HUD No. 07-105 Amy Cantu (202) 708-0980 For Release Wednesday July 11, 2007
HUD RELEASES TIPS FOR AVOIDING FORECLOSURE Information aimed at helping more homeowners stay in their home
WASHINGTON - Today, the U.S. Department of Housing and Urban Development (HUD) released its top 10 tips for homeowners who are facing foreclosure.
"These guidelines will assist homeowners who are struggling to pay their mortgage and could be threatened with foreclosure," said HUD Secretary Alphonso Jackson. "We want to encourage homeowners to take action and use every resource available so that they can get control of their finances and stay in their home."
If you are unable to make your mortgage payment:
1. Don't ignore the problem.
The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.
2. Contact your lender as soon as you realize that you have a problem.
Lenders do not want your house. They have options to help borrowers through difficult financial times.
3. Open and respond to all mail from your lender.
The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
4. Know your mortgage rights.
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.
5. Understand foreclosure prevention options.
Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov.
6. Contact a non-profit housing counselor.
The U.S. Department of Housing and Urban Development funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance.
7. Prioritize your spending.
After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
8. Use your assets.
Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.
9. Avoid foreclosure prevention companies.
Many for-profit companies will contact you promising to negotiate a loan work out with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide for free if you contact them. You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead.
10. Don't lose your house to foreclosure recovery scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a HUD approved housing counselor or trusted real estate professional.
To find out more about HUD-approved housing counseling agencies and their services, please visit www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.
FHASecure: Working Hard for Your Homeownership
The Federal Housing Administration has helped millions of Americans secure their dream of homeownership since 1934. Now we want to keep those dreams alive.
We provide mortgage insurance on loans made by FHA approved lenders throughout the United States and its territories. FHA insures mortgages on single family, multifamily, manufactured homes and healthcare facilities. It is the largest government backed mortgage insurer.
WHAT IS FHASecure
FHASecure is a refinancing option that gives credit-worthy homeowners, who were making timely mortgage payments before their loans reset but are now in default, a second chance with a FHA insured loan product.
For Immediate Release Office of the Press Secretary August 31, 2007
Fact Sheet: New Steps to Help Homeowners Avoid Foreclosure President Bush Announces Steps To Help American Families Keep Their Homes And Reform The Mortgage Finance System
Today, President Bush Announced Steps At The Federal Level To Help Homeowners In Need Of Assistance Avoid Foreclosure. These steps will help homeowners having difficulty paying their mortgages and ensure that the problems now disrupting the housing industry do not happen again. The fundamentals of America's economy are strong – economic growth is healthy, wages are rising, and unemployment is low. The markets are in a period of transition as participants are re-assessing and re-pricing risk. One area that has shown particular strain is the mortgage market, particularly the subprime sector.
The President Announced The Following Steps To Help American Families Keep Their Homes
1. The President Calls On Congress To Pass Federal Housing Administration (FHA) Modernization Legislation. The President's FHA modernization proposal would lower downpayment requirements, allow FHA to insure bigger loans, and give FHA more pricing flexibility. These reforms would empower FHA to reach more families that need help – first-time homebuyers, minorities, and those with low-to-moderate incomes – and offer more options to homeowners looking to refinance their existing mortgage.
The Administration Will Also Launch A New FHA Initiative Called "FHASecure." The President has asked Secretary Jackson to pursue important administrative changes to give FHA the flexibility to help more families stay in their homes during this time of transition in the mortgage market. The FHASecure program will help people who have good credit but who have not made all of their payments on time because of rising mortgage payments. For the first time, FHA will be able to offer many of these homeowners an option to refinance their existing mortgage so they can make their payments and keep their homes. FHA will also charge mortgage insurance premiums based on the individual risk of each loan, using traditional underwriting standards, so it can expand access and help even more families.
Since 1934, FHA Has Helped Close To 35 Million People Buy A Home And Stay In Their Home. FHA is a government agency that provides mortgage insurance to borrowers through a network of private sector lenders. It also offers options to homeowners looking to refinance their existing loan. The President's FHA modernization bill was first sent to the Hill in April 2006, and it passed the House last Congress with over 400 votes. The President has once again asked Congress to send him a clean FHA modernization bill as soon as possible so he can sign it into law.
