Obama Mortgage Loan Modification

March 31, 2009
Economic News, Information and Resources

In California the foreclosure moratorium is due to expire today.  This means the majority of home mortgages held by Fannie, Freddie, BofA and others will finally be released, that is if the moratorium is not extended for another 3 weeks as it has been now for months.

The moratorium expiring (if it does) will allow banks to finally foreclose and evict home owners that defaulted on their loans, likely long ago.  However, there are provisions that would allow the current occupant to stay in the home and rent it back from the bank at market price.  There are obvious problems with this provision.

First, how is market value determined in areas that are completely residential with no rentals?  The numbers will vary greatly.  Furthermore, will the occupants even be able to pay the rent and if not, how will they be evicted?

Second, it’s been presumed that banks will still be able to show a property to prospective buyers while the new “tenants” occupy the house.  How well will frequent showings of a property formerly owned by the current occupants go over?  This could even cause dangerous situations given the emotion tied to an extremely difficult economy and the loss of a house.

The goal of the moratorium was to allow home owners to modify their loans, which is easier to do today than ever but still was too late for many.

Loan modifications are for those 1-3 months behind on payments, still before the foreclosure process and able to provide proof of hardship.  Proof of hardship means job loss, medical bills etc.  The programs are not available to speculators or those who made the purchase as a second home.

To determine if you’re eligible for a loan modification, fill out the short form below and a specialist will contact you to help:

1. Your Name(required)
2. Email(valid email required)
3. Telephone(required)
4. State
5. Debt or Mortgage Amount(required)

 

Unfair Credit Card Practices > Washington

March 31, 2009
Updated Article
Economic News, Information and Resources 

 

In December, 2008 Congress passed stricter legislation to counter unfair practices by credit card companies. These practices included insufficient time to pay bills, increased rates on balances and fees.  This was a good first step to rein in companies that are obviously taking advantage of consumers but it is not enough as the new laws do not take effect until July, 2010.

During this time of limbo, credit card companies have taken it upon themselves to cut card limits, increase fees and interest on old balances.  Many card companies have canceled lines altogether, leaving consumers with large balances and no additional credit, which has a dire impact on the retail economy.

Washington is again pushing for additional rules to further restrict what card companies can do.  All of this will help but not for another year.

If you have a credit card, whether you carry a balance or not, you’ve likely had a change to the terms and conditions.  Not receiving notice in the mail does not mean there have not been changes.  If you have a card, call your issuer and ask if any changes have been made to your account.  You can also access your account on-line to view any changes.

It’s best to stay on top of changes because you could quickly accumulate additional interest and overage fees.

These changes also have a significant impact on your credit score.  If you’re in the market to acquire credit soon (new home purchase, refi, loan mod, etc.), make sure that your card is either paid off in-full or that you’re fully aware of the most current terms and conditions.

Can I Refinance Under Obama Stimulus?

March 29, 2009
Economic News, Information and Resources for Consumers

In previous months, refinancing has proven incredibly difficult.  The first obstacle was the fact that money was simply not available.  Banks held on to everything they had to effectively survive.  They were and are dealing with massive losses on loan defaults.  This is what precipitated the enormous bailout we’re in now.

The bailout, however, has helped to loosed up the availability of funds quite a bit but another problem has been interest rates.  Rates stayed reasonable, around 6% for months.  Many were waiting for the advertised 4% loans that still are yet to come.  We have seen rates get to 4.5% often, then inch up constantly to just over 5%.  The Fed is engaged in a massive buyout of mortgage backed securities, which should drop mortgage rates some time in the future.  We’re still anxiously waiting for this to happen.  As of today, we’ve seen rates at 4.375%.

Another obstacle to getting a loan refi is equity.  Most banks will require that you have at least 20% equity in your home to refi.  For the vast majority of people who want to refi, this is not the case, but again, the rules are starting to loosen.

Last, the all important appraisal.  3 years ago we saw crazy appraisals of homes that everyone knew were way out of line.  Today, appraisers are far more conservative in their estimates much to the dismay of sellers/those wanting to refi.  Often the appraisal will kill the deal because the bank is simply not willing to loan what the owner wants.  Unfortunately many owners are still in denial about the value of their homes but they need to remember that something is only worth what someone can and will pay for it.

 

Getting your loan refinanced is indeed easier today than it was 6 months ago but it still takes work.  Remember that equity will be required unless you move to a loan modification.  In that situation, it’s possible to have a second mortgage forgiven but there are restrictions.

Most banks will require proof of hardship.  They’ll also require that you be a few months behind on the payment already and that the house be your primary residence, not a second home or investment.

