Author Archive
July 4th, 2009, 3:00 am by Mathew Padilla
Happy 4th to all! Now back to regularly scheduled programming…
Glenn Gray discovered a way for his bank to grow amid the deepest recession in decades.
 The chief executive of Sunwest Bank in Tustin decided to expand his company by buying the operations of a failed rival.
Gray, 55, explains how the Federal Deposit Insurance Corporation selected his business bank to buy most of the $73 million in deposits and $80 million in assets of Irvine-based MetroPacific Bank, which failed on June 26.
Q. How did you learn a bank was going to fail and its assets be sold?
A. It first starts with us, or any bank, that wants to be a bidder letting the FDIC know that. The FDIC goes through a process; I can assume they review our financials. They examine banks, so they likely look at the last examination schedule, and then they either put you on an approved bidders list or they don’t. We did that several months ago, when we anticipated that, unfortunately, bank failures were going to be an ongoing occurrence.
Then we turn the clock back to about four weeks ago. The FDIC notified us of a potential failed bank situation. They spoke in very general terms, describing a business bank with about $80 million in assets in Orange County with a single branch. They asked, ‘Are you interested?. Well, yes, that fits our profile: community banks in Orange County or North San Diego.
Next they say here’s your password, go to a secure Web site and find more information. Once we visit the site we understand which bank it is; the bank is identified but not the identity of employees. The site has portfolio level statistics; you don’t get a break down of every single loan. The data are macro level. But there is enough information for you to start to form an opinion, and you don’t have to put in bid yet.
Next they told us we would have two days of due diligence. We came on site, visiting the bank in an area segregated from the rest of the employees. Most employees didn’t know we were on site. There was an FDIC representative there. Now we start to get into more micro level detail. You have to cover whatever you want to cover in those two days, looking at loans, deposits, financials etc. We met some people, but couldn’t get into their background or interview them.
Once the on-site review was done, we got a couple of days to form a bid. We finished up on a Thursday and had to provide a bid the following Tuesday. The next day (Wednesday June 24) they asked for some clarification and a little negotiation. Thursday (June 25) they notified us that our bid was accepted. Friday morning (June 26) we met with a larger group of FDIC employees and they did a walk through of what was going to happen. Then it happened that Friday at 4 p.m. They went in and took over the bank and we followed them.
Q. I saw something like that on the TV show 60 Minutes. But on that show and in your case a buyer (your bank) was lined up in advance of a bank being seized. I hear a takeover is messier if the FDIC can’t find a buyer…
A. Yes, it must be messier without a buyer. That’s what I hear also. In this case it worked out. We worked through a weekend, and we opened the following Monday morning: ‘Here’s Sunwest Bank.’
Q. Where did MetroPacific go wrong?
Read the rest of this entry »
Posted in: Bad debt • Bailout Buzz • Bank failures • Bank woes • Commercial lending • Company Watch • Meltdown • Q&A | Post a Comment »
July 3rd, 2009, 3:00 am by Mathew Padilla
 Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Ken from Newport asks:
Q. I currently rent in Orange County, and do not plan to buy here in the immediate future, because I believe prices in the areas I am considering are likely to continue to fall. However, I am considering buying investment property out of the area. My question is if I buy one or two properties as investments (taking mortgages), how will that impact my ability to borrow to buy my primary residence down the road? I understand that having multiple mortgages can negatively impact one’s ability to borrow for an additional property. Also, would that eventual O.C. purchase still get the benefit (lower rates, down payment requirements) of a primary residence, or would the rentals prevent that?
A. I am glad that you are seeing opportunity in the investment side and yours are good questions. You will not be penalized for having investment property. You will get a good rate with no change in down payment requirement.
But the lender will factor in the financial effect of those properties. Here’s how our industry looks at it. We use a formula to calculate the impact of the property on you.
