Real Estate Matters
www.reporterherald.com • Saturday, December 17, 2011 • Reporter-Herald
Recent changes to HARP may allow refinance ILYCE GLINK TRIBUNE MEDIA SERVICES
Q
uestion: My daughter is in an interest-only loan with a 30-year term. Her interest rate is 8 percent. She owes $128,000 on the loan. Fannie Mae owns the loan. She has tried to refinance her home. We thought that she could refinance her loan under the Making Home Affordable Plan, but she was told she makes too much money to get help. What would happen to her if she walks away from the home, and what are the penalties? Can she be sued for the principal, and can they garnish her wages? She has a good job, and if her wages were garnished, she would lose her employment. She is a single mom with a 10-year old son with no outside help. Answer: Your daughter does have a high interest rate on her loan based on where interest rates are today. But her loan is an interest-only loan, which means that her monthly payments are much lower than they otherwise would have been. Did your daughter take out an interest-only loan to lower her monthly payments so that she could afford to buy the home? You didn’t mention that your daughter can’t afford to make the payments. You seem to be asking what she can do to find a lender who would be willing to refinance her mortgage. Is she having a problem with the equity in her property? If the value of her home has dropped, she may not have enough equity to do a refinance. Most lenders will only allow her to borrow 80 percent of the home’s value. So if her old loan is greater than what her home is now worth, a lender won’t give her enough money in a refinancing to pay off the old debt. You might want to wait and see if your daughter can benefit from the recent changes that are being made to the Home Affordable Refinance Plan (known as HARP 2.0). It is designed for homeowners who want to refinance but whose homes are worth less than the mortgage balance. It may be that the HARP 2.0 guidelines will allow her to refinance her home. (Get more information on the program at MakingHomeAffordable.gov.) If your daughter walks away from the home, she runs the risk that the lender will pursue her for any money owed on the loan. While in some states there are laws that prevent deficiency judgments against borrowers, many states allow them. ■ See GLINK/Page E3
Homebuyers’
New Year’s Resolutions for 2012
Start the year off right when considering a home purchase ILYCE GLINK AND SAMUAL J. TAMPKIN TRIBUNE MEDIA SERVICES
O
ver the 18 years that we have been writing this column, we have offered New Year’s resolutions for homebuyers and sellers, along with financial resolutions that everyone can use to start their year off right. Unfortunately, it has been another very difficult year in real estate. And while we believe that the housing market will start to stabilize in 2012, we also believe it could be another very difficult year for home sellers, agents, appraisers, mortgage lenders, home inspectors, and title and escrow companies. On the other hand, if you’re buying a home to live in or as an investment, 2012 looks like it’ll be another terrific year. Before we get to the resolutions, let’s look at a snapshot of 2011 in the real estate market: • Roughly 25 percent of homeowners are underwater or are nearly underwater with their mortgages, according to third quarter of 2011 data from CoreLogic. • New home sales remain at near record-low levels, with only an estimated 310,000 new homes sold in 2011. • Home prices haven’t moved much at all, and are still declining in some states. Overall, a number of surveys found that home prices fell by another 3 percent in 2011. • The overall number of households has shrunk by millions during the Great Re-
cession. The trend for families to double or triple up continues. • More than a million homeowners were foreclosed on in 2011. Next year, lenders are expected to process some of the foreclosure backlog, putting another million or more homeowners into foreclosure. • Mortgage interest rates fell to historic lows in 2011. As we went to press, borrowers could get a 30-year loan for less than 4 percent, a 15year loan at less than 3.25 percent and a 10-year loan for less than 3 percent. All of this assumes and excellent credit and at least 20 percent equity in the property. • Despite ultra-low interest rates, millions of homeowners remain in financial jeopardy, unable to afford their payments and unable to refinance because of declining or negative equity in their homes. • Starting December 1, 2011, the federal government introduced a new and improved version of the Home Affordable Refinance Program, now commonly known as HARP 2.0. Up until now, only 70,000 underwater homeowners have been able to refinance under HARP. Supposedly, the new and improved program will encourage lenders to do more in this area. Nevertheless, most housing experts are skeptical that this version of the program will work better than the original one. And as with all of the Making Home Affordable programs, participation is entirely voluntary for lenders. • There’s still no consensus on what to do about Fannie Mae and Freddie Mac. Nearly a year ago, the government was required by law to introduce a plan on what to do with these secondary market behemoths. But political infighting and the depressed
housing market has kept any new ideas from taking root. Once again, we’re starting a new year with a less than optimal housing market outlook. Still, if you’re hoping to buy a home in 2012, here are a few New Year’s resolutions you might want to make:
behavior so that your credit score rises. The best thing you can do? Pay your bills on time and in full each month. The next-best thing you can do is maintain four open and active lines of credit. Each credit reporting bureau offers good credit behavior tips for free on its website, or you can go to MyFico.com. (Full disclosure: I contribute real estate posts to the Equifax Finance Blog, where Equifax’s credit experts blog about credit trends and information.)
ate a great deal for yourself. Yes, you are allowed to negotiate with lenders and ask them to give you a better deal.
