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Mortgage Dilemma - Some Possible Options For you
The Mortgage Dilemma
There is nothing worse than feeling trapped inside of a situation with your hands tied...and your hopes and dreams not meet, and especially when it involves the home you are living in. You can't pay the mortgage payment and make your commitments to everything else in your budget and this is the "Mortgage Dilemma" that too many Americans are in. What is just as bad almost, is when your hands are tied, with a upsidedown mortgage loan and you can't sell, refinance or modify the loan. But, you would like to get out of the upsidedown mortgage. You " can " pay the payment, you are current, but you would like to purchase another house; so what are your options? A valid question without a whole lot of options.
It has been reported that the refinance boom in 2009 helped the mortgage banking industry to huge profits for the year, according to a new analysis of company earnings released by Inside Mortgage Profitability. It said that 19 lenders reported a total of $16,645 billion in mortgage earings for all of last year, more than triple the amount they earned during 2008.
So with these statistics.....a whole lot of folks refinanced their mortgage loans in 2009 and a lot of people have made a lot of money, and some of them the same institutions who made money the first time the mortgage was made.
I am writing this hub because I saw a question something like this in the questions section and thought I would elaborate on the current "mortgage dilemma" for so many people. The hubber said they bought in the peak of the market about three years ago and now their home is upside down.......
Why are we here?
There are numerous Americans going through this same situation as I write this hub. Sales have decreased again last month, but that doesn't mean that refinances are not being done, maybe not as many.
What it does mean...with all of the new changing in mortgage lending guidelines meaning; FNMA, FHLMC and FHA....things are changing, some for the good of America and some of the changes will make it hard again for some low to moderate income individuals to have homeownership. New home purchases will not be as they ever were again probably, when the Subprime market went haywire and contributed to the three Investors above hitting rock bottom... maybe not FHA but the other two did.... We all know that story and we will be paying for it at some point.....probably.
I was working still in mortgage during the peak myself, so I saw what went on first hand. Here is actually what happened in a nutshell. Mortgage Bankers, Mortgage Companies, Mortgage Lenders and Mortgage Brokers, whatever title you call them..."everybody" made loans according to the guidelines that were generated by the investors. The guidelines changed/were amended/became less restrictive to borrowers who were getting the Subprime loans so that they could benefit from some of the "profits" instead of all of the Subprime Lenders reaping all of the benefit of such a booming market.
There was 100% financing, seller paid all of the closing cost which was added into the sales price and the value as based upon all of this....or somebody was going to be angry....this made the 80/20 loans prominent at that time also. The 80% first mortgage and 20% second, nothing in equity from day one.
Some borrower's had little or no funds for down payment and the reserves requirement was eliminated if the borrower's credit score was a certain number...individuals with less than perfect credit were allowed to get 100% financing, get a gift for closing cost over and above the seller paid cost....and the broker's could charge up to five (5) percent (in some State) on the loan over and above the lender who loans the money. This was how the Broker made their money. The Broker, we know is the middle man who gets the client for the Lender who funds the loan...THEY did not make up the guidelines...they only took advantage of them...but why wouldn't they...it was the regulations of the Federal and State that allowed this and it was okay. If you remember Congress stated that there should be more loans made to "everyone" who desired to have a home...So thus the guidelines and regulations were altered to allow more Americans homeownership.
I worked in Mortgage Lending for over 30 years. I have managed, underwritten and originated mortgage loans. I have seen the good, the bad and the ugly and I was working during the meltdown. I have seen the results of how homeowners have suffered from the less restrictive guielines. Now, they are hurting. I am not being negative nor do I mean to sound un-symphatic to consumers...actually I am speaking in their defense. Some of this could have and should have been prevented as you can hear from the televised news. **The information I have given you are programs and products which are available. I do not recommend or not recommend these, they are for informational purposes only. Other restrictions and guidelines may apply. You should contact your lender.
What has happened now!
The problem now for those who did obtain these 100 % loans; is that "in some cases" the appraised value was inflated to cover the closing cost that the buyer could not pay and the seller did not want to be taken out of his profit, but he wanted to sell the house so the price was inflated as well and the value is usually the same or higher than the sales price if all goes well. Therefore we are now seeing "declining values" almost everywhere. Some of these people do not have equity built up because you are paying more interest during the first few years of the mortgage to begin with and very little to the principal.
Who's fault is it? There is actually no need to try and place the blame for this huge catastrophe. It was allowed by the regulators...and the oversight committee did not for some unreasonable reason....see it coming. Even little old me could have told you that it is never sound underwriting practices to give anyone something they can't afford, just because they want it and everybody else is getting it too.....
I do not mean to sound cruel...but if someone had had the moral to step back and look at what was going on in the markets at that time....our America would be in a lot better economy now.
Some Options For You
If you need help making your payments and can't financially pay the full payments; talk to the servicer of your loan (lender). They are doing everything possible to help those who cannot help them selves. If you have lost your job or had a decrease in income, you can still appeal for some kind of help.
Some options are:
- forbearance agreement
- refinance programs - to include a FNMA Home Affordable Refinance product up to 125% over the value of your home. It is called Refinance Plus Loan. Ask you lender if you can qualify for this loan if you have a declining value.
- the above may also be available if you are in a more risky product such as an ARM loan.
- Home Afforable Modification...some call this the Obama modification...This product has been originated by the government to help those who are struggling to make their payments for one reason or another. Loss of income, added expenses, hardship in some form. You must be current with your mortgage payment with no 30 day lates. Your housing ratio must be greater than 31% to qualify among other things. You may go to HUD's website and see the guidelines yourself and then ask your lender about this process if you have not already.
There are those who have had no options but to consider foreclosure, short sale or deed in lou.To you I am deeply sorry and hope that you will someday recover and find a way to own a home again and normally if you have stable income and the foreclosure is older than 3 years...you could qualify again with a good credit score and some re-established credit.
For those who simple are in over their head with a declining value; if you can make the payment as in the case I read about and do not have the equity and/or savings, to get out of the mortgage loan, there is not a lot of choices that you may have. Depending upon the upsidedown amount...I have seen people sell the house with a sales price above the value . This happens rarely and it is usually not a sufficient amount and if it did you would really have to have a buyer who was gungho for the house. The buyer pays cash above the value as the loan amount is based upon the lower of the sales price or appraised value. In this economy, and with housing prices slipping, I don't see happening.
Right now is not a good time for many Americans and it doesn't really matter how we got here, the main issues is being able to get into a more stable financial situation, with a job that can meet your needs and help you survive. The road to recovery in any situation is sometimes long, but remember you are not alone and you can and will overcome and survive. You are an American and you will get through this...stay positive.
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