Product Review:
REVERSE MORTGAGES

As the population grows older, the reverse mortgage can be a valuable tool to help elderly homeowners supplement their income without putting their house at risk.

tip: learn more about reverse mortgages

For the homeowner who is behind on house payments, the threat of foreclosure looms large especially as months pass without a payment. In some markets owners may fall behind by two or three months before foreclosure action is taken, while in other markets -- particularly those with a high percentage of foreclosures -- it could take many more months to occur.

Regardless, if you have fallen behind on payments, then your home loan lender has every right to take back your home.

Notice of Default & a Grace Period

Once legal action has been initiated by the lender, both parties enter a pre-foreclosure period. This means that the days from when the Notice of Default has been received up to the court date, a state-mandated grace period kicks in. Also known as a "default cure" period, this timeframe is designed to give homeowners a remedy before foreclosure sets in.

In most cases, few homeowners will have the means to sufficiently satisfy the legal complaint against them, specifically come up with all of the funds owed to the lender which would prevent foreclosure.

Four Resolutions To A Pre-Foreclosure

Once pre-foreclosure has been started it must be ended in one of four ways:

• The homeowner reestablishes the loan by paying off the default amount during the grace period set by state law. This grace period is also known as pre-foreclosure or "default cure."

• The homeowner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan, thereby avoiding having a foreclosure included in his credit report.

• A third party comes to terms to purchase the property at a public auction at the end of the pre-foreclosure period.

• The lender takes ownership of the property, usually with the intention of selling it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).

Most homeowners go through a drawn out warning period before they lose their home. Usually, several notices have already been sent by the lender reminding borrowers that funds are due, including phone calls, email messages, perhaps a visit to the home seeking collection.

During the default cure period which averages thirty days in most states, homeowners can still attempt to raise the funds needed to satisfy the lender's complaint or entertain offers from interested buyers.

Investors make a habit of learning which homes are in pre-foreclosure and will contact owners if interested. Homeowners are urged to retain legal counsel before agreeing to any sale which may also require the approval of the lender especially if their debt isn't satisfied with the sale.

2009/03/13 consumer tips SE

If you are shopping for a home mortgage loan, then weighing the different choices available to you can save you thousands of dollars over the course of the loan. These choices generally include the loan type, length of the loan, your down payment, interest rate charged, fees, and lender selected. Of course, you don't want to make a snap decision with your home purchase loan options as a lot of money could be riding on the line. Please read on for some tips on how you can save money on your next mortgage loan.

Get Informed

A little bit of research on your part can save you plenty of money on your next mortgage loan. If you plan on living in your home for the long term, then comparing the home purchase loans options available to you is essential to helping you save money.

Assuming that you qualify for and can afford home financing, you will find that the number of mortgage choices available to you are almost limitless. Your loan term can be for 15, 30, 40 even 50 years with some lenders offering 20 and 25 year term mortgages too.

Annual Percentage Rates are generally not that different from each other, although a savings of even just one quarter of one percent can result in a significant savings over the life of the loan.

Six Loan Types

The loan types, ultimately, can yield some of the biggest savings and generally fall under the following categories:

Fixed Rate Loans -- The most popular mortgage lending option, a fixed rate loan means that your mortgage payment stays the same for the life of the loan. The amount you pay today will never change, but you will pay a slightly higher interest rate than the homeowner with a variable rate mortgage. Explore other options if you only plan on living in your home for the short term.

Adjustable or Variable Rate Loans -- A lower rate and the ability to borrow more money are two of the chief reasons for homeowners to seek a loan with a variable interest rate. If you are planning to stay in your home for three years or less, than an adjustable rate mortgage is the best choice for you. On the other hand, long term homeowners may find that the constantly changing loan payments to be a source of uncertainty and discomfort.

Hybrid Loans -- If you want the security of a fixed payment along with the lower cost of a variable rate loan, then a hybrid loan could be the best choice for you. With a hybrid loan, your interest rate stays fixed for a set number of years then adjusts yearly thereafter. Loans with a 5/1, 7/1 or 10/1 option means that they are fixed for the first 5, 7, or 10 years respectively and then adjust annually thereafter.

Interest Only Loans -- Consumers seeking low monthly mortgage payments can turn to interest only loans to save money. With an interest only loan, your monthly payments reduce the amount of interest owed on the loan, but not the principle initially. For example, for the first five or seven years of the loan, the principle stays the same meaning that your $350,000 principle remains the same until the interest only time-frame has ended. The flip side of interest only loans is that you could lose money if your home's value declines.

