A reminder I have brokers standing by to answer your mortgage questions. I was on vacation last week and have not received any questions this week. So email questions to mapadilla(at)ocregister.com or post them here as comments. See past questions and answers HERE and HERE. Questions and answers are posted Fridays. And if you post a question please say what city you live in.
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August 29th, 2008 at 11:05 pm
My question is with this new bill that bush sign will it help me. I have a first and second mortgage on my house total house debt is 510,000 the house on my zip code have drop they are selling for 227 to 253k im under for more then 250k plus my second loan is a variable.if you could please tell me who could help me with this loan problem. My house payments are out of control. Thank You
August 30th, 2008 at 2:48 am
Martin…who could help you? The bank. Get their location, drive by and drop off the keys as you drive to your new rental.
August 30th, 2008 at 6:41 am
If someone told you that you could buy something for twice the price that everyone else was paying, would you buy it? I agree, give them the keys. If you are really in financial trouble, live in the house rent free while you save up the money for the new rental. Your other option is to remain underwater while you struggle to pay twice or three times the amount it would cost to rent your house. Keep in mine that your house will very likely be worth less than you paid for up to 10 years while you wait for values to return to the unrealistic level they attained. Sad, but you have to be realistic and it’s just not worth it.
August 30th, 2008 at 2:29 pm
I have a question about PMI.
In the past, someone could put down less than 20%, pay PMI for a bit and refi after the house appreciated.
Nowadays, say you put down 10-15% but the house is depreciating. Is there a time limit or something where PMI will drop automatically or has it always been that an owner pays PMI if they owe more than 80% of the value of the house?
I hope that makes sense.
August 30th, 2008 at 8:21 pm
FHA allows you to buy homes with as little as 3% down with MIP for a maximum of 5 years. The maximum purchase price until Dec 31st 2008 is $729,750. In 2009, that # decreases to $625,500. You are required to have MIP even if you put more than 20% down on all FHA financing.
On conventional, you can avoid PMI by putting 20% down. Qualifying is more difficult.
FHA allows you to do things for qualifying you can’t do on conventional fannie & freddie stuff. For example, the 3% down payment can be a gift.
On conventional, the downpayment money must be seasoned for 60 days.
On FHA, you can use a non-occupant co-borrower’s income in order to qualify for a loan.
On conventional, you can’t do that.
For more answers to your ?’s, feel free to go to our website - freemoneyhour.com & click on “Ask Fred”.
August 31st, 2008 at 7:11 am
Say it’s a conventional loan. What happens when the value is decreasing even though you’ve been paying on it for years now. Do you continue to pay PMI?
August 31st, 2008 at 10:03 am
What would be the ramifacation if you walked away form a house you bought and the house lost 60,000. from the original price?
August 31st, 2008 at 11:11 am
I’m from IL. We hear so much about the huge foreclosures now in effect in CA. Why are the prices still so rediculously high? R the banks in CA so lucrative they can afford to hold these properties forever without dropping the prices to a reasonable level? By the way, $500,000 IS NOT REASONABLE!
August 31st, 2008 at 3:38 pm
Dana: When it comes to foreclosures and or short-sales, banks have never been smart. They very rarely negoitate until thousands upon thousands have been lost. They constantly try to play hard ball with their homeowners while no one can even get to first base. Business sense, banks don’t have them.
August 31st, 2008 at 9:30 pm
Denzil,
It will most likely just affect your credit. A lot of people do not know the answer to this question & it is a great question. If you care about your future credit and you want to save face and not have a NOD or Foreclosure on your credit report, you might want to consider a short sale (if you are upside down - which is what i assume).
How much do you owe on the property? Did you do 100% financing when you bought it?
There will be no tax ramifications if there is a Capital loss on the sale of a personal residence (please consult with your CPA). Most lenders will give you a 1099-c for the amount the bank writes off of the original loan, but since you will most likely have a capital loss on the sale, that will wipe away any tax ramifications (we just need to know the purchase price & what the property sold for or will sell for).
On a foreclosure, it depends on what the property sells for which could take up to 8 months after you walk away from it. Bankruptcy laws allow you to stay in the property longer and you might want to consult with a good BK Attorney. I have some names if you want. I do not get one penny for the referral.
The only time it hurts people, when you get a 1099-c is when you bought the property like 15 years ago, refinanced the property, took cash out and had a capital gain above 250k if single or 500k if married. Then you have some tax issues.
Some lenders will not send you a 1099 and will do what is called a “lein release” on a short sale. If you want to know the names of these lenders, go to our website - freemoneyhour.com & click on “Ask Fred” & I will be happy to tell you.
When a lender does that, that gives them the right to come after you up to 10 years to collect. Many of these lenders sell these rights to “Industry Vultures” and these guys will be watching you and your finances for the next 10 years. They buy this debt for pennies on the dollar and hope you hit the lottery or recover financially and if you do, they will be sending you a nice little “love” letter asking you for money.
