My New Blog

    The mortgage industry has changed again. The majority of existing mortgage lenders are putting a freeze on Home Equity Lines of Credit (AKA: HELOC’s). These changes will affect existing Home Equity Lines of Credit, and not fixed rate home equity loans. As many may already be aware, the lending industry is in chaos due to depreciating housing prices and the multi-billion dollar losses they’ve been absorbing on a quarterly basis. I very recently discovered the change and subsequently have had one client to date receive this notice from their current mortgage lender.

    My advice for clients with existing lines of credit, who may be procrastinating about the line not wait any further. These clients may need to consolidate debt, complete a home improvement project or other needs. Those who delay using their line may see it frozen unexpectedly. In addition, if you’ve been on the fence about getting a home equity loan then I would recommend applying right way. In the last year, the guidelines have tightened significantly and the days of 80/20’s and 80/15/5’s are now no longer available. So call or email me or my staff for immediate attention!

Here’s the article that was posted on msn.com the other day:

http://articles.moneycentral.msn.com/Banking/HomeFinancing/LendersCutOffTheHomeEquityTap.aspx?page=1

Attention All Clients:

Effective January 1^st, 2008 the State Department of Assessment and Taxation will no longer be automatically crediting homeowners the Homestead Credit as seen on previous tax bills. You now have to apply in person, online, or via mail. I encourage all homeowner’s to fill out this one time Homestead Credit Application as soon as possible. Be sure to pass this information along to any other homeowners you may know. This credit is significant and only takes about five minutes of your time. My Homestead Credit for last year was almost $1,400!!! Please note that if your home is a rental property or second home then you will not be eligible for this credit. Please use the link below to print off the application:

http://www.dat.state.md.us/sdatweb/Homestead_application.pdf

You will need to fill out this form and mail it to the appropriate address listed on this application. Be sure to fill out your Identification number. If you’re unsure of this number then please use the link listed below:

http://sdatcert3.resiusa.org/rp_rewrite/

· Pull drop down box to your appropriate county

· Check off street address

· Enter street number followed by street name in the two separate boxes

· The account identifier numbers are listed on the top line as seen in the example below. In this case, your identification number is: 02310260

Account Identifier:	District - 02 Account Number – 310XXX

Here’s a helpful link with frequently asked questions on the Homestead Credit and other helpful information from their website:

http://www.dat.state.md.us/sdatweb/homestead_app.htm

What is the Homestead Credit?

To help homeowners deal with large assessment increases on their principal residence, state law has established the Homestead Property Tax Credit. The Homestead Credit limits the increase in taxable assessments each year to a fixed percentage. Every county and municipality in Maryland is required to limit taxable assessment increases to 10% or less each year.

View a listing of homestead caps for each local government.

Technically, the Homestead Credit does not limit the market value of the property as determined by the Department of Assessments and Taxation. Instead, it is actually a credit calculated on any assessment increase exceeding 10% (or the lower cap enacted by the local governments) from one year to the next. The credit is calculated based on the 10% limit for purposes of the State property tax, and 10% or less (as determined by local governments) for purposes of local taxation. In other words, the homeowner pays no property tax on the market value increase which is above the limit.

Example

Assume that your old assessment was $100,000 and that your new phased-in assessment for the 1st year is $120,000. An increase of 10% would result in an assessment of $110,000. The difference between $120,000 and $110,000 is $10,000. The tax credit would apply to the taxes due on the $10,000. If the tax rate was $1.04 per $100 of assessed value, the tax credit would be $104 ($10,000 ÷ 100 x $1.04).

New Application Requirement

To prevent improper granting of this credit on rented or multiple properties of a single owner, a new law was enacted in 2007 that requires all homeowners to submit a one-time application to establish eligibility for the credit. The application form will be included in the assessment notice mailed to one-third of the homeowners at the end of December for the next three years. It also will be mailed to new purchasers of residential property.

Conditions

The tax credit will be granted if the following conditions are met during the previous tax year:

· The property was not transferred to new ownership.

· There was no change in the zoning classification requested by the homeowner resulting in an increase value of the property.

· A substantial change did not occur in the use of the property.

· The previous assessment was not clearly erroneous.

A further condition is that the dwelling must be the owner’s principal residence and the owner must have lived in it for at least six months of the year, including July 1 of the year for which the credit is applicable, unless the owner was temporarily unable to do so by reason of illness or need of special care. An owner can receive a credit only on one property---the principal residence.