2. The President Calls On Congress To Change A Key Housing Provision Of The Federal Tax Code So It Does Not Punish Families Who Are Forced To Sell Their Homes For Less Than Their Mortgage Is Worth. Current tax law counts cancelled mortgage debt on primary residences as taxable income. For example, if the value of a home declines and $20,000 of the homeowner's loan is forgiven, the tax code treats that $20,000 as taxable income. The President proposes temporary relief to ensure that cancelled mortgage debt on a primary residence is not counted as income.
The President Is Working With Congress In A Bipartisan Fashion To Make This Important Change. Senator Debbie Stabenow (D-MI), along with Senator George Voinovich (R-OH) and others, has introduced a bipartisan bill that would protect homeowners from having to pay taxes on cancelled mortgage debt. In the House, Representatives Rob Andrews (D-NJ) and Ron Lewis (R-KY), along with several of their colleagues, have introduced similar legislation. The President looks forward to working with Congress to reach agreement on a bill, so we can deliver this vital tax relief to American homeowners.
3. The President Announced That The Administration Will Launch A New Foreclosure Avoidance Initiative To Help Struggling Homeowners Find A Way To Refinance. Housing and Urban Development Secretary Alphonso Jackson and Treasury Secretary Henry Paulson will reach out to a wide variety of groups that offer foreclosure counseling and refinancing for American homeowners. These groups include community organizations like NeighborWorks, mortgage lenders and loan servicers, FHA, and Government-Sponsored Enterprises like Fannie Mae and Freddie Mac. The goal of this initiative is to expand mortgage financing options, identify homeowners before they face hardships, help them understand their financing options, and allow them to find a mortgage product that works for them.
The President Supports Actions To Protect Homeowners And Prevent These Problems From Happening Again
Federal Banking Regulators Are Improving Disclosure Requirements To Ensure That Lenders Provide Homeowners With Complete, Accurate, And Understandable Information About Their Mortgages. Many borrowers did not receive clear and complete disclosure regarding the terms and conditions of their mortgages. To help protect homeowners in the future, Federal banking regulators recently issued new disclosure guidelines for lenders, and they continue to consider new rules. Homeowners must have complete, accurate, and understandable information – including on the potential increases in their monthly payments.
Federal Banking Regulators Are Working To Strengthen Mortgage Lending Standards. Questionable underwriting standards enabled mortgage lenders to place some borrowers in sophisticated products they could not afford. The Federal banking regulators recently set forth new guidelines to address lending standards, and they will continue to examine new rules. Lenders have an obligation to ensure that their standards accurately measure whether borrowers can afford their mortgage.
The Administration Is Working On New Rules To Help Consumers Shop For The Best Loan Terms. This fall, HUD will propose reforms to the Real Estate Settlement Procedures Act (RESPA) that would promote comparative shopping by consumers for the best loan terms, provide clearer disclosures, limit settlement cost increases, and require fee disclosure.
The Administration Supports State-Based Efforts To Create A Comprehensive Mortgage Broker Registration System. The President has also asked Secretary Paulson to examine the broad issues surrounding mortgage brokers and originators.
The Administration Is Committed To Pursuing Fraud And Wrongdoing In The Mortgage Industry. Some lenders deceived their customers – and pushed them into taking out loans they knew these home buyers could not afford. Federal agencies, such as HUD, the Department of Justice, the Federal Trade Commission, and others, are aggressively pursuing wrongdoers and predatory lenders to ensure they are punished. This will send the message that these practices will not be tolerated.
The President Will Create A Presidential Council On Financial Literacy Composed Of Leading Private Sector Individuals Who Can Help Promote Financial Literacy. This Council will work closely with the Treasury Department, HUD, and the Department of Education to make sure that we are raising awareness of these complicated issues.
The President Supports The Efforts Of Public and Private Sector Groups That Are Promoting Financial Literacy And Providing Foreclosure Counseling. For example, the President's Budget proposes $120 million for NeighborWorks, which provides foreclosure workshops and counseling to borrowers. The President's FY 2008 Budget request includes $50 million for HUD's housing counseling program.
