Bank of America to Cut Some Mortgage Balances

By Tami Luhby, senior writerMarch 24, 2010: 3:51 PM ET NEW YORK (CNNMoney.com) 

 Bank of America announced Wednesday that it will first look at reducing the loan balances of certain distressed homeowners with subprime or adjustable rate mortgages to make their payments more affordable. The move makes Bank of America (BAC, Fortune 500) one of the first major loan servicers to systematically incorporate the controversial loan modification technique into its home retention program. Financial institutions, as well as the Obama administration, have come under increasing pressure in recent months to add principal reduction to their foreclosure prevention efforts. Facebook Digg Twitter Buzz Up! Email Print Comment on this story Housing experts argue that borrowers are more likely to walk away if their mortgages are underwater, meaning they owe more than the home is worth. Nearly 25% of borrowers are underwater, according to First American CoreLogic. Bank of America is launching the program to entice more borrowers to participate in its foreclosure prevention efforts and to reduce the chance of redefault, said Barbara Desoer, president of Bank of America Home Loans. When modifying mortgages, Bank of America will initially consider reducing the balances of borrowers with qualifying subprime, Pay-Option ARMs and prime 2-year hybrid ARM loans to bring down the monthly payments to 31% of pre-tax income. Currently, banks first look to reduce interest rates or lengthen the term.

To find out more about home loans you can visit the Home Loans page of www.RealEstateResult.com or find out about Government Programs that may help you.

Obama Plan Creates Short Sale Incentives Next Month
Thursday March 11, 2010 3:09 PM By Ellen Yan

For homeowners trying to do short sales, some good news will kick in next month.

Announced last year and finally here, short sale incentives under the federal rescue of troubled homeowner will start April 5 with participating lenders and loan servicers. It’s called Home Affordable Foreclosure Alternatives, part of the Making Home Affordable program, and cash will be given to borrowers, lenders and investors who make such deals.

A short sale is a home sale in which the lender agrees to take less than what’s owed on the mortgage, usually because the homeowner can’t pay the mortgage and the house is appraised for less nowadays.

Short sales have become more common, but they’ve been hard to pull off.

One big problem: Homeowners would have to get buyers to sign a contract, submit it to the lender and wait for an answer on whether the price is acceptable. This can take months and even more than a year, attorneys and real estate agents have complained.

That left real estate agents and sellers guessing on the price, said Melville-based attorney Peter Goodman, who represents homeowners on short sales and foreclosures. Some sellers submitted contract after contract in search of lender approval, he said.

But the new federal incentive program on short sales calls for lenders to cite a price before the homeowner goes through the selling process, the attorney said: “It will allow the homeowners to get a price on the property before submitting the contract. They can know how much the bank is willing to accept as their net before having to go to contract.”

There are many government programs you can use to help you if you are in a sticky situation.

FHFA Extends Refinance Program By One Year
Washington, DC — Federal Housing Finance Agency Acting Director Ed DeMarco today announced the extension of the Home Affordable Refinance Program, (HARP), a refinancing program administered by Fannie Mae and Freddie Mac, to June 30, 2011. The program is a key component of the Administration’s Making Home Affordable Program announced last February. The HARP program expands access to refinancing for qualified individuals and families whose homes have lost value. The program was set to expire on June 10 of this year.
“FHFA has reviewed the current market situation and the state of mortgage insurance availability and has determined that the market conditions that necessitated the actions taken last year have not materially changed,” said DeMarco. “Accordingly, to support and promote market stability, and to encourage lenders and other mortgage market participants to fully adopt the HARP program, including the implementation of the October 2009 expansion of loan-to-value ratios (LTVs) to 125 percent, FHFA is authorizing the extension of HARP until June 30, 2011.”
In 2009, Fannie Mae and Freddie Mac purchased or guaranteed more than 4 million refinanced mortgages. Of this total, 190,180 were HARP refinances with LTVs between 80 percent and 125 percent. The HARP began in April 2009 and has grown over the past few months. For more information on Fannie Mae and Freddie Mac refinance activity, see FHFA’s monthly Foreclosure Prevention & Refinance Report. Additionally, homeowners can visit www.MakingHomeAffordable.gov for additional information on the program.

