Your home means a lot of things to you, most of them good. Your home gives comfort and protection to you and your family, and it could well embody all your material hopes and dreams. But houses have become much more than just places to live. Your home is probably your biggest asset, and the price you could ask for it today is almost certainly much higher than what you paid for it back whenever.

With much of the U.S. well into a real-estate recession it’s unlikely that homeowners in once-booming areas will see a return of skyrocketing prices anytime soon. “Real-estate investments suffer serious and sometimes prolonged downturns,” writes economist W. Van Harlow in a new study of home equity and retirement from the Fidelity Research Institute in Boston. “A real-estate ‘bust’ could be quite damaging to an investor nearing retirement who relied too heavily on home equity.” It may be late for a lot of homeowners to read this, but here it goes anyway: It’s risky and bad planning to have too much of your net worth in your principal residence. No prudent stock-market player would put 60% or 70% of a portfolio in just one stock, but millions will hold that much or more of their total net worth in just one house. (more…)

search for : real-estate recession, home equity

The Federal Bureau of Investigation is cracking down on mortgage fraud like it’s organized crime, because, well, it is. And the agency’s message is clear for would-be perps who can’t do the time or pay the fine: don’t commit the crime. In it’s latest effort to stem the tide of mortgage fraud — 436 investigations in 2002, 1,036 investigations now — the agency has been working closely with the Mortgage Bankers Association. Late last week the FBI provided association members with a reminder that mortgage fraud is a federal crime punishable by up to 30 years in a federal pen or up to $1 million in fines — or both.

The advisory didn’t single out only mortgage lenders, but also served as a reminder that consumers who knowingly engage in fraud could also have to dig deep and long if found guilty. “It is illegal for a person to make any false statement regarding income, assets, debt, or matters of identification, or to willfully overvalue any land or property, in a loan and credit application for the purpose of influencing in any way the action of a financial institution,” the advisory says, pointing to nine federal provisions that could snare mortgage scammers. The FBI’s mortgage fraud section of its “Financial Crimes Report To The Public Fiscal Year 2006″ says crooks cost the mortgage industry from about $1 billion to more than $4 billion last year as scammers furiously worked two basic types of mortgage fraud. The agency said fraud for property amounts to 20 percent of mortgage fraud and occurs when a home buyer lies about income, debt or other information in order to buy a home. More prevalent is fraud for profit, typically involving mortgage industry insiders, multiple loan transactions and several financial institutions conspiring for financial gain. (more…)

search for : Federal Bureau of Investigation, mortgage fraud, Mortgage Bankers Association, mortgage scammers

I want to purchase a home that my parent own. It has a mortgage in the amount of $250,000 and has been appraised for $499,000. My parents want $200,000 out of it. Should I ask them to refinance and get the money they want and then just arrange to put the house in my name? Or should I purchase the home and give them the money? I want to put an addition on the property and would like to have money to do this without stressing out financially.

We have to analyze this from two points of view: you and your parents. I do not know what your parents paid for the property, but if they have owned and used it for two out of the five years before you buy it, they will be able to take the entire up-to-$500,000 exclusion. Since the price you plan to pay will not exceed $500,000, it would appear that your parents would not have to pay any capital gains tax. If your parents refinance the property, how can you be sure that they will get the $200,0000 they want? They currently own $250,000, which means that they will have to get a refinance loan in the amount of $450,000 in order to take out that amount of money. And even if their credit is pristine pure, I doubt that a lender would agree to such a large loan. Furthermore, your parents will have to be concerned about a gift tax. Currently, each of your parents gave give you (tax free) up to $12,000 per year. However, if they give you the house, that clearly exceeds the free gift amount and they must determine how this will impact on their own tax and financial situation (more…)

search for : mortgage, refinance the property

Is the housing slump really that bad? After all, the S&P 500 last week fell more in a single day (3.5 percent) than home prices have fallen in the past year nationally (3.1 percent). Still, it could be years before home prices regain the peaks seen before the current stumble - and even that’s optimistic. “I expect prices and sales to be modestly growing by June in most of the country,” said David Lereah, the chief economist for the National Association of Realtors and perhaps the most bullish housing economist. “But we’ll have to go into 2008, maybe even 2009 before we get even close to the peaks we saw in late 2005 or early 2006.”

