"Too late...they did and it destroyed me."
This was the reply email I got from a friend (will remain nameless) after I sent out my warning email about Countrywide freezing Home Equity Lines of Credit. If you missed it I had heard from a Ft Lauderdale Realtor that Countrywide made a decision to freeze his HELOC because of a decline in his property value. It is my understanding there was no notice before informing him he could no longer access his credit line.
I asked my friend who sent my this reply and he said Chase. So now I have gotten feedback about two major national lenders shutting off access to Home Equity Lines of Credit. As we have seen over the past year in the lending business - changes happen in waves and they cover the whole industry. I certainly hope that no other lenders will follow suit, but why take chances if you don't have to?
What should you do?
If you have a line of credit against your property, and you think you may need or want to tap into that equity anytime in the next 12-18 months, you may want to take it out now. This way you will definitely have access to it. Lenders can't make you pay it off if you already owe it and are paying on time, but they can keep you from borrowing it, like they did to my friend above.
But I will be paying interest?
True - you will. But you can offset part of this by sticking the money you borrow in an account and earn some interest at the same time. So if you pulled money out of a Line of Credit and were getting charged 7.5% by the lender, and you could get 5% on a money market at the bank, then it would really be costing you 2.5%. So under these circumstances it would end up costing you...
Less than $21 per month to have $10,000 available to you.
And for every extra $10,000 you would keep available, it would cost you another $21 - so $42 for $20,000, $63 for $30,000, etc. Is it worth it to pay this? Your call. The real question is do you think you will need this kind of money over the next 12-18 months. Do you have another source for it? Keep in mind - I don't get any benefit by you taking money out of your equity line - even if I put the line of credit in place for you. I just don't want to see anyone I know get caught in a pinch, when they could have easily avoided it.
In case you are not sure whether you should have extra money around here is a list of common reasons someone might need extra assets short term:
Emergency Fund (most planners reccommend 6 months of your income)College / Education ExpensesOpportunity Fund (there are great buying opportunities now)Start a businessDivorceMarriageBaby (previous three in no particular order )You may not yet know the reason you may need money....You If you do what I am suggesting and take money out of your home equity line, you can always pay if back, you just won't be able to get it once your lender decides to freeze the account. In my opinion - its better to have and not need than to need and not have.
The lending and mortgage business may take a while to recover. You should take action now if it is in your best interest.
Real estate prices cannot be helped by any of this, and it is likely that the market will continue to get worse before getting better. If you are going to need a new loan anytime soon on property that you already own - now is a good time to act...over the next year the options you have available are certain to decrease...
You should take an inventory of your financial state of affairs - if you want some advice on what your options regarding your money, house, and mortgage are - I'm always happy to help - no obligation - just call 954-217-9518, or visit at Florida Mortgage
Word just in from one of our friends, Scott Todd - a local Realtor in Fort Lauderdale, FL that could affect many of our friends and family. It seems not only are the banks and mortgage companies making it harder to get new loans, but they have started taking back access to equity lines they have already granted in light of declining property values.
We have stated in previous articles and blog posts that lenders reserve the right to freeze a line of credit on property that has been damaged in the aftermath of a hurricane. If the lender's collateral is no longer there or is damaged, then they may not allow homeowners to access the available credit when a homeowner may need it most. According to Todd, though, his line of credit was frozen due to a drop in property value - even though there is nothing wrong with the home.
We have said it countless times before - money in property is not the same thing as money in the bank. It may not be there to "withdraw" via a loan or line of credit when you need it most. Thankfully, our friend wasn't put in jeopardy by this situation, but there may be people who are using their line of credit as a savings "account" and have their money in the line of credit instead of the bank. If the bulk of someone's savings is suddenly trapped in their home, it could be devastating for them.
