I'll have to face that music some time."
Becky and Jeff Mehaffey of Marysville, Wash., haven't made payments since early 2009, but are still in the home where they raised four children. Mr. Mehaffey is out of work because of health problems and the failure of a drywall-installation business he helped create. His wife is also looking for work.
"A lot of calamities hit at once," Mr. Mehaffey said. "One way or the other, we'll get through it."
Delaying the foreclosure process is "definitely a bad thing," said Anthony Sanders, a professor of real-estate finance at George Mason University. "You want to recognize losses, get over the pain, move on as quickly as possible."
But Tom Lawler, an independent housing economist in Leesburg, Va., said the delays haven't been entirely bad, because banks needed time to figure out which homeowners could be helped in a way that served the interests of both lenders and borrowers. The delays also avoided swamping the housing market with too many foreclosed homes all at once.
But Mr. Lawler said banks now need to become more efficient at foreclosing in cases where borrowers clearly can't afford their homes.
For now, some borrowers have little idea what the consequences will be for failing to make payments. To revive mortgage lending that doesn't carry a government guarantee against defaults, "people need to know what the ground rules are," Mr. Lawler said.
At the end of the first quarter, about 9.4% of borrowers were overdue on payments but not yet in foreclosure, and about 4.63% were in the foreclosure process.
"If mortgage delinquencies are not yet clearly improving, it also appears they are not getting worse," Mr. Brinkmann said. "However, a bad situation that is not getting worse is still bad."
James R. Hagerty at wsj.com
JUNE 4, 2010
Fifteen-Year Mortgage Hits a Record Low
WASHINGTON—Home-mortgage rates were little changed last week, holding steady for the most part at or near recent lows, including a record for the 15-year fixed-rate loan, Freddie Mac said.
The 30-year fixed-rate mortgage average rose slightly to 4.79% for the week ended Thursday, according to Freddie's weekly survey.
In the prior week, the average rate was 4.78%, the lowest since December. The year-ago average for the 30-year home loan stood at 5.29%.
"The economy grew at a slower rate than originally reported in the first three months of the year … which suggests inflation will remain tame in the near term," said Freddie Mac chief economist Frank Nothaft, referring to revised data on U.S. gross domestic product.
"As a result," he said, "mortgage rates held at historic levels this week."
Rates on 15-year fixed-rate mortgages averaged 4.2%, the lowest level since Freddie Mac began tracking the mortgage in 1991, down from 4.21% in the prior week.
One-year Treasury-indexed adjustable-rate mortgages averaged 3.95%, unchanged from the prior week and the lowest level since May 2004. The one-year ARM averaged 4.81% a year ago.
The five-year Treasury-indexed ARM averaged 3.94%, down from 3.97% in the prior week and 4.85% a year ago.
wsj.com
Finding Your Dream Foreclosure: What to Know When You’re Buying an REO Property
By Amy Hoak
Print Article
RISMEDIA, October 5, 2009—(MarketWatch/MCT)—Buying a foreclosure often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge.
“The vast majority of the banks don’t want us to advertise them as ‘bank-owned’ because it comes with a negative connotation,” said Ryan Melvin, co-owner of More Realty Group in Las Vegas.
That means no sign on the front lawn indicating the home is anything other than a traditional sale. A buyer probably won’t find a property advertised as a foreclosure on marketing materials, said Melvin, who specializes in real-estate owned properties, or REOs, those that have been reclaimed by a bank, typically after an unsuccessful foreclosure auction.
Plus, in some markets, including Las Vegas, foreclosure inventory is actually down compared with last year as government programs attempt to keep owners in their homes and banks aren’t putting as many homes on the market, Melvin said. That’s making it harder for buyers to snag a foreclosure, and those paying with cash often win a bid over someone who needs financing.
If you’re considering the purchase of a home that is now owned by a bank, it’s also important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.
Those looking for the best deal probably shouldn’t rule out non-foreclosure properties, either, said Mark Goldman, a mortgage broker with Cobalt Financial Corp., and a real estate lecturer at San Diego State University. Sometimes, people set their sights on bank-owned properties “like the word ‘foreclosure’ equals ‘good deal,’” he said.