Take the rental income, say $1,000 per month, and multiply by .75 to account for vacancy, management, and repairs. You get $750. From that deduct the mortgage payment and the monthly property tax and insurance. If that total is $700, you made a $50 per month profit and it is added to your income. If the total expenses are $950, you are losing $200 per month and that is treated as a permanent obligation, just like a $200 car payment, and added to your debt for qualifying purposes. When you get loans on your investment properties, run the numbers and then pretend you are buying a home here also to assess the impact.
Note also that non-owner occupied loans are the same rate as owner-occupied but they carry a 1.5-point add-on to the fee up to 75% loan-to-value, and a 3-point add on from 75% to 80% LTV. So plan on putting 25% down. Good luck.
Ben in Costa Mesa asks:
Q. I am 85 years old. My spouse is 80. Our home is paid for and I am thinking of obtaining a reverse mortgage for the maximum allowed, which I believe is $300,000? My home currently is probably appraised at $800,000 (was around $1,100,000 last year). I want to do some remodeling, maybe help two of our children buy a home in this down market and have a little fun with a few extra bucks in our pocket. Any reason not to get a reverse mortgage? What should I look out for?
A. First, congratulations on making it to 85. It sounds as if you are a good candidate for a reverse mortgage. The only thing to note is that they are expensive, especially with up-front fees. There is a lot of information about these products at www.reverse.org. AARP’s Web site also has a lot of information on reverse mortgages.
Finally, reverse mortgages are available through specialized channels, not like regular loans. I hope you find a lot of things to have fun doing with the extra bucks. You’ve earned it.
That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question.
Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it. Also, readers keep submitting variations on the same question, which has already been answered: what to do when you can no longer afford your mortgage. I have decided not to publish most of those questions, because they are repetitive, although I appreciate the difficult situation many homeowners are in these days.
Read prior questions and answers by clicking on the headlines below…
Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |
Posted in: Mortgage Answers | 1 Comment »
July 2nd, 2009, 1:55 pm by Mathew Padilla
There is one silver lining to a soft economy: lower mortgage rates.
The average rate on a 30-year fixed mortgage in Orange County fell today to the 5% range, brokers said. Rates have trended down from the 5.25% to 5.5% range last month as the U.S. unemployment rate hit 9.5%.
A soft economy means investors buy U.S. Treasuries for their safety, which drags down their yields and indirectly leads to lower fixed mortgage rates.
 Consumers in Orange County with good credit today can get a 30-year fixed mortgage as low as 4.875% with 0.625-point fee, said Jeff Lazerson, head of online brokerage Mortgage Grader in Laguna Niguel. That’s for “conforming” loans up to $417,000 that can be sold to Fannie Mae or Freddie Mac — such loans generally have the lowest rates on the market.
“Rates are down because putting lipstick on a pig only works until you take a closer look…it’s still a pig,” Lazerson said. “In other words, the government and the Wall Street gatekeepers have been hyping that the economy is getting better. It’s not getting better. Consumers aren’t spending because they are worried about their jobs, if they haven’t already lost their jobs.”
Jeff Altman, a partner in brokerage WestCal Mortgage Corp. in Orange, said he saw conforming rates today closer to 5.125% with a one-point fee.
More from this blog…
Posted in: Mortgage rates | 16 Comments »
July 2nd, 2009, 3:00 am by Mathew Padilla
TransUnion reports 6.7% of Orange County homeowners with mortgages were at least two months behind on payments in March, up from 5.3% in December and more than double the rate a year earlier.
Orange County’s bad debt rate topped the U.S. — which had a 5.2% rate — for the fourth straight quarter. California’s rate was higher, however, at 8.4%, up from 6.9% in December and 4.3% a year ago.
I previously blogged the county’s 90-day credit card delinquency ratio hit 1.4% in March.