The President Has Asked Secretary Paulson To Lead The President's Working Group On Financial Markets In Examining Some Of The Broader Market Issues Underlying The Recent Mortgage Problems. The President's Working Group on Financial Markets is led by Treasury Secretary Paulson and is composed of Federal Reserve Chairman Bernanke, Securities and Exchange Commission Chairman Cox, and Commodity Futures Trading Commission Acting Chairman Lukken. The group will examine:
The role of credit rating agencies and how their ratings are used in lending procedures, and
How securitization, the repackaging and selling of assets, has changed the mortgage industry and related business practices.
# # #
October 2006 Real Estate Housing Starts down 14.6%.
Lowest level in the last 6 years. Building permits,a indicator of future building activity fell for the 9th straight time.
Real Estate Construction since September 2006 shows a six month supply of new construction for sale.
New Home Sales in October 2006 = Sales of Existing Home Sales and New Home Sales
The median house price fell by 1.7% from January to August 2006. This is the first annual decline since April 1995. NAR
More info to follow!
FINANCIAL LOAN COUNSELING
IN SPECIFIC ZIP CODES.
They used to call it RED LINING!
The bill is HR 4050.
A new program called, The Predatory Lending Database Pilot Program
has targeted certain zip codes in the City of Chicago.
They are as follows; 60620, 60621, 60623, 60628, 60629, 60632, 60636,
60638, 60643, and 60652. These zip codes are mostly populated by
African American and Hispanic. Extra steps to borrow money in these
area if your FICO score is at certain level. More info to follow!
May 2007 REAL ESTATE QUESTIONS.
What is a High Ratio Mortgage? Mortgage loan exceeding 80% of the property value.
What is Debt to Income Ratio? It's total liabilities divided by borrower's Gross Income.
What is Loan to Value Ratio? Known as LTV. Ratio of money borrowed to fair market value, usually in reference to real property. Example: 20% down = 80% LTV.
EQUAFAX (800) 525 - 6285 or (800) 685 - 1111
P.O. Box 740241, Atlanta GA. 30374
TRANS UNION (800) 680 - 7289 or (800) 916 - 8800
P.O. Box 390, Springfield PA. 19064
SOCIAL SECURITY FRAUD LINE 1(800) 269 - 0271.
Should You Try to Sell Your Home During the Holiday Season?
By June Fletcher
Question: We put our house on the market late in June. Since then, we have had lots of people come through but no bites. We have been told that our house will be a teardown and that it probably will be sold to a contractor or builder. Since we're coming to the holiday season and winter months, should we take it off the market for November through the end of January and get the kick of a new listing in February?
--Tom Sommer, Inverness, Ill.
Tom: For everything there is a time and a season -- and late fall isn't the season to be selling a home.
When thoughts turn to turkey, mistletoe and cozy evenings by the fire, the last thing people want to do is get out boxes and start throwing things in them -- except, of course, when they're wrapping last-minute holiday gifts. Moving seems like too much of a hassle during the holidays. If ever there was a time to take your house off the market and let your listing "refresh," this is it. Why should this matter when think you're going to sell to a builder? Because you probably won't -- at least not directly. Unless your house sits on a large, subdividable parcel of land, you will likely sell to a buyer who'll hire a contractor later.
With the housing market cooling very rapidly, finding a builder who's willing to take on a speculative project is going to become more and more difficult. The rate of single-family starts fell 41.2% to 1.53 million this month, and permits have nose-dived, according to the National Association of Home Builders. New single-family home sales hit an annual rate of 1.075 million in September, down 14.2% from the same month a year before, according to government statistics. Until the housing market recovers from its current slump -- which some housing economists don't think will happen until 2009 -- even small builders will be fixated on getting rid of their existing backlog of properties, not starting new ventures.