4. CREATE A GREAT HOME BUYING TEAM
Whether you’re buying investment property or a home 1. PULL A COPY OF YOUR to live in, you’ll want to creCREDIT HISTORY AND ate a team of real estate proCREDIT SCORE fessionals who can help you find the right property, at the Mortgage lenders have beright price, on the right come extremely conservative terms, without any and restrictive in deciding headaches. which mortgages will get funded. Lenders will pull The team should include a 3. SHOP AROUND FOR credit scores from each of great real estate agent, mortthe three credit reporting bu- THE BEST LOAN gage lender, real estate attorreaus (Equifax, Experian and ney, tax preparer (with expeEven though the federal Trans-Union) and then use government is backing more rience in investment real esthe middle score to detertate if you plan on buying rethan 90 percent of all the mine your loans interest rate loans through Fannie Mae, al estate as an investment) and terms. You need to know Freddie Mac, FHA, VA and and real estate inspector to that information ahead of start. Residential real estate USDA, it pays to shop time. Go to AnnualCredit investors will want to add a around. Make sure you talk Report.com and receive a to at least four or five lenders 1031 exchange professional free copy of your credit histo- before you sign your applica- and commercial inspector (if ry and then pay for your cred- tion, including a “big box” appropriate) to the mix. it score (about $9). You can lender, a small local lender, a Having the right team in also go to each credit report- credit union, a mortgage bro- place will go a long way ing bureau or MyFico.com ker and an online lender. Use toward making your dream and purchase a copy of your the information you glean of homeownership come credit history and score, if true. from each lender to negotiyou’ve already used up your freebies.
For more information, call Glink’s radio show at 800-972-8255 on Sundays from 9 to 10 a.m., write to Real Estate Matters Syndicate, P.O. Box 366, Glencoe, IL 60022 or visit www.thinkglink.com.
2. PRACTICE GOOD CREDIT BEHAVIOR Lenders regard borrowers with credit scores above 780 as their best customers. Unless your credit score is above that level, you should work on eliminating any errors, and practicing good credit
Real Estate Matters
LPS Mortgage Monitor: Colorado 6th-best in nation COLORADO DIVISION OF HOUSING
A
ccording to the October 2011 report released by LPS Applied Analytics, there were 3.9 million loans in the US that were either in foreclosure or were more than 90days delinquent during October of this year. Delinquencies were down 28 percent from the peak during October, but the foreclosure inventory remained at historic highs.
Nationally, the percentage of active mortgage loans that were non-current during October was 12.2 percent, which was down 7.5 percent from the same period last year. In Colorado, the percentage of active mortgage loans that were non-current during October was 6.7 percent, which was down 13.3 from the same period last year. Colorado's year-over-year decline in non-current loans was the eighth largest in the nation. Only Nevada,
Michigan, Arizona, California, Utah, Idaho and Wyoming showed larger declines. Only five states reported lower percentages of non-current loans than Colorado, making Colorado sixthbest in the nation for the percentage of its mortgage loans that were noncurrent during October 2011. Montana, Wyoming, South Dakota, Alaska and North Dakota reported lower percentages of non-current loans during October.
Buying a home that needs work? Call the experts in FHA 203(k) renovation financing. An FHA 203(k) mortgage allows you to finance both your home purchase and renovation with a single loan. Call now to learn more. Vivian DeVoe, VP Mortgage Banker, NMLS#269876, 970-227-4702 Loans and rates subject to credit approval. Owner-occupied residences only. FHA conditions and restrictions apply.
LPS Mortgage Monitor is an indepth report of mortgage industry performance. The monthly report is based on data from the company’s market-leading repository of loan-level residential mortgage data and performance information, including more than 40 million active loans across the credit spectrum. This data is analyzed by LPS experts to produce more than 30 charts and graphs reflecting both trend and point-in-time performance observations.
www.HomeStateBank.com
970-203-6100 Check the license status of your mortgage loan originator at http://www.dora.state.co.us/real-estate/index.htm Think big
Bank small