Just more signs consumers are hurting from the recession and housing downturn. TransUnion’s Keith Carson, a senior consultant in its financial services group, predicts a national 7% delinquency rate by year end:
“Credit performance generally lags economic conditions. Thus although there have been some pockets of promising news on the economic front, we see unemployment and deflated housing prices continuing to pushing up delinquency rates through the remainder of this year. At this juncture it is difficult to predict with any certainty what impact, if any, the various government initiatives will have on the mortgage delinquency.”
I’m guessing government programs help a small portion of troubled borrowers, and mostly delay foreclosures, thus delaying a housing recovery.
More from this blog…
Posted in: Defaults & Foreclosures | 7 Comments »
July 1st, 2009, 1:03 pm by Mathew Padilla
Bloomberg reports that Fannie Mae and Freddie Mac will begin refinancing loans they own or guarantee up to 125% of the value of a property for some homeowners in financial difficulty. Here’s more:
Housing and Urban Development Secretary Shaun Donovan made the announcement in a statement today. Currently Fannie Mae or Freddie Mac, through President Barack Obama’s Home Affordable program, can refinance mortgages they own or guarantee when the loan is worth as much as 105 percent of the home’s market value.
The continuing slide in home prices has pushed millions of Americans beyond that 105 percent loan-to-value ratio, limiting participation in Obama’s initiative. Fannie Mae and Freddie Mac have refinanced 80,000 loans under that program, which set out to help as many as 5 million people who may owe more than their homes are worth, Federal Housing Finance Agency Director James Lockhart said at a real estate conference on June 18.
The decision to change the allowable ratio is part of an effort to “adapt to an ever-changing housing market,” Treasury Secretary Timothy Geithner said in the HUD statement. “By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly.”
Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia, said mortgage brokers have told him that many aren’t sending borrowers through the program because it’s cumbersome and the loan applications “still have a lot of bells and whistles, which makes them difficult to do.”
Read the full story: Fannie, Freddie to Refinance Larger Underwater Loans.
And here is the Housing and Urban Development release.
This should improve participation in the plan somewhat, although many struggling borrowers in Orange County and other parts of the country do not have loans owned or backed by Fannie or Freddie. And bigger loans means bigger risk to taxpayers.
In other news…
Posted in: Bailout Buzz • Defaults & Foreclosures • Fannie & Freddie • Loan underwriting • Meltdown • Refi | 12 Comments »
July 1st, 2009, 3:00 am by Mathew Padilla
Steve Thomas at Altera Real Estate in Aliso Viejo reports that the number of O.C. distressed properties (homes listed by agents as foreclosures or short sales) was 2,919 last week, down 143 vs. two weeks earlier or a 4.7% decline.
Since Dec. 26, the number of distressed homes on the market has dropped 46% while the non-distressed supply is 22% lower.
As a percent of all listed homes for sale, distressed properties were 31.8% of the market last week vs. 32.9% two weeks earlier. For a look at housing demand, read: Demand for O.C. homes hits plateau.
Here’s a look at various slices of the O.C. market as of last Thursday: total inventory listings; distressed property listings; and the share distressed listings have of total inventory supply on a percentage basis in each niche …
| Slice |
All inventory |
Distressed |
Share |
| By price … |
|
|
|
| • O.C. $0-$250k |
1,488 |
846 |
57% |
| • O.C. $250-$500k |
2,274 |
1,281 |
56% |
| • O.C. $500k-$750k |
1,669 |
461 |
28% |
| • O.C. $750k-$1m |
1,093 |
182 |
17% |
| • O.C. $1m-$1.5m |
1,012 |
93 |
9% |
| • O.C. $1.5m-$2m |
581 |
33 |
6% |
| • O.C. $2m-4m |
769 |
23 |
3% |
| • O.C. $4m+ |
398 |
4 |
1% |
| All O.C. |
9,188 |
2,919 |
32% |
| • Attached |
3,519 |
1,448 |
41% |
| • Detached |
5,656 |
1,461 |
26% |
| County high share |
|
|
|
| • Santa Ana |
595 |
442 |
74% |
| • Foothill Ranch |
32 |
23 |
72% |
| • Garden Grove |
220 |
146 |
66% |
| • Anaheim |
402 |
262 |
65% |
| • Buena Park |
102 |
65 |
64% |
| • Rancho Santa Marg. |
111 |
70 |
63% |
| • La Habra |
105 |
64 |
61% |
| County low share … |
|
|
|
| • Seal Beach |
296 |
3 |
1% |
| • Laguna Woods |
432 |
16 |
4% |
| • Corona Del Mar |
228 |
11 |
5% |
| • Laguna Beach |
414 |
22 |
5% |
| • Newport Coast |
200 |
14 |
7% |
In other news…
Posted in: Defaults & Foreclosures • Distressed sales • distress | 4 Comments »
June 30th, 2009, 4:58 pm by Mathew Padilla
At a recent foreclosure auction in Santa Ana, investors bought eight properties, or 36% of the 22 offered for sale.
