Archive for the 'Mortgage' Category

Banks are really tough these days. Even foreclosed unit buyers who have good credit scores and stable income struggle to acquire a loan. Approval may only be possible if the repossessed property on sale reaches standard of good financing and by-laws.

Banks now check the value and type of building insurance, the dimensions of the property, and for the new buildings, the number of sold and closed units.

Most of these requirements have existed for years, but due to the recent status of the housing industry strict adherence is observed. Some lenders even follow Fannie Mae and Freddie Mac’s directives.

Documents are now asked not only from the buyer, but also the building where the previously-foreclosed home is located.

Banks check a lot of insurance: fidelity bonding, or insurance against building manager and board of director’s embezzlement; A-rated insurance; and if location is risked for floods, flood insurance.

Small buildings do not usually have fidelity bonds or rated-A insurance. Foreclosed-apartments on higher-rise buildings do not see the purpose of having flood insurance. Additional insurance means additional $2,000 to $2,000 yearly.

Smaller banks may be more helpful, but deals are still better in national lenders.

Foreclosed properties on co-ops of less than 5 units also have trouble in acquiring refinancing. Some banks will only allow one new loan in a small building and let their loan officers find other lenders for the other homeowners.

Manhattan, New York is one of the markets on which these stricter national standards cannot apply. Banks do not usually approve on walk-ups, apartments smaller than 500 square feet or buildings without parking. But in Manhattan, 500 square feet is already average sized and walk-ups are not substandard and under construction buildings without parking are still selling.

For new constructions, lenders will only approve loans if at least 70 percent of the units are sold or only 49 percent is unoccupied. Developers are then forced to self-finance by offering mortgages to their potential buyers. If they would not do this, buyers cannot buy a unit, construction will be halted.

Politicians, lenders and the economically concerned want to put a halt to foreclosure. But if homeowners really want relief, then they ought to let their home be repossessed.

With the impending doom of unmanageable loans, inflated properties and, unstable and unpredictable employment, accepting defeat against foreclosure would reboot the troubled homeowner’s finances.

Foreclosure may get credit scores low, but it can be saved.

Regressing to sustainable renting may be better in these tough times.

Foreclosure could help the credit market, with securitization unsuccessful. Cutting down mortgages into bundles made asset classes with different interests in a dissolution strategy. Senior bundle holders can do modifications, but not juniors. Lower bundles are of little worth and are even legal hindrances for sales.

It is best to start clean by surrendering to foreclosure.

More homes are repossessed than sold. Home prices are falling along with new home constructions. With more homes stagnant in the market, there will be no demand for new homes.

It is said that lethal financing ended early 2007. By summer of that year, 100 percent financing, negative payback option ARMs, piggyback seconds and no-income no-job no-asset loans are no more. Real estate purchases were then financed by stricter loan guidelines. This is where ends meet up. If default rates of late 2007 loans are lower than 2004 to early 2007 mortgages, this confirms a turning point.

Main Street and Wall Street believes that foreclosure may establish recovery. As weak owners give up to repossession, assets transferred to smarter owners. Plus, the foreclosed homeowners of today are homebuyers of the future.

Credit flow changes are not all about money. It is about beginning a clearly guided and reliable lending system with reasonable standards and product which investors will definitely buy.

Then there is loan modification, and it is bad. Modification forces the foreclosure-troubled to rescue an overvalued home. This is predatory lending that creates more mortgage slaves.