And that’s not always true.
One option for finding foreclosure listings: Go straight to the bank.
Lender Web sites, such as those operated by Bank of America, Chase and Citibank, will list the properties the financial institution has reclaimed when borrowers defaulted. To find a list, simply do a Web search for REOs and the name of the lender. Contact information for the property’s listing agents is usually provided for each entry.
For a fee, other sites will hunt down properties for you. RealtyTrac.com, which helps people find foreclosure and pre-foreclosure properties, charges $49.95 a month, after a free seven-day trial. The company also recently launched BankHomesDirect.com, which charges $19.95 per month and lets people search just for REOs.
Foreclosures.com charges $49.95 per month, after a free seven-day trial.
Otherwise, you might want to enlist the help of a realty agent. Someone who works regularly with REOs might be able to track down the properties more easily than a traditional agent. Melvin is a member of the National REO Brokers Association, nrba.com, which has a searchable database of brokers on its site. There’s also the REO Network, reonetwork.com, which connects buyers with those who specialize in selling REOs.
Lenders aren’t held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn’t occupied the home to notice leaks or other problems. For that reason, an inspection is crucial.
“If there are lessons out of the last couple of years, it’s certainly buyer beware,” said Dan Steward, president of the home inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.
“We have all heard the stories of people ripping the copper pipe and wiring out … people have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall,” Steward said. Some have ripped out toilets and kicked in walls or left water faucets running before they left the house, often out of anger.
You don’t need to be told the toilet is gone, but an inspector can tell if there is damage 20 feet down the water line because of the way that toilet was ripped out, he said.
Other issues could pop up due to the property being vacant. Large banks will often hire a field service to cut the grass, shovel the snow and winterize a home, yet when homes aren’t occupied it’s harder to catch small problems before they become big ones.
“When we live at home or drive the car, if something is off we notice it. We notice it and we deal with it,” Steward said. When a place is unoccupied, pests could become an issue. If you were living in a home, a nest of raccoons probably wouldn’t be able to find a home in your crawlspace—not for long, anyway.
A neighborhood environmental report might also be worthwhile, he said, which could reveal if the property was the site of a drug lab, for example. When a meth lab is operating in a home, air quality issues can arise; when a home was used for growing marijuana, there is a tendency for mold problems from the high humidity, Steward said.
The time it takes to complete the sale can vary from lender to lender. In some cases, the process goes smoothly, Goldman said. Other lenders are disorganized.
“It really depends on who you’re doing business with,” Goldman said.
But for your best chance at having an offer accepted and for a quick closing process, have everything in order before making the offer, said Duane Andrews, CEO of Clear Capital, a company that provides valuation products for the mortgage and lending industries. That includes having the financing firmed up and writing a clean offer — for example, asking for new oven racks as part of the deal could peg you as a demanding buyer who will be annoying to deal with, he said.
“What this tells the seller is this guy is going to be a pain and they don’t have time for this pain,” Andrews said.
In fact, most bank-owned properties are sold “as is,” so if there is something you want fixed, it’s best to just factor that into the price you’re offering, Melvin said.
But don’t expect to bargain the listing price way down, Melvin added.
Banks typically price their properties at a 20 percent to 30 percent discount anyway, he said. If the property has been on the market for a week or two, don’t expect the bank to drop the price; if the listing is older, you might have more power, he said.
Also, don’t be surprised if the bank that is selling the property asks you to get an approval from its mortgage operation; you often don’t have to take the loan from their company, but they may want to get a closer look at your finances to make sure you’re a solid buyer, Melvin said.
Above all, make sure to follow directions when submitting the offer, he said. That likely includes having an approval letter from the bank and the correct amount of earnest money.
“Most listing agents will have instructions how we want buyers agents to submit the offer,” he said. Delays can occur when instructions aren’t followed exactly.
(c) 2009, MarketWatch.com Inc.
Distributed by McClatchy-Tribune Information Services.