Mortgage Rates Climb
By Chris Kissell • Bankrate.com

Mortgage rates crept higher this week.

The benchmark 30-year fixed-rate mortgage climbed 4 basis points this week, to 5.15 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.45 discount and origination points. One year ago, the mortgage index was 5.41 percent; four weeks ago, it was 5.13 percent.

The benchmark 15-year fixed-rate mortgage edged up 1 basis points, to 4.52 percent. The benchmark 5/1 adjustable-rate mortgage rose 2 basis points, to 4.53 percent.

WEEKLY NATIONAL MORTGAGE SURVERY
Results of Bankrate.com’s Feb. 24, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

                                                     30-year fixed                  15-year fixed                        5-year ARM
This week’s rate:                   5.15%                                  4.52%                                       4.53%
Change from last week:     +0.04                                 +0.01                                       +0.02
Monthly payment:             $900.94                            $1,263.93                               $838.97
Change from last week:    +$4.06                               +$0.85                                     +$1.96

BUYERS vs. SELLERS
Home sellers and buyers have just two months — until April 30 — to agree to a deal if they want to qualify for the federal homebuyer tax credit. As the calendar creeps closer to that fateful day, who will be in the catbird seat: buyers or sellers?

Jim Sahnger, a mortgage consultant for Palm Beach Financial Network in Stuart, Fla., says an abundance of housing stock tips the scales toward buyers. “Buyers should gain the advantage,” he says.

David Kuiper, a mortgage planner at First Place Bank in Holland, Mich., also believes excess home supply strengthens the hand of buyers, at least in his market. “Sellers really aren’t in a position to negotiate,” he says. “Buyers will simply move along to the next home.”

However, he concedes, other markets may have stabilized enough that he can imagine “some of the advantage shifting to sellers” as shoppers feel pressure to purchase before the deadline.

Jeff Lazerson doesn’t believe either side has an edge. “I think it’s a neutral situation,” says Lazerson, president of Mortgage Grader, a mortgage broker based in Laguna Niguel, Calif. “We have such a logger jam in the system now, with just trying to get a loan into the system and out the other end.

“I don’t see anybody having an advantage in this situation because the system is still on life support.”

FORGET FORECLOSURES
Meanwhile, homebuyers hoping to qualify for the tax credit — up to $8,000 for first-time buyers and $6,500 for move-up buyers — should forget about purchasing a short sale or foreclosure on the cheap, Sahnger says. It takes time to close on the sale of a distressed property, making it difficult to meet two important tax credit deadlines — April 30 (for having a home under contract) and June 30 (for closing the transaction).
Sahnger says it may be possible to wrap up a short sale before the deadlines if the seller has been preapproved for sale at a certain price and the buyer agrees to act fast. But such success stories are likely to be rare, he says.

“Buyers should stay away from short sales right now,” he says. “The time required to get all the negotiations in is quickly waning.”

Lazerson agrees: “The foreclosures and short sales — those are taking months and months to get a resolution.”

Instead, Lazerson urges shoppers to focus on finding “clean inventory,” homes unattached to a short sale or foreclosure process. “The clean inventory is the stuff everyone wants now because those transactions can happen pretty quickly,” he says.

In today’s market, finding such a property may be a challenge. “There’s not a lot of clean inventory out there right now,” Lazerson says.

To increase the odds of success, Sahnger urges buyers to work with a real estate agent who will “show them properties only where there is a likelihood of getting a deal done.”

“This is not a time to be working with an agent that does not know the landscape,” Sahnger says.

SUMMERTIME BLUES?
The window of opportunity also may be closing fast for sellers, Sahnger says.  Once the credit expires, he says, the housing market could experience “a real hangover” of soft sales that mirrors the slide in auto sales following last fall’s Cash for Clunkers program.

“Anyone that sits on their hands thinking they are in control as a seller could end up woefully disappointed this summer,” he says.

