This Boston Fed paper offers an excellent and detailed definition of the “infamous” subprime borrower, which traditionally referred to a person with a low credit score. If you’re interested in the data behind risks with respect to subprime lending then give the paper a whirl.
Britney Spears' House
We are all guilty of being gluttons of some particular vice. Yes, you! Here at Loanzen, we’ll be the first to admit celebrity real estate gets us hot in our Pumas.
We like the good stuff. HUGE monthly payments. Gigantic option ARM loans. Wild foreclosures. That sort of hyperbolic junk. In that light, do we have any guesses how much Britney Spears’ mortgage payments added up to in May of 2007? Any takers?
… $25K … nope!
… $40K … not even.
File this factoid under the celebrity mortgage carnage: Britney Spears’ official mortgage payments was $49,267–that’s for one month folks! Now, when you consider that on an annualized basis we’re talking nearly $600K and that’s not considering taxes and insurance.
How about them apples!
The jumbo loan category is about to get a much needed boost:
Major banks are heading into the jumbo segment, originating big loans at affordable rates — not to then sell to Wall Street bond traders but to keep in their own investment portfolios. Bank of America, the country’s largest mortgage lender, is rolling out a large program to finance loans between about $730,000 and $1.5 million, with fixed 30-year rates starting in the upper 5% range. The loans will be available through the bank’s retail network and through its Countrywide Home Loans subsidiary. After April 27, Countrywide will be re-branded — shedding the name it’s had since 1969 — and morph into Bank of America Home Loans. Bank of America acquired Countrywide in 2008.
Currently jumbo loans are nearly impossible to refinance at a sensible rate due to investors risk aversion. This is leaving thousands of home owners in states like California, Florida and Nevada waiting for relief of any kind. We’ll keep you updated as this news trickles in.
The Federal Reserve’s decision to print cash likes it’s going out of style to the tune of $1 trillion dollars sent mortgage rates down, down, down. A drop in the 30 year interest rate for conforming loans to well below 5% is forcing many would be buyers and refinancers to take notice.
As one could imagine, mortgage brokers are thrilled beyond belief. The hope is, depressed mortgage rates will drive consumers back to the refinance and purchase well. Economists said the Fed’s actions could kick-start the slumping California, Florida and Nevada housing markets.
If you haven’t already, get on the horn with a reputable broker or lender. Rates will not stay here forever. Happy hunting.
We interrupt the regularly scheduled viewing of the DOW going in the tank to offer you the most astonishing, fear inspiring and pure jaw dropping statistic of ‘em all.
Circa 5.4 million American homeowners–yes your neighbors, brothers and friends–with a mortgage were either behind in their payments or already in foreclosure at the end of 2008 according to the Mortgage Bankers Association. That’s almost 12.4% folks. Swallow your sandwich before you hurl. It’s really that bad.
That compiles to one in eight households with mortgages. Please take a moment to process this data. More to come later …
And the good news keeps on coming. There are times in history when Americans need to let their elected officials know that they’re dead wrong. Today is one of those days.
Let’s be honest: housing and the greater economy has frankly never been worse than it is today (sans 1929). We’ve just received news that the Obama administration is attempting to push through legislation limiting the deduction of mortgage interest along with property taxes on federal returns. Why you ask?
Data suggest 80% of the benefit goes to roughly 20%of the homeowners who itemize. Shall we say this is yet another example of Obama’s desire to level the playing field between classes? Absolutely. Politics aside what are the medium term effects of such legislation? If you guessed further depressing home values of middle/upper class Americans then you win The Happy Meal because that’s all we’ll be able to afford looking forward.
Many folks bank on this deduction every year. Removing it is the psychological equivalent of saying, “Forget purchasing or ref-ing that nice home. It’s simply not worth it.”
But wait, shall we digress for another moment? Housing doesn’t exists in a vacuum, we think this has become explosively clear since the onset of the credit crisis. Therefore, this type of reform ultimately will push the entire market down yet again. Howard Hanna III, CEO of Howard Hanna Holdings Inc. spelled it out for us,”Any reduction in the amount homeowners can deduct will only slow down a housing market already suffering.”