Keep checking back for the most up-to-date information on refinancing and loan modifications.

The Obama Stimulus Check > When will I get it?

Economic News, Information and Resources for Consumers
March 29, 2009

Congress recently passed the enormous stimulus bill which means many people will be receiving a stimulus check of $400.  This stimulus is similar to that passed by the Bush administration, which provided checks of $300 to each person or $600 per couple.

So we know the stimulus is coming, but when?  This all depends on when you successfully file.  A successful filing means the return has not been kicked back for some error.  An error could be a social security number or a name that does not match.  This is a common problem given many people do not go by their legal names (the one associated with your social).  To get your money sooner, make sure there are no errors before you submit it.

Your return can be send by mail or electronically.  If you’re anxious to get your return back quickly, we suggest filing electronically.  Any accountant should be able to file for you but popular accounting software programs also offer this service.  If you don’t feel like paying for an accountant or software, the IRS offers an e-file service for free.  To learn more about that service, visit the IRS website directly.

If you bought a house recently or are in the process, there are potential tax advantages for you that you might want to take advantage of before you file.  A new home purchase between certain dates can result in an $8,000 tax reduction off the top of your taxes.  It’s even possible to do this for your 2008 taxes.  To check details on this program, consult your accountant or read what the IRS has to offer.

Stimulus plans, programs, refinancing, and loan modifications are changing rapidly with the economy. Check back for the most up-to-date information that affects you.

Unemployment Picture > March 2009

Unemployment is arguably the most important number we should watch as a gauge of the health of the economy.  

We’ve seen job losses of 600,000 per month for several months, all bad news.  We’ve also seen more people staying on unemployment benefits while the newly unemployed join in.  But with all of this dire news, the market had its best 3 week growth since 1982.  Why?

 

The market is always looking for some good news, even if it’s really bad news that just wasn’t as bad as they thought it was going to be.  Here’s an example:

The nationwide unemployment rate is predicted to rise to 8.5%.  This number is released next Friday so if it continues to rise but less than expected, the market will likely see that in a positive light.  Realistically it should be seen as bad news until the light turns green and unemployment actually drops instead of rising less than expected.

Unemployment is of particular importance because ultimately that is what fuels our economy, people with jobs spending money (especially retail).  In reality reports of increased existing home sales and new home sales are meaningless when jobs are still on the decline.  It’s obvious that the people buying now have been waiting on the sidelines for a long time to buy a home.  This pool of people is finite and will run out at some point.  They might also stall buying if interest rates don’t drop to the marketed rate of 4%.

So when will unemployment actually improve, which means people are being employed?  The economy has all the appearances of improving this year, maybe later than expected but still this year.  However, the jobs scene is typically the last one to improve because companies that had to tighten their belts for 2 years are concerned with over-hiring.

We’ll have a much better picture next week when the jobs report comes out.  When it does, we’ll be hoping for actual improvement of lower overall unemployment.

The “Little Known” Foreclosure Moratorium > Fannie and Freddie

If you’ve been in the market for a home and are wondering why more are not on the market with all of the foreclosures and lost jobs, there is a reason.  Fannie and Freddie have created a pattern where they are extending a moratorium on foreclosures and evictions at 3 week intervals.

To the dismay of about everyone in the real estate industry, this moratorium just seems to go on forever.  The most recent date was pushed back to March 31, effectively saying that foreclosures and evictions would begin again on April 1.  If you are holding your breath for this date to come through, don’t.  The government is involved so this could take much longer.

Why do we have a moratorium on homes that should have already been on the market for sale?  The primary goal with this moratorium is to keep people in their homes through loan modification programs. It effectively provides more time for certain programs to gain footing so some people can be helped, but not everyone will be eligible.

You must be living in the home (primary residence) to qualify.  Second homes and vacation properties will not qualify.  For some reason with the Fed sponsored deals, you must not have filed bankruptcy.  

You’re also going to have to prove your hardship.  This means you can’t just gain a loan mod if you’re still able to pay.  Last, you must have missed at least 3 payments.

Loan modifications programs are more available than ever so if you tried before and were turned down, try again because your chances are better now.

The Possibility of Inflation > What it means

We are still in a very deep recession though we had some promising signs this week with existing home sales and new home sales both increasing over last month’s numbers.  This is great news but remember that the comparison is not a strong one and recovery from dismal numbers is nothing to cheer about yet.

We’ve had a number of stimulus (or similar) packages passed as well as massive bailouts of companies that most in the country are not happy with (AIG).  

We’ve seen a budget passed today that is more than any other passed by an American President.  It’s massive spending that regardless of the side of the aisle you fall on, will have equally massive results.