Appeal Rights

If you have been denied a Homestead Tax Credit and you believe that you are eligible, contact the Central Office for the Homestead Tax Credit Program at the telephone numbers listed below. A final denial of a Homestead Tax Credit by the Central Office may be appealed within 30 days to the Property Tax Assessment Appeal Board in the jurisdiction where the property is located.

Further Information

For questions about the Homestead Tax Credit, you may telephone 410-767-2165 in the Baltimore metropolitan area or at 1-866-650-8783 toll free elsewhere in Maryland or visit the Department’s website at www.dat.state.md.us.

H.R. Bill 3395 is introduced in the US House.

House Financial Services Committee Chairman Barney Frank (D-MA), along with Representatives Miller (D-NC) and Watt (D-NC), introduced H.R. 3915, the "Mortgage Reform and Anti-Predatory Lending Act of 2007." The proposed bill, intended to prevent the further deterioration of the housing market, will have sweeping effects on the lending industry as well as for the consumer.

The bill contains three sections. The first section or Title I will create a federal duty of care and outlaw steering. The bill would require criminal background checks, testing to demonstrate basic knowledge of loan products and continuing education and professional ethics training for all who originate mortgage loans. This section also creates a minimum licensing standard for all originators and net worth or bond requirements of $100,000. These provisions will only help to prevent fraud, alleviate deceptive lending, and provide for a safer, more level playing field for consumers to shop for their mortgage. Licensing and criminal background checks will also help ensure consumers receive the loan that is best for them, at agreeable standards and conditions. Unfortunately, the provision for steering will essentially eliminate zero-point loan possibilities for consumers. Yield Spread Premium, also known as YSP, is the money paid by a lender to your originator as commission for completing a loan. This helps consumers pay less closing costs and require less cash for purchasing a home. Lawmakers, falsely believing this indirectly costs more for the consumers, want to ban such programs.

The second part of proposed bill known as Title II sets minimum standards for all mortgages. It creates a standard for the ability to repay and hardwires underwriting guidelines. Underwriting will include a verified ability to repay and take into account amortizing payments. Guidelines will also include taxes and insurance payments when calculating ratios. For refinancing, the act will define and require a net tangible benefit. While the intention of eliminating repeat refinancing is valid, the unintended consequences are not taken into consideration. A federal “net tangible benefit” by federal standards may not be taking into consideration the needs of the consumer. The ability to complete an equity refinance to eliminate debt, reduce a loan term, or take a 2^nd mortgage is likely to be greatly reduced. Severe restrictions will be placed upon first-time homebuyer mortgages with negative amortization features. However prepayment penalties that reduce a borrower’s ability to refinance out of a loan would be eliminated as part of this bill.

The Federal Reserve’s actions to lower the federal funds rate will have a positive effect on the real estate market, albeit a small one. As home owners’ have suffered through adjusting interest rates, declining home values, and record foreclosures, they are looking for some good news. Unfortunately, contrary to popular belief, the rates declining by 50 basis points does not mean that the 6.25% interest rate, 30 year refinance you were expecting Monday the 17^th will automatically be 5.75% on Tuesday the 18^th. Rates will not come down automatically solely because of a Fed action; the markets were already anticipating lowered rates and was already priced accordingly. As a result, shoppers for new mortgages won’t catch much of a break. While short-term rates have moved lower as a result of the Fed’s cut, the market or 1^st mortgage-based long-term rates that are used to price mortgages edged higher. Consumers will instead benefit from the direct rate correlation on their credit cards and home equity lines of credit as well as many others. For those adjustable rates nearing a reset, the rate jump expected will have slightly less of an impact than would otherwise occur.

Not only will a favorable real estate market not come back overnight, but the process will be a slow one. It can often take upwards of 12 to 18 months for the effects of lowered rates to trickle through the overall economy. Inflation, the housing market and the chance that the overall economy will fall into a recession still remain. While the Fed’s rate cuts may have provided a confidence boost to the markets, many analysts and builders think it will take more cuts — and more time — before the housing market recovers.

Wow, check out this list of lenders or banks that have imploded since 1-1-2007!  It's simply left me speechless...

