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>In This Housing Market Expect The Worst

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Now that there are one million foreclosures and a browned out lawn every ten houses in almost every subdivision, it’s time for the fancy-dan boys to come out of the woodwork. If it isn’t a reverse mortgage advertised by movie star Robert Wagner, it’s a quick-cash carnival character like the guy above who promises money now for your house regardless of its condition. In fact, they hope it is in poor condition so they can offer you less–not 50% of market value, not 30% or even 20% in many instances. “Would you take 10%?”

Many homes in America were bought at too high a price and are now in what we call a reverse mortgage situation. That means the house is worth less in today’s market than what is owed to the Mortgage company. There may be ten million of those around. Yet, experts tell us only five percent of the homes in America are in line for foreclosure. And that’s because five percent of the owners stopped paying their monthly mortgage bills.

And the U.S. Congress is poised to bail out these people with your tax dollars and mine? I think that is patently unfair to the rest of us.

I say, let the free market take care of those houses and those mortgages. In many cases, Michael Corbett said on Larry King the other night, 57 percent of those receiving foreclosure notices do nothing about it. They don’t care. They don’t even call the bank or mortgage company to see what they can do.

Banks don’t want their houses. They want those people to get in touch with their “workout” office and see if the mortgage and monthly payment can be lowered so the people can save their house. But 57 percent? Yes, those figures come from HUD, the Housing and Urban Development office. If 57 percent of the foreclosed people don’t care enough to even call the bank, why are we even considering our tax dollars helping them out. If they can’t help themselves, they are beyond help. Don White

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>"No-Cost" Loans Rated Best

>Mortgage-Broker Study
Finds High Fees Charged
Original Story By JAMES R. HAGERTY Edited
May 30, 2008

In an article on May 30, 2008 the Wall Street Journal revealed that the home-mortgage industry takes advantage of consumers’ confusion to charge some people much higher fees than others.

This comes following a study by the Department of Housing and Urban Development (HUD). This is an illegal maneuver on the part of the mortgage companies and any infractions should be promptly reported to HUD officials.

The study by Susan Woodward, a former chief economist for HUD, also found that loans arranged by brokers typically carried higher fees than those obtained directly from lenders.

HUD looked at 7,560 fixed-rate home-purchase loans completed in May and June 2001 and insured by the Federal Housing Administration, an arm of HUD.

The study says lenders typically make better offers to borrowers in neighborhoods with higher general levels of education. Where’s the ACLU and NAACP when you need them?

Total fees paid to the lender and broker averaged nearly $3,400 on loans with an average initial principal balance of $105,000, the report said. For brokered loans, the average fees were $4,000, compared with $3,150 for loans made directly by the lender. Those fees are a combination of upfront charges and additional funds brokers and lenders get for selling loans with relatively high interest rates.

For brokers, these additional payments are known as yield-spread premiums. Brokers often defend yield-spread premiums as a way for borrowers to reduce their upfront fees in exchange for paying a slightly higher interest rate. But the study found that the yield-spread premiums mainly benefited the brokers. For every $100 extra they paid in higher rates, the borrowers on average received only a $7 reduction in upfront fees. Banks also typically kept most of the benefit when borrowers paid above-market interest rates, the study said.

Paying Points To Lower Interest Rates Is Bogus
Borrowers who paid “discount points” to lower their interest rates typically didn’t benefit from a corresponding savings in their interest costs, the study said.

“No-Cost” Loans May Be The Best For Borrowers
It found that borrowers who chose “no-cost” loans — in which all fees are built into the interest rate — typically paid the lowest effective fees.

Roy DeLoach, executive vice president of the National Association of Mortgage Brokers, said that the study relies on “stale” seven-year-old data and that other studies have shown consumers save money by obtaining loans through brokers.

>Homes Are More Available and Less Expensive

>The Orlando Sentinel is featuring a story about how great it is to buy a house NOW. It’s entitled:

“Now may be The Right Time To Take The Plunge”

Jerry Jackson says first-time homebuyers squeezed out of the market by the 2004-06 housing-price surge may want to consider taking the plunge now.

Everyone knows prices are lower than they’ve been for several years. But the important thing is that we really don’t know how low they will go. That isn’t stopping many people who are picking up a foreclosure or two. My friend Merrill Roberts has a world of experience in foreclosures. He owns several houses that he knows must be fixer-uppers before they can be sold.

If you’re in the market for a price about half of what that home previously went for, start investigating. You can go to the County Clerk’s office. They will send you a list of foreclosure candidates. In Florida, attorneys make a living on foreclosures because the law is definite on the amount of time a bank has to notify a delinquent “owner.” We might not want to use that word, owner, because in most cases these homes have gone down in value so much that the Bank now owns the home because the purchaser stopped making payments months ago.

Just drive by some of these homes. They will be vacant, with browned out lawn and shrubs. Once a person can’t make his mortgage payments it doesn’t make sense for him to continue to keep up the exterior.

Or does it? If that home is in a gated community that person will have received a notice to clean up his yard, turn on the water, and start making improvements. If he can’t, and if he knows he can’t possibly save the home, it will go back to the bank. Many speculators contact banks and mortgage companies and try to buy a package of homes for huge discounts. They fix them up and turn around and try to sell them, making a neat profit.