Folks, this is simple economics. Punish one sector of highly connected financial system and watch the rest of the market anguish in pain months thereafter. We’re certain this proposal will have an extreme negative effect on a market that is damn near another hitting another inflection point to the downside. This is a representative democracy. Call you local Congressman and let them know this stinks.
BREAKING NEWS — Information regarding the mortgage relief bill is pouring in. Some of the broader points sounds good however the principal reduction side of things has yet to be fully articulated. Here’s what we’re learning you’ll need to be eligible to receive assistance:
- must be owner occupied & primary residence
- first lien only
- no minimum LTV
- 31 % or greater debt to income ratio
- loan balance must be under conforming loan limit of 729K
The modification itself can only occur once. After that, the government will throw you in a detention camp with former Gitmo prisoners. We’re just kidding, take it easy. The modification plan applies to all loans below $729K (no love for the jumbo folks again) that we’re written before January 2009. Possible restructing of mortgages can look as follows:
- as low as 2% payment
- term can be elongated up to 40 years
- principal can be reduced ***(no firm details here today)
- if borrower stays current can receive up to 1K/year toward principle for 5 years
Any questions? Leave ‘em in the comments.
We’ve been fielding a ton of questions about loan modification lately. Instead of “attempting” to get you the answers we decided to reach out to an insider. Dave Greek of GoProCapital is a mortgage and loan modification expert that has personally modified over 100 loans in the past year. Check out GoProLoanMod and download his free loan modification manual (or contact him directly if you want additional assistance).
If there are any more questions please leave them in the comments and we’ll re-post them with answers at a later date. Happy hunting.
How did you become an expert in loan modification?
That’s a great question because there are a ton of so called “experts” out there in the market today. Basically, I had to become an expert because I was a mortgage broker for the last 8 years and many of my past clients desperately needed my help. My clients either bought more house than they could afford or have suffered a financial hardship due to the failed economy.
It’s very sad to see but considering I handled their loan transactions, I have a moral obligation to do my best to keep them in their home. Plus, I already had the valuable relationships with folks inside large banks — making it easier to get the ball rolling on the loan mod side. Many people blame brokers for the crisis but I feel we were simply a messenger for the greed that was circling the major financial institutions. I also feel some of that greed ran through to the borrowers as well. When a next door neighbor shows up with a new Mercedes because he/she refied and took cash out due to his/her home appreciating 20% in 6 months, there was no reason we couldn’t do the same thing right?
Bottom line is everybody thought it would never end and they lived way above their means by leveraging their home and using it as an ATM machine. I was just as guilty of that. Now it’s my job to help fix some of this. I studied and read every piece of information I could get my hands on and compiled it all into a reference guide for my staff. I recently decided to offer it to borrowers as a book at no cost.
We’re hearing a great deal about loan mods in the news these days. What are the biggest misconceptions?
The biggest misconception I hear is that most people think they need an attorney or a professional modification company to handle their own loan modification. This is totally untrue but TV and radio ads tell a different story. These ads paint a picture that brokers misled borrowers (pointing to RESPA violations in the loan paperwork) and unless you hire a professional to sift through all that garbage you won’t get approved. This is false. You either have a hardship or you don’t.
Over 50% of all foreclosure happen without the borrower ever speaking with their lender. Many people think that once they’re late it’s over. They feel embarrassed and have trouble picking up the phone to call their lender to negotiate. It’s a difficult and unfortunate situation and easy to ignore. Lenders want to hear from borrowers. Banks want to keep borrowers in their homes and would rather deal direct with the borrowers then with an inexperienced loan modification company.
Can the everyday borrower really negotiate a loan modification on his or her own?