As of 8-30-07, according to this helpful website:  http://ml-implode.com/

"Imploded" Lenders:

143. Allstate Home Loans / Allstate Funding
142. Home Loan Specialists (HLS)
141. Transnational Finance Wholesale
140. CIT Home Lending
139. Capital Six Funding
138. Mortgage Investors Group (MIG) - Wholesale
137. Amstar Mortgage Corp
136. Quality Home Loans
135. BNC Mortgage (Lehman)
134. Accredited Home Lenders
133. First National Bank of Arizona (FNBA) Wholesale, Correspondent
132. Chevy Chase Bank Correspondent
131. GreenPoint Mortgage - Capital One Wholesale
130. NovaStar (Wholesale), Homeview Lending
129. Quick Loan Funding
128. National City Home Equity
127. Calusa Investments
126. Mercantile Mortgage
125. First Magnus
124. First Indiana Wholesale
123. Pacific American Mortgage (PAMCO)
122. Spectrum Financial Group - Wholesale
121. Lexington Lending
120. Express Capital Lending
119. Deutsche Bank Correspondent Lending Group (CLG)
118. MLSG
117. Trump Mortgage
116. HomeBanc Mortgage Corporation
115. Mylor Financial
114. Aegis
113. Alternative Financing Corp (AFC) Wholesale
112. Winstar Mortgage
111. American Home Mortgage / American Brokers Conduit
110. Equity Funding Group
109. Sunset Mortgage
108. Fieldstone Mortgage Company
107. Nations Home Lending
106. Wells Fargo Alternative Lending Wholesale
105. Entrust Mortgage
104. Alera Financial (Wholesale)
103. Flick Mortgage/Mortgage Simple
102. Alliance Bancorp
101. Choice Capital Funding
100. Premier Mortgage Funding
99. Stone Creek Funding
98. FlexPoint Funding (Wholesale & Retail)
97. Starpointe Mortgage
96. Unlimited Loan Resources (ULR)
95. Freestand Financial
94. Steward Financial
93. Wells Fargo (Correspondent)
92. Bridge Capital Corporation
91. Altivus Financial
90. ACT Mortgage
89. Alliance Mortgage Banking Corp (AMBC)
88. Concord Mortgage Wholesale
87. Heartwell Mortgage
86. Oak Street Mortgage
85. The Mortgage Warehouse
84. First Street Financial
83. Right-Away Mortgage
82. Heritage Plaza Mortgage
81. Horizon Bank Wholesale Lending Group
80. Lancaster Mortgage Bank (LMB)
79. Bryco (Wholesale)
78. No Red Tape Mortgage
77. The Lending Group (TLG)
76. Pro 30 Funding
75. NetBank Funding
74. Columbia Home Loans, LLC
73. Mortgage Tree Lending
72. Homeland Capital Group
71. Nation One Mortgage
70. Dana Capital Group
69. Millenium Funding Group
68. MILA
67. Home Equity of America
66. Opteum (Wholesale, Conduit)
65. Innovative Mortgage Capital
64. Home Capital, Inc.
63. Home 123 Mortgage
62. Homefield Financial
61. First Horizon (Subprime)
60. Platinum Capital Group
59. First Source Funding Group (FSFG)
58. Alterna Mortgage
57. Solutions Funding
56. People's Mortgage
55. LowerMyPayment.com
54. Zone Funding
53. First Consolidated (Subprime Wholesale)
52. EquiFirst
51. SouthStar Funding
50. Warehouse USA
49. H&R Block Mortgage
48. Madison Equity Loans
47. HSBC Mortgage Services (correspondent div.)
46. Sunset Direct Lending
45. Kellner Mortgage Investments
44. LoanCity
43. CoreStar Financial Group
42. Ameriquest
41. Investaid Corp.
40. People's Choice Financial Corp.
39. Master Financial
38. Maribella Mortgage
37. FMF Capital LLC
36. New Century Financial Corp.
35. Wachovia Mortgage (Correspondent div.)
34. Ameritrust Mortgage Company (Subprime Wholesale)
33. Trojan Lending (Wholesale)
32. Fremont General Corporation
31. DomesticBank (Wholesale Lending Division)
30. Franklin Financial (Wholesale Operations)
29. Ivanhoe Mortgage/Central Pacific Mortgage
28. Eagle First Mortgage
27. Coastal Capital
26. Silver State Mortgage
25. ResMAE Mortgage Corporation
24. ECC Capital/Encore Credit
23. Lender's Direct Capital Corporation (wholesale division)
22. Concorde Acceptance
21. DeepGreen Financial
20. Millenium Bankshares (Mortgage Subsidiaries)
19. Summit Mortgage
18. Mandalay Mortgage
17. Rose Mortgage
16. EquiBanc
15. FundingAmerica
14. Popular Financial Holdings
13. Clear Choice Financial/Bay Capital
12. Origen Wholesale Lending
11. SecuredFunding
10. Preferred Advantage
9. MLN
8. Sovereign Bancorp (Wholesale Ops)
7. Harbourton Mortgage Investment Corporation
6. OwnIt Mortgage
5. Sebring Capital Partners
4. Axis Mortgage & Investments
3. Meritage Mortgage
2. Acoustic Home Loans
1. Merit Financial

Option Arms, also known as “1 Month Option Arm", "12 MTA Pay Option ARM," "Pick a Payment Loan", "1-Month MTA", "Cash Flow Option Loan", and "Pay Option ARM". All refer to an adjustable rate mortgage on which the rate adjusts monthly with no adjustment caps, and that allows borrowers the “option” make very low initial mortgage payments that rise over time.

