Every day we continue to read story upon story upon story about foreclosures. It is almost as if people who are decisionmakers are in a panic to find a solution. Instead of coming up with one viable solution, it appears that every couple of weeks there is a new solution on the table. Of course with each new solution comes requirements to qualify for that solution. Everyone will not qualify for every new program that becomes available. I encourage you right at the outset of this blog to find out which ones you are eligible for. Then compare the pros and cons of each.

I was not surprised to find out that The Bush administration and several major mortgage lenders recently unveiled “Project Lifeline,” a national program that is supposed to help some homeowners facing possible foreclosure. As a matter of fact, I remember the day this information came forth last week. I had finished writing on mortgages and thought to myself wow I can actually keep writing. There is so much happening in the housing industry foreclosures, FHA options and mortgage fraud. Let’s talk about Project Lifeline.

Project Lifeline targets those who are seriously delinquent on their mortgage. This program is a joint effort by six of the largest lenders. This should not be a surprise such as Countrywide, Bank of America, Wells Fargo, Citigroup and others. Let’s face it with as much as Countrywide has been in the news, there should be a step of good faith or solutions.

To qualify the following requirements must be met borrowers must be at least 90 days behind in their payment. They cannot be within 30 days of foreclosure sale. From what I read this new plan is not so limited to where it only applies to subprime loans. It should be interesting to see how many are able to qualify for this plan. We have had FHA Secure, HopeNow and a couple of others. Now is the time when you should literally sit down and write out on a sheet of paper a pro and con list for each of the different programs. Look at each of the requirements and do not be hasty in making your decision.

I do not want the readers to misunderstand what I am saying by listing the different programs. What I am saying is I definitely believe in solutions. My concern is that after a time there will be some many programs out there, the person who needs it the most will not be able to find one that fits them. They will just miss qualifying for one reason or another in this or that program. I understand that there are numerous foreclosures that no one could have anticipated what is currently happening all over the
United States. My recommendation to anyone that continues to remain in the real estate industry and are a realtor or even mortgage broker or lender, do something that your competition probably has not done 1) if you see the person’s income is not enough – then turn them down and explain to them in detail what needs to be done with their finances and 2) Establish and maintain relationships with your clients. Developing relationships for the long term versus short-term will be evident.

Dr. Taffy Wagner

Remember about a week or so ago I wrote about Countrywide being under a microscope. I felt it was owed to our readers to keep a watch on what is happening with Countrywide. Lo and behold as I was reading different stories regarding home ownership on Cnn.com today, I saw a story about Countrywide. I could not pass up the opportunity to share on current news.

Don’t you think with a title that says, “Countrywide Financial expands scope of mortgage workout”, I had to see what happened once they were placed in a bubble. Whether you have heard it before or not, sometimes people’s lives have been placed under a microscope or a fish bowl which means that every can see what you are doing. Do your actions change or even how do you handle yourself when everyone is watching? We know that Countrywide has been somewhat on the hot seat lately.

Countrywide has decided to expand its program to help borrowers manage their mortgage payments regardless of the type of subprime loan they have or whether they have fallen behind on payment. From what I understood after I read this story, this initiative has been brokered with ACORN, adds borrowers of subprime, fixed-rate loans. I have to ask you did they ever have a choice? Could they have continued to have story after story about them being written.

Let me share this number with you that I saw and could not help but say, “Big Brother does need to be watching on this one.” About 735,000 of the 9 million loans serviced by Countrywide fall into the subprime category, according to Michael Gross who is Countrywide’s managing director for loan administration. 735,000 is a lot of people and that says to me those people need tons of assistance. What I did not see in this article is how many people are going to be helped by this sudden initiative.

Clearly there are people out there in situations that ending marriages, disrupting families and even more. One thing that we need to consider is there are probably going to be even more people falling into the subprime category. Obviously all of these loans have not readjusted.

