applicants at Best Mortgage

According to the latest news, ACORN (the Association of Community Organizations for Reform Now), has just issued the results of the impact of upcoming adjustments to adjustable rate mortgages. To refresh your memory, ACORN is the nation’s largest community organization which deals with low and moderate-income families. Their study used a sample of 275 subsidiary lenders owned by 15 of the largest lenders in the country. These lenders represent 65.5% of all residential mortgages that were originated in 2005 and 55% of the sub-prime market. Each of the lenders was asked to provide the public version of data they collected as mandated by the Home Mortgage Disclosure Act (HMDA) which includes information on the race, gender, and census tract of each applicant and whether the applicants received high-cost loans. The study examined only first conventional purchase and refinance mortgages; no government guaranteed (i.e. VA or FHA) loans. 130 metropolitan areas were examined to determine the disparities between borrowers of different race and income levels to identify those areas and groups that may pose the greatest risk of “rate shock.” ACORN noted that, while ARMs represent about 24% of all home loans nationally, in some communities and among some demographic groups they account for a much larger percentage of the mortgage pool. ARMS also make up about 75% of all sub-prime loans - a 50% increase since 1999. The report stated that “until this year there has been little recognition of the prevalence of adjustable interest rates in sub-prime loans and the danger posed by these ARMS.” The focus instead has been on predatory practices such as excessive fees, high interest rates, and balloon payments. Sub-prime loans are generally tailored for a market where people cannot obtain a conventional loan at a standard rate but Freddie Mac and Fannie Mae have estimated that at least 1/3 of sub-prime borrowers could actually have qualified for a lower cost mortgage so, it would seem that a “large number of the borrowers who have received ARMS should not have been in the sub-prime market.” The ACORN study found 32 markets where at least one out of three loans given out was high cost and thus subject to rate reset shock. In ten of these markets high cost loans represented 2/5 of the home purchase and refinance mortgages. The ten were Detroit, Michigan, Memphis, Tennessee, Jackson, Mississippi, McAllen, El Paso, Laredo, Brownsville, Texas, Springfield, Illinois, Birmingham and Alabama.
ACORN also found that minority neighborhoods are at a great risk of payment shock because of the extent of high cost loans. More than half of the high-cost refinance loans in 67 of the areas examined in the study were in minority communities and in 44 of these areas over 50% of the purchase loans were high cost. And the risk was not limited to the low income in minority areas. Upper-income minority borrowers were found to be at greater risk than white borrowers of similar income. In 12 metropolitan areas upper-income African-Americans were at least three times more likely than their white counterparts to receive high-cost refinance loans and in 15 metropolitan areas upper-income African-Americans were at least five times more likely to receive a high-cost purchase loan than upper-income whites. These areas are mostly southern or east coast (Atlanta, Baltimore, Charleston, Durham, Jackson, NYC, Washington, DC, plus Milwaukee and San Francisco). Interest rates for sub-prime ARMs are usually tied to the London Inter-Bank Offer Rate (LIBOR) with a margin of about 5.5% added on. The LIBOR has increased from 1.21% in January 2004 to 5.64% in June 2006. While many ARMs have rate caps that limit the amount that a rate can adjust on each anniversary and over the life of the loan, many sub-prime loans do not - or else have caps that allow very large increases. Even a typical 2% cap on a $150,000 loan would allow an increase in the monthly payment of $212.
Another survey, performed by Public Opinion Strategies, found that lower-income people did not think that traditional mortgages were an option for them and we also less informed about reset shock and the debt risks. Borrowers with prepayment penalties and minimum equity may be unable to refinance out of a loan that, once it readjusts, they can no longer afford. The First American Real Estate Solutions research notes that approximately 1 million households are in danger of losing their homes through foreclosure aver the next five years because they will not be able to afford new payment levels and will owe more on their homes than they can recoup through a sale or refinance. The ACORN report shows that the impact of rate reset shock may be concentrated in certain metropolitan areas and among certain demographic groups that can eventually cut the prices down.