Read more:
http://rismedia.com/2009-10-04/finding-your-dream-foreclosure-what-to-know-when-youre-buying-an-reo-property/#ixzz0WHYOs1TZ
Top 3 Real Estate Mortgage Scams: What You Need to Know
Print Article
RISMEDIA, November 2, 2009—Being a homeowner is one of the biggest dreams for the American people. Due to record numbers of homeownership and cheap mortgage rates, individuals who did not own a home previously are now looking for mortgages for financing their ambitions. On certain occasions, the dream of homeownership is associated with a cost that exceeds the mortgage.
For finding out how much your mortgage is going to cost you, a loan mortgage calculator often works as a user-friendly tool. Nevertheless, this tool can’t save you all the time. Similar to other forms of investment, real estate mortgage loans are also subject to scams. Mortgage frauds and scams can make you lose thousands of dollars on interest as a minimum because of excessive fees and other hidden costs. The worst that can happen is that you can lose your home to foreclosure.
According to industry professionals, there are three principal or familiar types of real estate fraud:
1. Identity theft via mortgage request
2. Bait and switch
3. Loan flipping
For preventing scams, it has been witnessed that offense is the best defense. Understand the truth and don’t hesitate to make queries.
Bait and switch is a fraudulent sales technique where a loan product is publicized at a lucrative rate (bait). However, the product or rate is subsequently changed for the gain of the lender (switch). This is an utterly illegitimate and deceitful practice. For instance, one interest rate is assured at the time of selling a loan, but a bigger rate is provided at the time of closing.
When you’re obtaining a pre-approval or mortgage quote, you believe that your question with the lender is secret, right? You’re wrong. On many occasions, important financial details about you and your mortgage requirements are hacked by vying lenders. This can happen within 24 hours of your credit bureau inquiry. Your loan officer is even unaware of this. Many firms provide countrywide accessibility to your financial details to the lenders and everybody in your city who requested for a mortgage within the last 24 hours. Any other lender can talk to these individuals the following day and give them a pre-approval for an improved mortgage loan.
One more dilemma is mortgage solicitation through telephone, the Internet or door to door. These scams involve filling in an application through fax, the Internet or over the telephone and often the rates are phony. However, it is not the largest issue to be bothered about–it is nothing but identity theft. Even though the rates are legitimate, the company would get all your important details such as your social security number that can result in mortgage scam or identity theft.
Another type of mortgage scam that is prevalent in the real estate industry is loan flipping. Loan flipping denotes frequent refinancing of a mortgage within a small time frame with very small gains to the borrower. It takes place when a borrower can’t keep up with the planned payments or constantly combines other unsecured loans into a new secured loan at the request of a lender. Lenders flipping loans ask for too much origination fee with every consecutive refinancing. They might ask for these fees on the basis of the whole loan amount, not only on the increased amount summed up with the loan principal through refinancing. In addition, every refinancing might attract prepayment penalties that can be funded as a portion of the overall loan amount, accumulating the debt of the borrower.
If you’re buying a home, looking for a home equity loan or considering a mortgage refinance, it is better to work with a trustworthy lender. You must shop around and do some homework to get the best offers. Try to stay away from furnishing any details until you’re confident that the company or individual you’re talking to is right for you.
For more information, visit www.mortgagefit.com.
Read more:
http://rismedia.com/2009-11-01/top-3-real-estate-mortgage-scams-what-you-need-to-know/#ixzz0WDkqqgIn
Top 3 Real Estate Mortgage Scams: What You Need to Know
Print Article
RISMEDIA, November 2, 2009—Being a homeowner is one of the biggest dreams for the American people. Due to record numbers of homeownership and cheap mortgage rates, individuals who did not own a home previously are now looking for mortgages for financing their ambitions. On certain occasions, the dream of homeownership is associated with a cost that exceeds the mortgage.
For finding out how much your mortgage is going to cost you, a loan mortgage calculator often works as a user-friendly tool. Nevertheless, this tool can’t save you all the time. Similar to other forms of investment, real estate mortgage loans are also subject to scams. Mortgage frauds and scams can make you lose thousands of dollars on interest as a minimum because of excessive fees and other hidden costs. The worst that can happen is that you can lose your home to foreclosure.