However, Lazerson believes buyers and sellers may get a reprieve this summer. He thinks chances are good Congress will either extend the homebuyer tax credit again or try something else to boost home sales.

“The guys sitting in office right now, they don’t want to get thrown out,” he says. “There’s going to be some other subsidy or stimulus to keep that whole thing going.”

If you’re in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate’s rate tables.

Let Uncle Sam help pay for your move
By Kay Bell • Bankrate.com

Americans have always been mobile. Our restlessness is even encouraged somewhat by the Internal Revenue Service’s tax deduction for moving expenses.

To write off your relocation costs, a move must be work-related. Then you have to pass the time and distance tests. But as long as a move meets these requirements, it doesn’t matter if it’s your first job, the same job or a new job.

And while you have to use the long Form 1040 to claim the moving costs, you don’t have to itemize any other deductions. The costs are detailed on Form 3903 and the total transferred to the adjustments to income section of your return. There is no Schedule A to complete, no percentage-of-income thresholds to meet, no deduction phaseouts because you made too much money.

MOVING TAX-BREAK OBSTACLES
The biggest moving hurdle, practically and taxwise, is the 50-mile distance test. As suburbia and exurbia expand, this test is designed to ensure that your move isn’t just a way to ease your daily commute to work.

The location of your new job must be at least 50 miles farther from your previous residence than your last office was. That means if you lived 10 miles from your old job, your new job must be at least 60 miles from your old home before you can deduct moving costs.

The IRS says to figure the distance using the shortest of the more commonly traveled routes; i.e., don’t take the scenic route to make sure you meet the mileage measurement. Also, remember that the distance test only considers the location of your old home and how far it is from your previous job versus the one for which you relocated, not your new residence.

Then there’s the time requirement. It has two components and is Uncle Sam’s way of guaranteeing that you don’t use tax breaks just to help you check out the scenery around the country. First, moving expenses generally are deductible if incurred within one year of starting a new job. Secondly, you have to work full time at a new job for at least 39 weeks during the first 12 months. The worked weeks don’t have to be consecutive or even with the same employer.

Self-employed workers moving to a new locale must meet the year-to-move deadline and work full time at their entrepreneurial enterprise for 78 weeks during the first 24 months. Again, the worked weeks don’t have to be consecutive.

ACCOUNTING FOR YOUR MOVEMENTS
Once you meet the time and distance requirements, gather up your moving receipts.  IRS-approved deductions include the costs to move household goods and personal property, limited storage and insurance fees, and utility connection or disconnection charges.

Some lodging and travel expenses near your new and former homes also are deductible, as are shipping costs for your car.  Uncle Sam even lets you write off the travel arrangements you make to get your household pets to your new home.

In addition to the basic eligibility and receipt requirements, here are a few other things to keep in mind:

• If you’re married and file jointly, only one spouse needs to meet the time and distance tests. However, you cannot combine the weeks your spouse worked with the weeks you worked to satisfy the time-employed component.
• If your new employer reimburses you for some or all of your transfer costs, don’t look to the IRS for additional help. Moving expenses paid by your boss aren’t deductible.
• If you deduct moving expenses and then don’t pass the time tests, you must file an amended tax return or include the moving expenses in your income the next year.

By Mana Tulberg, VenturaCountyRealEstateTalk.com

The Federal Housing Administration (FHA) has introduced new rules for the FHA home loan program which will ultimately have a huge impact on Ventura County’s home buyers and consequently, Ventura County’s real estate market.  Due to a significant rise in the number of defaulted FHA loans, the FHA’s cash reserve has fallen below the Federally mandated level.  This has prompted new FHA home loan guidelines to ensure that the new FHA home buyers are in a better financial position and have greater equity at the time of purchase.

The new FHA guidelines will introduce new restrictions for FHA borrowers.  Below is a list of a few of these conditions and restrictions:

• Downpayment for borrowers with a credit score above 580 will remain at 3.5%.  However, home buyers with a credit score less than 580 will have to provide 10% downpayment towards the purchase of their new home.  This rule will go into effect in early summer 2010.