A reverse mortgage (known as lifetime mortgage in the UK) is a type of loan available to seniors (62 and over in the US), used as a way of converting their home equity (the value of the home, minus the amount of any existing mortgages) into one or more cash payments while retaining ownership of the property (continuing to live there) and avoiding monthly payments. Repayment of the loan is deferred until the borrower is no longer living in the home.
In a typical mortgage, a home owner pays a monthly amortized amount; after each payment, the owner has more equity in the house. After a certain amount of time (typically 30 years), the mortgage will be paid in full and the property released from the debt. In a reverse mortgage, the home owner pays nothing each month and all interest on the debt is added to the lien on the property. If the owner receives monthly payments, then the debt on the house increases each month.
If a house gains significantly in value after a reverse mortgage is taken on it, it is possible to get a second and even third reverse mortgage to borrow against the increased equity that the owner now has in the more valuable house. But, in the United States a reverse mortgage must be the first and only mortgage on the property (if there is an existing mortgage, it will be paid off with some of the proceeds from the reverse mortgage). In the United States, if the property increases in value (and as the mortgagee ages and qualifies for more money), the reverse mortgage may be refinanced to borrow more against the increased equity.
To qualify for a reverse mortgage in the United States, the borrower must be at least 62. The borrower must pay off any existing mortgages with the proceeds from the reverse mortgage and, if needed, additional personal funds. There are no minimum income or credit requirements, and for most reverse mortgages, the money can be used for any purpose. A pending bankruptcy that has not been finalized may, however, slow the process. Some types of dwellings, such as lower-value mobile homes, do not qualify. Before borrowing, applicants must seek HUD approved counseling. The counseling is a free safeguard for the borrower and his/her family, to make sure they completely understand what a Reverse Mortgage is, and what the process of obtaining one is. Reverse mortgages are offered by some state and local governments. These “public sector” loans generally must be used for specific purposes, such as paying for home repairs or property taxes. The majority of reverse mortgages are FHA insured.
The amount of money that an individual homeowner can receive from a reverse mortgage depends on their age, the Federal Housing Administration (FHA) or Fannie Mae (FNMA) appraised value of the home, and the starting interest rate (effective upon closing/finalization of the loan). The location of the home may also have an impact. There is also a type of reverse mortgage for homes valued over the maximum Fannie Mae limit. These are called “cash” accounts, and are proprietary loan products. In a reverse mortgage in the U.S., a borrower can be paid in a lump sum, monthly (payment of advances), through an increasing line of credit, or a combination of all three. The money received (loan advances) are not taxable and do not affect Social Security or Medicare benefits.
The cost of getting a reverse mortgage from a private sector lender exceeds the costs of other types of mortgage loans from such a lender. There is an insurance premium of 2% of the loan and a 2% origination fee in addition to normal closing cost. Thus a $200,000 loan would have $8,000 in costs beyond the normal closing costs, which are typically some thousands of dollars. In addition, there is a monthly service charge of $30 that is usually added to the total amount of the loan.
The lowest cost reverse mortgages are offered by state and local governments. They generally have low or no loan fees and the interest rates are typically low or moderate as well. But, as noted above, they often have many restrictions, and many states don’t have such programs at all.
The most popular type of reverse mortgage in the U.S. is the FHA-insured Home Equity Conversion Mortgage (HECM) which accounts for 90% of all reverse mortgages originated in the U.S. As of December 31, 2005, a total of 195,418 HECM loans had been issued since the program’s inception in 1989. However, program growth in recent years has been very rapid. The National Reverse Mortgage Lenders Association (NRMLA) reports that 55,659 HECM loans were endorsed thru the first nine months of fiscal year 2006, an 83% increase over the 30,404 loans endorsed during the same period in the prior fiscal year.

A Jumbo Mortgage is a mortgage with a loan amount above conventional loan limits. Jumbo Mortgages apply when agency (FNMA and FHLMC) limits don’t cover the full loan amount. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of residential mortgages in the U.S. They set a limit on the maximum dollar value of any mortgage which they will purchase from an individual lender. Currently, the 2006 limit is $417,000; $625,500 in Alaska, Hawaii and the U.S. Virgin Islands. This leaves a portion of the market to look elsewhere for placement. Other large investors, such as insurance companies and banks, step in to fill the need with maximum mortgage amounts going to the $1 million or $2 million range. The average interest rates are typically greater than normal for conforming mortgages and vary depending on property types and mortgage amount.
Fixed Rate Jumbo Mortgage is a type of jumbo mortgage with a fixed rate. The characteristics of a jumbo fixed rate mortgage are the same as a conventional mortgage. Depending on the loan amount however, certain loan-to-value restrictions may apply. Consult a qualified loan officer for details.
Adjustable Rate Jumbo Mortgages are those with adjustable rates. The features of a jumbo adjustable rate mortgage (ARM) also depend on the loan amount.
Balloon Jumbo Mortgages are another option for a borrower. The guidelines for this type of jumbo mortgage vary depending on lender/broker.

