Mortgage woes? Tell it to them!

Well, now you have a place to complain, gripe, and deal with all your mortgage issues and woes.  Developed by the Obama administration, the Consumer Financial Protection Bureau is now open for business.  And they want to hear all about your mortgage problems.  This government agency has been mostly dealing with credit card complaints (talk to them about that, too) but now want to hear about mortgages.  

When you get to their page, you can easily submit your complaint, watch a YouTube video from their director, and connect with them via Facebook or Twitter.  According to this Chicago Tribune article, when they initially opened up to hear credit card complaints, they received over 5,000 and were able to resolve over 3,100!  They’re hoping to handle complaints through the end of this year.  

As I mentioned, the easiest way to contact them is via their Web site.  However, they’re also reachable via postal mail at P.O. Box 4503, Iowa City, IA 52244, fax 855-237-2392, or telephone 855-411-2372.  Please be aware that it is not a toll-free number.  But they did mention that they’re hoping for virtually no wait time to speak to a representative.

You can also create an account through the site and visit often to check the status.  You can also view correspondence between CFPB officials and members of Congress as well as recent press releases regarding the bureau.  

I’d love to hear if anyone has submitted a complaint through you and whether they were successful in resolving it or not.  I hope that this is another avenue the government has established to take care of those underwater and remove some of the excess inventory we’re seeing on the market.  Please post your story if you have one in the comments!

Advice to women: Shop more

 

It’s been a while since I wrote anything about the difference between men and women in regards to real estate.  But then I came across a very interesting article.  It turns out that there’s a reason that 32% of women were likely to get a subprime mortgage than men, according to a 2006 study.  They don’t shop enough.

I know, I know.  I am just as surprised as you are.  In fact, when I’m dealing with clients purchasing a new house, it’s often that the women take longer to find something because they want to make sure they’re getting the best deal and are in love with their new home.  So what’s going on here?  It actually makes sense.  Women tend to rely on the instincts of their emotions, trusting a recommendation on mortgage rates from friends, rather than shopping for the best deal.  Men, on the other hand, shop around for the best rate, and, therefore, they generally pay lower rates.  

This was all determined by a 2006 study in Journal of Real Estate Finance and Economics.  According to the article, “It makes sense to Daily Finance columnist Laura Rowley. ‘It’s not surprising, because mortgage shopping can be incredibly complex, so we look to people we can trust to help make the decision,’ says Rowley. ‘But this is one area where you don’t want to get by with a little help from your friends.'”

Rowley suggests that everyone should get at least three written estimates, generally from two mortgage brokers and one direct lender, like your bank.  You’ll want to explain that you’re planning to buy a house in your general price range that you’ve predetermined along with the percentage you’re willing to put down.  And remember that interest rates can change multiple times a day.  So if you find a low rate, you might consider talking to the lender about “locking in” that rate while you search for a house so it doesn’t go back up.  It’s worth everyone’s time to figure out the best rate and the best type of loan in order to save the most money.

If you need a recommendation for a great mortgage broker, please contact me via my Web site.

Refinance mistakes to avoid

Last week I blogged about the new HARP guidelines and how they can help homeowners refinance when they owe more on the home than it’s worth.  I talked about how the loan has to be owned by Freddie Mac or Fannie Mae and that you have to be current with your mortgage.  Since rates are very low, I do encourage you to try to refinance your home to a lower rate if it’s possible for you and to take advantage of the HARP program if you can.  That said, this week I want to talk about several mistakes people make when refinancing and how to avoid them.

1. Not getting the best rate.  It seems obvious.  One lender offers you 5% and another 4.75%.  You go with the lowest one.  You really have to look at the entire cost of a loan, not just the quoted interest rate.  The APR (annual percentage rate) is what matters most.  Your house can be worth less than you think, especially after an appraisal.  The benefit of the HARP program is that it often doesn’t require an appraisal, which can really affect your refinance.  So make sure you do your research.

2. Think of the objective you want with refinancing.  Is it a lower monthly payment?  Is it that you want your home paid off in 10 years?  Know this before you sign any papers.  A lot of borrowers don’t realize that if you refinance to another 30-year loan and you’ve been paying yours down for 10 years, you just went to 20 more years on your loan to another 30.  So if your plan was to have your home paid off in 20 years, that’s most likely not going to happen anymore.  And let’s say you know your job is going to relocate you in a few years.  A 5-year or 3-year adjustable rate mortgage could be most beneficial and offer you the lowest monthly payment.

