Archive for the ‘Uncategorized’ Category

The Spirit of Giving

Tuesday, October 2nd, 2007

So Nehemiah and AmeriDream are suing HUD for banning DPA (down payment assistance). Let’s reivew what happens with DPA “gifts”:

The program works this way: Once contacted by a lender, Nehemiah sends a gift covering the homebuyer’s down payment. Average gift: $4,000. The seller of the home then reimburses Nehemiah, plus a fee.

HUD’s complaint is that often the sellers, despite being discouraged by Nehemiah, add those costs to the sale price. The agency says this leads to greater financial strain on the homebuyer, and more defaults for HUD, whose Federal Housing Administration insures the mortgages. “Loans made to borrowers who rely on these types of seller-funded assistance perform very poorly,” the agency said in its final decision banning the program.

If Nehemiah and AmeriDream are as devoted to consumers as they say they are, maybe they could use their corporations to help people in ways that don’t involve jacking up housing prices.

On The Bright Side…

Thursday, August 16th, 2007

All this doom and gloom may have you feeling very down in the dumps, but fear not! As Forbes points out, all this housing trouble may light a fire underneath the progress of FHA modernization. This is similar to the earlier story about how reforms should get moving after August, but its got the added delight of some bytes from HUD’s assistant secretary Brian Montgomery:

“Every day that we don’t get some sort of reform is a day that we can’t help families that are trying to get out from a high-cost exotic subprime loan,” Montgomery said.

Yes, FHA will be great for first time home buyers and those who are trapped in ever-rising ARMs.

“If you put your mind to it, you can accomplish anything.”

Friday, June 29th, 2007

An article in the Baltimore Sun looks at the problems of today and sees many similarities with the problems of years past.

“It’s really back to the future,” said Paul E. Skeens, owner of Carteret Mortgage Corp.’s branch in Waldorf. “We’re headed back to a more normal cycle [after the feeding frenzies of the boom years]. The crazy stuff may be gone, but the old solutions still work great.”

The article highlights tried and true solutions for borrowers in a post-boom market, including Freddie Mac and FHA loans, reassuring weary souls that all is not lost. All that’s missing is the Flux Capacitor…

The Truth About Caps and ARMs

Wednesday, May 30th, 2007

The current subprime bust can be attributed primarily to 2/28 and 3/27 ARMs. With these adjustable rate mortgages, which became extremely popular in ’04 and ’05, the borrower pays a fixed rate for 2 or 3 years, respectively, and then their interest rate fluctuates annually for the remainder of their 30 year loan. Well, what seemed like a great idea has turned sour when many borrowers found themselves unable to pay the higher interest rates and some mortgage companies have even gone out of business. With many of the 3/27 ARMs beginning to change rates in the autumnal months, things are not looking bright.

Not only can FHA loans potentially serve as a refinancing option for those in subprime trouble, but FHA also will make itself a viable and less risky ARM options for initial borrowers. Although the 30-year fixed is the FHA mainstay, FHA also offers a variety of ARMs. Plus, the FHA protects lenders with annual caps between 1% and 2% percentage points, and life-of-loan caps between 5% and 6%. So not matter what FHA ARM you choose, your interest rates will never go up more than 2% a year and 6% over the full loan term.