 I have looked more closely at those eight properties, after blogging previously on the June 26 trustee’s sale. (Read the first post: Frenzied Bidding on Discounted Foreclosures. Property pictured is on Newell Street in Garden Grove; photo courtesy of ForeclosureTrackers.com)
On seven of the properties, the banks or loan servicers offered an average discount of 61% against the debt owed on a first mortgage. (On one of the properties, I could not find the notice of trustee’s sale.)
Those seven properties sold for an average discount of 56% against debt. Even though investors bid against each other, they barely nudged up the sale price from the bank’s minimum bid.
According to Zillow, investors got discounts to current market value ranging from $21,500 to $141,000. Zillow’s estimate is a very rough guide to what a property might fetch on a resale.
And here’s a table of seven of the properties. NTS is amount owed on notice of trustee’s sale before the auction. Min Bid is the least a bank would accept. Discount is amount between NTS and Min Bid as a percentage. Sale is what investor paid.
| Property |
City |
NTS |
Min Bid |
Discount |
Sale |
| 13114 NEWELL ST |
Garden Grove |
$561,072 |
$253,000 |
55% |
$267,600 |
| 2501 WEST SUNFLOWER AVENUE, UNIT H6 |
SANTA ANA |
$319,663 |
$106,250 |
67% |
$110,500 |
| 720 NORTH ZEYN STREET |
ANAHEIM |
$564,741 |
$129,147 |
77% |
$206,000 |
| 1381 SOUTH WALNUT ST UNIT 2304 |
ANAHEIM |
$358,096 |
$123,250 |
66% |
$154,100 |
| 23241 CAMINITO ANDRETA UNIT #57 |
LAGUNA HILLS |
$455,850 |
$170,000 |
63% |
$170,000 |
| 61 VIA BACCHUS |
ALISO VIEJO |
$452,410 |
$264,401 |
42% |
$293,500 |
| 4201 5TH ST # 103 |
SANTA ANA |
$277,745 |
$111,741 |
60% |
$111,741 |
| |
Totals |
$2,989,578 |
$1,157,789 |
61% |
$1,313,441 |
In other news…
Posted in: Auctions • Defaults & Foreclosures | 13 Comments »
June 30th, 2009, 7:43 am by Mathew Padilla
Bloomberg reports:
Delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.
Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.
“I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement released with the quarterly report. President Barack Obama’s plan to create “sustainable, payment- reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said.
Obama’s program, unveiled Feb. 18, aims to help as many as 4 million borrowers by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their homes are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007.
The agencies also said, not for the first time, that mortgages modified to help struggling borrowers stay in their homes fail about half the time. For example, about 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months. That increased to a 63 percent default rate after a year.
The only thing that would significantly improve the loan mod success rate would be principal reductions. But banks almost never willingly reduce debt on a property, which would mean recognizing a loss without gaining control of a property. And bankruptcy cramdown legislation keeps getting stuck in Congress. So the foreclosure tsunami continues.