Which is why I wouldn't spend the holidays baking sugar cookies if I were you. Use the time while your house is off the market to create a more aggressive marketing plan, one that throws your net as wide as possible. Yes, you or your real estate agent should be contacting local builders who have customers in the pipeline and just need a lot, but you should also be canvassing remodelers, antique-store owners, neighbors and others who might know someone who'd like a smaller, older home. After all, you can't be sure your house will be torn down -- new owners might decide to renovate it instead. With that in mind, spend some time cleaning and decluttering your home and keeping the landscape trimmed, even if you don't want to spend the money and effort to replace outdated items that buyers care about, like flooring, countertops, roofing and appliances. If the new owners only care about the land and don't plan to keep the house, they'll likely pay more for a property that you obviously have loved. -- June Fletcher is a staff reporter at The Wall Street Journal and an authur. 11-10-06
YOUR CREDIT SCORE. WHAT IS IT ALL ABOUT?
Called a FICO score. Stands for The Fair Isaac Corporation. Most lenders use the FICO score to determine your credit risk. Be it a mortgage, auto loan, or revolving credit (credit cards). FICO scoring is used when you are requesting money to borrow. But today, FICO scoring is used on a consumer purchasing insurance and a person who is seeking employment. So you see, FICO scoring is determining not only credit risk, but also day to day events not related to borrowing money. There are three credit bureaus that use FICO scoring. 1. EQUIFAX, 2. TRANS UNION, and 3. EXPERIAN. FICO determines your score from the following; + HOW LONG YOU HAD CREDIT, 15% + HOW MANY CREDIT INQUIRES, 10% + PAYMENT HISTORY, 35% + BALANCE OWED, 30% + TYPES of CREDIT YOU HAVE, 10%. The credit bureaus reports actual numbers that reflect your FICO score. These numbers, (FICO Score), range from 300 to 850. The lower the number, the higher the credit risk = HIGHER the INTEREST RATE and additional qualifying information needed. The higher the number, the lower the credit risk = LOWER the INTEREST RATE and less qualifying information needed.
In most cases, the credit score reported does not justify the true credit risk. After speaking with other professionals who interpret credit risk and after I reviewed many credit reports there is no solid reason why a persons credit score is high or low. It is often the roll of the dice dictating the cause and effect regarding our credit scores. For example; a senior citizen with no balance owed on his/her property, automobile, and with one revolving credit card open with a low balance is usually penalized with a low FICO score. A person with a high balance on their mortgage and auto loans, with high credit card balances score High on their FICO score. FICO score by it self doesn't give a true picture of credit risk. Majority of the lenders doing business in the last few years are only determining credit by FICO scores alone. Remember the higher the FICO score the Lower the Interest Rate. The Lower the FICO score the Higher the Interest Rate. This does effect the monthly payment amount, and the total cost of the loan. Your total Annual Percentage Rate or APR. A greater burden is placed on the borrower in paying back the loan. This does have a relationship on borrowers paying back a loan on time or defaulting on that particular loan. Has an over all effect on our free markets and our nation as a whole. Turns out that lenders are able to command higer interest rates, and fees. Thus guaranteeing a HIGH rate of return for the banking and credit bureau industry. In dollars and cents this equates to Billions of dollars of your hard earned Cash. Sucking out money that would benefit our purchasing power, effecting our economy and jobs in the GREAT U.S.A.! Jim Liceaga
Information re. credit report agencies are; EQUAFAX (800) 525 - 6285 or (800) 685-1111, P.O. Box 740241, Atlanta, GA. 30374, EXPERIAN (888) 397 - 3742, 701 Experian Parkway, P.O. Box 2002, Allen Texas 75013. TRANS UNIONis (800) 680 - 7289 or (800) 916-8800, P.O. Box 390, Springfield, PA. 19064. SOCIAL SECURITY FRAUD LINE I (800) 269 - 0271
Putting Your Mortgage in Reverse To Supplement Retirement Funds November 14, 2006
By Amy Hoak Federally insured reverse mortgages are gaining in popularity, and experts think they're poised to become an even bigger part of the lending industry in coming years. The reason: More seniors are finding that traditional retirement tools, including IRAs, pensions and 401(k)s, are not providing enough income to help fund their living and health-care expenses, says Peter Bell, president of National Reverse Mortgage Lenders Association. More importantly, new reverse mortgages could address one of the main concerns some seniors have about the loans -- their costs. "There are at least four new products in development," says Ken Scholen, director of the AARP Foundation's Reverse Mortgage Education Project.
