Upside Down Mortgage

Archive for January, 2008

Subprime Crisis Causes And Effects

The United States Treasury Department, along with several other federal financial regulatory agencies, released a Statement on Subprime Mortgage Lending in June 2007. This sizeable document (it is 31 pages long) is aimed at people involved in borrowing and lending for mortgages at subprime rates. Of particular concern to the authors are adjustable rate mortgages (ARMs). The Statement provides guidelines that will ensure more appropriate practices regarding ARMs. The agencies are concerned that lenders persuade borrowers to take out ARM loans by giving them an extremely low rate of interest (called a “teaser rate”) for the first few months. Unfortunately, this rate adjusts upward very soon to a formula based on and exceeding the prime rate. Now the loan is no longer within the means of the person who is classified as a subprime borrower, and it will cause extreme financial hardship. Other issues covered by the Statement are below.

Adequate documentation of income for subprime borrowers is not always required by lenders. This practice is of concern to the agencies because it leads to so-called “liar loans.” A borrower can put whatever inflated number he chooses on the application form, knowing there will be no effort to verify that this is truly the amount of his income. These loans greatly increase the chance that the borrower will default, which is a problem for the lender as well.

The agencies also address the problem of the introductory rate period. Most ARM loans include significant penalties for early prepayment, and the penalties extend well past the initial period. In addition, borrowers are not always given full information about additional monthly payments that will be required, such as taxes and homeowners insurance. This failure to disclose such information leaves the borrower at an enormous disadvantage, and will no longer be permitted.

It is interesting and unusual that, three months before releasing the Statement on Subprime Mortgage Lending, the agencies involved in creating it requested comment from the public, from members of Congress, and from financial institutions that engaged in mortgage lending. From the industry came the comment, over and over, that they are opposed to disclosing to borrowers all the details of ARM fees and rates. They think that would result in “overloading the consumer with information”! This is of great concern to the agencies, and to the author of this article as well. We don’t think the average consumer requires the protection of subprime lending agencies from information overload. Consumers can handle information just fine! Failure to disclose costs and fees for which the borrower will be responsible is nothing short of deception.

Virtually all comments reflected uneasiness that there was no adequate definition of the term “subprime” within the Statement. When the final revision appeared in June, readers were requested to refer back to the definition of a subprime borrower contained in the earlier guidelines document Expanded Guidance for Subprime Lending (2001). All the pertinent characteristic are listed there, and can be used in determining whether a particular borrower should be classified as subprime.

The Statement also requires that every borrower be given a full repayment schedule, including information on amortization, and an estimate of the amount of insurance and taxes that will be applicable. This must be done whether or not the extra costs are escrowed and are included in the loan. The extra charges must be part of a mandatory and accurate calculation of the borrower’s debt ratio.

The Statement on Subprime Mortgage Lending is a valuable effort to remedy some of the ailments of the current housing market, and insure that subprime borrowers as well as subprime lenders are not left with a financial disaster on their hands because of imperfect communication between them.

About the Author:

Learn more about Subprime Consumer Lending as well as insight into Foreclosure Lending Subprime when you visit http://www.subprimelendingcrisis.com, the online portal and resources for subprime mortgage lending crisiss.

Article Source: ArticlesBase.com - Subprime Mortgage Lending - 2007 Statement

Insights & Outlook For The Effects Of Subprime Crisis

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Mortgage Fraud Attorney Florida

When the financial bubble burst, many people’s lives went spinning out of control. Unfamiliar with the fallout they would be facing, homeowners were scrambling for information. Unfortunately, the unscrupulous scammers were just starting to gear up their machines to reel in the catch.

The FBI defines mortgage fraud as "any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan", and there is a plethora of companies doing just that.

There are several organizations across the country that offer rescue plans for people in financial distress. However, incidents such as changing signed documents after the clients leave the office, or other acts of fraud, are all too common.

Some unethical companies may claim to be working in government-sponsored homeowner programs or agencies. Actual or fictional names of government agencies or other official-sounding terms could also be used as the scam artists do their best to appear legitimate.

There is help available for those who have been unfortunate enough to fall prey to these tactics.

If consumers think they have encountered a mortgage fraud situation, or are even suspicious, one of the first stops they can make is the Florida Attorney General's Office. A toll-free Consumer Hotline has been set up, and there is a variety of mortgage- and fraud-related information on their website.

Through its Division of Real Estate, the Florida Department of Business and Professional Regulation sets rules and guidelines for real estate professionals and exercises disciplinary authority. A Consumer Complaints Section is available to report any incidents people believe to be unethical or illegal conduct by real estate professionals.

HUD, the U.S. Department of Housing and Urban Development, also offers consumers the resources they need to make intelligent decisions when it comes to their mortgages.

Here are some points to watch out for when dealing with rescue recovery plans.

Avoid up-front fees:

One prominent scam in play is the requirement for up-front fees by mortgage rescue firms. Consumers facing foreclosure are coerced into paying fees for loan modification or payment rescheduling assistance. All too often, these companies are not legitimate and do nothing to prevent a foreclosure from proceeding. In the end, the homeowner loses the fee, receives no assistance, and forfeits their home.