According to industry professionals, there are three principal or familiar types of real estate fraud:
1. Identity theft via mortgage request
2. Bait and switch
3. Loan flipping
For preventing scams, it has been witnessed that offense is the best defense. Understand the truth and don’t hesitate to make queries.
Bait and switch is a fraudulent sales technique where a loan product is publicized at a lucrative rate (bait). However, the product or rate is subsequently changed for the gain of the lender (switch). This is an utterly illegitimate and deceitful practice. For instance, one interest rate is assured at the time of selling a loan, but a bigger rate is provided at the time of closing.
When you’re obtaining a pre-approval or mortgage quote, you believe that your question with the lender is secret, right? You’re wrong. On many occasions, important financial details about you and your mortgage requirements are hacked by vying lenders. This can happen within 24 hours of your credit bureau inquiry. Your loan officer is even unaware of this. Many firms provide countrywide accessibility to your financial details to the lenders and everybody in your city who requested for a mortgage within the last 24 hours. Any other lender can talk to these individuals the following day and give them a pre-approval for an improved mortgage loan.
One more dilemma is mortgage solicitation through telephone, the Internet or door to door. These scams involve filling in an application through fax, the Internet or over the telephone and often the rates are phony. However, it is not the largest issue to be bothered about–it is nothing but identity theft. Even though the rates are legitimate, the company would get all your important details such as your social security number that can result in mortgage scam or identity theft.
Another type of mortgage scam that is prevalent in the real estate industry is loan flipping. Loan flipping denotes frequent refinancing of a mortgage within a small time frame with very small gains to the borrower. It takes place when a borrower can’t keep up with the planned payments or constantly combines other unsecured loans into a new secured loan at the request of a lender. Lenders flipping loans ask for too much origination fee with every consecutive refinancing. They might ask for these fees on the basis of the whole loan amount, not only on the increased amount summed up with the loan principal through refinancing. In addition, every refinancing might attract prepayment penalties that can be funded as a portion of the overall loan amount, accumulating the debt of the borrower.
If you’re buying a home, looking for a home equity loan or considering a mortgage refinance, it is better to work with a trustworthy lender. You must shop around and do some homework to get the best offers. Try to stay away from furnishing any details until you’re confident that the company or individual you’re talking to is right for you.
For more information, visit www.mortgagefit.com.
Read more:
http://rismedia.com/2009-11-01/top-3-real-estate-mortgage-scams-what-you-need-to-know/#ixzz0WDkqqgIn
Top 3 Real Estate Mortgage Scams: What You Need to Know
Print Article
RISMEDIA, November 2, 2009—Being a homeowner is one of the biggest dreams for the American people. Due to record numbers of homeownership and cheap mortgage rates, individuals who did not own a home previously are now looking for mortgages for financing their ambitions. On certain occasions, the dream of homeownership is associated with a cost that exceeds the mortgage.
For finding out how much your mortgage is going to cost you, a loan mortgage calculator often works as a user-friendly tool. Nevertheless, this tool can’t save you all the time. Similar to other forms of investment, real estate mortgage loans are also subject to scams. Mortgage frauds and scams can make you lose thousands of dollars on interest as a minimum because of excessive fees and other hidden costs. The worst that can happen is that you can lose your home to foreclosure.
According to industry professionals, there are three principal or familiar types of real estate fraud:
1. Identity theft via mortgage request
2. Bait and switch
3. Loan flipping
For preventing scams, it has been witnessed that offense is the best defense. Understand the truth and don’t hesitate to make queries.
Bait and switch is a fraudulent sales technique where a loan product is publicized at a lucrative rate (bait). However, the product or rate is subsequently changed for the gain of the lender (switch). This is an utterly illegitimate and deceitful practice. For instance, one interest rate is assured at the time of selling a loan, but a bigger rate is provided at the time of closing.