In other news…
Posted in: Defaults & Foreclosures • Meltdown | 14 Comments »
June 29th, 2009, 8:04 am by Mathew Padilla
The Wall Street Journal reports Treasury Secretary Timothy Geithner’s plan to help investors buy troubled assets from banks has lost momentum.
Big banks worried about having to sell at fire-sale prices while small banks feared they would be shut out. Potential buyers balked at the risk of doing business with the government, concerned that politicians might demonize them for making big profits.
The Public-Private Investment Program, or PPIP, has faced resistance since it was announced in March. And the Federal Deposit Insurance Corp. has essentially shelved the part of PPIP that called for the government-financed buying of whole loans. Treasury is supposed to move forward with a focus on buying securities, but now that may be greatly reduced.
The Journal quotes Lee Sachs, counselor to the Treasury secretary, as saying the department remains committed to the program and has received more than 100 applications from potential investment managers. Read the full story HERE.
Meanwhile, the Bank of International Settlements, which represents the world’s leading central bankers, released a report today that, among other things, argues bad assets remain a threat (I added the bold type):
Overall, governments may not have acted quickly enough to remove problem assets from the balance sheets of key banks. The 1990s experience of the Nordic countries indicates that addressing problem assets is necessary to reduce uncertainties, re-establish confidence in a lasting way and lay the basis for an efficient financial system (see Box VI.B). Despite acknowledging these lessons, the steps taken so far have focused largely on providing guarantees and subsidised capital. At the same time, government guarantees and asset insurance have exposed taxpayers to potentially large losses. Progress on problem assets has been slowed by the complexity of the securities affected, legal constraints and, above all, the limited political will to commit public funds to the clean-up effort. The lack of progress threatens to prolong the crisis and delay the recovery because a dysfunctional financial system reduces the ability of monetary and fiscal actions to stimulate the economy.
The lack of progress on removing troubled assets from the banks’ balance sheets and recognising the associated losses is illustrated by the US
experience. Rather than buy impaired assets directly, the US Treasury outlined a plan in March, the Public-Private Investment Program (PPIP), to value these assets and to remove them through an auction mechanism. Under the PPIP, eligible private sector investors are invited to bid on troubled real estate assets held by banks. Winning bids receive matching government capital and non-recourse funding on attractive terms, with the US government assuming any losses beyond the equity invested. The generous terms were designed partly to boost the value of the underlying securities, to provide sufficient incentives for private capital inflows and to attract expertise to value and manage these assets. Despite the favourable terms, as of May 2009 the outlook for the PPIP was uncertain.
To increase confidence in the banks, US regulators conducted stress tests on 19 bank holding companies in April 2009 to ensure that they were
sufficiently capitalised given a set of assumptions about losses on various bank assets over the next two years. Following the release of the results in early May, US regulators directed 10 of the banks examined to increase their level of capital or to improve the quality by including more common shares. Several banks took advantage of the reduced uncertainty and the increased risk appetite of investors that accompanied the publication of the stress test results to raise equity and issue debt. While the United Kingdom conducted a similar exercise, other European countries were still debating the merits of an EU-wide stress test.
What seems clear is that the deterioration in credit quality will generate more losses on banks’ loan books and other credit exposures (see Chapter III).
Banks may therefore have an incentive to delay recognising losses, aided by accounting rules that provide management more discretion over when to
write down assets. Taxpayers will not want to be exposed to greater potential losses, but key financial institutions are likely to require more government support in order to facilitate the required adjustments, to restore confidence in the financial system and to restart lending on a sustainable basis.
This suggests a drag on recovery. Read the report HERE.
More from this blog…
Posted in: Bad debt • Bailout Buzz • Meltdown | 7 Comments »
June 27th, 2009, 3:00 am by Mathew Padilla
Investors announced bids within seconds of each other on some steeply discounted foreclosures auctioned on Friday in front of the Santa Ana Courthouse.
