Credit Cards Mojo » Mortgage

Owners Stop Paying Mortgages, and Stop Fretting

admin2 — Wed, 02 Jun 2010 04:39:00 +0000

ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of.

Foreclosure has allowed them to stabilize the family business. Go to Outback occasionally for a steak. Take their gas-guzzling airboat out for the weekend. Visit the Hard Rock Casino.

“Instead of the house dragging us down, it’s become a life raft,” said Mr. Pemberton, who stopped paying the mortgage on their house here last summer. “It’s really been a blessing.”

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

Its The Banks, Stupid — And Us, And…

admin2 — Sun, 18 Apr 2010 01:18:05 +0000

We’ve heard much of it: Mortgage backed securities i.e. bonds, touted as spreading the risk for high-risk, would-be home owners to abet home owning, but relieving the lending banks of the risk of default by off loading that risk to the bond holders. Credit default swaps, called swaps after intense lobbying by the big banks to avoid the name “insurance,” to avoid being required to hold reserves against prospective losses. Rating agencies paid by the very companies whose credit-worthiness they rate. The finance committees of both Houses of Congress that, according to Bill Moyer’s journal, received $120,000,000.

Names should be named: Alan Greenspan explained to Congress recently that he had no effective influence on Congress. But he and Larry Summers successfully helped block in Congress a Clinton Administration effort to investigate the derivatives market. No influence? My foot. Greenspan lobbied for giant Pimco after he stepped down as Fed Chairman, to save a class of Fannie May bond holder’s bonds. One wonders just what fee was earned. Larry Summers earned several million consulting for a hedge fund while President of Harvard. He is President Obama’s Economic Advisor. If he now favors “regulation”, where was he when he argued to Congress against investigating the derivative market? It seems no one was responsible. No one. Greenspan, Summers, our Treasury Secretary, the presidents of the big banks. Our Titans were, well, so persuaded of their world view, or so greedy, that they were blinded. But look at the havoc they have wrought. Is that accepting responsibility? Is that “leadership?” Is that moral? I don’t notice that the answer is “Yes.”

More Homeowners Fall Behind on Mortgages

lorenzo — Mon, 23 Nov 2009 12:12:21 +0000

About one in seven American households with mortgages is behind on payments or in foreclosure, according to new data from the Mortgage Bankers Association. That is up from about one in 10 a year ago.

The group reported Thursday that 14.4% of first-lien mortgages on one-to-four-family homes in the third quarter were 30 days or more overdue or in the foreclosure process. That is the highest rate since the MBA began reporting such data in 1972, and works out to about 7.5 million households at risk of losing homes. The percentage is up from 10% a year earlier and 7.3% two years ago.

Loan defaults have been rising swiftly for more than three years. At first, the problem largely reflected loose lending practices during the housing boom that allowed millions of people to buy homes they couldn’t afford. Now the problem is compounded by rising unemployment, which hit 10.2% in October, the highest since 1982.

Problem mortgages hit new high at 14 percent

lorenzo — Mon, 23 Nov 2009 12:06:49 +0000

Data mean foreclosures may not peak until next year

More than 14 percent of borrowers were in trouble on their mortgage during the third quarter, a new record, according to an industry survey released Thursday, which also suggests that the foreclosure rate is likely not to peak until next year as unemployment rates continue to rise.

Unemployment remains a big driver of the problem, according to the Mortgage Bankers Association, which conducts the survey. Those with delinquent loans now include a growing portion of people traditionally considered creditworthy and people whose mortgages are insured by the Federal Housing Administration.

“The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve,” said Jay Brinkmann, the group’s chief economist.

About 9.6 percent of borrowers were delinquent on their mortgage during the third quarter, according to the survey, and another 4.5 percent more were somewhere in the foreclosure process. Overall, about 14 percent of mortgage loans or 7.4 million households were delinquent or in the foreclosure process during the quarter, according to the group.

Google Tackles Mortgage Market With New Comparison Ads

lorenzo — Fri, 30 Oct 2009 02:22:46 +0000

Google has just debuted a new form of advertising called AdWords Comparison Ads — a special kind of ad that will prompt users to view a list of sponsored products in a structured format. To get started, Google is running the ads for queries related to the mortgage market, though it has plans to eventually expand beyond that. The ads are in a limited rollout for now, with only some users in some states seeing them.

Here’s how Google describes the new ad type:

AdWords uses a host of targeting and relevancy signals to determine the best ads for each query. However, sometimes a user’s query doesn’t provide enough information for us to confidently predict what they want. Take, for example, users who search for “mortgage.” Do they want a new home loan or a refinance? Do they want a fixed rate or an adjustable rate loan? Comparison Ads improves the ad experience on Google.com by letting users specify exactly what they are looking for and helping them quickly compare relevant offers side by side.

Users searching for “mortgage” on Google.com may see a promotion from Comparison Ads prompting them to select the type of loan they are looking for and to compare various rates.

