Posts Tagged “loan”
Freddie Mac’s recently released economic outlook describes a refreshingly brighter view of the year ahead, but the pace of recovery in the forecast is well below the growth that has followed most recessions in the past half-century.
As the still-fragile recovery gradually gains more solid footing by the end of the year, Freddie Mac’s economic outlook anticipates real GDP growth of 3 to 3.5 percent. In addition, Freddie Mac said the jobs picture will improve, but it will be with some delay, as many employers postpone hiring until business picks up further.
While the housing market showed broad signs of stabilizing in the second half of 2009, risks of retrenchment remain high in the face of the heavy flow of foreclosures and REO properties. As a result, prices in the hardest-hit areas have the potential to be depressed even further. At the national level, Freddie Mac said it expects the housing market to weather the growth in distressed sales without significant setbacks, but risks still remain.
Considering current conditions and economic policies as well as the lessons from past business cycles, Freddie Mac believes this view is justified. While this scenario does assume that there is no further flare-up of financial crisis, this appears to be a reasonable expectation, Freddie Mac said. Conditions in most parts of the market are on the mend, many risk spreads are returning to pre-crisis normal, and corporate bond markets have largely recovered. In December, the first commercial mortgage-backed security was issued without TALF backing since mid-2008, but the private-label single family mortgage-backed security market is still largely frozen.
Following the 1974-1975 recession and the double-dip recessions in the early 1980s, economic growth surged 7 percent or more for sustained periods. This is more than twice the pace Freddie Mac expects over the coming year. Such subdued performance is due in large part to the aftereffects of the financial crisis, including the high rate of mortgage defaults, the growing inventory of loans in foreclosure, weakened bank balance sheets and the corresponding reluctance to lend, and depressed household net worth.
However, macroeconomic policies aimed at offsetting these drags are providing support for the recovery. About one-
third of the $784 billion of fiscal stimulus money was spent or went to Americans in the form of tax deductions during 2009, and including funds obligated for projects and activities brings the total funds committed to about one-half of the $748 billion. Freddie Mac said most of the remaining funds will flow into the economy this year, bolstering private spending.
In addition, monetary policy is extremely accommodative, and FOMC statements have signaled that target interest rates are likely to remain “extraordinarily low” until the economy and labor markets improve. While the Fed has said most of the liquidity facilities put into place during this crisis will continue to wind down, private markets appear ready to reassume their role, eliminating the need for these facilities to go forward.
The near-term picture of housing market trends was clouded by the passing of the original deadline for the first-time home homebuyers’ tax credit, Freddie Mac said. Home sales surged in 2009 in advance of the planned end of the credit, but sales may experience a temporary slowdown as many potential buyers who would normally have bought a home in early 2010 rushed to close before the end of November.
Initial reports of housing activity are consistent with such a decline. According to the Mortgage Bankers Association, mortgage applications for home purchases declined 20 percent in December, relative to the third quarter average, and the National Association of Realtors reported a 16 percent decrease in pending home sales in November. The weakness in pending home sales even prior the original expiration of the tax credit could be due to the length of time from when a contract is signed until closing, Freddie Mac explained. A lower level of closings in December would imply fewer pending contracts in November.
With the extension of the tax credit through spring and its expansion to include existing home buyers, it is likely that additional buyers will accelerate their purchase decisions into the first half of 2010. As a result, a rebound in sales is expected.
Despite the expected pickup in sales, single-family mortgage originations are projected to be about 10 percent lower in 2010, compared with last year. This decline in originations is driven by lessened refinance activity, as the refinance share is projected to slip from approximately two-thirds of lending in 2009 to just over one-half of this year’s volume.
In a market where the interest rate differential relative to the adjustable-rate mortgage (ARM) is small, borrowers prefer the steady principal and interest payments of a fixed-rate loan. As a result, ARM volume is anticipated to continue to be muted. In addition, interest rates for 30-year fixed-rate loans are projected to remain in the 5 to 6 percent range through 2010, marking a continuation of a relatively low-rate environment that will support the housing market recovery.
DSNews.com
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DETROIT–(BUSINESS WIRE)– Ralph R. Roberts, consumer advocate and spokesperson for Federal Loan Modification Law Center, today released a list dispelling the top five myths about loan modification. Intended to better educate homeowners facing the prospect of losing their home in foreclosure, the following list demystifies the most common misconceptions surrounding the loan modification process.
MYTH #1: My bank wants me out of my house. My bank wants my home. Banks and other lending institutions do not want to foreclose. They earn more money if you can make your payments. When they foreclose, they not only lose your monthly payments, but they also have the expense of foreclosing (attorney fees), rehabbing the home, and then selling it (agent commissions). In today’s market, there’s a good chance they’ll have to sell the home at a loss. This is all good news for you – it means the bank is highly motivated to make a deal with you.