3. Don’t refinance when you shouldn’t.  In Number 2 I just talked about the potential of your company relocating you.  So let’s say you decide you’re going to keep your home as a rental.  You have to be careful about refinancing now because your home would no longer be your principal residence.  This could shoot your monthly payments way up.  Discuss with your lender any potentials for not staying in the home long-term so they can help choose the best option for you.  Refinancing may not be it.

4. Be aware of your responsibilities.  Know in advance that lenders will often check your credit again right before closing.  So if you refinance, now is not the time to buy a new car on credit or make a major purchase.  Know when your interest rate lock expires so you get everything completed before that time so you don’t lose the rate you want.

More great advice can be found in this Bankrate article.   And I can be reached via my Web site.

New HARP guidelines will help

I love hearing good news for homeowners having trouble paying their mortgage.  I keep having to remind my friends and clients that “You’re not the only one dealing with this.”  For those of you who don’t know, HARP (Homeowner Affordability Refinance Program) is a government program that was designed to help homeowners refinance.  Great news just announced last week:  Even if you’re underwater on your mortgage, you can still refinance!

Here’s the status on what you need to know.  Below is a list of those eligible to possibly refinance with HARP funds under this program:

1. Your loan must be owned by Freddie Mac or Fannie Mae.  You can contact your lender to find out.  Or you can look this up online by clicking here for Freddie Mac and here for Fannie Mae.

2. You currently owe more than the house is worth.  For those of you that this doesn’t apply to, you’ll be able to regularly refinance by contacting a mortgage lender.

3. Currently have an interest rate higher than prevailing rates.  However, if your interest rate is 4.5% right now, you wouldn’t qualify because rates aren’t that low.  Be thankful that your rate is so low. 🙂

4. Would have to pay mortgage insurance by refinancing.  There is no PMI or mortgage insurance through the HARP program.

5. Have a decreased monthly income due to job loss or job change and couldn’t refinance.  You will still need to show that you can afford the new monthly payments.

As a reminder, you do not need to meet all five of the above criteria.  Just one is acceptable.  The only thing  that is required is that the loan is currently owned by Freddie Mac or Fannie Mae.  Lenders through HARP are currently refinancing for up to 105% of the home’s current value.  

Aside from having no mortgage insurance with these HARP loans, oftentimes it’s not required that an appraisal be done on the home.  Plus closing costs are generally lower with more lenient underwriting.

If you want to find out if you qualify to take advantage of this program and need the name of a great lender, please e-mail me at noah.seidenberg@cbexchange.com or visit me online.

We can improve the mortgage industry

So now the government wants our help.  But this is going to be a good thing for all those homebuyers out there.  

According to this USA Today article, the Consumer Financial Protection Bureau is looking to get our feedback to help make their mortgage paperwork and disclosures a lot more user friendly.  They want to know suggestions on how to make the expenses easy to understand as well as getting input on what borrowers are looking to see in the paperwork.

For example, right now borrowers are given two documents when applying for a loan: a Truth in Lending form (a disclosure) as well as a Good Faith Estimate which predicts what your closing costs will be.  And the Good Faith Estimate was just regulated last year saying that the total cost could not be more than 10% off what the initial estimate was.  

But they’re still confusing.  According to the article, “They really don’t tell the consumer what they want to know,” says Mike Anderson of the National Association of Mortgage Brokers. For example, a key concern for borrowers is the total amount they’ll need to pay at closing. Yet that figure is absent from the current forms.”  Oftentimes you don’t receive the exact amount you need to bring to closing until 24 hours prior, sometimes as close to 2 hours prior.  This is hard when closing first thing in the morning when you have to get to a bank first.

I think this is a great idea.  They’re asking for our input as borrowers as to what’s important to us, rather than just trust the guys in suits that work there.  So I suggest that everyone goes on the Web site to view the forms and make suggestions.  It will be July 2012 before all the forms are finalized and the bureau said they’d be taking suggestions through at least September of this year.  

I can’t stress enough how great it is that our feedback can go toward implementing something that we’ll continue to use.  If you’re confused about any part of the forms or want to see more, definitely go online to give your input.  It’d be great if they did this with the HUD-1 settlement statement as well.  I have many buyers who are confused by how the statement appears and only get a cursory look with their attorney at closing.

I’m available online for all of your real estate needs.