Consumers may be offered these loans with a low “teaser” rate often as low as 1% usually during the first couple months before the rate is fully indexed. The teaser rate is the rate that the minimum monthly payment is based. After the initial rate is over, the rate jumps to the fully indexed rate that depends on the type of index utilized by the lender (usually COFI, CODI, or MTA but can vary), plus a margin of around 2.50%. That fully indexed rate often may jump over several times from the initial payment. The changes occur monthly with generally with no cap on the size of the changes but usually will have a lifetime cap of around 9.50%. Payments in the early years may initially remain the constant. However, when clients typically make the minimum payments, interest is accruing on top of the loan. Negative amortization occurs when the monthly payment does not include the full amount of interest due. The amount of interest that is not paid is added to the principal balance due. Option Arms give the borrower the ability to make a minimum monthly payment, and this payment is less than full interest. After usually 4-5 years, the lender will reassess how much of negative amortization has accrued and allow usually between 115-125% negative amortization. .In addition to paying the minimum payment, the consumer is often able to pay interest only, 15-year fixed, or 30 year fixed.

An example of the other payments:

• Interest Only Payment -This is based of the margin plus the index (this index is usually also a codi, cosi, mta, etc). Lenders use a 12 month rolling average of the index and the index will change monthly.

• 15 Year Option Payment - The rate is derived the same way as the interest only (margin plus index).

• 30 Year Option Payment -The rate is derived the same way as the interest only (margin plus index).

Risk to the Borrower

The risk to the borrower can be great. Many borrowers have a misconception of how this rather complicated program actually works. Often borrowers are often so intrigued about the introductory initial rate and rush to get signed up without understanding the implications. Borrowers, by nature, often look exclusively at rate, not understanding that rates can and often are misleading. In today’s market where home owners are seeing falling home values, Option Arms can have dire consequences. Some examples:

• A borrower needing to sell their home quickly (for job transfers, layoffs, better schools, etc), the borrower may owe more money they the value of the home. As a result, the borrower may actually have to write a check potentially for thousands of dollars at settlement!
• A borrower who needs to refinance into a different loan or needs equity from their home may be out of luck. Many borrowers are faced with a changing environment where programs now require considerable equity in the home.
• When home prices were increasing, negative equity was never a problem; today home owners may be in considerable trouble.

While all loan programs have their pluses and minuses, most borrowers don’t need 4 options to pay their mortgage. The initial lower payment may have been enticing and helped enable getting into the home initially; it is dangerous to the consumer. Many other brokers, knowing consumers may already have record low rates or can’t afford normal payments, push such programs to help increase business. Unfortunately, most brokers are unaware of how the program truly works, don’t or won’t disclose the loan properly. Many are loosing their homes as a result. Did you know that to date we have not originated not one of these Payment Options Arms?  If you are in one of these loans, seek advice from one of our mortgage consultants today!

The real estate market is much different from what it was just a one short year ago. The market changes hit fast; catching many off guard. Many who were expecting their homes to consistently appreciate at a rate of 20% per year realized quickly that it is not always the case. Once believed to be impossible, home values have actually been depreciating!. As a result, expectations, plans and dreams with what is usually the largest investment we will make in our lifetimes have changed. The needs for re-evaluating your mortgage situation has never been greater. A loan program that may have appeared wise only a short time ago can be setting you up for owing more on your home than it is worth or increased payments that occur monthly. Such issues can and have lead to the spike in recent foreclosures!

Certain issues to consider in today's market:

• While rates are still favorable, they are steadily increasing.
• "Specialty" programs that were once available to borrowers with less than perfect credit, limited documentation, or limited money down programs, have or are continually being eliminated.
• House prices are dropping fast.
• The media attention to the greater real estate market has brought negative attention to the industry. Some warranted, other parts not.

As a result, it is crucial to ask those imoportant questions today to weed through all the information you are getting from the media. It is vital to evaluate your own situation and how it is effected by the changing market place. Please contact us any time via email, phone or the website, even if it is just to ask questions about your individual circumstances.