I attended the trustee’s sale to gauge investor interest these days and to see if the state’s foreclosure moratorium, which began earlier this month, is having any impact.
Whenever I attended auctions in 2007 and 2008, investors generally passed on properties. But on June 26 they jumped on houses and condos with discounts of greater than $100,000 on the debt and fees owed on each property.
For example, at least four people bid on a two-bedroom house in Anaheim on Zeyn Street. Winning bid: $206,000. Amount owed before foreclosure: $565,000. Discount: $359,000. (Amounts are rounded to 1,000, and I assume amount owed is on first mortgage. There could be more liens against the property, but they should be eliminated by the auction.)
The discount is what the bank is willing to accept; it’s not directly related to the current market value, though I am sure the bank has a ballpark value in mind when it decides how much to accept. Zillow estimates the Anaheim house is worth about $301,500.
At trustee’s sales, properties are sold as is, meaning there could be property damage and the owner, or former owner, may have to be evicted.
Another risk is if there are competing foreclosures nearby. I checked ForeclosureRadar and here are other foreclosures or potential foreclosures within less than a mile of Zeyn Street.
The map shows five bank-owned properties (red dots) and many more notices of default (green dots) and notices of trustee’s sale (blue dots). The map suggests dozens of potential foreclosures.
A few other examples:
- Another property in Anaheim, a condominium on South Walnut, sold for $154,000, 57% off the debt owed of $358,000. At least three investors bid on it.
- Two investors went after a two-bedroom condo in Aliso Viejo, repeatedly raising bids by increments of $100 or $1,000. It finally went for $293,500 — but despite the heated interest that price was 35% off the debt of $452,410. Zillow says its worth $315,000.
- A property on West Sunflower in Santa Ana went for $110,500, close to a third of $319,663 owed.
What about the state’s 90-day foreclosure mortatorium? Well as I said previously, dozens of lenders and loan servicers have already received permanent or temporary exemptions. They just need to show they are currently modifying loans.
With that said, many foreclosures appear to be repeatedly delayed. More than 200 properties were originally scheduled for auction on Friday, but the day before I counted just 94 still scheduled for June 26.
The auction started at noon and two hours later only about a dozen had been auctioned, with more than half going back to the bank. I had enough and left. However, I plan to attend once a week or so, and am happy to meet any blog regulars at an auction.
One last thing, of the 94 scheduled for Friday nine owners had filed for bankruptcy, roughly 10%, which suggests the foreclosure had been previously delayed.
More headlines from this blog…
Posted in: Auctions • Defaults & Foreclosures | 25 Comments »
June 26th, 2009, 6:01 pm by Mathew Padilla
Banking regulators today shut down MetroPacific Bank in Irvine, and immediately sold most of its deposits to Sunwest Bank in Tustin.
MetroPacific Bank’s one office will reopen Monday as Sunwest, according to the Federal Deposit Insurance Corp. MetroPacific customers can access their money over the weekend via bank cards and by writing checks.
MetroPacific’s failure will likely cost $29 million to the FDIC’s insurance fund, the agency said. The FDIC is only keeping control of about $6 million in deposits from brokers. MetroPacific had a total of $73 million in deposits on June 8.
Sunwest is also buying virtually all of MetroPacific’s $80 million in assets, the FDIC said.
The California Department of Financial Institutions seized MetroPacific and immediately turned it over to the FDIC.
Three other banks in other states failed today. Read more at the FDIC’s Web site. And read the release on MetroPacific HERE.
Posted in: Bank failures • Company Watch • FDIC | 6 Comments »
June 26th, 2009, 3:00 am by Mathew Padilla
Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Q. My home in Orange County has a value of about $800,000. My remaining mortgage is less than $100,000. I’m about half way through a 15-year loan with an interest rate of 5.38%. Monthly payments are $1,394 (not including taxes). Almost $1,000 of this is now going toward principal. Given these parameters, would I be ahead of the financial curve if I were to pay off the remaining loan? I have read articles both pro and con on this issue. If it makes any difference in the calculations, I run a business out of my home and deduct related home office expenses.