Because so many have been victimized by this fraud scheme, governments at all levels have put the brakes on these exorbitant fees. The FTC (Federal Trade Commission) recently put out a consumer warning to avoid any company that asks for a large fee in advance, noting it is definitely a red flag to consider. These fees are prohibited in 20 states, with more to come.

While there are a large number of nonprofit agencies that do offer homeowner assistance programs under government sponsorship (usually through HUD), they charge little or no fee for their services.

Leaseback/rent-to-buy scams:

In order to get the consumer to sign on for this scheme, the scam artist offers a deal to have the owner turn over the deed to their property in exchange for a rent-to-own agreement. Supposedly, this will allow the owner to stay where they are and at some point in the future, reclaim their home. Unfortunately, once the deal is signed, the owner may find there are a number of hidden fees and penalties, making it easy for the scam artist to void the deal and evict the owner.

Debt-elimination schemes

In this scenario, the scam artist often claims to be able to eliminate the homeowner’s debt by way of secret laws or other financial trickery known only to his company. When the homeowner buys into this plan, it usually involves a fee for advice, and the owner is convinced to halt their mortgage payments to participate in the false program. This puts the homeowners in a dire position as they end up in a far greater debt situation that is difficult to resolve.

About the Author:

Visit WaterfrontPropertiesAdmiralsCove.com for everything to do with Admirals Cove Jupiter. You'll find information about a range of issues and properties in this beautiful area, including Homes For Sale in the Admirals Cove Golf Village.

Article Source: ArticlesBase.com - Mortgage Frauds Rampant in Florida

Payments and Modifications Miami Florida Attorney Foreclosure bankruptcy www.FloridaLawAttorney.com

Do It Yourself Loan Modification Kits

Most of us have heard about the recent flood of foreclosures resulting from changes in the housing market. Now, many of the homeowners who find themselves threatened by foreclosure are seeking assistance in the form of loan modifications from lenders and other parties. Recent reports show that the demand for loan modification programs is growing, leading to a bottleneck  in foreclosure prevention programs for many of those using do it yourself loan modification options to try to save their investment in a home within a certain timeframe. As American households continue to seek help, government agencies have stepped in with some recommendations for how to establish an affordable mortgage payment schedule. Here are some of the things financial experts recommend for obtaining a mortgage loan modification.

1.  Collect All Necessary Paperwork

When it's time to look for foreclosure help in the form of a loan modification, you should start out with the proper documentation in hand to show lenders and other parties the financial details of your situation. This starts with having the current mortgage payment schedule handy. You will also want to have paperwork on hand for a home-equity line of credit (HELOC) or second or third mortgage to be able to see what kind of equity you really have in your home at any given time. If a property is part of a collective association, such as a condo or townhouse, those homeowners’ fees should also be included.

Along with the documents on home equity and a mortgage payment schedule, each responsible member of your household will want to have appropriate income documents available. Just like when the original mortgage was set up, having tax records of income is critical for negotiating the loan modification process. Since the writing of the original mortgage, your household’s income situation may have changed. You should collect pay stubs for salaries or weekly paychecks, as well as all applicable self-employment documents for sole proprietors or those working primarily as 1099 contractors. An accurate assessment of property taxes should also be included, and government officials recommend bringing paperwork related to any other active loans, including student loans, car loans, credit card statements and more, to provide a complete view of a household’s finances.

2.  Do a Self-Assessment and Decide on a Loan Modification Process

Another critical step in the loan modification process is to decide how much legal oversight your household needs. Those with the resources to bring in qualified counsel can benefit from having an attorney look over documents from a party providing assistance with the loan modification.

In addition, recent news reports indicate that government lender Freddie Mac is recommending households create a “financial statement” in the form of an essay that details their financial situation, such as any financial hardship you are dealing with and what you expect for the future.

3.  Hook Up with Loan Modification Assistance and Evaluate Professional Offers

If a household is choosing to rely on an outside third party to help decipher a loan modification kit or similar tool, that's not necessarily a bad idea. Just as the household received some professional assistance with the original mortgage, this kind of assistance can be good for a loan modification program. However, public officials warn consumers to be wary of any loan modification scams in which third-party firms make false promises up front, but fail to deliver immediate assistance after receiving payment for services. You should hold third parties to professional standards by staying engaged in the process and refusing to pay up-front fees without a reasonable assurance of a successful outcome.

If you are looking at a potential foreclosure, the above steps will get you started on the road to a brighter future. A practical loan modification will save your credit and keep you in your home. These programs are becoming a vital tool for helping us stay afloat in tough times and saves communities from the damage a rash of local foreclosures can bring.

About the Author:

P Davis helps people understand the Loan Modification Process. A few helpful tips can help most homeowners lower their mortgage payments.

Article Source: ArticlesBase.com - Foreclosure Help in 3 Steps: Preparing for a Loan Modification

This Loan Modification Kit Can Save Your Home and You Can Do It Yourself for under $50