When you’re obtaining a pre-approval or mortgage quote, you believe that your question with the lender is secret, right? You’re wrong. On many occasions, important financial details about you and your mortgage requirements are hacked by vying lenders. This can happen within 24 hours of your credit bureau inquiry. Your loan officer is even unaware of this. Many firms provide countrywide accessibility to your financial details to the lenders and everybody in your city who requested for a mortgage within the last 24 hours. Any other lender can talk to these individuals the following day and give them a pre-approval for an improved mortgage loan.
One more dilemma is mortgage solicitation through telephone, the Internet or door to door. These scams involve filling in an application through fax, the Internet or over the telephone and often the rates are phony. However, it is not the largest issue to be bothered about–it is nothing but identity theft. Even though the rates are legitimate, the company would get all your important details such as your social security number that can result in mortgage scam or identity theft.
Another type of mortgage scam that is prevalent in the real estate industry is loan flipping. Loan flipping denotes frequent refinancing of a mortgage within a small time frame with very small gains to the borrower. It takes place when a borrower can’t keep up with the planned payments or constantly combines other unsecured loans into a new secured loan at the request of a lender. Lenders flipping loans ask for too much origination fee with every consecutive refinancing. They might ask for these fees on the basis of the whole loan amount, not only on the increased amount summed up with the loan principal through refinancing. In addition, every refinancing might attract prepayment penalties that can be funded as a portion of the overall loan amount, accumulating the debt of the borrower.
If you’re buying a home, looking for a home equity loan or considering a mortgage refinance, it is better to work with a trustworthy lender. You must shop around and do some homework to get the best offers. Try to stay away from furnishing any details until you’re confident that the company or individual you’re talking to is right for you.
For more information, visit www.mortgagefit.com.
Read more:
http://rismedia.com/2009-11-01/top-3-real-estate-mortgage-scams-what-you-need-to-know/#ixzz0WDkqqgIn
Top 3 Real Estate Mortgage Scams: What You Need to Know
Print Article
RISMEDIA, November 2, 2009—Being a homeowner is one of the biggest dreams for the American people. Due to record numbers of homeownership and cheap mortgage rates, individuals who did not own a home previously are now looking for mortgages for financing their ambitions. On certain occasions, the dream of homeownership is associated with a cost that exceeds the mortgage.
For finding out how much your mortgage is going to cost you, a loan mortgage calculator often works as a user-friendly tool. Nevertheless, this tool can’t save you all the time. Similar to other forms of investment, real estate mortgage loans are also subject to scams. Mortgage frauds and scams can make you lose thousands of dollars on interest as a minimum because of excessive fees and other hidden costs. The worst that can happen is that you can lose your home to foreclosure.
According to industry professionals, there are three principal or familiar types of real estate fraud:
1. Identity theft via mortgage request
2. Bait and switch
3. Loan flipping
For preventing scams, it has been witnessed that offense is the best defense. Understand the truth and don’t hesitate to make queries.
Bait and switch is a fraudulent sales technique where a loan product is publicized at a lucrative rate (bait). However, the product or rate is subsequently changed for the gain of the lender (switch). This is an utterly illegitimate and deceitful practice. For instance, one interest rate is assured at the time of selling a loan, but a bigger rate is provided at the time of closing.
When you’re obtaining a pre-approval or mortgage quote, you believe that your question with the lender is secret, right? You’re wrong. On many occasions, important financial details about you and your mortgage requirements are hacked by vying lenders. This can happen within 24 hours of your credit bureau inquiry. Your loan officer is even unaware of this. Many firms provide countrywide accessibility to your financial details to the lenders and everybody in your city who requested for a mortgage within the last 24 hours. Any other lender can talk to these individuals the following day and give them a pre-approval for an improved mortgage loan.
One more dilemma is mortgage solicitation through telephone, the Internet or door to door. These scams involve filling in an application through fax, the Internet or over the telephone and often the rates are phony. However, it is not the largest issue to be bothered about–it is nothing but identity theft. Even though the rates are legitimate, the company would get all your important details such as your social security number that can result in mortgage scam or identity theft.