I would have to wonder if I were in this position could I trust the new program that is being offered since I was placed in a less than optimal position before. I recommend they look at all of their options whether it is Countrywide or are there better options through FHA loans or even the FHA Secure program. Do your homework before you end up in another undesirable situation.

Dr. Taffy Wagner

I am sure you are aware that I absolutely love learning new information and sharing it with our readers. If information that has been shared keeps you from spinning your wheels and making wrong choices, it is all worth it. One factor of that is are you ready to receive the information and apply what you learn. I have to tell you, it is crucial that whether you are dealing with home ownership or any other area of your life, you must remain teachable. If you do not you are setting yourself for a lot of mistakes.

With everything that is happening in the real estate and housing industry, I don’t believe you can ever get too much information about different types of loans. I have decided to share with our readers about Graduated Mortgage Payment Insurance. This is also called Section 245. Section 245 enables a household with a limited income that is expected to rise to buy a home sooner by making mortgage payments that start small and increase gradually over time.

I have to share right now even though I know it is not. Sounds almost like an ARM. We all know that FHA administer mortgage insurance programs that assist low and moderate income families become home owners by lowering some of the initial costs of their mortgage loans. I must admit I can see how this might help different job professions; however, I would recommend that a consumer look at the timing of when they are expecting to receive that increase and when they want to purchase.

We have all heard, “TIMING” is everything. It is whether it is purchasing a house, a car and even choosing a loan. Let me caution our readers and say do not be too hasty and end up in a situation that has dire consequences. Take your time and read about all the different types of loans and discern what best fit your needs, paycheck and how you want your picture of the American Dream to look.

If you are a potential homeowner and considering a graduated-payment mortgage to purchase a home you must remember you monthly payments to principal and interest will increase each year for up to 10 years, depending on which of the five available plans they select.

Let me share some of the details about the plan. Three of those five plans permit mortgage payments to increase at a rate of 2.5, 5, or 7.5 percent during the first five years. Needless to say if you have not prepared for this during those five years, you could end up in a very sticky situation. The American Dream begins to turn into a nightmare. Research, research and more research. The other two plans permit payments to increase 2 and 3 percent annually over 10 years. It is great to have options. Make sure you are honest with yourself about your finances before you begin your journey of home ownership.

Dr. Taffy

As a consumer housing advocate, I teach on home ownership often. When consumers are preparing to purchase a home they think about where they want to live, the type of house they was whether it is pre-existing or building, even the school system in the neighborhood and the distance from their job. Granted, those are very good requirements that all consumers should consider, but I say to you there are even more items you should consider.

Purchasing a house is a major purchase and should not be taken lightly. Do not choose a house based on keeping up with the Jones’s, relatives or friends that have a certain type of house that you like. I recommend that you do not even purchase more house than you can afford. Maybe you are reading this and asking yourself, what do I mean by that? There are people that purchase homes and then they cannot afford to furnish the house. You probably know what I am talking about now, you drive by the house and there are no window treatments and you can see all in the house. Do not misunderstand because when we moved into our homes both times we took our time with furnishing our home and did it without incurring extraneous debt. We made the choice and paid for all of our furnishing with cash and on our own schedule not anyone else’s.

When you are not educated with good information you can make the mistake of overbuying. What that says to me is that you are not aware of your finances down to income and expenses. A very crucial item that you need to sit down and factor out is what your debt-to-income ratio is. I strongly advise that you figure this out even before you start looking for a house.

Let me define for you what debt to income ratio means and then elaborate on how it pertains to FHA if you are considering getting an FHA loan. Debt-to-income ratio is the percentage of a consumer’s monthly gross income that goes toward paying debts. Remember, gross income is a person’s income before all deductions. The debt-to-income ratio can include certain taxes, fees and insurance premiums. This is what lenders look at to determine what percentage of your income is available for a mortgage payment after all continuing obligations are met.

Therefore, if you are applying for an <a href=”http://www.fhamortgagecenter.com/”>FHA loan</a> and are not sure what their debt-to-income ratio is let me share with you. After doing much research, I found out that the FHA has a 29/41 rule which means this:

Gross monthly income times 29 percent equals the amount that can be applied towards housing

Gross monthly income times 41 percent equals the amount that can be applied towards recurring debt and housing expenses.

