Love's Real Stories

Answering all the real estate questions you never knew you had.

Category: Loans

March 13, 2014

Forward in Reverse

The Reverse Mortgage has shifted into a new gear. The loan program that allows people to tap their home’s equity for income can now be used to either buy or refinance a home.

The Reverse Mortgage is backed by FHA, and was created for people over 62 years old to refinance the equity in their home, eliminate monthly payments, and use the money as a cash advance or monthly income, with the guarantee that they will never owe more than their house is worth.

The program now also allows for people over 62 to buy a home and finance the debt as a Reverse Mortgage so they have no monthly payments, and receive money instead.

“The Reverse Mortgage completely changed my life,” says Carol Hennison. “After my husband passed, I couldn’t keep our home. The payments and upkeep were too much. ”

Carol sold her home and with the proceeds made a down payment on her newer, smaller place. She financed the purchase with a Reverse Mortgage, which allows her the choice of taking cash advances or receiving monthly payments. Carol chose to receive the monthly payments.

“I have no loan payment and I receive monthly income,” she said. “I can’t believe it!”

The catch is that Carol’s loan balance grows over time, as she receives payments, and the loan balance could eventually exceed the value of Carol’s home. If that were to occur, though, the lender can never pursue her or her heirs for anything. The Reverse Mortgage program is designed to keep people like Carol in their homes and the payments she receives will continue until she moves or dies. If there aren’t enough proceeds from the sale of the house to pay off the loan, the lender takes the loss.

John Baxton was behind on taxes and insurance for his house, and late on his mortgage payments. “The last thing I wanted to do was sell my house, but it looked inevitable,” he says. “Then my son heard about this program and I was saved.” Baxton refinanced into a Reverse Mortgage which ended his house payments and gave him monthly income, as well as cash to bring his taxes and insurance current.

“Now I can stay here and live very comfortably.” he said. “It’s quite a reversal!”

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December 17, 2013

The Deal

Twenty-five billion dollars used to sound like a lot of money. But next to the trillions we’ve seen thrown around in bank bailouts, tarp funds, and mortgage scandals, it’s no surprise we barely lifted an eyebrow and had to stifle a yawn at the new National Mortgage Settlement. The government has settled with the five biggest banks for a collective fine of $25 billion as compensation for mortgage and foreclosure fraud. The money is supposed to go to homeowners who were wrongly foreclosed upon or wrongly denied loan modifications.

Depending on which politician, consumer advocate, or analyst you listen to, the deal is either a boon or a bust.

Version one, boon:

The government has finally gotten somewhere with their commitment to justice by nailing the banks for their fraudulent loan practices. This is the biggest money settlement in our nation’s history, and it’s just the beginning. The banks are also obligated to open up loan modifications in the form of principal reductions for hard-working people who are “underwater” in their homes, whose loans are more than their homes are worth. If the banks don’t play this right, they will be whacked for more fines. This will break the back of the foreclosure crisis, our economy will straighten up, and home values will rise.

Version two, bust:

The big bank boys are slapping each other on the back, lighting big cigars, and clinking their drinks together in celebration of being let off the hook once again. For the equivalent of a parking ticket in their big-buck world, they are absolved of high crimes against the people of our country. No banker has been brought to justice in this scandal, and they have just been given a new “Get Out of Jail-Free” card. Now with no fear of lawsuits they will drop the hammer on foreclosures they’ve been stalling, which will further depress home values.

Twenty-five billion is a big number. Get out the calculator and start dividing. Please, let’s figure out who gets how much, and if it will make a difference.

No yawning.

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August 22, 2013

Dressing Up

I received a phone message from a frustrated homebuyer, who was calling about the article I wrote about a frustrated homebuyer.

“The only point you made,” he said, “is that buyers with all cash are beating out us buyers with loans. Duh. We know that. Why don’t you give some constructive advice to help us out instead of just rubbing our faces in it?”

I considered his constructive advice and went on to the next message, this from a formerly frustrated homebuyer who succeeded in buying a house.

“We were so frustrated,” she said. “We made offers on six houses, and lost every one. Then we learned the secret to success. The secret is all about dressing up. Our Realtor dressed us up. There were three other offers on the house we bought. Two were all cash.”

I located that Realtor and asked her what gives with all this dressing up. She looked furtively about and quickly ushered me into her office. In a hushed voice she said she would tell me the secret if I promised not to tell anyone, which I haven’t.

She described the typical situation: A house comes on the market. The house is shown intensively because housing inventory is low and buyer demand is high. The seller receives five offers right off the bat. The seller and their Realtor review the five offers. One is all cash and close enough to asking price, so it’s the winner. The offers with loans are the losers.