Two big factors could prolong the slump: the glut of homes on the market after a record building boom, and the fact that prices saw unprecedented gains during the white-hot real estate market of the first half of the decade. Another worry is rising mortgage defaults, especially in the subprime sector, that could lead lenders and regulators to choke off the credit that fed the previous booms. Celia Chen, director of housing economics for Moody’s Economy.com, says she thinks it will take until 2009 for prices nationally to reach the peaks hit in 2005. Take inflation into account, she said, and a full recovery could take more than 7 years. (more…)

Investors are waiting to find out how just how bad their hangover will be as thousands of loans made to home buyers with spotty credit histories have begun to look dubious in the sobriety that followed the housing bubble. Wall Street is roundly punishing companies whose business is making so-called subprime loans and analysts say a purge of such loan makers would not be unusual. Shares of companies such as Novastar Financial Inc. and New Century Financial Corp. have been hit hardest — their stock is down 80 percent and 90 percent for the year, respectively.

Investors are concerned that New Century Financial Corp. might soon be felled by the credit restraints that are revisiting the market, and that they will take down similar companies faced with a growing number of defaults on home loans. New Century, which traded at around $30 per share just over a month ago, closed at $3.22 on the New York Stock Exchange Friday after falling another 66 cents, or 17.6 percent. Investors are fleeing on concerns of a possible bankruptcy. Lenders may now find themselves holding deeds to homes in a flat real estate market as risky borrowers are overwhelmed by mortgage payments that ballooned when tempting teaser rates expired. New Century, already the target of shareholder lawsuits, alarmed investors Thursday when it announced one of its financial backers had turned off the funding spigot. The company said last month it had failed to keep tabs on how frequently borrowers missed payments. Wall Street is now looking for signs that the problems of New Century and other subprime lenders will branch outward as even more banks pull back on funding. “We’re definitely going to see fewer small companies in this space,” said Bose George, an analyst at Keefe, Bruyette & Woods Inc. “I think that happens with a combination of mergers, probably some bankruptcies as well. We’ve already seen a lot of bankruptcies of smaller lenders,” (more…)

search for : subprime loan, Novastar Financial Inc, New Century Financial Corp

If your house has been on the market for quite a while (3 to 6 months), you may have already dropped your price and now you’re waiting for the buyers to rush in and make wonderful offers on this now-priced right property. And then it happens. The lone buyer does appear, like a bandit in the night and offers you even less than what you just agreed to. Quite a bit less — about 10 percent less. So on your $350,000 house, that you just dropped to $324,000, you now have an offer for $299,000. With a seller subsidy request of $5,000. At this point, your net is $294,000.

So how do you handle such a low-ball offer. Well, first of all — don’t panic, get angry or lose sleep. Especially, don’t reject the offer right off the bat and tell them to come back when they’re serious. Remember, it’s now a negotiation game and the buyer IS serious or he or she would not have made an offer. Several things have happened before this offer came in. The buyer, with his agent, has researched the market, walked through as many as 30 or 50 properties, conducted a study on the value of the property and written an offer for your house. Remember, you just won the lottery. They could have written on any other house, but they selected yours. So let’s get busy. First of all, do an analysis of your own goals and needs. How much do you really need to come out of this house to meet your goals of moving to your next home? What could you really live with and what amount are you going to counter. Remember this last point — what are you going to counter? This is assuming that you’re not rolling over and that you’re going to stay in the game. (more…)

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Ty and Kimberly Mitchell refinanced their home loan. They allege that the loan holder violated the federal Home Ownership and Equity Protection Act (HOEPA) by charging excessive “points and fees” exceeding 8 percent of the amount borrowed, or $400, whichever is greater. The Mitchells argue the $455 appraisal fee, $821 title insurance fee, $67 phone bill and the $1,178 overstatement of the payoff amount for their old refinanced mortgage should be included in the total points and fees calculation of their new Beneficial mortgage. Beneficial replied that the appraisal fee, title insurance fee, $67 phone bill and the $1,178 overstatement of the payoff on the old mortgage were paid to third parties so they should not be considered as “points and fees” charged for the new Beneficial mortgage.

If you were the judge would you rule that the mortgage holder charged excessive “points and fees” in violation of federal law? The judge said no! “Appraisal and title insurance fees, if bona fide and reasonable, are excluded from HOEPA’s definition of total points and fees,” the judge began. Neither did these fees violate the federal Real Estate Settlement and Procedures Act (RESPA) because they were paid to unaffiliated third parties for services performed and Beneficial derived no benefit from the payments, he explained. As for the $67 Verizon telephone bill, he continued, evidence shows this was paid by Ty Mitchell after the loan closing so Beneficial never received that payment nor was it incident to the extension of mortgage credit. The alleged $1,178 overcharge for the mortgage payoff demand of the previous first mortgage was not a finance charge because it was not an incident to extending credit, the judge emphasized. Therefore, there were no excessive loan points and fees that would make this mortgage subject to HOEPA’s regulation provisions, the judge ruled.
(more…)

search for : payoff on the old mortgage, points and fees, Appraisal and title insurance fees, Real Estate Settlement and Procedures Act, RESPA, HOEPA’