Me Myself N My Mortgage Theories

If you’d like to reorganize your debts and pay them off by filing bankruptcy, then Chapter 13 is what you may have thought of. This is what helps you to restructure your debts and pay them back over the next 3-5 years. However, prior to filing Chapter 13, consider the 3 things as given below:

1. Adjustment of your loan payment: Even though you can restructure loan payments by filing Chapter 13 bankruptcy, things may not be that easier for you. This is because the loan payment may increase while you’re in Chapter 13 bankruptcy.

The lender is not obligated to negotiate with you and modify your loan terms. Moreover, you may be able to adjust payments on one mortgage but not on the other on your primary residence.

2. Getting rid of second mortgage: Chapter 13 filing may not be enough to help you restructure your second mortgage payments. Say for example, you have a first mortgage balance worth $350,000 and a second loan balance worth $80,000. Now, if your home value is $400,000, then you’ll hardly be able to pay off your first mortgage dues.

As per laws in California, in the midst of housing crisis, one can eliminate liens due to mortgages only if such liens are not secured by the equity in a property. So, if we consider the example given above, the second mortgage would be actually an unsecured lien as you won’t be able to pay it off under Chapter 13 repayment plan. So, the second mortgage lien can be eliminated from the title once you complete the 3-5 year repayment plan.

3. Your affordability to keep the home: Prior to filing Chapter 13, you need to understand and find out if at all you can afford to keep your home. Only then filing Chapter 13 and starting over your payments make sense.

Are you jobless and don’t know how to keep up with your mortgage payments? Well, ask your lender if he’s offering mortgage unemployment insurance. This is a kind of insurance policy especially being offered by home builders and real estate agents in recent times. The purpose of such a policy is to help one meet his monthly payments when he’s unable to find a job at the earliest.

What does the insurance policy cover?

The policy usually covers monthly mortgage payments between $1800 and $2500 for a maximum time period of 6 months. The policy covers property taxes and homeowners insurance as well. The coverage however depends on the market in your area of residence.

There are buyers who’re even getting back their mortgage payments as refund provided their appraised value falls short of their home sale price after they’ve stayed in their homes for 3 years or so. And last but not the least, certain companies are allowing home buyers to walk away from their properties in case of job loss or if they’re just behind on their loans.

Buyers who simply walk away don’t need to worry about their mortgage payments at all! But then doesn’t it affect their credit? Well, it surely does but the impact isn’t as bad as a foreclosure on their homes.
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It’s the tax filing season and you must be busy filing out the paperwork…..

Well, just in case you’re not aware, I’d like to share it with you that the IRS has set a date, that is, March 15 when it intends to hold its Super Saturday. This is when the IRS employees will help prepare the basic 2008 tax returns for those who qualify for the income tax credit or those who earn less than $42000 a year.

It’s a free service and a much needed one at that especially in these times of economic crisis. Even if you’re unable to pay the tax bills, you’ll be allowed to visit the centers and discuss your chances of getting a payment plan to pay off your taxes.

What else you can get on Super Saturday…

Well as a taxpayer, you can expect to get copies of your tax returns and any kind of help with letters, levies on your wages or bank. You’ll find the IRS assistance offices from their official website (irs.gov) or, you may just call them at 800-906-9887 for the free assistance centers. The assistance centers will remain open from 9a.m to 2p.m.

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The Obama Administration is planning to reduce tax deductions on mortgage interest for the rich and high income taxpayers. By doing so, he’ll be using the reduction in benefits or increase in income taxes in order to compensate for his ambitious programs, which are aimed to revive the staggering economy.

As per Obama’s plan, the tax deductions available to the rich will be capped at 28%. That is, they can deduct only 28% of the total interest they pay every year on their mortgages. So, people in the higher marginal tax brackets of 33% and 35% will get a comparatively smaller benefit from their deductions on mortgage interest, state taxes and charitable contributions etc.

What’s the purpose of Obama’s plan?

With the tax benefit reduction, Obama aims to raise $318 billion over a period of 10 years. It is in accordance with the President’s campaign to increase taxes for families earning more than $250,000.

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Hi all,

There’s a lot of talk going on about Barack Obama’s Bailout Plan which is likely to be presented before the Congress in the coming weeks.

The primary purpose of the Bailout plan is to create and maintain flow of money between banks, financial institutions and consumers in order to revive the economy.

The Bailout Plan is aimed at breaking new grounds in helping troubled borrowers even before they miss a payment. There’ll be a standard approach to determine whether a borrower is in mortgage problem. This will be followed by a revaluation of the borrower’s property in order to set new mortgage terms while at the same time making sure that banks do not suffer a loss as they have been going through ever since the mortgage meltdown.

The Bailout Plan will bring about a standard program which can help modify mortgage loans for all kinds of borrowers. The Treasury Secretary, Timothy Geithner has recently given some guidelines on how the Obama Administration will spend the second half of the $700 Billion of Bailout Package previously approved by the Congress.

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Government-backed investors, Freddie Mac and Fannie Mae have both raised mortgage fees thereby raising concerns among borrowers who’ll now have to spend more in getting a mortgage.

The National Association of Realtors and National Association of Home Builders have protested against a series of such increases for the past 15 months. The Associations say that the Investors are adding on to the mortgage costs thereby deterring home buying or refinancing at a time when the housing market needs a boost.

Freddie Mac’s higher fees affect mortgages offered against condominiums, interest only loans, refinance loans and others with combinations of low credit scores and down payment. In spite of Freddie Mac and Fannie Mae not being directly involved with borrowers, they can have a big impact on the rates and fees the latter pay.