If they click the promotion, users are taken to a page with more detailed sponsored results. They can choose directly from the offers listed on that page, or they can further refine their search by providing additional information like income and home value…

Once users find an offer that matches their specific needs, they can either call you directly or request a quote. If a user requests a quote, Google automatically anonymizes the user’s phone number and sends you a unique code that you can use to contact the user. You only pay if a user calls the phone number on your offer or fills out a form to request a quote.

Homeowners who ’strategically default’ on loans a growing problem

lorenzo — Mon, 21 Sep 2009 00:08:54 +0000

A study shows that people who abruptly and intentionally abandon their mortgages often have high credit scores, in stark contrast with most financially distressed borrowers.

Reporting from Washington –
Who is more likely to walk away from a house and a mortgage — a person with super-prime credit scores or someone with lower scores?

Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to “strategically default” — abruptly and intentionally pull the plug and abandon the mortgage — compared with lower-scoring borrowers.

National credit bureau Experian teamed with consulting company Oliver Wyman to identify the characteristics and debt management behavior of the growing numbers of homeowners who bail out of their mortgages with none of the expected warning signs, such as nonpayments on other debts.

Cheaper Mortgages Spark Lower FICO Scores for Payers

Staff Writer — Sun, 19 Jul 2009 23:36:07 +0000

Victor Stern thought his money troubles were over when he got approval to modify his home loan. Then his credit score dropped 121 points.

Stern, a business development director at an information technology company in Charlotte, North Carolina, said he was shocked to see his credit score drop to 619 from 740 after entering the trial period for a loan adjustment under President Barack Obama’s Home Affordable Modification Program. A salary reduction caused him to seek a change in the terms of his loan before he missed any payments.

Banks, including Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., report the loan modifications to credit bureaus. The adjustments can lower credit scores because of the way the FICO formula, the most widely used by U.S. lenders, works. (Read more at: Bloomberg.com)

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Cheaper Mortgages Spark Lower FICO Scores for Payers

Nationwide offers 125% mortgage

Staff Writer — Fri, 10 Jul 2009 12:30:16 +0000

The Nationwide Building Society has introduced a mortgage allowing borrowers to take loans worth 125% of the value of the home they are buying.

It will only be available to existing customers in negative equity who want to move house.

Negative equity means that the value of someone’s home is less than the amount they owe on their mortgage.

Nationwide said the deal was a very “niche offer” and that not everyone in negative equity would qualify.

The Financial Services Authority is considering limiting mortgage loans to 100% of a property’s value.

‘No more risk’

The Nationwide only offers new customers mortgages worth 85% of the value of the home they want to buy. (Read more at: BBC)

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Nationwide offers 125% mortgage

Undocumented income makes it hard to get a loan

Staff Writer — Fri, 10 Jul 2009 00:47:21 +0000

With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800, Jennifer France and her partner would seem like ideal candidates for a mortgage refinance.

But when they applied to swap an interest-only loan on their nearly $1 million San Carlos home for a 30-year fixed that locked in today’s low rates, they were summarily denied. The reason: effectively, because both operate their own businesses.

“I was really surprised, I had been preparing to refinance for years,” said France, a landscaper and gardener. “It’s hard for the self-employed; that puts us in a bind.”

While the amount they make is easily enough to qualify for the new loan, tax deductions for self-employed workers dropped their official income below the threshold that banks wanted to see.

A few years ago, theirs would have been the ideal scenario for a stated-income or no-documentation loan, which allowed individuals with ample but unconventional sources of income to secure home loans. But after untold numbers of borrowers lied about their financial wherewithal to buy homes they couldn’t afford, often with a wink and nod from mortgage brokers, nearly all lenders stopped offering what became known derisively as “liar loans.” Now even the well-qualified borrowers for whom the products were first intended can’t get them. (Read more at: San Francisco Chronicle)

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Undocumented income makes it hard to get a loan

Mortgage defaults in America: Can pay, won’t pay

Staff Writer — Tue, 30 Jun 2009 11:06:53 +0000

It is easier to dump a home loan if a friend has done so too

HOUSE prices in America have fallen so far that as many as one in five households have mortgage debt greater than the value of their homes. In a few states, borrowers are not liable for the shortfall between an unpaid loan and the resale value of the home it is secured upon. Even where borrowers are on the hook, lenders often find it too costly to pursue unpaid debts. So some homeowners may be tempted to default and escape the burden of negative equity.

How widespread is this practice? New research* based on a survey of 1,000 homeowners suggests that one in four mortgage defaults are “strategic”—by people who could meet their payments but who choose not to. The main drivers of strategic default are the scale of negative equity, and moral and social considerations. Few would opt to renege on their mortgage if the equity gap were below 10% of their home’s value, the authors find, partly because of the costs of moving. But one in six would bail out if loans were underwater by a half.

Four-fifths think strategic default is wrong. Those in the unethical minority are four times more likely to renege on loans (allowing for other influences) when their negative equity reaches $50,000. But morality has its price. When the equity gap reaches $100,000, “immoral” homeowners are only twice as keen to walk away from their debts as “moral” ones. People under 35 or over 65 are less likely to believe that default is wrong. So are the well-educated. (Read more at: Economist.com)

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{Photography by TheTruthAboutMortgage.com}

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Mortgage defaults in America: Can pay, won’t pay