There are some higher risks connected with Jumbo Mortgages, mostly for lenders. This is because if a Jumbo mortgage loan defaults, it is harder to sell a luxury residence fast for full price. Luxury prices are more vulnerable to market highs and lows. That is one reason lenders prefer to have a higher down payment from Jumbo loan seekers. The interest rate charged on Jumbo Mortgage loans is generally higher than a loan that is conforming due to the slightly higher risk to the lender. IT can vary but is generally .25 to .5 % higher. If you need current jumbo interest rates, you can check www.bankrate.com
Jumbo Mortgage loan options are similar to traditional loan programs. They simply require a slightly higher down payment, of usually an additional 5% for similar program types. No money down programs are generally available, but instead require a minimum of 5% down payment for a jumbo mortgage. Because the loans are large, jumbo lenders frequently offer variable loan programs to the jumbo client. The risk of an interest rate increase can result in a large dollar amount increase. Generally adjustable rate mortgages are popular due to the low payment. It is expensive to refinance a jumbo loan due to the closing costs. Some lenders will offer the service of an extension and consolidation agreement, so that the person who refinances jumbo will not have to pay for mortgage tax again on the same principal balance. In other cases title insurance companies will offer up to a 50% discount often required by law for those refinancing within 1 year to 10 years. The largest discount is for within one year.
There are some recent trends to know. Due to Increased Housing Prices there is a large increase in the number of Jumbo loan applicants. Many consumers are becoming jumbo borrower when simply buying a modest ranch and not the typical luxury residence we often think of when a jumbo loan is needed. New loan programs are now offered to address the large increase in Jumbo Loan applications. Because of the steep housing value increases during the recent years (2000- 2006) mortgage loans are required in excess of the conforming limits in most big city areas or their suburbs. The new loans are either a 40 or even 50 year amortization, or an interest only option. They allow the jumbo loan borrower to pay the loan back over a longer period of time, or to defray any repayment of principal for a few years - thus saving them on their monthly payment. In some cases the banker makes a larger profit if the loan takes more than 30 years to repay.

When you immigrate or visit some foreign country on long-term basis, it’s always hard to borrow money for buying homes. They have to develop a solid credit history, learn about taxes and insurance, buy within their means and sometimes agree to less-than-ideal borrowing terms. This mostly concerns people who are on temporary work visas. Due to the situation many countries today try to develop a borrowing opportunity to foreigners. For example, the United States enable a non-permanent resident to borrow money to buy a home.
A typical H-1B visa holder is a college graduate with specialized job skills (such as computer programmer or a distinguished top model) according to the Immigration Service. There are similar temporary visas for movie stars, professional athletes, nurses and high achievers in the arts, sciences or business. Although they may live in the United States for years and come to this country with the intention of eventually gaining permanent residency, people holding these long-term but temporary work visas are classified as “non-immigrants.” The INS can send them back to their countries of origin when the visas expire. That doesn’t stop mortgage companies from lending money to them. Many lenders are willing to give money to such people, even thought their visa would expire shortly. There are two things that usually stop foreigners from buying a house: job insecurity and possible home prices rising, which is true indeed. They’d rather wait until they get their green card. If you first considered buying a house at $140,000 price in spring, in a year the identical house would probably cost you $220,000. Right now the industry has changed. For example, 10 years ago any immigrant would have to establishing accredit history to get his auto loan but right now lenders give automobile loans to anybody. Perhaps it makes sense to think the same way about home loans. Nevertheless, most of people who move to the United States sometimes have misconceptions. They believe that the entire monthly mortgage payment is deductible from federal income taxes (the interest and property taxes are deductible). And, like native-born first-time home buyers, they often underestimate the costs of taxes, insurance, utilities and maintenance, because many of those costs have been included in their rent. When you’re looking at property, it should be in your budget first of all. A typical situation is when a foreigner arrives to the country and puts at least 20% down and gets an adjustable-rate mortgage. Five-year and seven-year hybrid ARMs are popular, and foreign nationals often pay a higher interest rate than citizens with equivalent credit histories - maybe an eighth-point or quarter-point higher or even more. Very often the outcome of the affair can be foreseen: a foreign person could skip town and leave the country, so it’s kind of understandable why the banks would raise mortgage points or deny at all. When moving to another country, especially the US, credit history can be big help! The first thing a prospective homeowner should do after moving to the United States is to get a Social Security card. That’s the key to establishing a credit history. It’s crucial to obtain credit cards or auto loans and repay them on time.
Not so long ago China took first steps to helping foreigners get their auto loans. The Branch of the China Construction Bank now provides a car mortgage service to foreigners living in Shanghai. As part of a series of new policies, the bank branch is also offering vehicle mortgages to people from the other parts of the country and living in the city. From now on, buyers of all kinds of vehicles can take out a mortgage with the bank, provided their cars are registered in the city. The branch also raised the upper limit for the age of mortgage applicants to 65 years, compared with 60 previously. The bank also allows car buyers to enjoy other favorable policies, such as lower interest rates and longer loan terms. The China Construction Bank is the country’s first commercial bank that gets into the vehicle mortgage business. It began issuing car mortgages to local residents four years ago. Last year, China’s central bank, the People’s Bank of China, announced that foreign non-banking institutions in the country were allowed to apply to operate vehicle mortgage service.