Minimum Payment Loans -- The lowest monthly payment home mortgage loans are Minimum Payment Loans. Basically, you'll make lower monthly payments for a certain length of time and afterwards pay a higher rate. Where housing prices are high, these types of loans have made homeownership a dream come true for consumers who might otherwise not be able to afford a home.

Zero Down Mortgages -- In some cases, consumers can purchase a home with no money down. Typically government sponsored loans, zero down mortgages can be ideal for the consumer who cannot raise the capital to cover closing costs and the down payment. Variations of the zero down mortgage are those loans requiring 3 to up 20% down.

Get Empowered

Not every consumer is eligible for each loan type mentioned; restrictions apply and fees vary. Clearly, fully understanding the terms of your loan is important toward recognizing the advantages and disadvantages of your mortgage choice. An informed consumer is an empowered homeowner which is what you want to be when weighing your mortgage choices.

2008/01/07 consumer tips SE

Housing prices have tumbled, so much so, that homes valued at one rate in 2004 were worth less than that in 2008. In fact in some markets home prices fell to levels not seen since around 2000 or 2001.

What hasn't fallen are property taxes which spiked earlier in the decade as tax administrators saw a ready supply of new tax revenue suddenly made available home values increased. Homeowners were shocked to learn that their housing values which suddenly increased by 30-50 percent or more were taxed at a higher rate, driving up property taxes by thousands of dollars in some cases.

The Wall Street Journal (Monday, January 5, 2009, pg. A3) reported in an article titled, “Call Grow to Cap Property Taxes,” that some jurisdictions are still raising taxes even as home values drop. In some states the amount of taxes paid as percentage of income continues to rise, putting added pressure on consumers.

Leading the way with the highest property taxes in the nation is New Jersey where the media property tax for 2005-2007 was $6082 according to The Tax Foundation. That translates into a figure of 7.1% for the average New Jersey household, but it clearly doesn't reflect the impact that higher taxes has on people living on a fixed income. In many northern New Jersey communities it isn't uncommon for residents to face an annual property tax bill topping $12,000 or $1000 per month. For the homeowner with limited resources this burden is unsustainable.

Home prices fell an average of 20% across the country in 2008, but that isn't stopping some communities from raising property taxes even as the recession deepens. Citizen groups in some states are banding together to fight the increases making sure that property tax relief measures are put on the state ballot.

State leaders appear to understand the gravity of the problem and are, in some cases, calling for a statewide cap on property tax increases. On January 1st, New York City residents were hit by a seven percent property tax boost, but even Gov. David Paterson is realizing that the increases are too much is working with legislative leaders to support a 4% statewide cap.

Homeowners do have other weapons in their arsenal when it comes to fighting property tax increases. Besides the ballot box, individual assessments can be challenged if the homeowners does his homework. This may mean finding out what evidence the tax man used to come up with a higher valuation including property description and location, building a case to present reasons why your taxes should be lowered, meeting with the tax assessor informally and, if your personal appeal still hasn't worked, filing a formal appeal with the county board.

The country's current economic climate may not be enough of a reason for you to appeal your taxes. What every homeowner has to do is make a personal appeal to have their taxes lowered while working with citizens groups to stop or cap tax increases at the ballot box.

2008/01/07 consumer tips SE

When an economic crisis hits – whether personal or national – there is a certain group of people who come out of the woodwork, just like cockroaches, scammers who want to separate you from your money. These days with millions of people struggling to pay their mortgages and millions more finding that their retirement funds have taken a hit, scammers are preying upon vulnerable consumers like never before.

Quite frankly, it takes an extra special amount of alertness on the part of consumers to avoid being scammed.

One area where scam artists are performing their dirty deeds is when it comes to home ownership. Because much of your personal information is publicly available, these crooks will often know that you are having financial problems and are waiting for the opportunity to give you their solution. Unfortunately, their solutions are meant to help themselves at your expense, possibly costing you hundreds of dollars or even the outright loss of your home.