• All new FHA borrowers’ upfront mortgage insurance premiums will increase from 1.75% to 2.25%.  The FHA mortgage insurance is a cost borrowers pay because they are able to purchase a home with less than 20% downpayment.  This rule will go into effect in Spring 2010.

• Home sellers’ concessions, which is the amount home sellers contribute to the FHA home buyers’ closing cost, will be reduced from 6% to 3%.  This means home buyers will have to come up with the additional money for their closing costs.  This rule will go into effect in early summer 2010.

Some Ventura County home buyers may see these new FHA guidelines as an additional hurdle in their road to homeownership.  Many FHA home buyers who were relying on FHA’s low closing cost and low downpayment will have to come up with some additional cash.  In today’s economy where cash and revenue is scarce, coming up with additional cash may be more difficult for some FHA home buyers.   Therefore, Ventura County may experience a thinning in FHA home buyers during the summer season where traditionally the real estate market is at its busiest.

By Tami Luhby, senior writer January 20, 2010: 6:51 PM ET

NEW YORK (CNNMoney.com) — Cut loan principal for borrowers whose homes are worth much less than their mortgages. Attack the problem of option adjustable rate mortgages. Cut down on red tape.

Those are some of the ideas in a plan issued Wednesday by a group of state officials who have been working for more than two years to stem the foreclosure tide.

The state attorneys general and banking regulators urged the Obama administration and loan servicing firms to step up their efforts.

“Potential foreclosures are being built up in the system, said Tom Miller, Iowa’s attorney general. “The efforts really need to be more efficient more effective more timely on behalf of the servicers.”

Under the administration’s program, eligible borrowers can see their monthly mortgage payments reduced to no more than 31% of pre-tax income. So far, the effort has helped about 66,500 people, with another 787,200 homeowners in trial modifications.

Reduce loan principal: State officials say that servicers should cut the loan balances of homeowners, in addition to reducing interest rates and extending the terms of the loan. This is especially true in places where property values have plummeted. Reducing principal will make it less likely that homeowners will default on their modified loans.

Pay attention to option ARMs: More than 40% of these complex mortgages are delinquent. Even worse, over the next two years, many will adjust, driving up borrowers’ monthly payments. Servicers need to address these loans before they fall into foreclosure.

Limit required paperwork: Many homeowners are not receiving permanent modifications under the president’s plan because they haven’t submitted all their documents. Treasury Department officials should reduce the amount of paperwork borrowers are required to file and speed up the debut of a central portal where homeowners can submit the forms. The portal is currently set to launch at the end of March.

Expand counseling and mediation efforts: State should expand their housing counseling and mediation programs, which require homeowners and servicers to meet before the completion of the foreclosure process.

Suspend foreclosure proceedings: Treasury officials should amend the president’s program so that the entire foreclosure process is halted when a borrower applies for the president’s program. Currently, only the sale is stopped.

Help the unemployed: Treasury officials and servicers should do more to assist the unemployed so they do not fall into foreclosure. A growing number of borrowers with good credit backgrounds are behind in their payments because of the weak economy.

Mortgage Rates Move Lower for 3rd Week
By Holden Lewis, Bankrate.com

Mortgage rates fell slightly for the third week in a row.

The benchmark 30-year fixed-rate mortgage fell 8 basis points this week, to 5.15 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.45 discount and origination points. One year ago, the mortgage index was 5.59 percent; four weeks ago, it was 5.24 percent.

The benchmark 15-year fixed-rate mortgage fell 6 basis points, to 4.56 percent. The benchmark 5/1 adjustable-rate mortgage fell 5 basis points, to 4.63 percent.

Mortgage rates have held fairly steady since mid-December, ranging as low as 5.13 percent and as high as 5.33 percent. The Federal Reserve is buying most mortgage-backed securities being created nowadays. Thus, the Fed is in the position of being able to manage mortgage rates — and it looks like the Fed wants them in the vicinity of 5.25 percent.