But home prices are still falling nationally and we have a huge inventory of houses and condominiums for sale — a mix that should spark more sales by year’s end, Realtors say.

Jackson says some buyers are still reluctant. “Stunned by the subprime-lending debacle, banks and thrifts want higher credit scores and bigger down payments.”

The newspaper offers some tips for newcomers:

Q: Is it true that no one is getting approved for home loans these days?

A: Home loans are being made every day, even to first-time buyers. Yes, lenders have raised the bar during the past year, but not that high. After all, they make money lending money, and a small army of private corporations and public agencies works full time at selling homes or promoting the benefits of homeownership.

Q: But my credit history is not so good. Do I have to keep renting forever?

A: Renting is a good option for many people. But for those who expect to stay in one location for at least a few years and want to try to build some financial equity, weak credit is not an insurmountable barrier.

Mitchell Harlee, 39, recently became a first-time homeowner in Orange County, fulfilling a lifelong dream despite some past bill-payment problems. “I had credit issues,” he said. A single father raising two daughters, Harlee improved his credit score by working closely with an east Orlando Century 21 real-estate agent, Michele Guzman, who specializes in first-time buyers. Harlee attended Guzman’s free seminars and followed her advice for about a year — and finally was able to buy a spacious, four-bedroom, two-bath home in Pine Hills for $150,000. He got a 30-year, fixed-rate mortgage with an interest rate of 5.9 percent from First National City Mortgage.

Better still, “I didn’t have to put a penny down,” he said, because he qualified for an Orange County down-payment-assistance program that Guzman told him about. “I couldn’t have done it without the help,” Harlee said.

Q: What kind of credit score do you need to qualify for a mortgage? Isn’t it really high now?

A: A couple of years ago, buyers with credit scores as low as 500 could still get a home loan, under some circumstances. Now the minimum is more like 560. But that’s still not a tough score to reach, credit experts say, if you make an effort to pay bills on time, clean up your credit record and control your debt load. To qualify for down-payment-assistance programs such as those run by various local counties and cities, credit scores typically have to be 630 or better — still in the moderate range.

Q: Housing prices still seem over the top to me. Aren’t homes unaffordable except for the wealthy?

A. The good news is affordability is starting to make a comeback. At the peak of the market frenzy in July 2006, the typical first-time buyer in Central Florida was earning only 59 percent of the annual income needed to qualify for the median-priced starter home, which sold at that time for $216,655, according to Orlando Regional Realtor Association records. Since then, the median price for a starter home has dropped to $179,350, as of April, and the typical first-time buyer now earns 77 percent of the annual income needed to buy such a home (assuming a 10 percent down payment). Also, mortgage rates in mid-2006 averaged about 6.4 percent for a fixed, 30-year loan. Now the average fixed rate is 5.77 percent.

Q: What if I don’t have a 10 percent down payment?

A: Loans insured by the Federal Housing Administration are making a comeback, and those loans typically require only 3 percent down. FHA-insured loans, made through regular lenders such as SunTrust Mortgage and others, have been around for years, but they were overshadowed during the housing frenzy, when buyers could get higher-interest subprime loans with little or no money down and little or no income documentation.

“If you could walk and chew gum, you could get a home loan,” recalled Re/Max Associates agent Mike Williams in Deltona. Now, he said, “You’ve got to be working and have decent credit. But decent credit is still attainable.”

Q: What about new homes?

A: There are so many out there, sitting empty, that builders are cutting deals and even paying Realtors to help move the inventory. Mary Gibson recently became a first-time owner in DeLand by buying a new house from a builder’s inventory in a deal she found with Williams’ help. Gibson applied to the Volusia County first-time homebuyer program, which uses state money to help qualifying buyers with their down payments.

“Plus, the builder actually brought $14,000 to the table,” said Williams, an agent in the Deltona area since 1987. “That doesn’t happen often, but the builder wanted to get this out of the inventory. There’s a lot of inventory out there,” he noted, which gives buyers added leverage when negotiating.

Q: Where can I go for free advice and information?

A: The U.S. Department of Housing and Urban Development has lots of advice on its Web site, much of it helpful for first-time buyers. HUD recommends people check out free or low-cost counseling outfits that can help lay the groundwork for getting that first home.

In the Orlando area,http://www.hud.gov/ HUD-recommended groups include the Consumer Credit Counseling Service of Central Florida, the Metropolitan Orlando Urban League, and the Housing and Neighborhood Development Service of Central Florida (known as HANDS). Links to their Web sites and phone numbers are at the HUD.gov Web site. With a nonprofit group such as HANDS, which is supported financially by Wachovia Corp., Bank of America and the Dr. P. Phillips Foundation, among others, consumers can get one-on-one counseling, learn about homebuying seminars, and even see a list of homes for sale that qualify for various down-payment-assistance programs.

Realtors can help, and mortgage brokers can, too — though they both make money off their services one way or another when a sale is completed. That means consumers should learn as much as possible before turning to the paid professionals, who have a financial stake in the outcome.