This formula all in itself can help you decide if you are in a financial position for home ownership. Use this formula as an educational tool that can help you in the home buying process.

Dr. Taffy Wagner

I was watching our local news yesterday and they were interviewing this couple about purchasing a house. I must admit, with all the foreclosures on the market I would not have thought it was a buyer’s market. But in all reality it could be seen as a buyer’s market. With the inventory on the market, you can take your time picking and choosing exactly what you want potentially for a more affordable price.

This story I watched on the news showed this young married couple with a child buying their first home. One thing that I found interesting was the wife said, they called it a short sale and it took them about five months to get it. One of her recommendations was to take your time. Even though the wife is working, she was saying it costs them a $100 more and they felt they should do it.

Another factor I think people in the market should look at is if it is a foreclosed house, what is the condition? How much work needs to be done to the house and also location? This is one of those circumstances where investigation will pay off. You do not want to overpay for a house and then have tons of repairs once you close on it. Weigh all of your decisions. I say this because if you do not do your homework ahead of time and purchase a house unwisely, you are going to regret it. The fact that you have to come there every day will make it worse. In order to prevent this feeling, take your time, do the research and talk to people in the neighborhood.

As you are preparing to purchase a house, let me caution you to not buy the first one you see. Take your time and shop around. You might be pleasantly surprised to know that you actually get the perfect house and a reasonable price. One that does not require exterior and interior work. If you purchase a house and are not happy with it, you will literally be miserable every time you drive up to your home. Do not be hasty in your decision making but careful and weighing all your options. Do not purchase a house before you are financially ready. Make better decisions to alleviate future problems. I invite you to share with our readers whether or not you think it is a buyer’s market.

Dr. Taffy

Just when they probably think it could not get any worse, Countrywide is under investigation by several states. I read where one former employee was suing Countrywide and KB. Apparently Countrywide is under investigation because of its subprime lending practices. How many times have we seen those same companies that did subprime lending come under fire or end up filing bankruptcy themselves.

Look at some of these details that I read about when I was looking at Countrywide. The attorney general’s office
Florida started a mortgage fraud hot line last year. They received 150 complaints on Countrywide. That is a lot of complaints and makes me wonder if any of those are duplicates. Seems Attorney generals in
Illinois and
California are conducting similar investigations. I do applaud these agencies for stepping up and taking action. One thing that I encourage the readers and potential home owners is to do your research. Do not let someone tell you how you should think or decide about a particular situation.

Do you guys remember when Countrywide suffered heavily under the weight of the subprime fallout. Then Bank of America comes in to the rescue. Seems as if this is not a good mix though. SRM Global Fund, which owns a 5.2% stake in Countrywide stated the acquisition is a bad deal for shareholders. This makes me want to ask the question if this has been publicized in the media. This information sure does make you think if this is going to go through or not.

Countrywide has even had a quarterly loss of $422 million. I know if that were me, I would definitely have to do something different. That is a very significant loss and will probably continue to incur loss. I thought I read earlier today where the CEO forfeited some of his bonuses in order to give that money to the shareholders. Of course because I want to share it with my readers, I can no longer locate it. He wants to do what is best for the consumer.

Even as Countrywide is under the looking glass in my opinion, I saw a news breaking story that said Countrywide sent a letter to 122,000 customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off.”I can just imagine the people feeling they were getting some relief and now they are going to worry and stress all over again. They did not get an opportunity to get some things cleaned up. Now they are back to square one. During the beginning of any year, people seek the opportunity to clean up finances and start fresh. For those people that are affected by this decision, I hope they had the chance to correct some things when it comes to their home.

Stay tuned. I am sure we will be hearing more and more about Countrywide over the next few weeks.

