Government Mortgage Relief Plan

admin — Tue, 02 Mar 2010 08:24:46 +0000

Nationwide news channels are filled with reports on the Obama stimulus plan and focused mostly on the 75 billion allocated by Obama’s administration for Mortgage Relief. Obama’s plan focuses on keeping up to 9 million people from foreclosure. Helping these homeowners avoid foreclosure is vital to stabilizing home prices and ultimately the economy.

The plan is pretty simple, give incentives to mortgage lenders for getting out of their seat and helping homeowners facing foreclosure. Something they should of done a long time ago. Many homeowners facing foreclosure have become drenched in debt, their debt to income ratio has far exceeded the guidelines for getting a mortgage in the first place. This can be attributed to predatory lending at which time the loan was originated, however; most homeowners are dealing with lower income due to job loss. Mortgage payments are typically the bulk of a homeowners debt.

Obama’s plan focuses on cutting mortgage payments to acceptable levels, which they have designated as 31% of the homeowners total income.

The other part of the plan would help homeowners which have a mortgage owned or guaranteed by Fannie Mae or Freddie Mac. Homeowners that are upside down on their mortgage, owing more than their home is worth, can refinance with a special program. Normally equity or LTV (Loan to Value) is a major factor in refinancing. The bank or lender is willing to take more of a risk if you have equity in your home. They believe homeowners are going to fight tooth and nail to keep their mortgage if it has 15-20% equity. Homeowners that are upside down on their mortgage currently have no options for refinancing into a lower mortgage rate. Their mortgage rates in many cases have adjusted and they are stuck with an inflated mortgage payment and declining home values. Removing these restrictions is estimated to help up to 5 million homeowners reduce their mortgage payments.

Keeping mortgage rates low for homeowners that can refinance and new homebuyers is key to stimulating the economy and keeping banks afloat. Mortgage rates may be reduced another .5 percent to a new historic low of 4% for a 30 year fixed mortgage. Overall the mortgage relief plan is solid, but it is not very clear how deep this crisis runs. The government has funneled billions of dollars into banks such as Bank of America, but they know little about the damage done to their balance sheets. From the sign of the banks declining market value and need for more bailout money it is safe to say the government may be in for a big surprise when they get a in depth look into the banks they have been assisting.

Waiting on mortgage relief for foreclosure relief from the government is not something recommended by most in the financial industry. If you are struggling paying your mortgage now you should see foreclosure help immediately.

By: Chris Timmons

Second Mortgage Loans in Canada – How I Qualified and Saved My Credit

admin — Sat, 05 Dec 2009 19:10:32 +0000

The use of second mortgages by clients is more common then one would think. The common issue amongst my clients is what would the lender think and how would I qualify.

Income qualification is secondary to the LTV (Loan to Value) calculation on the property. The impact of the LTV is discussed in a future article (Second Mortgage Loan in BC with Bad Credit | LTV What the Heck is It?)

Where the income qualification comes in, is where the private lender determines if the client can survive and fund the balance of the 1st mortgage and the 2nd mortgage. Lenders in this category are not looking for trouble or foreclosures. They want to know that the clients can move forward and complete their obligation.

The income requirements can vary between the private lenders issuing second mortgages in BC.

Some private lenders have minimal requirements others look for complete confirmation of all income sources. The level of detail is usually tied to the rate. A lender of second mortgages who only considers LTV will usually have a higher tolerance for risk in the second mortgages they issue in BC. The rate will usually reflect the level of perceived risk.

Here is the interesting part, private lenders are intent on ensuring that the debt is paid. As I tell my clients…”The money people want their money” Not excuses, not we had a run of bad luck; sorry social services is down the hall.

The determination of income levels and personal budgets is an exercise that the borrowers should go through. No one wants to lose their house but that is precisely what will happen if you default on your second mortgage.

Prepare an analysis of what you make and how much you spend. Determine if you can make the mortgage payment, it may that the mortgage payment is less then your total payments today. However in some cases, such as when the tax man is knocking on your door with a lien, it is worthwhile considering the higher interest, fees and payments to ensure that your house remains your house.

Only .49% of mortgages in Canada are in default at any one time. The impact of a foreclosure will have a disastrous impact on your credit rating. Revising your lifestyle in line with your income may save your house and your credit rating.

Run the numbers, ensure that your income is sufficient to make the payments on the second mortgage. And on a final note, you may lie to your Momma; lie to the taxman but don’t lie to your mortgage broker when you are figuring out how to refinance your debt.

By: Duncan Seward

Mortgage second » Ltv

Government Mortgage Relief Plan

Second Mortgage Loans in Canada – How I Qualified and Saved My Credit