With increased demand for reverse mortgages, there's been more competition and those applying a year from now could be pleasantly surprised by their lower costs. "If you don't need to do it in the next year or so, definitely wait and see," Mr. Scholen says. The Federal Housing Administration insured 74,412 "home equity conversion" mortgages during the year ended Sept. 30, compared with 43,082 the previous year, according to the Department of Housing and Urban Development. Nearly half of all FHA reverse mortgages have been originated in the last two years. A reverse mortgage is just what it sounds like -- instead of a homeowner making payments to the bank to pay off a mortgage, the bank pays the homeowner who has a significant amount of equity built up. The lender, in return, puts a lien on the property. Borrowers receive money from a reverse mortgage in four ways: They can get a lump-sum payment, get a monthly cash stream, establish a line of credit or sign up for some combination of the three. To qualify for these loans, borrowers must be at least 62 years old. But not all seniors are falling in love with this financial tool. It wasn't right for John Lopez, 71, a Boca Raton, Fla., retiree who looked into a reverse mortgage so that he and his wife could live in their condo more comfortably. After learning some of the costs and the adjustable interest rates associated with reverse mortgages, they decided against it. "The charges are horrendous," and the loans complex, he says. "I don't think the average person out here could handle some of these things without a lawyer."
Upfront Costs According to the AARP, upfront and ongoing costs for a 74-year-old borrower in a $250,000 home in May 2006 could be about $25,000 -- not including interest. For that, the homeowner could draw about $1,000 in monthly payments. Almost all lenders charge adjustable interest rates on home-equity-conversion loans. Other costs include origination fees, third-party closing costs, mortgage insurance premiums and servicing fees. But Mr. Bell points out that most often the cost of the appraisal is the only one that may need to be paid at the outset. Remaining costs often get paid with loan proceeds. Another worry prospective borrowers have is that they will lose control of their property by signing up for the loan, says Jim Mahoney, chief executive officer for Financial Freedom Senior Funding, a subsidiary of IndyMac Bancorp that specializes in reverse mortgages. But that fear -- that "the bank takes the house" away from the owner -- is unfounded, he says. The homeowner retains the home's title for the life of the reverse mortgage, he says. When the homeowner moves or dies, the loan comes due and must be paid off by the borrower or the heirs, which could be done by selling the house and using the proceeds. The borrower never has to pay back more than the value of the home; the FHA pays the excess amount if there is one. To ensure that borrowers know what they're getting into, they also must go through counseling before getting the loan. Some reverse mortgages resemble annuities, with fixed monthly payments for life, even if equity is depleted. But unlike annuities, the borrower can't move and continue to receive the monthly income.
Equity Drops One downside of reverse mortgages, however, is that as the equity in the home is diminished, less money is available for emergency purposes, says Jon Beyrer, a financial planner with Blankinship & Foster in Solana Beach, Calif. On top of that, some consumers considering a reverse mortgage decide against it because they want to leave their house -- or the equity built up in it -- to their heirs. Those considering a reverse mortgage should ask themselves five questions:
• Is downsizing a better option? Homeowners should seriously look at selling and moving as a way to tap a home's equity, Mr. Scholen says. Those who do will sometimes find that they could get more for their home than they thought or that another living situation is more attractive.• How long do you plan to stay in the house? A reverse mortgage doesn't make sense, for example, for someone planning on moving two years in the future, Mr. Mahoney says.• Might other loans be better? If the mortgage is being considered to supplement a rainy-day fund, it might be best to consider a line of credit that can be tapped when it is needed, Mr. Mahoney says. If money is needed for a shorter period of time, maybe a home-equity loan is a better choice, Mr. Scholen says.
• How much could you get from a reverse mortgage?
• When do you need the loan? In addition to waiting for less-expensive products in the pipeline, remember that homeowners are eligible for more money the older they are and the more their house is worth, Mr. Scholen says.
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