A. Paying off a loan is financially identical to making a guaranteed investment with a return of whatever the note rate is. There are not many safe 5.375% investments around these days.
If you took $100,000 out of an account where it is earning 1% or 2%, it reduces your annual income by $1,000 or $2,000. Using it to pay the loan off would save $5,375 in interest. This is very attractive so I would strongly consider it.
That said, I would do this only if you had enough resources to be comfortable doing so. You don’t want to lose all your liquidity. Having cash and a mortgage is better than having no cash and no mortgage, if you see what I mean.
Concerned in Fountain Valley asks:
Q. The mortgage on our home is in my husband’s name only. The house is in our trust as community property. We are both in our seventies and I would like to find out if I can continue paying off the same mortgage if my husband should die before me or would I have to refinance the loan? Also our children are named as beneficiaries. If we both passed away could they continue the same loan or would they have to refinance?
A. To the extent that this a legal question, you ought to ask a lawyer. I’ll give you my “industry experience based opinion” which is that neither his death nor yours would trigger the “due on sale clause” that would require it to be paid off. Our industry is greedy, but I don’t think we are mean. Sleep well and don’t worry.
That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question.
Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it. Also, readers keep submitting variations on the same question, which has already been answered: what to do when you can no longer afford your mortgage. I have decided not to publish most of those questions, because they are repetitive, although I appreciate the difficult situation many homeowners are in these days.
Read prior questions and answers by clicking on the headlines below…
Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |
Posted in: Mortgage Answers | 9 Comments »
June 25th, 2009, 9:32 am by Mathew Padilla
Bloomberg reports:
The Federal Reserve will let one of its emergency programs expire and trim two others in a sign that improving financial markets allow a first step toward ending its unprecedented interventions.
The three programs provide funds or Treasury securities to securities brokers and money-market funds. They are authorized under a provision allowing loans to nonbanks under “unusual and exigent circumstances.”
Five other emergency facilities, including foreign currency-swap lines with central banks around the world, will be extended by three months through Feb. 1, the Fed said in a statement in Washington. They would have expired Oct. 30.
“Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time,” the Fed said in its statement.
The Fed didn’t announce the changes yesterday following the Federal Open Market Committee meeting because it needed to coordinate the extension of the currency swap lines with other central banks, a Fed official told reporters on a conference call.
Interesting. Things have improved somewhat, but aftershocks may continue.
Posted in: Bailout Buzz • Fed | Post a Comment »
June 25th, 2009, 8:02 am by Mathew Padilla
The government’s role in the housing market continues to expand. Here’s the latest from National Mortgage News:
The Federal Housing Administration insured $27.3 billion in single-family mortgages in April — up 8% from the previous month due to higher mortgage purchase volume. Mortgage purchase volume rose $1.6 billion to $11.7 billion, while refinancings crept up by $350 million to $15.6 billion, according to an FHA monthly activity report. … Meanwhile, FHA servicers ramped up their loss mitigation efforts and completed 7,366 loan modifications in April, up from 4,837 in March. But this didn’t stop a 24 basis point increase in the FHA seriously delinquent rate in April and the percentage of FHA loans 90 days or more past due hit 7.32%.
Over the past few months, FHA has accounted for roughly 25% of purchase loans in Orange County. It barely existed here during the housing boom because it could only insure small loan sizes. That all changed amid the credit crisis.
Most buyers in the county are using FHA to put down as little as possible, close to the minimum 3.5%.
Under FHA, consumers pay an insurance premium and that pool of premiums protects note holders from losses on the loans. But if delinquencies swamp the pool, then taxpayers could be on the hook. The program is run by HUD.
In other news…
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