Take Advantage of Homeowner Programs to Avoid Foreclosure

September was a month full of chaos in the mortgage and housing markets. Looming failure of Wall Street titans like Lehman Brothers and AIG, buyouts of troubled banks like Washington Mutual and Wachovia, and talks of federal government intervention made interest rates unpredictable for potential homebuyers. With ARM loan interest rates continuing to adjust upward, and energy and food costs remaining high, borrowers by the hundreds of thousands forced to enter foreclosure. In fact, according to the Mortgage Bankers Association, 40 percent of all subprime ARM loans in the U.S. were in some stage of foreclosure or default in September, with 12 percent of all prime ARM loans falling into the same category.

Widespread foreclosures create numerous problems for both individual neighborhoods and for the country as a whole. Obviously, on a national level, soured loans have cost companies millions of dollars and in some cases, their very existence. On a local scale, abandoned foreclosed properties that fall into disrepair are magnets for vagrants and criminal activity. Nearby homes also fall in value as foreclosed homes make the neighborhood less desirable to live in.

Millions more of American homeowners are expected to fall into foreclosure during the next few years. In some cases, there may be no way to save their home. Yet in many other cases, homeowners can avoid foreclosure by talking with their lenders and possibly taking advantage of new federal programs.
Talk to Your Lender

The first step to avoiding default and foreclosure is to approach your lender and tell him of your situation. If your ability to keep up with your payments is lagging, talk to your mortgage lender before you actually have to make a late payment. Foreclosure means a huge loss of money for lenders, plus a lot of hassle to resell the property. Many would rather renegotiate the terms with you and possibly even write-down your mortgage balance a bit, instead of losing out completely on their investment when you default.
HOPE for Homeowners

In addition to early programs for struggling homeowners, the federal government started a new initiative in early on October 1, called HOPE for Homeowners, which could save as many as 400,000 American mortgage borrowers.

The program authorizes the Federal Housing Authority to back more adjustable rate mortgage (ARM) loans in danger of failure. It works like this: a worried homeowner contacts a HOPE representative. The representative works with the lender and voluntarily gets them to agree to write down the loan balance to 90 percent of the current value of the home. Then, they refinance the original mortgage into an FHA-guaranteed 30-year fixed rate mortgage with predictable monthly payments. As the value of the home appreciates in the future, the homeowner agrees to share some of that equity with the government.

In order to qualify for this program, borrowers must be able to fully document their income, occupy the property involved (no investment properties will qualify) and their housing costs after the refinance must total no more than 31 percent of their income (38 percent if they participate and in a 3-month trial period with timely payments.)

Borrowers interested in participating in the FHA program can contact their lenders, speak with a HUD counselor, or call 1-888-995-HOPE

Tips for First Time Home Buyers

Buying a home can be a long, complicated and frightening process, and it is important to be prepared. Knowledge is power when it comes to negotiating the difficult world of home prices, interest rates and mortgage loans. For a first time home buyer, there are many factors to consider before you buy. The more information you can gather before you start shopping, the better off you will be.
Look Beyond the Price

When it comes to securing a quality mortgage loan, it is important to look beyond the interest rate to the true cost of the loan, both now and in the future. Read the paperwork, including the fine print, carefully, especially if the interest rate is below market rates. Upon closer inspection you may find that the interest rate is guaranteed for only a short period of time, or that it is subject to rise sharply in the future. Your mortgage loan may be the most important contract you will ever sign, and it is essential that you understand your rights and your responsibilities before signing on the dotted line.

In many cases it will make sense to hire a lawyer to review the mortgage paperwork for you. Many communities provide some sort of first time homebuyer program designed to help renters become homeowners
, and these organizations may be able to provide the legal advice you need at a price you can afford.
Every Situation is Unique

Every homebuyer will have a different set of circumstances, and it is important for the lender to consider those factors. Some homeowners may plan to move in a year or two, and they may be able to benefit from a variable rate mortgage. Others will plan to remain in their home for decades, and those home buyers may benefit from the stability of a fixed rate mortgage and its predictable and stable monthly payment.