Mortgage confusion still high

Zillow.com’s Mortgage Marketplace recently conducted a nationwide survey about what adults know about mortgages.  The Chicago Tribune posted a column about the results, and they were pretty surprising to me that a lot of adults don’t know much about mortgages.  So I wanted to post some results here and discuss to make everyone more knowledgeable.

1. 57% of prospective homebuyers don’t know how ARM (adjustable rate mortgages) work.  Most thought that they will always reset at a higher rate.  First of all, a definition.  An adjustable rate mortgage is one where the rate can change after a certain number of years.  For instance, you’ll hear the terms 5-year ARM or 10-year ARM.  That means the rate will reset after that number of years.  So if you lock in at 5% interest for a 5-year ARM, in 5 years, the rate will go up or down (not always up!) depending on what the current market conditions are.  And ARMs also have limits to how much they can go up or down.  The difference between this and a fixed rate loan is that your interest rate will not change on a fixed rate.  So it’s important to discuss ALL conditions with your mortgage broker prior to signing a loan.

2. 33% believe that being prequalified for a loan means you have financing secured.  This is very misleading.  Oftentimes when you go to make an offer or begin looking at homes, your Realtor will want to make sure you’re prequalified for a loan.  That means you’ve spoken to lenders who will talk to you and find out the maximum purchase price you have.  The lenders should pull your credit and get some other documentation from you to know the amount you can spend.  This, however, does not mean the loan is done.  Once you’ve found a home, you will submit your contract to your lender who will go through the underwriting process.  This involves an additional credit report sometimes, paycheck stubs, tax returns, etc.  You’ll also make sure that the title is clear on the home, all prior to you actually signing any closing paperwork.

3. 55% think that mortgage rates are set per day.  In fact, rates can fluctuate all throughout the day, just like the stock market.  It’s important to know this because sometimes your lender will quote you a rate of 5%, for example, and by that afternoon, that rate could be up to 5.125%.  So you’ll want to talk to your lender about “locking in” a certain rate, which you can often do but are given a timeline on it to go under contract on a home for that rate to stick.  And while missing the deadline can mean your rate will go up, it’s also possible that the rate will be lower.

I’d love to know what other mortgage questions you have.  Please always speak to a financial representative prior to signing any paperwork on a loan so you understand the process.  I can be reached  online.

Foreclosures down, backlogs up

Well, I’ve got good news and bad news.  And the bad news can even be interpreted as good news for some.  Good news: foreclosure rates across the country are at a 3-year low, according to MSN Real Estate.  Bad news: Courts are so backlogged by the foreclosure filings that it’s taking a year or more for foreclosures to be processed on some homes.  And that can be good news for those underwater on their mortgages, as they can live in their home for even 2 years in some states without being evicted and without a mortgage payment.

RealtyTrac Senior Vice President Rick Sharga says that “This is really all part of the robo-signing paperwork issue.  Almost none of this is related to a decline in distressed properties. ”  It’s just that Courts can’t keep up with all the paperwork.  And Sharga is unsure whether we’ve reached our peak of foreclosures or more filings will occur once the banks and Courts start catching up.  Even new hirings aren’t helping the banks move the process along any quicker.  And that’s also bad news for buyers interested in foreclosure or bank-owned properties.  The waiting process can still take a while for someone to review all the paperwork.

I just mentioned how some homeowners can live in homes for 2 years prior to being evicted.  In some states, like New York and New Jersey, it’s taking the bank an average of 800 days to finalize a foreclosure once the process has started.  And now the government is going to charge lenders for handling foreclosures improperly.  They’ve also passed regulation requiring 14 mortgage servicers to hire more staff and have a single point of contact for a homeowner dealing with a foreclosure or loan modification.

Nevada leads the country with the highest foreclosure rate.  1 in every 35 homes has received a foreclosure filing.  Arizona and California round out the top 3.  And, unfortunately, Illinois also is included in the top 10, along with Colorado, Idaho, Utah, Georgia, Michigan, and Florida.

And analysts say it can take years for all these foreclosed homes to clear the market brining home values up again.  But it could take even longer because of the backlogs in the courts.  Fannie Mae and Freddie Mac even said they’re going to slowly trickle foreclosures into the market instead of releasing them all at once.  While this is beneficial to home values now, it just means it will take even longer for the housing market to stabilize.

What do you think?  Should banks be allowed to control when foreclosures hit the housing market?  Please leave me a comment or visit me online.