When a considerable number of loans are being originated, Freddie Mac and Fannie Mae decrease the price they pay in order to compensate for higher risk characteristics. These extra charges are passed on to borrowers in the form of high mortgage costs or rates.

In the aftermath of housing crisis, raising mortgage loan fees could deter borrowers from applying for loans. As it is, months of foreclosure have been a matter of concern for homeowners. It needs to be seen as to how borrowers react to the investors’ decision to raise mortgage fees.

Technorati Tags: mortgage fees, mortgage costs

With mortgages rates getting lower you may be tempted to apply for a loan and buy a home of your own. But make sure you have saved enough for the down payment. Your credit history is another important factor to help you qualify.

As we all know, the market has been in turmoil with changes coming in every now and then. To help you survive in the midst of market crisis and buy a home without much hassle, I’ve given below a list of 5 tips to make things easier for you.

1. Save enough for the down payment: When you’re buying a home, you should try and make a down payment worth 20% of the home purchase price. For that, you’ll have to save good amount of cash.

Make sure you keep aside some cash each month. If possible, take up a part time job to increase your savings. The more you save, the higher your down payment and the less you need to borrow.

2.Negotiate with the seller: When you sign a contract with the seller, make sure he’s willing to pay a part of the closing costs. This is known as seller concession which usually ranges from 3-6% of the total closing costs.

3. Check how much you can afford: Find out how much mortgage you can afford to manage. Use the how much house can I afford calculator and check your affordability. Do this before you talk to lenders. That’s because it’s you who can determine how much you can pay for.

You need to prepare a realistic budget to find out if actually you can afford the house payment along with other expenses. Shop with a number of lenders and compare the loan offers before you choose the one that suits your financial situation.

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The Federal Reserve has recently come up with an initiative to revive the weakening economy by investing $800 billion into the troubled mortgage and credit markets. As per the initiative, the Fed will be buying $100 billion in debt and $500 in mortgage-backed securities guaranteed by Freddie Mac and Fannie Mae.

The problem is, investors are no longer willing to buy mortgage backed securities that Freddie Mac and Fannie Mae have purchased because they’re uncertain over what the market would turn out to be. Hence the initiative is being taken by the Fed to save an ailing economy.

Apart from the Fed buying Fannie Mae and Freddie Mac loans, they would also get together with the Treasury in order to create a $200 billion program. This program would help them purchase securities backed by auto loans, student loans, loans for small business and various other forms of credit. The effect of the plans announced by the Fed and the Treasury is quite evident as these have helped bring down interest rates on mortgages.

Rates on 30 year mortgages have dropped down by half a percentage point to 5.75% and it is expected that rates may go even lower. This is expected to help buyers seek conventional loans or refinance their adjustable rate loans into fixed rate mortgages.

Let’s hope that people can get out of the mortgage mess and refinance into better deals thereby helping to reduce the housing crisis that has gripped the entire nation.

Technorati Tags: fed and freddie mac, revive economy

Hi all,

I’ve been away for quite some time now. But let’s hope I’ll be able to continue from now on.

Well, lots of changes are taking place in the industry, the latest being the decision of the Federal Reserve to revise the Good Faith Estimate (GFE). The GFE is an estimate of the closing costs one needs to pay while taking out a mortgage. Currently the GFEs offered by different lenders are not standardized and it’s very difficult to interpret them.

What the Fed plans to do is, revise the GFEs by the beginning of 2010, make it more standardized and also reduce the number of pages. In all, it’ll be a 3 page document that any borrower can understand easily. Apart from the GFE, the HUD will also standardize the HUD-I Statement.

What’s the new GFE and HUD-I Statement like?

The first page of the GFE contains a summary of the loan offer. This includes the loan term, amount, initial rate of interest, whether the rate is fixed or adjustable, and whether negative amortization is applicable. Also, it mentions whether one should pay taxes and insurance in an escrow and if there is a prepayment penalty or balloon payment.

The second page of the GFE speaks about the lender’s total origination fees, third party fees and taxes. There’s a box there which asks if the borrower intends to pay points to get a lower interest rate or whether the borrower will take a higher rate in return of reduced closing costs.

The third page provides 2 tables using which borrowers can compare and find out what’s the different in paying discount points, getting a lower rate and paying less in closing costs. The other table helps borrowers compare loan offers and choose the best.

The purpose behind revising the GFE and HUD-I Statement is to compare the numbers in the GFE with that of the HUD-I Statement. Let’s hope the new docs will help borrowers understand whether they can afford the loan.

Technorati Tags: gfe, good faith estimate, HUD-I Statement

The new housing rescue bill - Hope for Homeowners Act of 2008 is being signed into law by President Bush. It aims to provide mortgage relief to thousands in financial problems and modernize the FHA so that it can back loans for risky borrowers.

Here are the key points stated in the Housing Bill:

Tax credit for first time buyers:
If you’re a first time buyer (that is, you haven’t owned a home for the past 3 years), the law will provide you with tax credit up to $7500 but not more than 10% of your home purchase price. However, only those who have bought their homes after April 8, 2008 and prior to July1, 2009 are eligible for the tax credit.

With this credit, your tax bill for the year of purchase will get reduced by $7500 maximum. So, if you buy a house in 2008, you’ll get the credit this year itself, that is for which you’ll have to file your tax returns by April 15, 2009. But if you buy the home by June, 2009, the tax credit will be available to you for the 2009 tax year.

However, you need to repay the credit within the next 15 years and you’ll have to start paying 2 years after your home purchase. If the house is sold prior to the repayment period, then you’ll have to pay the remaining tax to the IRS.

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