Goverment intervenes in Mortgage Woes

The government, aka Bush, has created an agreement to freeze interest rates. But, this option is only available for those with certain sub-prime mortgages and will only continue for five years. The reason for this is hopefully reduce the number of foreclosures coming in the near future. The number of foreclosures continues to rise dramatically.

Credit is no longer easy for borrower’s to obtain. In Pennsylvania one third of the number of mortgage banks have closed this year. In New Jersey the decline has been less but still it’s an impressive 22% decline.

This decline is just the icing on the cake – there is also a decline in employment related to the closings. Of course, the snow ball effect begins - less jobs, less spending, therefore less jobs and so on.

So, the governments plan will help but it definitely won’t cure the Foreclosure problems we are experiencing and will continue on into the foreseeable future.

After the Short sale?

by Nancy Woodward

When real estate is sold, normally there is a profit for the buyer. When the buyer has less equity than the current selling price of the home, it is necessary to do a short sale to avoid foreclosure.

This definitely leads to tax consequences for the seller. They may owe taxes to the government on the amount that was forgiven by the lender. This can be acapital gains.

Many of the homeowners I have spoken to in an effort to help them - don't understand or believe this concept. They tell me ' other investors don't tell me this'.

You should make yourself aware of this situation and how the process actually works. The lender has several ways of handling the deficiency:

1. They can attempt to collect this amount from the seller

2. They can require the seller to sign a promissory note.

3. They can just cancel this amount.

Now we need to see how the IRS handles this process. They consider any amount of mortgage debt ordinary income once it is forgiven. This means income taxes will have to be paid.

More to follow --

New jersey State foreclosures at 16%, South Jersey Falls

by Nancy Woodward

Foreclosures in the south jersey area in the third quarter declined seven percent. Unfortunately forclosures in Cape May County rose thirteen percent during the same period.

These numbers are still below the state average of sixteen percent and the national average of thirty percent.

Realty Trac Inc. calculated the numbers. They are a tracking firm based in Irvine, California with a major presence on the internet.

I have used the site to find foreclosures in the New Jersey area.

Foreclosures

Real Estate Foreclosures affect the current Real Estate Market
By Nancy Woodward

For many months now, real estate foreclosures have been on the rise. We hear this on the news regularly. The causes are many – a major cause was the creative financing in the form of adjustable rate mortgages which now are adjusting upward.

More than one million foreclosure filings were reported in the United States this year. That represents 42% more than the foreclosures reported in 2005. The increasing number of foreclosures creates an opportunity for Real Estate Investors but have a different affect on the current market trends.

In Atlantic County, New Jersey, most homes sold are ones that are priced right. This means the price that the buyer is willing to pay for the property today. For many homeowners this is not easy to do. It actually means the under priced homes are the ones selling in a reasonable amount of time.

The purchases represent those who plan to occupy the home. The market is much slower and the appreciation in homes will continue to be slower for some time. The day of swift appreciation allowing investors to sell the home quickly for a substantial increase are over for the moment.

Purchasing a pre-foreclosure property might be the right action for you to take if you have been considering buying a home and felt you could not afford to buy one. You can get a better value if you do your due diligence. Research the market before you begin.

Many investors, including myself, will offer a pre-foreclosure property at below market prices. This allows the investor to make money but still move property more quickly. If you are able to find one of these properties, you can get a good deal.

As usual, do your due diligence. Good luck!

Foreclosures

Foreclosure is now a sad reality of life for many homeowners
By Nancy Woodward

Foreclosures in general have been on the rise for over a year. At this time, sub prime borrowers are scrambling to refinance their loans. They payments have now skyrocketed and homeowners realize they must find a way to reduce the loan payment now. Tighter lending standards put into place by Federal Regulators in recent months are making it more difficult to refinance subprime loans.

According to Brett Warren, president of Buyer’s Home Mortgage Inc., as recently as six months ago, most requests to refinance were from homeowners wanting to reduce their interest rates or take equity from their property. Today, most requests are coming from subprime borrowers trying to reduce payments.

Many of these homeowners obtained loans with teaser rates and high fees. Some now find themselves in a position where the equity in their home is negative. As the number of resetting loans increase, so will the foreclosure rate.

Philadelphia and New Jersey have a majority of mortgages in the prime rate area. These seem to have a lower foreclosure rate according to Mortgage Bankers Association. The highest increases in foreclosures last month were in California and Florida, followed by Ohio and Michigan. The firing of employees in the automotive industry had a direct impact on this.

While this number will continue to increase, homeowners should seek help before they reach the foreclosure point. There are ways to solve the problem.