Crooked lenders have become a wide spread phenomenon nowadays. People with criminal background set up business as debt collectors or lenders. The Committee of Public Accounts of the UK keeps on criticizing the Office of Fair Trading (OFT) for failing to stop such people from obtaining consumer credit license. More precisely, the Committee expressed disappointment that the OFT still doesn’t have routine access to information on criminal convictions to check new credit license applicants. The battle to prevent criminals becoming lenders was being hampered by a lack of so-called “joined-up government”.  The MP Edward Leigh stated: “There’s still far too little control to prevent crooked lenders and debt collectors from obtaining a consumer license”. Plus, the Committee said that there’s no proper software that could help to check credit license holders. There’s still little control over crooked lenders that can disable them getting a consumer credit license.
Due to such situation the Consumer Credit Counseling Service (CCCS) proposed the way to improve the situation by raising the cost of consumer credit licenses to deter loan sharks and other crooked lenders. Moreover, the CCCS suggested organizing a free service for people to challenge unfair credit terms and to stop crooked lending activities.

The Russian plastic card market is relatively new but has already displayed an impressive growth rate. According to the estimate of the Central Bank of Russia, 42,5 millions of plastic cards were issued before 1^st July, 2005, which is 1,5 times more than in the previous year. The credit cards segment is relatively small (4,2% for the same date), but its growth rate is higher (82% with 50% - for debit cards). Experts forecast that it is plastic card crediting which is going to become the priority one for Russian banks and which will substitute consumer crediting. By the year 2008 the amount of credit cards can reach 15-20 mln, which is higher than the present figure. In November, 2005 IMA-Consulting Company carried out a complex credit card market research in Moscow.
A general description of the situation
For the time being our credit card market looks slightly chaotic. Strict requirements for the necessary documentation are compensated by low service charges and credit rates, and vice versa. It is difficult to say (predict), which trick will the indistinct bank criteria for getting a credit card play on the next applicant. However, the market is developing in the direction, forecasted by the financial analytics. In future we will observe the development of the two following credit card segments of the market:
-     The segment with the high service cost and low requirements for the customers.
-     The segment with the low cost for using a card and high requirements for the customers.
In general, though, banks aim to reduce requirements for the applicants: less paperwork - more clients. Banks offering unclear (not transparent) conditions will motivate customers to collect all the necessary documents by giving out bonuses and promoting preferential terms: the more convenient repayment period, bonuses for using cards, special conditions depending on the service character provided (e.g. getting the interest from the account balance), on the habits of the customer (discounts in the shopping malls, restaurants, drug stores, etc).
However, today the top issue is to establish the competent working procedure with the potential consumers. The effective communication with the customers secures the successful promotion of credit cards as a new product. The research shows that 28% of the citizens of Moscow complain about the current service quality in the banks.
 

Lenders expect to be repaid along with interest and other fees for letting you use their money. No wonder lenders check the credit history of loan applicants to determine if they are credit worthy.
In judging a person’s credit worthiness, lenders often look at the “three Cs” of credit: character, capacity, and capital.
•          Character refers to your personal qualities—your honesty and willingness to repay debts. If your record shows you have paid your bills on time, lenders will assume you will continue to do so in the future.
•          Capacity is a measure of your ability to repay debts. Creditors will want to know about your income sources, how much you earn, and your other financial obligations.
•          Capital refers to what people own—money in the bank or property. In general, the more you own, the easier it is to repay debts. Lenders also may ask that some capital be used as security (collateral) for a loan.

This page is generated by Wpkeys plugin