So, be careful what you are signing. Know your options. Talk to a good CPA and someone who understands all the tax/credit ramifications of a short sale and foreclosure.
August 31st, 2008 at 9:37 pm
Greg,
On conventional financing PMI automatically drops off after 7 years & 5 years on FHA (even if the value decreases).
You can get rid of PMI on conventional by (1) refinancing if you have 20% equity, (2) paying the loan balance down to 80% ltv, or (3) proving to the lender you have 20% equity by getting an appraisal - very difficult & a lot of work.
September 1st, 2008 at 7:25 am
That’s what I needed. Thanks!
September 1st, 2008 at 9:00 am
I was an LO for New Century but never did FHA’s. The new law illiminates the down payment assistance from none profits where the seller pays the down after closing back to the none profit (is that correct?). Anyway does that have any bearing on CAL HFA loans? The differed 2nd on a CAL HFA loan is deffered until you sell the house or pay off the first but does it have to be paid off if you refinance or can it be suborinated if you do no cash out? The reason I wonder is becuase I still see FHA loans at 6.5% roughly but CAL HFA’s are at 7%. I have the 15k for a down but would like to keep it for an emergency fund. Can you buy down a CAL FHA? I could put that in with the closing or at least try.
I remember doing loans in FL where they had a 2nd for storm windows that was sponsored by the county and if they didn’t sell the house in 5 years the loan disappeared but I had a heck of a time with underwriters and LTV and trying to suborinate. I never did the loan becuase her LTV was too high with the 2nd and with the high LTV her DTI needed to be lower on the back end. she decided to wait until the loan disapeared in 3 years. It was a sponsored program for lower income homeowners.
September 1st, 2008 at 9:25 am
Sorry “subordinate” .
September 1st, 2008 at 2:58 pm
About Mortgage modifications: There are 2 alternatives. Like mentioned, a “short refi” where the lender drops enough balance to get you into an FHA loan, which are becoming more and more strict these days, or, contact a firm that specializes in Loss Mitigation. (Re-negotiating the terms of an adjustable rate mortgage into a fixed, even with neggative equity.) The cost is around $3500, upfront for the whole process. You can read more about it at http://www.LegalEagleFinancial.com or contact Randall 714-426-2226
September 2nd, 2008 at 10:39 am
Fred & Greg….PMI does not automatically drop off in 5 years….it does drop off automatically when the principal balance reaches 78% of the original amount financed. Also if your payment includes PITI and you pay extra on the principal you can excellerate the time it would take to reach 78% LTV
September 2nd, 2008 at 4:38 pm
Why are credit lines and hard money lenders exempt from reg Z?
September 5th, 2008 at 12:43 am
Martin, try NACA. It was started by Bruce Marks ( Reader’s Digest 6/08). They step-in to help. They do not charge PMI, only 30 yrs. fixed,no flex/ARM, no credit scores, and their interest rate is posted everyday on their website. Their members are volunteers and understand the foreclosure problem. They have been through it themselves. FYI, the keys in an envelope to the lender is called “jingle mail”. If all else fails….jingle-jingle!!! P.S. Bush’s bill has no teeth, no force, no help. bon
September 5th, 2008 at 11:46 am
I’m trying to refinance my mortgage. The bank I’m refinancing through just told me that the county is showing TWO liens on my house - rather than the single mortgage that should show through Wells Fargo.. It seems that whomever Wells Fargo bought my mortgage from never released their lien on my home. I don’t know who the original lender was because I refinanced five years ago through a broker and the original lender sold my mortgage to Wells Fargo before I ever even made my first payment to them. Wells Fargo’s attitude seems to be, “Well, (shrug) I don’t know what to tell you - if you don’t know what your loan number was or who we bought it from then I don’t know if we can help you.” They did say they’d contact the county but it will take a month or more!!! Is there anything I can do? I’m freaking out right now.
September 5th, 2008 at 1:32 pm
Heather contact a title company and they will be able to look up the title tranfer history of the house since it was first built. They may charge you a little but what I don’t understand is why the bank you are refinacing through does not know who the lien holders are??? When they run a title search and two liens pop up they know who they are! Ask your current lender who the title company is and call the title directly or have your lazy LO do it.(your loan officer should be on top of that if he/she wants to fund your loan) You pay for title charges they should do the work for you. When I did loans this happened often and it is easy to take care of if you just make the calls. The credit report should show the previous lender if the pay off was with in the last 7 years.
The people who who have your mortgage now (Wells) usaually aren’t much help, since you are paying them off. They will drag thier feet becuase they are loosing you business.
September 5th, 2008 at 1:37 pm
Matt no answer for the CAL HFA loans??? I guess I can call them directly but I thought the info would be helpful to other people.
September 14th, 2008 at 5:48 am
I am looking to borrow funds to purchase a second home. My primary home has no mortgage. I consider three options: getting a mortgage on the second home, getting a mortgage on the primary home and use the money to purchase the second home or getting a home equity loan on the primary home. Which one would give me the best tax advantage? Thanks for your advice.