Author: Bill

HUD has always played this game with home owners in distress.  Who remembers the HUD Forbearance program??  Back in the olden days when I served as a bankruptcy trustee, we had Chapter 13 petitioners involved in a “HUD FORBEARANCE”.  The program may still be in effect.  I don’t know and don’t have the stomach to look. 

HOW DID IT WORK?  A home owner in trouble once they were more than a few months behind and on the verge of foreclosure would make application to HUD for Forebearance.  If accepted, HUD would permit them to make reduced payments for 1, 2, 3, etc. years during which time the owner would make regular mortgage payments and the lender could not foreclose.   

However, the home owner’s arrears did not go away.  The arrears, plus accrued interest and penalty (still accruing), were added to the mortgage balance (sound familiar?). 

HOW DID THEY GET TO BANKRUPTCY COURT?  HA!  Easy.  The didn’t make their mortgage payments, even reduced payments.  The arrears continued to build, accrue interest and penalty and they were just getting farther behind and the mortgage balance continued to loom larger and larger.  Bankruptcy would give them protection from the lender and start their “clock” all over. 

Sometimes the chapter 13 plan would get approved and the debtor/home owner would make payments to the bankruptcy trustee for a while, but eventually, more than half would again default on the regular monthly payments.  Even though the chapter 13 plan showed sufficient income to make the payments. . . . . . . .

The more things change, the more they stay the same.

By Lenn Harley

Found on activerain.com

Buyer’s remorse is one of the realities of home purchase that we have to contend with. Thus, it is incumbent upon you to find ways to beat it as the amount involved in the transaction is not something to sneeze at. It is not uncommon to see seasoned home buyers who end up having second thoughts about what they want to see and have in the home that they intend to buy. The good thing is that we are still in a buyer’s market, and serious homebuyers still have a wide range of options and sufficient elbow room to clinch a good deal.

That being said, you need to understand that buyer’s remorse will always be a critical issue regardless of the prevailing condition in real estate markets, and it is a more important concern for first-time home buyers. This is a normal occurrence that you have to prepare for unless you consider yourself an extremely unemotional person or has experienced the buying process many times before. So, where does that leave you? Accept the fact that you can end up second guessing your home buying decision.

The truth of the matter is that when buyers gain the upper hand in the market, feeling of remorse is the logical result in a significant number of transactions. These are the instances where serious buyers shop extensively, but tend to defer action on their final choice. You have to reconsider your perception of the situation especially when you think that you can manage buyer’s remorse if you spend more time shopping for more choices. In truth and in fact, you must also account for non-buyer’s remorse.

Another variable that tends to influence buyers’ decision is the volatility of the situation in real estate markets. We are regularly bombarded by a stream of information and news about the overall state of health of real estate markets. This information makes it unsettling for a lot of players in the market, and this is one of the major reasons why we are seeing a glut in most real estate markets. It is because of the confluence of these events that pushes most buyers to the sidelines, and what we get is more than the usual cases of indecision and second guessing. Buyers tend to be unusually rigid with their offering price for fear that they may end paying more than they should probably have. Now, this can be extremely frustrating if another buyer suddenly comes in and takes the seller on his asking price.

Surely, there are ways by which you can get over the hump and overcome buyer’s remorse.

1. Do your homework before you start the negotiation

It is essential that you determine what you really want and how far you are willing to go in order to get them. The more time and effort you spend preparing for the negotiation the stronger your chances are of avoiding getting into a slump as a result of buyer’s remorse. You must carefully study the situation in the market. Look around and gather lead information and find out how you can add mileage to every dollar you are going to spend for your dream home.

2. Look for reinforcements

If indecision and doubt set in after you finalize the paperwork, the best thing that you can do is to seek the advice of trusted buddies and reputable real estate players, who can provide you with material affirmation of your decision to buy the home for sale.

3. Get your mortgage pre-approved

This act practically gives you a complete cover in as far as your budget range is concerned. It also allows you to focus on the appropriate selection of homes where you are most likely able to close a deal. Once you have the numbers, you can easily and confidently make your final decision knowing fully well that you have what it takes to complete the transaction.

By Laurel R. Lindsay

Found on ezinearticles.com

There is a buzz in the real estate and mortgage world that says that FHA is moving towards changing how they charge insurance premiums – again! And the proposal I am hearing is going to reduce the number of people who are eligible for the FHA Program, as well as make the program less attractive.

Let’s start by explaining that, contrary to the public’s consensus, the FHA is not a lender, they are a government owned insurance company. They collect premiums from borrowers and insure lenders of repayment, if those borrowers default on their mortgages….this insurance allows lenders to loosen their underwriting standards and approve many more applicants. Presently, they charge these premiums in two different ways:

The UFMIP (Up Front Mortgage Insurance Premium) for most FHA loans is levied at 2.25% of the loan amount. The good news is that while it is a closing cost, the UFMIP can be (and usually is) financed….added on top of the base loan amount. So, for example, on a $200,000 base loan amount has a $4500 UFMIP; therefore, the total loan amount is $204,500. Because it is financed in the loan amount, our borrower is paying $24.17 in their monthly P&I payment to cover it (at a 5% note rate).
The second insurance charged is the MMIP (Monthly Mortgage Insurance Premium). Currently, for most FHA loans is calculated by multiplying the principal balance of the loan by .55% and dividing by 12. Because the principal balance is constantly being reduced as payments are made, the MMIP adjusts downward annually until such time as the principal balance is reduced to 78% of the purchase price (which will be a minimum of 5 years, but typically 12-14 years). In our $200,000 example the MMIP is $91.67. This amount, too, is added to the mortgage payment.
As you know, a major factor in approving borrowers is that borrower’s ability to repay the loan which is determined by dividing their debt by their income. Any increase in payment makes it harder to qualify. In our example, our borrower’s qualification includes a total of $115.84 to cover the FHA insurance premiums.

Now look at the proposed changes. FHA wants to reduce the UFMIP to 1% and increase the MMIP to 1.55%. On its surface it doesn’t look tragic, but let’s look at our example $200,000 loan. Our total loan amount is now $202,000, which means the monthly impact of the $2000 is $10.74 (as opposed to the $24.17). BUT, our MMIP has been increased to $258.33 (a whopping $166.66 more)! In total, our borrower’s mortgage payment will go up $153.23!!!!

What’s the real impact? The same borrower that qualifies for a $200,000 FHA loan, based on their income, will only qualify for $172,000 loan. They will have to look in different neighborhoods and/or sellers will need to reduce their prices further to keep the same buyers interested in their home. It has the same effect as interest rates going up more than 1%….I shudder to think what the cumulative effect will be if this happens AND rates go up.

I am asking you to call your elected officials and tell them that they need to stop the FHA from implementing this….NOW!!!

PS- I recognize the FHA needs to increase revenue to cover losses on bad loans, but I suggest they increase the UFMIP (when I started in the business it was 3.8% and no MMIP, for example) because our borrowers need not come up with more cash to close, as it is financed, and it has a much lower impact on people’s ability to qualify. PLUS, the FHA gets more money now and doesn’t have to wait to collect it monthly over years.

This blog post was brought to us by our good friends over at kcmblog.com and Dean Hartman, the Chief Planning Officer at Continental Home Loans.