It is also important for those buying a first home to factor in the additional costs of the mortgage when deciding how much they can afford to pay. Things like closing costs and the high price of private mortgage insurance can drive up costs and eat into funds that would otherwise be available for home improvements, furnishings and other essentials. In some cases sellers may be willing to pay some of the closing costs, and some lenders will be able to negotiate those closing costs downward. The key is to ask those questions before the closing date arrives, and to be prepared to search for a better deal if necessary.

First time buyers should also be on the lookout for any hidden fees. These small nuisance fees can add up to hundreds of dollars on closing day, so be sure to scour your paperwork for any such fees. If you are unsure about the legitimacy of any charge be sure to ask for a valid explanation. Again, an experienced real estate attorney can provide valuable insight into which fees are reasonable and which are out of bounds.

And of course first time home buyers should not lose sight of the home itself in the quest for the perfect mortgage. Any defects should be pointed out to the seller well before the closing is to take place. The costs of every needed repair should be carefully negotiated prior to the purchase, and buyers should always follow up to make sure that all requested repairs have been made. A home is a major purchase, and it is important to make sure that everything has been taken care of before moving in.

Existing Home Sales - March Report
Last Updated: 3/1/2010

For the second month in a row, sales of existing U.S. homes fell in January, according to the National Association of Realtors. With the deadline of the first-time home buyer tax credit in December extended through June, buyers felt less pressure to buy immediately. Total sales fell 7.2 percent to a seasonally adjusted annual rate of 5.05 million units, down from December's downwardly revised 5.44 million sales. The silver lining is that January's sales figures were up 11.5 percent over January 2009 data.

"Most of the completed deals in January were based on contracts in November and December," said NAR chief economist Lawrence Yun. "People who got into the market after the home buyer tax credit was extended in November have only recently started to offer contracts, so it will take a couple months to close those sales. Still, the latest monthly sales decline is not encouraging, and raises concern about the strength of a recovery."

The national median home price fell in January to $164,700 from a downwardly revised $170,500 December price, but the latest median is unchanged from a year ago.

The NAR defines existing homes as all previously-owned single-family homes, townhouses, condominiums, and co-ops. The group "seasonally adjusts" the sales numbers to factor in things like inclement weather, school sessions, winter holidays, etc. to smooth out the trends. The NAR also describes its sales data based on an annual pace. The monthly figure represents the total number of housing units that would be sold in one year if the current rate were to continue unchanged.
Sales Pace by Region

Sales of existing homes dropped across the board on a regional basis during January with the Northeast seeing the greatest decline. Sales there fell 10.9 percent to a seasonally adjusted annual pace of 820,000 units. Still, things are better than last year, as the latest numbers are up 22.4 percent from January 2009.

The South experienced a 7.4 percent monthly decrease in sales, to 1.87 million homes, but sales are up 12.0 percent from the previous year.

In the Midwest, sales declined by 6.9 percent in January to a rate of 1.08 million units. Sales in the region are up 8.0 percent compared with year before.

Sales fell by 5.2 percent in the West to an annual pace of 1.28 million houses, yet still rose by 7.6 percent from one year ago.
Home Prices

The median home price, the point at which half of all homes are sold for more and half are sold for less, fell in all regions but the Northeast on a monthly basis.

In the Northwest, the median price rose to $245,300 from $240,700 in December, and the new price was up 8.8 percent from January 2009.

The Midwest saw a price decline to $130,300 in January from $135,300 the month before. The median price also fell 1.0 percent below the previous year's price.

In the South, the median dropped to $140,200 from $148,400 in December. The price is down 2.0 percent over last year.

The median price in the West sank to $203,400 in January, from $216,200 the month before, and it is down 5.8 percent over the same month in 2009.
Inventory

Housing inventory decreased for the sixth straight month in January, falling 0.5 percent to 3.265 million homes for sale. At the current sales pace, that represents a 7.8-month supply, an increase from December when there was a 7.2-month supply. On a yearly basis, inventory is down 9.6 percent.