Then, she revealed her secret: “I insisted I be given the opportunity to present my buyers’ offer to the seller. In person. Buyers’ agents have that right, but it’s rarely exercised these days. I was persistent and the listing agent made arrangements with the seller. Then the dressing up began.”

The dressing up consisted of: 1) a glowing letter from the buyers’ lender proclaiming the buyers’ qualifications, with assurances the loan would close quickly; 2) a letter from the buyers themselves containing a mini-biography, complete with photos; 3) kneeling before the seller and begging them to take her buyers’ offer.

“Actually,” said the Realtor, “no kneeling; I simply described my buyers in a very personal way to the seller, and expressed their true desire to own that home. The seller reacted favorably, and chose my buyers’ offer over cash.”

I’m calling this information constructive advice. But remember, it’s a secret, so keep it under your hat.

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May 23, 2013

Rubber Check Time

Here’s a man who says he lost his home to foreclosure, though he never failed to make a single payment to his bank.

“I was working overseas,” said Allen Coltin, “and to my surprise, my bank sent me foreclosure letters. I called them. I screamed. I had an attorney scream and write letters. They foreclosed and made me hit the road.”

Colton has been waiting for a promised settlement. “I can sue them, but these guys are playing with monopoly money.” He has not drawn the monopoly card that says “The bank has made a mistake in your favor.” More like: “Go directly to jail. Do not pass Go.”

In the meantime, the “Big Five” in the banking business (B of A, Wells Fargo, etc.) made a settlement with the Feds and the States to pay out billions of dollars to people who similar to Colton, were victims of “foreclosure abuse.” The payouts have begun, but sadly, and perhaps not surprisingly, some of the payout checks are bouncing like rubber balls.

The official word from the banks: “No comment.”

The official word from the consulting company hired by the Treasury Department to handle the payouts: “Our employees are not authorized to speak concerning this matter. Therefore, no further information is available through our office.”

The official word from the Treasury Department: “Take a hike,” (according to one of the rubber-check recipients).

Granted, this is a complicated business. After all, the settlement money is $3.6 billion; being paid out to 4.2 million people, in amounts ranging from $300.00 to $125,000.00. What’s the likelihood the right check will go the right person, bouncing or not?

Guess who got a check for $300.00? Allen Coltin. “And it bounced!” he screeched. “Mine was supposed to be $125,000.00! I lost my house! Gaaa!”

On the other hand, we find the lucky ones. Here’s a woman who pulled a good monopoly card: “I just got a check for $125,000.00,” she said. “I had no idea it would be that much. I knew I got jacked around by the bank, but this changes everything!”

Here’s a man who got a letter from his bank stating his entire home loan was forgiven because “Our institution has been made aware of errors in the transference of documentation regarding your mortgage.” The man remains nameless, and all he said is, “Shhh!” and very quietly, “Yeehaww.”

As for Allen Coltin, he’s still looking for that Get Out of Jail Free card.

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October 10, 2012

A Rare Time

Houses for sale are in short supply, and buyers for houses are abundant.

“We had four offers the first three days on the market,” said one seller. “We were stampeded. Buyers were coming through when I was getting dressed for work in the morning, and when we were eating dinner in the evening. I just told ‘em ‘don’t mind us, make yourselves at home’!”

True, the competition among buyers is tough, but houses are still on sale. Prices are steady- with a small upward crawl.

Houses are on sale and money is on sale, too. Interest rates are lower than your grandparents could get. A low interest rate means a quicker pay-down on your loan; quicker than your grandparents could pay down their loan.

“Our lender showed us the payoff rate on our loan, and we were amazed,” said a buyer. “Because our interest rate is so low, about 30 per cent of our payment goes toward paying down the principal- it’s not all interest. That means we’re gaining equity fast.

The sale on houses and money means people who want to sell and buy higher get a break. The difference between their current loan payment and the loan payment on a new home is smaller than ever before. Big gains for little pain are out there right now.

Houses and money won’t stay on sale for long- not both at the same time anyway. The small upward crawl in house prices will inevitably get up and start walking. Interest rates don’t make a habit of lying low, either. Their natural urge is to head upward. When prices and rates make their move, buyers won’t have it so good. Neither will sellers buying up. Big gains will be more painful.

But right now the sale is on. For buyers it is tough maneuvering through the frenzied crowd, but worth it if you have the bucks. For sellers it couldn’t be better if you plan on buying, too.

It’s a rare time when houses and money are on sale- you might want to look around and see if there is a deal out there for you.

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