Scam artists operate in a number of different ways, but they always work on your emotions to force you to make decisions that can bring you much harm. Let's take a look at some of the methods scammers use to convince you that they are looking out for your good when they really aren't:

Fear – Fear is a big motivator for people – we either fight or take flight. With their backs to the wall, some consumers make snap decisions, choices that they later regret. A scam artist will use the fear of you losing your home to convince you to sign away your home to them in exchange for some money. Each scam operates a bit differently from the other, but most likely you'll give them the title to your home without receiving just compensation.

Ignorance – Ignorance of the law is no excuse for not knowing the law, but many homeowners simply don't know their rights when it comes to home ownership and foreclosure. Some scam artists will try to intervene in your foreclosure, by offering a “white knight” solution which they say will solve all of your problems. Oftentimes, this involves extracting a fee from you – let's say, $500 – which involves making phone calls on your behalf you can make for free. Worse, are those scammers who take your money and run.

Pride – Knowing that people who get scammed are often too prideful to admit that they were taken, scammers know that they can operate without impunity, going from homeowner to homeowner with their plans to extract money from them. Don't let your pride get in your way – report a con job to the police and be prepared to file a complaint and testify in court if need be.

When con artists come a calling, they'll offer to you a number of solutions including:

Telling you you're in foreclosure when you are not. If you are behind on your mortgage payments, that doesn't mean that you're being foreclosed...yet. Contact your lender and find out where you stand and let them know you fully intend to meet your obligations. Don't involve a third party (unless it is an attorney representing you) to tell you otherwise.

Offer to provide counseling. Personal business counseling is fine, but what are you getting for their advice? Moreover, what fees are being charged? Some financial counselors are legitimate while others are offering services you can do yourself, but for a fee.

Sign over the deed to them. Never sign your home's deed over to another party, especially without having an attorney represent you. In addition, do not make payments to a third party as they may not be representing your lender. Again, contact your lender and remain in communication with them throughout your personal financial crisis.

Ultimately, if you are behind on your payments and have no way out, putting your home on the market could help you avoid foreclosure while also protecting your finances and credit. Never sign or do anything out of duress, recognizing that scammers will take advantage of your fear, ignorance, or pride to steal money from you.

2008/10/13 consumer tips

With the U.S. housing market experiencing one of its worst downturns in memory, consumers who are in a position to refinance their mortgages in a bid to improve their financial position need to be careful when seeking out a new loan.

While the overwhelming majority of lenders are knowledgeable, professional, and consumer friendly, there is a small pool of lenders who are operating just below the radar, predatory lenders who are looking out for #1. In this case, they're the #1 and you're only a means to an end – a way for the lender to sell you a loan that won't improve your financial standing, rather quite possibly do the opposite.

The U.S. Department of Housing and Urban Development (HUD) continues to warn consumers of the predatory loan practices out there. We've taken a look at what they are saying and are including the following links courtesy of HUD to help you push back predatory lending:

• Protect yourself from predatory lenders:
  For information about loan fraud and advice about preventing it, see Don't Be A Victim of Loan Fraud.
• Local information on predatory lending:
  Here are some Local Resources by state, that can help you avoid being a victim of predatory lending.
• For FHA loans:
  For problems relating to origination, underwriting, or appraisals contact the FHA Resource Center.
• Avoiding foreclosure on an FHA loan:
  Visit the HUD National Servicing Center web page.
• Non-FHA mortgage loans:
  For complaints concerning practices which include disclosure of interest rates and finance charges (APR), prepayment penalties, credit life insurance, fraud, deception, etc. contact the appropriate agency from this list to complain about the mortgage lender or mortgage broker.
• Lender threatening to foreclose or mortgage in default:
  HUD funds housing counseling agencies throughout the country. To find a housing counseling agency near you, call toll-free (800) 569-4287 immediately for free guidance or visit the web page.
• Settlement Procedures: (FHA and non-FHA mortgages).
  Visit the RESPA web page for information on RESPA disclosure requirements such as the Good Faith Estimate, HUD-1 and escrow account statements, and how to file a complaint with your lender concerning the servicing of your loan.
• File a housing discrimination complaint:
  Discrimination in mortgage lending is prohibited by the federal Fair Housing Act and HUD's Office of Fair Housing and Equal Opportunity actively enforces those provisions of the law. Learn how the Fair Housing Act can help you fight predatory lending.

As always, if you believe that you're being taken advantage of, taking action at the soonest possible moment will save you much headache and possible heartache later on. Local advocacy groups may be able to help you out, but your best course of action is the personal moves you make to counter predatory lending.

2008/09/30 consumer tips