Potential home buyers in search of a mortgage are wary of all kinds of adjustable rate loans these days, but hybrid ARMs can be really good deals even in these times of historically low interest rates, some lending experts insist.
Hybrids are “a great product at a great rate,” says Christopher Cruise, a mortgage broker in Silver Spring, Md.
Currently, starting rates are under 4 percent, generally a full percentage point lower than traditional, 30-year, fixed-rate mortgages. Hybrids are locked in at that starting rate for five, seven, or sometimes even 10 years, then they adjust—usually a maximum of 2 points a year with an overall cap of 6 or 8 points.
In the meantime, the savings on a hybrid ARM can be thousands of dollars and make sense for a buyer who doesn’t expect to be in a home for more than five or six years.
Even if they stay in the same house, it’s likely they’ll have an opportunity to refinance. “Seven years for a mortgage is an eternity these days,” Cruise says.
He recommends that buyers do the math, considering the worst-case scenario. In many cases, particularly with jumbo loans, the savings will still be substantial even if the loan adjusts to the maximum for a couple of years.
Source: United Features Syndicate, Lew Sichelman (05/03/09)
Both presidential candidates have announced plans to help voters deal with the challenging housing economy.
Here are their ideas as posted on their election websites:
Sen. John McCain:
Direct assistance to homeowners. No taxpayer money should go to real estate speculators who made bad decisions about investments.
Reform financial and lending systems to prevent a repeat.
Require participating lenders to forgive part of subprime borrowers’ loan principals and place them into new 30-year Federal Housing Administration loans.
Give financing to municipal and civic groups trying to solve problems within their own communities.
Sen. Barack Obama
Create a standardized disclosure plan that allows for full-disclosure of loan costs and provisions.
Crack down on mortgage fraud.
Give a mortgage credit to those who don’t itemize deductions.
Create a fund to help homeowners who face foreclosure refinance.
Allow bankruptcy courts to modify a homeowner’s mortgage payments.
Source: The San Diego Union-Tribune, Lori Weisberg
Rising foreclosures and tightening credit standards are making it more difficult for the housing market to recover from the current downturn than it has been for the market to rebound from previous slowdowns, according to a Harvard University study.
“Historically, housing markets recover only after the economy has entered a recession and a combination of falling mortgage interest rates and house prices have improved housing affordability,” Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard, said in a statement.
“It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets,” he said. “The slump in housing markets has not yet run its full course.”
The center predicted that income growth over the next 10 years would be constrained, reducing demand for homes. Much of employment growth will be in part-time and low-wage positions, the study said.
“The somber conclusion is that if the economy slips into recession or job losses keep racking up, household growth and homeownership demand could fall even more,” the center said in the release.
Source: Reuters News, Lynn Adler 06/23)
Illegal immigrants can make good home buyers, according to a new study.
Undocumented immigrants — those who aren’t legal permanent residents — who have an individual taxpayer identification number (ITIN), good credit, and proof of tax filing can qualify for a fixed-rate “ITIN mortgage.”
Less than 1 percent of ITIN loans have gone into foreclosure, according to the Hispanic National Mortgage Association. That compares with 1.2 percent for prime mortgages and nearly 11 percent for subprime mortgages given to borrowers with poor credit history, according to the Mortgage Bankers Association.
The Internal Revenue Service has issued more than 12.5 million taxpayer ID numbers since 1996 to foreigners who weren’t eligible for a Social Security number, including visa holders legally in the United States, spouses of U.S. citizens, and undocumented workers.
Community banks and credit unions began accepting the nine-digit numbers from mortgage applicants in 2000, most of them illegal immigrants with modest incomes. Most large banks are still reluctant to accept these numbers. By law, banks must verify customers’ identity, but they don’t have to check immigration status.
Source: Charlotte Observer, Deborah Hirsch
The FBI was instrumental in 206 convictions in 2007 for real estate securities and commodities fraud.
According to an FBI report released Thursday, the 1,204 mortgage fraud cases pursued in 2007 resulted in 321 indictments and court orders for $595.9 million in restitution.
The FBI, working in conjunction with the Securities and Exchange Commission, is investigating more than 1,300 mortgage-fraud cases and conducting 19 corporate investigations linked to the subprime lending crisis.
Source: The Associated Press, Marcy Gordon 05/22/08