Archive for the ‘Mortgage’ Category
The economy shed 539,000 jobs in April, raising the 6-month total to nearly 4 million jobs lost.
And while the April data may look bad, it’s actually 10% better than what was expected.
As a result, it’s turning into a bad day to be shopping for mortgage rates.
After bottoming out early last week, conforming, 30-year fixed rate mortgages have risen in cost by as much as three-quarters of a percent. Today’s good-for-the-economy report may push costs higher still.
Now, it may seem odd to categorize 539-thousand lost jobs as “good-for-the-economy”, but it’s important to remember that on Wall Street, expectations are everything.
Investors are constantly buying and selling securities based on what they think will happen in the future. And, up until this morning, there was an expectation that 600-thousand jobs had been lost in April.
As it turns out — relative — the actual job loss data wasn’t so bad.
Now, markets are making adjustments and re-forming expectations of what’s ahead for the economy. They’re preparing for things like higher levels of consumer spending in the months ahead, and fewer home foreclosures nationwide. Both outcomes would help to spur the economy from recession.
This helps explain the stock market’s early rally, too.
For now, mortgage markets remain sensitive to whiffs of an economic recovery. In general, if there’s good news for the country, it going to be bad news for mortgage rates.
Mortgage rates are off slightly in advance of the weekend.
The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent. The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.
In its press release, the FOMC noted that the economy may still be contracting, but that it’s not happening with the same speed as in prior months. Household spending is stabilizing and financial markets are “easing”.
Nevertheless, threats to the recovery are everywhere with the following items on the Fed’s short list:
- The growing ranks of unemployed workers
- The reduction of housing wealth nationally
- Reduced inventories and investment from business
Furthermore, the FOMC fingered today’s inflation levels as too low to support economic growth. This justifies the Fed’s plan to hold the Fed Funds Rate near zero percent “for an extended period”.
For home buyers and refinancing homeowners, today’s press release was not favorable.
After the Fed’s announcement, stock markets rallied on the idea that the worst of the economy really is over and that led to a broad bond market sell-off. Mortgage rates spiked in response, adding as much as 0.125 percent, in some cases.
The FOMC’s next scheduled meeting is June 23-24, 2009.
Source
Parsing the Fed Statement
The Wall Street Journal Online
April 29, 2009
https://online.wsj.com/public/resources/documents/info-fedparse0904.html
Congratulations! Your loan modification is almost done. Here are just a few tips to wrap up the process.
You’ll receive a loan modification packet from your bank that looks very similar to loan documents. Review them to ensure the following terms are what you agreed to:
- Interest rate
- Interest rate reset cap
- Term of modification (how many years)
- Monthly payment
- Good faith payment due
- New principal balance of your loan
If all of these are in good shape you’ll need to:
- Sign the documents in the presence of a notary
- File a copy for yourself
- Wire good faith payment funds to the bank via the wiring instructions they provide (they will not accept a personal check)
Once that’s all done your loan modification is complete. Congratulations! You made it.
Related Posts in the Loan Modification 101 Series
- Loan Modification 101- The Basics
- Part 1- Loan Modification 101 – How to start the loan modification process
- Part 2- Loan Modification 101 – Doing your homework
- Part 3- Loan Modification 101 – Determining if you qualify for a loan modification
- Part 4- Loan Modification 101 – Tips for qualifying for a loan modification
- Part 5- Loan Modification 101 – Negotiating new loan terms
- Part 6- Loan Modification 101 – Finalizing your loan modification
Stay tuned to this blog for more great real estate, mortgage and loan modification advice. Thanks for reading and please share this series with friends and family who may need this help.
Courtesy of Morgan Brown, founder of Blown Mortgage.
If you’ve gotten this far, congratulations! It means you’ve been approved as a loan modification candidate and the bank has or will be making you an offer very soon. This post will cover some ways to negotiate with your lender to get the best possible modified terms for your new mortgage.
What to expect from your bank offer
If the bank does approve you for a home loan modification there are a few constants that you must be aware of:
- The bank will not write down the principal balance of your loan, they will adjust your interest rate to lower your payments, but you’ll still owe the same amount on your mortgage.
- The bank will not waive late payments. These will usually be added to your principal and tacked on the back of the loan.
- The bank will require a good faith payment ranging from one to two month’s mortgage payment as a sign of good faith that you’re committed to the mortgage.
- The bank will demand that you have the ability to afford a reasonable market interest rate as part of your modification. (You won’t be negotiating for 1% when the going rate for a 30-year fixed is 6.25%.)
So far we’ve discussed the basics as it relates to getting a loan modification. Now we’ll talk about a few tips that will help you qualify for a loan modification. These tips are centered around your hardship letter and the monthly expense worksheet.
The hardship letter
Called an LOE in the biz (letter of explanation) this letter is your explanation of why you believe you qualify for a home loan modification. Remember these facts when writing your hardship letter:
Banks want to work with people that:
- Are credit-worthy and have a good payment history
- Have been in their home for a long time
- That have been impacted by an unusual adverse event
- Have good potential to keep earning their current level of income
- Have good potential to pay back the mortgage
- Are likely not to go in to default after modification
Banks don’t want to work with people that:
- Have been chronically late in making mortgage payments
- Have lived in their home less than a year
- Are a poor credit risk
- Have lost their primary source of income
- Are likely to go in to default after modification
You want to write your hardship letter with these facts in mind. A good hardship letter includes:
- An explanation of the event that caused you to fall behind on your mortgage (or if you’re current why you’re requesting a modification). This should be positioned honestly as a one-time setback that is in the past.