Fed officials say they plan to stop buying mortgage-backed securities by the end of March. That might accompany a rise in mortgage rates. The Fed hasn’t tipped its hand on whether it will resume buying mortgage-backed securities if the central bank’s exit from the market causes rates to rise sharply.

Weekly National Mortgage Survey
Results of Bankrate.com’s Jan. 20, 2010, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week’s rate: 5.15% 4.56% 4.68%
Change from last week: -0.08 -0.06 -0.05
Monthly payment: $900.94 $1,267.30 $848.82
Change from last week: -$8.15 -$5.08 -$4.95

FHA Will Cost More
The federal government has another change up its sleeve — raising the price of getting an FHA-insured mortgage. The Federal Housing Administration requires lower down payments than conventional mortgage programs. Thus, FHA-insured loans are popular. About one-quarter of borrowers get FHA-insured loans nowadays, so the higher prices will affect a lot of homebuyers and refinancers.

The FHA doesn’t lend money; instead, it insures mortgages underwritten by private-sector lenders. FHA insurance protects the lender from losing money if the borrower defaults on the mortgage. Borrowers pay for FHA insurance twice: first, with a lump-sum payment called the upfront premium, and subsequently in smaller monthly payments. The FHA is going to increase the upfront premium this spring, and will ask Congress to allow it to raise the monthly premiums.

Right now, the upfront premium is 1.75 percent, which means that someone borrowing $100,000 would pay $1,750 at closing. (This portion of the FHA premium can be rolled into the loan amount.) The upfront premium will be raised to 2.25 percent this spring, FHA Commissioner David Stevens announced. This premium increase amounts to $500 more for every $100,000 borrowed.

That’s the annual premium. The monthly premium is more complicated, because it varies depending on the loan’s term and the original loan-to-value ratio. For most homebuyers, the monthly premiums are either $41.67 or $45.83 for every $100,000 borrowed, which amounts to $500 or $550 annually per $100,000 borrowed. (It’s the higher amount if the borrower made a down payment of less than 5 percent.) Stevens said he wants to raise monthly premiums, too — but the FHA has to seek Congress’s permission to do so because the monthly premiums are as high as they can legally go. Stevens didn’t say how much he wants to raise the monthly premiums.

The FHA says that if it gets the authority to raise the monthly premiums, “the second step will be to shift some of the premium increase” from the upfront payment to the monthly payments. In other words, the 2.25 percent upfront premium would be temporary, and would eventually be reduced.

The premium increase is the biggest change that the FHA announced, but there were a couple of others that directly affect borrowers. The FHA will reduce the amount of money that the seller can contribute to the buyer’s closing costs, from the current 6 percent of the home’s value to 3 percent. This change will reduce “incentives to inflate appraised value,” according to the FHA.

And the agency will require a credit score of at least 580 to qualify for the FHA’s 3.5 percent down payment program. A borrower with a lower credit score would have to come up with a down payment of at least 10 percent. This change won’t have much of an effect, because most lenders require a credit score of 620 or 640 for FHA borrowers, anyway.

All of these changes are being made because too many FHA-insured mortgages have gone bad and the agency’s loan-loss reserves are depleting. Charging higher premiums will replenish the reserves.

If you’re in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate’s rate tables.

By Les Christie, staff writerDecember 31, 2009: 3:39 PM ET

NEW YORK (CNNMoney.com) — Starting Jan. 1, new rules go into effect that simplify and clarify exactly what mortgage lenders will charge for a loan.

The initiative from the Department of Housing and Urban Development (HUD)requires that a new “Good Faith Estimate” form be given to all applicants, one that makes it easier to compare true costs of loans from different lenders.

“The main purpose is to give consumers the tools to be able to compare apples to apples,” said Robert Grosser of Luxury Mortgage, a New Jersey-based direct lender. “All lenders must use a specific form and disclose fees in the same spots on the same forms.”

Until now, borrowers might have focused on interest rates or monthly payments to compare mortgages options. But fees play a big part in total cost, said Vicki Bott, HUD’s Deputy Assistant Secretary for Single Family Programs

There are generally two blocs of fees.

One covers origination charges, what the lender receives for providing you with the loan.