Reverse Mortgage Proceeds

Reverse Mortgages - How do I receive the proceeds of my Mortgage?
By Nancy Woodward


There are several ways for you to obtain cash from your home using a reverse mortgage without having to repay the loan at all. When you obtain a normal mortgage, you decrease your loan thereby decreasing your liability and increasing your equity. Since this type of mortgage(Reverse Mortgage) works exactly the opposite of a normal mortgage, it essentially increases your liability to the lender and decreases equity in your home.

Four ways to receive the proceeds of your loan:

1. Lump sum - You can take all of the money at one time in a single lump sum of cash.
2. Cash advance – You can take a regular cash advance – i.e. monthly
3. Credit line - You can use an account that will allow you to take cash when you want it up to a maximum amount.
4. Using one or more of the above ways – this gives you the freedom to choose when and how much you want to take. This way can be used to effectively reduce the interest added to the balance of your loan.

After you qualify for your loan and receive funds, no one will have to repay this loan until you die, sell your home, or move out of your home on a permanent basis. You will have to qualify for the loan:

1. You must own your own home
2. You must live in this home
3. You must be 62 years of age or older.
4. Generally you must not have a mortgage loan on your home – generally Reverse Mortgages must be the ‘first’ mortgage.

While Reverse Mortgages can help you remain in your home, you are still the property owner. This means you must pay your property taxes and homeowner insurance, and making repairs on the property.

While you cannot have another first mortgage, it is possible to pay off existing debt, both in your home and credit debt, and with the money you obtain from your Reverse Mortgage proceeds.

As Americans are aging, society is seeking more ways to help them maintain their lifestyles by remaining in their home as long as possible. This is a way homeowners can obtain the necessary income without additional expenses.

As in any financial arrangement, I suggest you do your due diligence. Investigate the subject, talk to your attorney and perhaps your relatives and friends prior to moving forward.

Do I quality for a Reverse Mortgage?

Do I Qualify for a Reverse Mortgage Loan?

This is a good question I received from a friend. There are guidelines to qualify.

1. You must own a home. You can own this home with others but your name must be on the title of the home.
2. You must live in the home and it must be your primary residence.
3. You may be eligible even if you have a small loan on this home whether it be a mortgage or secondary loan.

While these are easy qualifications, you must continue to own the home and live in it for the loan to remain open.

You will not have to make payments on this mortgage. You won’t need to qualify for the loan other than the value of your property must be ascertained. You won’t be asked questions about your health.

Easy… Yes, but consider the costs prior to moving forward.

Inflation Risk may Increase Mortgage Loan Rates

Mortgage Rates May Rise – if Inflation risk Increases
By Nancy Woodward

According to Charles Plosser, President of the Federal Reserve Bank of Philadelphia, the Federal Reserve may need to raise the benchmark interest rate as recent stronger US economic growth increases the risk of more than moderate inflation.

Mr. Plosser discussed the growth prospects in a speech to the Greater Philadelphia Chamber of Commerce. He feels we may not see stability without an increase in the rate to avoid inflation.

The Fed has not changed the benchmark interest rate which stands at 5.25 percent. This is the fifth straight meeting they where there has not been an increase. The benchmark rate affects the rates which bank charges for loans to individuals and business customers.

The Fed is concerned over inflation. Possner thinks it is possible that moderate inflation will continue although he is concerned over the 3.5 percent annual pace the economy expanded in the last quarter.

Greater growth than expected fuels the fear of inflation when the economy is strengthening. Let’s hope the fears are unfounded. Rising inflation affects all of us, particularly the Real Estate – Home Loan Market.

If you are in the market to buy Real Estate, you should keep an eye on this. You will win on the value of the home you buy now, but you can offset that win with a greater than expected interest rate.

Consumer Prices are growing creating Inflation Worries – Where will this leave interest rates?

by Nancy Woodward

The Consumer Price Index rose .2 percent in January, 2007. Considering there was a large drop in the costs related to energy, this indicates the cost of medical care, food and plane fair rose at a faster pace.

Economists were not expecting this size increase. The Fed held its meeting yesterday and they again expressed concern that inflation is the biggest threat to our economic future. With prices rising and performance slowing, the threat is definitely increasing.

If the Fed becomes concerned enough, Fed Chairman Bernanke will raise interest rates. Rising rates directly affect mortgage rates and the ability of the consumer to buy homes. First time buyers have a harder time qualifying for a loan when rates rise.

The number of homes in inventory rise. Builders and contracts slow their efforts in the new construction arena. Those businesses affected by the rising rates reduce their spending in other areas to compensate for cost increases.

All of this causes growth to slow down thereby affecting inflation. While it is good to slow inflation, those affected negatively by the process would disagree. Hopefully the economy will hold it self in check and Bernanke’s statement to Congress that inflation pressure would decline over the next two years as growth remains moderate will, in fact, be the way it goes.