- These can range from your adjustable rate mortgage resetting, to an illness now recovered, to a job loss that has been replaced by a new, stable and similar paying position. These are all one-time events that don’t impact your ability to pay a reduced amount moving forward.
- A statement of your desire to stay in the home and make paying the mortgage a priority.
- A statement of why your situation was temporary and one-time.
- A statement of why your situation is improving.
If you’d like a free hardship letter simply subscribe to Blown Mortgage’s Loan Modification Tips email list.
Be brief and to the point. We don’t need a novel, just a straightforward and accurate letter that states your willingness to stay in the home and the freak nature of the event that caused you to request a loan modification.
So far in this series we’ve talked about the process of loan modifications, how to get started and how to collect the information you need to accurately complete your monthly expense worksheet. The monthly expense worksheet is going to be used by your lender to determine if you qualify for a loan modification or not. Therefore this is an extremely important step that must be taken with care. Once you submit your monthly expense worksheet it becomes part of your file and is very hard to change it once submitted. Take your time and make sure it is correct!
Tip: Never lie on your monthly expense worksheet. Loan fraud is a federal crime. Knowingly submitting false information will jeopardize your modification application and may subject you to legal action from your lender.
Once you’ve received your loan modification application from your lender it’s time to do your home work. What do we mean by “your homework?” We mean simply the collecting and ascertaining of your income and expenses in order to successfully complete your loan modification application.
In brief – think back to the documentation you needed to apply for your loan, you’ll need essentially that information in order to complete your loan modification application.
The mortgage payments are soaring because your ARM reset, or your income was cut in half, or two-thirds, or completely by a recent layoff. The bills are piling up and the savings is disappearing quickly. You need relief, and you’ve heard a lot about loan modifications as part of the way out of your financial train wreck. You’re not alone, millions of Americans face foreclosure every day and the specter of losing a home is one of the most emotionally and mentally grueling challenge a family can face. The first thing to getting started with a loan modification is: to pick up the phone.
Astonishingly, in more than 50% of homes that go in to foreclosure the homeowner never picks up the phone to talk to the lender. This seems counter-intuitive, but in reality, makes perfect sense. Too many homeowners feel helpless and give up before they even try. To get a loan modification your first step is to try – to pick up the phone.
Mortgage loan modification, the changing of terms on an existing home loan, is becoming a well-known practice as the US housing market continues to struggle. Borrowers who find themselves underwater on their mortgage – owing more than the property is currently worth – and facing a rising monthly mortgage payment are being encouraged to pursue relief through modifying their home loan. But for all the news and hype around loan modifications very few homeowners really understand what goes in to getting their home loan terms changed to a level that they can afford.
In this series of posts we’ll teach you the basics of how the loan modification process works so that if you’re considering a loan modification you’ll understand how to give yourself the best chance of successfully completing the process.
In this series on loan modifications we’ll cover:
- How to start the loan modification process
- Doing your homework
- Determining if you qualify for a loan modification
- Tips for qualifying for a loan modification
- Negotiating new loan terms
- Finalizing your loan modification
A Note on the Loan Modification Process
Because each loan and each lender, mortgage servicer or mortgage investor is different the process may be slightly different in your situation. Use this information as a guideline; but be sure to follow the specific requirements of your lender. Additionally, every loan has to be evaluated on its own merits. That means that a loan modification can take anywhere from 30 days to 90 days to complete. Your organization, persistence and diligence will make the difference in shaving days off the process.
A Note on Loan Modification Companies
Federal housing law makes taking money up front for a loan modification illegal. Many loan modifications get around this by affiliating themselves with a lawyer, and collect a retainer for legal service. Others collect a processing fee for submitting your loan package. Either way, be warned that paying to have a loan modification company do your modification application for you does not guarantee success. And, there are many unscrupulous characters moving in to this space. The Department of Housing and Urban Development (HUD) urges extreme caution if you choose a company to represent you in the modification process.
Next Step: Part I in the Loan Modification 101 Series- Part 1- How to start the loan modification process.
Related Posts in the Loan Modification 101 Series
- Loan Modification 101- The Basics
- Part 1- Loan Modification 101 – How to start the loan modification process
- Part 2- Loan Modification 101 – Doing your homework
- Part 3- Loan Modification 101 – Determining if you qualify for a loan modification
- Part 4- Loan Modification 101 – Tips for qualifying for a loan modification
- Part 5- Loan Modification 101 – Negotiating new loan terms
- Part 6- Loan Modification 101 – Finalizing your loan modification
You can learn more about doing your own loan modification here. Courtesy of Morgan Brown, founder of Blown Mortgage.
The basis of most mortgage lending is credit scoring. In general, the higher a person’s credit score, the lower his offered mortgage interest rate.
Despite the many credit scoring models in use today, however, just 3 are relevant to American homeowners:
- The Equifax BEACON® score
- The Experian Fair Isaac Risk Model
- The TransUnion EMPIRICA®
Generically, these scoring models generate what are commonly known as “FICO” scores.
FICO scores are measurements of probability. The higher a person’s credit score, by definition, the less likely a person is to default on his home loan. This is one reason why credit scoring has added importance lately — mortgage lenders are very careful about what they’re lending and to whom.
Notably, minimum FICO thresholds have been added to all types of mortgage loans.
FICO scoring has 5 main components as listed above. Payment history and credit capacity are two of the largest pieces, but a myriad of other factors contribute to a credit score, too. For example, the longer your reported history of managing credit, the more favorably your credit score will respond.
The myFICO.com website does a terrific job with credit education, explaining in plain language the ins-and-out of credit scoring and ways to boost your score. It also makes a free, 20-page PDF available for download.
Whether you’re a homeowner or lifetime renter — consider it required reading.