Dr. Taffy

Last year when I began writing this blog I talked about reverse mortgages. Recently I read a story that I felt was worth sharing about even here regarding reverse mortgages. Before I elaborate on that story let’s go back and recap who qualifies for a reverse mortgage. First, the borrower must be 62 years or age or older. If you are not this age or older, you do not qualify for a HUD reverse mortgage. I would say move on to find other options for your particular situation. Second, you have to own your home outright or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan. Does this make sense at this point? Third, you must live in the home. Fourth requirement which notice I did not say optional is that you receive consumer information from HUD-approved counseling sources prior to obtaining the loan.

According to a new study released by AARP’s Public Policy Institute, few seniors are choosing to take advantage of reverse mortgages. The AARP report, based in part on its 2006 national survey of reverse mortgage shoppers, found that seniors interested in a reverse mortgage were more likely to do so for reasons of necessity (48 percent) than for money to provide “extras” (38 percent). “When asked to name the ‘main reason’ for looking into a reverse mortgage and the ‘main use’ for the loan proceeds, borrowers most frequently mentioned paying off existing mortgages,” the AARP said. Just as I shared before it seems that most would look into to meet health care and disability cost. When our parents get elderly and their health begins to change, you might be surprised that they need some additional income to pay for their medicine or other health needs. I can understand how they would look into a reverse mortgage.

So why aren’t seniors giving it two thumbs up and applying. One of the reasons cited most often was high costs. The AARP noted, adding that 69 percent of borrowers surveyed also said the costs incurred to obtain an FHA-insured reverse mortgage were high. Ask yourself, how many times have you walked away from a loan of any sort because the costs were too high. Let’s face it when you are dealing with a home loan there are fees – i.e. origination, appraisal, standard closing costs and more. By the time the seniors pay for all of that, they would have incurred more costs that they were not ready for. What could they have applied that money towards and continued to do what they were already doing before they entertained applying for a reverse mortgage.

I was recently with my mom for a period of time and I know that a reverse mortgage is not one of the things I had even thought about with her. I am sure it is not something she has ever thought about as well. She and I are of the same mindset and look forward to paying that last mortgage payment and owning the house, not begin incurring costs in her retirement time.

I recommend any senior do your research and homework before going into a reverse mortgage. Make sure it is the appropriate option for you.

Dr. Taffy Wagner

As I was on a working vacation last week, I listened to President Bush’s last State of the Union address. I was prepared for the topic of foreclosures and home ownership because every day in the media those remain very “HOT” topics. He did address that topic because so many people are affected. I did some research and found out that the House approved two measures this past Tuesday which are designed to boost the ailing housing market as part of the economic stimulus package. I tell you what we can all say “OUCH” about the housing market. In some way we are all affected by what is happening in the housing market. I am sure like me, you know someone that has faced foreclosure and having a lot of foreclosures in a neighborhood affects your property as well.

This is one of those times where it does not appear to be a light at the end of the tunnel. I continued to read about what the House approved. Seems they were under pressure from the Bush administration and the lawmakers limited the duration of one of the measurers. Apparently the plan raises the maximum size of mortgages Fannie Mae and Freddie Mac can buy from $417,000 to as high as $729,750 in expensive parts of the country. The propose increase would expire at the end of the year. The House also passed stimulus bill increases the size of Federal Housing Administration backed loans from $352,790 to as high as $729,750 in expensive areas until year-end allowing more borrowers with weak credit to refinance into federally insured loans.

I am all for consumers having the opportunity to get into loans that are fixed per se and federally insured so that they begin to get some relief and know that people are concerned about them. I applaud FHA for wanting to serve more consumers and help them in their time of need. All the different solutions that are out there I believe eliminated a lot of the people that were really in trouble and needed the help. For example, I remember one of the solutions talked about they could not have been late on a payment in order to apply for assistance. Well, given the current state of the housing market if they had not been late on a payment why are they receiving additional options for their mortgage. They are not the ones that need it.

I will be watching to see how the above loans help those that hurting in this market.

Dr. Taffy Wagner