The divide on this issue is also massive with some believing that spending is the way out of this mess while other believe that tax cuts and business support is the way to go.  

History tells us that this type of spending can lead to massive inflation and that has many concerned.  In the simplest of terms, inflation is when the dollar is greatly reduced in value.  People who owned businesses in the 70’s probably remember having to adjust prices daily as the dollar dropped.  Many joked that it took a wheelbarrow of money to buy bread and we even heard stories of areas in Europe in the 20’s where the value of currency was so low they had to stamp the bills with alternate values as they could not print it fast enough.

If massive inflation does occur, you can also plan on very high interest rates.  In the 70’s mortgage rates were in the high teens and low 20’s.  Today rates are around 4.5% but that could easily change.

Of course the good news is that if we do have inflation and you’re in a low interest, fixed rate mortgage, you’ll be able to easily pay off that debt.  If you have a variable rate, you’re in trouble.

Inflation causes many problems in the economy but there is a fix to inflation, it’s called a recession, much like we’re in now.

We don’t know where the economy will go or if inflation will happen at all.  But, it is good to be prepared for any economic event by keeping debt to a minimum and effectively managing cash flow.

When will I get my tax refund, rebate check?

April 15 is right around the corner so many are wondering how long it will take to receive your rebate checks (Obama stimulus checks).

The stimulus package passed under the Obama administration originally had a $500 stimulus check per person but as it passed through Congress, it was bumped down to $400.  Couples will receive $800.

The fastest way to receive your stimulus check is to file electronically.  There are a number of services that can do this for you as well as any accounting firm but there’s also a free way to accomplish this same goal.  The IRS offers a number of e-file options, including a free one through them directly.  To learn more about these options, visit the IRS site directly.

After you’ve filed your taxes electronically, and assuming there are no errors, like a wrong SS# or incorrect name, you can plan on receiving your refund within 4 weeks.  The time does obviously vary depending on volume, where the times around April 15 are the busiest.  To expedite the process you can also request a direct deposit.  This way you are not waiting for a check to arrive in the mail.  The IRS offers another neat option so you can check on the status of your refund and know if it’s been sent or when it will be deposited.  To learn more about the status of your refund, visit Where’s My Refund from the IRS.

Beyond taxes, there are a number of incentives for consumers who want to purchase homes and to get involved in other types of investments.  To fully understand them, you might consider discussing these options with your accountant.

Loan Modifications Under The New Stimulus

Loan modifications are more available today than at any time during this recession.  This is due, in large part, to two events.  

First, market forces have changed significantly with mortgage rates dropping to all-time lows (and they should go lower).  This is due to large purchases of mortgage backed securities by the Fed.

Second, we’ve had two stimulus packages passed that have helped consumers and home owners.  The first package was relatively simple because we were at the beginning of the recession and no one knew how deep it would be.  In that package, each “taxpayer” received $300 to help stimulate the retail economy.  It didn’t work.

The second stimulus was much larger, $750 Billion and intended to remove toxic debt from the financial system.  Most or all of that money is gone so now we have a $1 Trillion stimulus passed recently to buy up the rest of the toxic debt.  If anything, this purchase will keep mortgage rates low but could cause serious inflation in the coming years.  This is to be seen and being debated by leading economists.

But the current environment does lend itself to loan modification access so if you’re 1-3 months behind on your payments or know that missing them is imminent, you could be eligible.  Check with your bank to see what they’re doing and be prepared to use an attorney to get the job done.

Will the economy improve in 2009?

We’re already through the first quarter of 2009 and many want to know when the economy will improve.  The best answer is that the economy will improve, but it takes time.

We’re starting to see some improvement in housing, particularly given yesterday’s report that existing home sales rose 5.1% over the previous month.  This isn’t huge but it’s a move in the right direction.   The economy flows best when people are buying homes and making them better, contributing to the community economy.  

Interestingly, cash is still hard to come by from banks even though they have almost $800 billion sitting in vaults at their disposal.  The Fed announced they’ll be pumping another $1 Trillion to add to this number but it seems the banks will need to have their hands forced before they start lending.

One problem is that banks have so many anxious customers who want to buy, refi, or get small business loans that they can be picky in who they approve for the loans.  It shouldn’t be this way as the consumer and business owner is the real catalyst to a healthy economy.

The next piece to watch is inflation, which is tied to how much money the Fed pours into the economy. Essentially, the dollar loses value causing prices to rise.  Back in the 70’s we had double digit inflation, which pushed interest rates up to the teens for mortgages.

We have initial signs that the economy will improve this year but at this point, anything can happen.  A sustainable recovery will only happen when jobs become available again.

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