Another type of mortgage scam that is prevalent in the real estate industry is loan flipping. Loan flipping denotes frequent refinancing of a mortgage within a small time frame with very small gains to the borrower. It takes place when a borrower can’t keep up with the planned payments or constantly combines other unsecured loans into a new secured loan at the request of a lender. Lenders flipping loans ask for too much origination fee with every consecutive refinancing. They might ask for these fees on the basis of the whole loan amount, not only on the increased amount summed up with the loan principal through refinancing. In addition, every refinancing might attract prepayment penalties that can be funded as a portion of the overall loan amount, accumulating the debt of the borrower.
If you’re buying a home, looking for a home equity loan or considering a mortgage refinance, it is better to work with a trustworthy lender. You must shop around and do some homework to get the best offers. Try to stay away from furnishing any details until you’re confident that the company or individual you’re talking to is right for you.
For more information, visit www.mortgagefit.com.
Read more:
http://rismedia.com/2009-11-01/top-3-real-estate-mortgage-scams-what-you-need-to-know/#ixzz0WDkqqgIn
Top 3 Real Estate Mortgage Scams: What You Need to Know
Print Article
RISMEDIA, November 2, 2009—Being a homeowner is one of the biggest dreams for the American people. Due to record numbers of homeownership and cheap mortgage rates, individuals who did not own a home previously are now looking for mortgages for financing their ambitions. On certain occasions, the dream of homeownership is associated with a cost that exceeds the mortgage.
For finding out how much your mortgage is going to cost you, a loan mortgage calculator often works as a user-friendly tool. Nevertheless, this tool can’t save you all the time. Similar to other forms of investment, real estate mortgage loans are also subject to scams. Mortgage frauds and scams can make you lose thousands of dollars on interest as a minimum because of excessive fees and other hidden costs. The worst that can happen is that you can lose your home to foreclosure.
According to industry professionals, there are three principal or familiar types of real estate fraud:
1. Identity theft via mortgage request
2. Bait and switch
3. Loan flipping
For preventing scams, it has been witnessed that offense is the best defense. Understand the truth and don’t hesitate to make queries.
Bait and switch is a fraudulent sales technique where a loan product is publicized at a lucrative rate (bait). However, the product or rate is subsequently changed for the gain of the lender (switch). This is an utterly illegitimate and deceitful practice. For instance, one interest rate is assured at the time of selling a loan, but a bigger rate is provided at the time of closing.
When you’re obtaining a pre-approval or mortgage quote, you believe that your question with the lender is secret, right? You’re wrong. On many occasions, important financial details about you and your mortgage requirements are hacked by vying lenders. This can happen within 24 hours of your credit bureau inquiry. Your loan officer is even unaware of this. Many firms provide countrywide accessibility to your financial details to the lenders and everybody in your city who requested for a mortgage within the last 24 hours. Any other lender can talk to these individuals the following day and give them a pre-approval for an improved mortgage loan.
One more dilemma is mortgage solicitation through telephone, the Internet or door to door. These scams involve filling in an application through fax, the Internet or over the telephone and often the rates are phony. However, it is not the largest issue to be bothered about–it is nothing but identity theft. Even though the rates are legitimate, the company would get all your important details such as your social security number that can result in mortgage scam or identity theft.
Another type of mortgage scam that is prevalent in the real estate industry is loan flipping. Loan flipping denotes frequent refinancing of a mortgage within a small time frame with very small gains to the borrower. It takes place when a borrower can’t keep up with the planned payments or constantly combines other unsecured loans into a new secured loan at the request of a lender. Lenders flipping loans ask for too much origination fee with every consecutive refinancing. They might ask for these fees on the basis of the whole loan amount, not only on the increased amount summed up with the loan principal through refinancing. In addition, every refinancing might attract prepayment penalties that can be funded as a portion of the overall loan amount, accumulating the debt of the borrower.
If you’re buying a home, looking for a home equity loan or considering a mortgage refinance, it is better to work with a trustworthy lender. You must shop around and do some homework to get the best offers. Try to stay away from furnishing any details until you’re confident that the company or individual you’re talking to is right for you.
For more information, visit www.mortgagefit.com.
Read more:
http://rismedia.com/2009-11-01/top-3-real-estate-mortgage-scams-what-you-need-to-know/#ixzz0WDkqqgIn
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