The second bloc consists of settlement fees, for say, title insurance or an appraisal.

If borrowers accept the offers as outlined, lenders must issue the loans under the costs listed — with little room for surprise.

If the mortgage originator provides services in the second bloc, it must stick to the original fees within 10%. If, for example, the lender tells you the title insurance it arranges will cost $2,000, the final fee for that cannot exceed $2,200. (If you decide you’re going elsewhere for title insurance, you’re on your own.)

“It truly drives accountability,” said Bott. “It makes the lender say, ‘What I quoted is what you get.’”

The estimate is not iron clad, and can be altered if there’s a material change in circumstances. If the appraisal comes in lower than expected, for example, that could affect the mortgage rate, though the lender must quickly tell the borrower, according to Bott.

The new 3-page form has lines covering all the settlement fees, such as the origination fee and points charged up-front to reduce the interest rate. It also clearly lists the initial loan amount, the term length in years, the monthly payment, the initial interest rate, and whether that interest rate can rise plus any prepayment penalties or balloon payments.

There’s also a “shopping chart” on the third page in which up to four different deals can be placed side-by-side and their costs easily compared.

Say two lenders both offer a 5% loan on a $200,000 mortgage that has a monthly payment of $1,074 a month. One lender may charge $5,000 for it and another just $3,000. The new form should make it simpler for consumers to recognize the better deal.

“It’s definitely a step in the right direction toward simpler and straightforward key information on mortgages,” said Alex Pollock, an American Enterprise Institute fellow who has developed and advocated for the use of a one-page mortgage form to better help consumers understand their obligations.

He does not, however, think the new form goes far enough.

“It focuses on the question of whether this is the best deal,” Pollock said. “In my opinion, it’s more important to ask if I can afford this mortgage. This might be the best deal I can get but I still may not be able to afford it.”

By Lori Rozsa • Bankrate.com

While the tumultuous real estate market has many people hunkered down hoping it will all blow over, proactive homeowners are looking beyond the uncertainty. They’re weighing a decision about whether to refinance their current mortgage or trade up to a house they couldn’t afford three years ago.

Making a move more alluring, interest rates continue to hover at 4 percent to 5 percent and tax credits of up to $8,000 for first-time homebuyers and up to $6,500 for buyers who have been in their homes for at least five of the last eight years consecutively are available.

But before you take the leap, real estate professionals caution that the same basic rules about buying a home still apply. Here are four questions to ask yourself:

1. How long do I plan to stay in the new home? (The rule of thumb is at least five years to make a new mortgage worthwhile.)

2. Do I really need to move or just want to grab a deal?

3. Can I cover the costs to close and relocate? With every winner, there’s usually a loser, and you could be both if you find a great deal on a bigger house but can’t sell your current home.

4. If I stay in my current home, does it make sense to refinance and maybe add that extra bedroom or build a deck to improve the property?

Take a deep breath and analyze what you really need, not what the market seems to be telling you to do.

“The decision depends on the individual. Are they looking to move because their family has grown or has their job changed locations, or do they want a shorter commute? Those are reasons to look at buying,” says Bernard Markstein, senior vice president of the National Association of Home Builders in Washington, D.C.

But don’t move just for the sake of moving, says Elizabeth Blakeslee, an associate broker with Coldwell Banker Residential Brokerage in Washington, D.C. Now is a great time to buy, but prospective homebuyers should make sure that’s what they really should do.

“You have to figure out your motivating factors,” Blakeslee says. “If you’re just trying to get a deal, you might want to think about it a little longer. These low interest rates are certainly a consideration for people, but as with every decision in life, you have to ask yourself, ‘What is my goal?’”

Markstein says there are several good reasons to buy a house now. “Rates are historically low; it’s essentially a buyer’s market. And for people moving up, obviously they won’t get as much for their own home as they would have a few years ago. But if they’re reasonable and set a good price and they find another house at a good price, the two together could be a real benefit,” Markstein says.

If you’re not really looking to move, but you just don’t want to miss the real estate bargain boat, Markstein says it might be smarter to stay put.