MYTH #2: My credit score is bad so I won’t qualify. Unlike the option of refinancing out of trouble, which requires you to apply for a new loan, loan modification simply adjusts the terms and perhaps reduces the balance of a loan you already have. Your credit score is much less of a factor in determining whether you qualify for a loan modification. In addition, a successful loan modification can actually improve your credit score over time, especially if it prevents you from ending up in foreclosure or bankruptcy.
MYTH #3 I am not late on my mortgage payments so I won’t qualify. I have to miss a payment to be eligible. Early on, this was true. In fact, some early eligibility requirements stated that you had to be 61 days delinquent in order to qualify. In other words, you would have had to have missed two full payments. The truth is that the eligibility requirements are constantly changing and differ among lenders. Many lenders are now working out loan modifications with borrowers who are up to date on their payments. It’s difficult to determine whether you qualify until you actually discuss your situation with the lender or with an attorney who is knowledgeable and experienced in loan modifications.
MYTH #4: I would be better off walking away or declaring bankruptcy than modifying my loan. Walking away from the home and filing for bankruptcy are certainly two options, but they are rarely the best options when you are facing foreclosure. If you simply walk away, the lender is unlikely to pursue legal action against you, but in some jurisdictions, the lender can pursue a deficiency judgment against you to collect the difference between what the lender receives for your home at auction and what you currently owe on the balance of the mortgage. Filing for bankruptcy may be better than just walking away, but it can leave a blemish on your credit history that makes it difficult to borrow money in the future. A successful loan modification is almost always a more prudent choice.
MYTH #5: It’s too late. I have already received a foreclosure notice. As long as you still reside in the home – that is, you didn’t voluntarily abandon it, and the home hasn’t been sold at a foreclosure auction – you may still have time to work out a loan modification with your lender. The sooner you take action, the more options you have available and the more time you have to pursue the best option, but you can still negotiate late into the process. By contacting the lender or, better yet, having your attorney contact the lender on your behalf, you demonstrate a good faith effort to work out a solution and can often buy yourself extra time to negotiate a loan modification.
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As you consider buying a home and as you begin house hunting, determining how much home you can afford is one of the most important tasks to complete to ensure that you are fully aware of your affordability options. In this day and age, a pre-qualification is just not sufficient and a pre-approval is the more true assessment of what you can afford. Before you actually start to house hunt, it is imperative to choose an end lender to pre-approve you. This pre-approval process is detailed and thorough and after this is completed you will acquire a letter of pre-approval which lets both real estate agents and sellers know that you are a serious shopper who means business.
Furthermore, a pre-qualification is general, basic and is typically conducted over the phone and does not require you submitting financial statements or documents to prove your financial strength. You are asked to provide basic estimates about your income, tax returns, pay checks and your income versus your debts. With this estimated information the lender will then estimate what your maximum loan amount could be if you were to apply.
Subsequently, a pre-approval is far more involved and a trusted realtor with experience can help you gather all of the appropriate documentation. The lender will prepare your full file including actual documentation of pay check stubs, tax returns, etc. which will verify your income and assets. This along with checking your credit, your lender will then calculate your actual debt to income ratio and give you an exact figure of what the maximum loan amount you can carry. This of course, is subject to a pending contract, market appraisal, underwriting approval and so on…
A great real estate professional should be able to guide and direct you toward this process smoothly and effortlessly. They should also have extensive knowledge and whatever they don’t know they should aggressively pursue the answers for you. Typically, the best agents have a circle of trusted industry professionals that they can refer you to, in the effort to provide you with the best resources to make your best move.
So, if you want to get the best deal around town, these top 12 questions may prove to be very informative to you during this process and may help you secure the best loan program out there for your circumstances.
1. What loan programs do you offer and which one is best for me?
2. How long will the pre-approval process take
3. What documents will you require of me to secure my loan as quickly and as painlessly as possible?
4. Are you charging me loan origination points?
5. May I have a good faith estimate highlighting every potential line item I may see on the closing statement?
6. What is your policy on locking rates, and will you honor a lower rate if the rates drop during the application process or lock-in period?
7. Is there a pre-payment penalty on my loan?
8. Is my loan a conventional fixed rate or an adjustable rate?
9. Is there mortgage insurance on my loan?
10. How much down payment will I be required to bring to closing and what is my loan to value ratio?
11. Are you charging me an application fee?
12. When will you collect the appraisal fee?
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