It’s not hard to negotiate your mortgage but there are a few tricks borrowers need to know that will help. The first trick is being prepared. Have your financial information at hand when calling to negotiate. You need the following items:
- Bank statements
- Monthly obligations
- W2s
- Loan paperwork
- Checking and savings account balances
- Tax returns
- Subordinate financing statement (if applicable)
Another trick is to be cordial and transparent (sounds like common sense but you wouldn’t believe how many people call ticked off. Lender CSRs are overwhelmed and often get beat up by callers. Being friendly has worked for me practically every time. I’ve even had reps tweak the numbers in order to get approved. Your main goal is to get past the first call. With most lenders the first point of contact is a screening process that is designed to gather information about your financial situation. This data gets inputted into a computer allowing the CSR to obtain an immediate decision.
If the financial information looks bleak, the CSR can render a denial right there. Don’t fret, it’s not completely over if this happens. My book shows ways to get back in the game. If the numbers are acceptable, then you can get to the next level which is a review of financials and a manager assigned to the file. Up until last week you needed to be late on your mortgage or have a financial hardship. This may include job loss, a medical issue, an ARM loan resetting or anything that affects your income or your current payment. The rules are changing daily and it’s not always required under the new rules. Bottom line is: the prepared and kind folks can negotiate their own mortgage. Continue Reading »
Bill Gross Think About Mortgage Rates
We’ve all watched mortgage rates steadily increase the past few month. The rate on standard long-term mortgages charged by lenders to prospective homeowners has risen from 5.04 per cent on January 13 to reach 5.51 per cent on Friday, according to HSH Associates, mortgage market analysts. The jump represents an almost 10 per cent rise in borrowing costs. Of course, as rates move up people are less inclined to borrow thus putting more pressure on the nuclear reactive housing market. This seems counterintuitive right? If we’re in such a horrible state shouldn’t mortgage rates being going down? The answer, of course, is yes.
So, what gives? Folks, there is some good news on the horizon.
Bond king and all around genius Bill Gross thinks mortgage rates are headed south once again, “I think at some point we’re going to see a 4.5 percent mortgage rate and the 10-year Treasury rate capped at some level. When the Fed comes in to buy Treasurys that will be a big day.” Hold on, relief might just be on its way.
The chairman of the Senate Banking Committee, Chris Dodd, said he will refinance two mortgages that he received through a VIP program from the inspirational and philanthropic Countrywide Financial Corp. He also agreed to reimburse Angelo Mozilo for the tanning bed he loaned him during the time the two men worked together during the tulip crisis of 1620.
At Loanzen, we’re all about helping our customers negotiate a better mortgage rate and fee structure (we believe mortgage transparency is a good thing), so we thought we’d go ahead and do an high level analysis of Senator Dodd’s current situation. We want to make sure he has all the data necessary to make a sound financial decision. Here are the mortgages currently on the books:
Home Location #1 — Washington, D.C.
Appraisal – $792K
Loan Balance — $506K
Mortgage Type: Refinance
Credit – 768
Salary –$170K (additional income as well)
Current Angelo BFF Rate: 4.25 for 5 years
Current Payment – $2,489.22
NEW RATE -- 4.375 w/2 points
New Loan Payment — $2,526
Paying No Points Rate – 5.75 to 6 1/4
Home Location #2 – Haddam, Connecticut
Appraised Value – $500K
Loan Balance – $275,042
Mortgage Type: Refinance Mortgage
Credit – 768
Salary –$170K (additional income as well)
Current Angelo BFF Rate: — 4.5 fixed for 10 years
Current Payment – $2,020.25
NEW RATE– 4.375 w/ 2 points (only if this is a vacation/first home NOT an
investment property)
New Loan Payment – $1,373
Paying No Points Rate – 5.75 to 6 1/4
So let’s ponder this scenario friends. You’re the head of one of the most powerful committees in the world. You get a sweetheart deal from the tannest man in America on not one but two mortgages. Someone discloses the “less than fair” deal after the market turns to pixy dust. You throw a news conference admitting you’re wrong and that you’ll make it better by refi-ing out. You go ahead and refinance at market historic lows — paying 2 points on both deals — at the rate of 4.375% for a 30 year fixed loan. You walk away saving $7,325.69 per year on your mortgages. Now this is a beautiful country.
***Rates are on approximation as it’s impossible to determine exact numbers without a full application (to see the true mortgage rates and fees submitted by the community visit Loanzen)
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