Right now, with the market in flux, the safest place to have your money is where you can get it easily - in the bank or some other account instead of your house. If you were planning on using money from an equity line of credit some time this year or next, you should really look at the option of taking it out of the property now. Perhaps using a larger first mortgage product - rates are very low right now on fixed rate loans. Just don't leave yourself at the mercy of bank policies that will be aimed at protecting their interest instead of yours. We will give you straight answers and options so you can make the best decision no matter what your circumstances.
Scott Todd is a Realtor with Charles Rutenberg Realty www.cstrealestate.com
Looks like Fannie Mae is deciding to place lumps of coal in the stockings of potential borrowers this year, after stuffing it with goodies over the past several years with more agressive lending...
As of last week Fannie pulled the plug on certain types of "no income" verification loans, causing many lenders to do the same. Gone are "No Ratio", "No Income", and "No DOC" loans that were based off of Fannie Mae guidelines. There are a few out there that may still have a program in place, we have a lender still doing a NO DOC (only based on credit score and equity) loan at lower LTV's (75%).
The other news regarding Fannie of great importance to the Realtor / Investor community, is that they will reduce maximum available financing by 5% LTV if the property is in a market considered "significantly depreciating". If you aren't familiar with this designation, and what this means check out a previous blog post below...
Many lenders had reduced their max loans already on the more aggressive lending programs, but for those who could verify income and assets, and had good credit 100% financing was still available.
As of January 15th, 100% financing will no longer be available even for perfect borrowers in these depreciating markets. There have been some lenders who have already implemented these changes effective now.
You might appreciate that we all may have a buyer we are working with that would liketo get into a property with no downpayment on a normal loan. They are on the clock now, for sure...the time to deal is now. Otherwise that buyer who has been floating out there waiting to scoop up a property might have to go scoop up some more cash to get into the deal.
As our way of spreading holiday cheer and as additional incentive to motivate those borrowers still on the fence, here is what we are going to do - we will eat, the appraisal fee on your closed loan file. That's right get your appraisal gratis....
We have cah out refi's with no seasoning to use the appraised value up to 75% LTV. So if you bought a property cash or hard money, rehabbed it and now its worth a lot more, we can use that value, even if you just bought it a couple of months or weeks ago. This program is great - no income verification, fixed rates in the mid to low 7%'s.
Hard Money Loans - from Broward to Ocala, homes built after 1968 can get full purchase fnancing plus rehab money up to 65% after rehab value. If you have a property older than this, we still have an investor who will fund the entire purchase price for the right deal.
Call us today - we will help you get buyers qualified, or help you get cash out of your properties through refi's....call us today 888-2Lend-Fast or 954-217-9518.
Happy Holidays to all! Call us now!
It has been so nice to wake up and not break out in a sweat as I walk the 20 feet from my front door to my car in the mornings anymore. I look forward to this all year, and it’s a big reminder of why people continue to move down to Florida. We have heard so much talk of people moving out of Florida recently, that this is a good reminder of why people stay and keep moving here.
Imagine having to wake up in biting cold every morning for months, or having to shovel snow, or scrape ice off of the windshield of your car before heading off in the morning. Of course, for millions o f Americans outside of Florida, this is a way of life. But if you had the choice not to, you might trade in the bite of winter for the for steam of the Florida summer.
Every year, people wake up and think “That’s it, I can’t take another of these winters!”. So even though there is a lot of “negativity” towards Florida and real estate currently, the long term outlook remains good for us. Florida’s population is estimated to be close to 29 Million by 2030 (about 18M currently), and 7 of the top 19 fastest growing counties in the United States are located right here. (source: US Census)
Just as important are jobs—Florida continues to have the lowest unemployment rate of the ten most populous states, based on the latest nationwide data, and has been below the national average since mid-2002.
Based on the latest nationwide data, Florida ranked third in job growth among the ten most populous states, behind only Texas and California. “Florida remains the fourth most populous state in the nation and continues to rank third highest in job growth nationally, relative to our population,” said Monesia T. Brown, Director of the Agency for Workforce Innovation. “Based on the November 2007 Site Selection Magazine, Florida’s business climate is among the top 10 in the nation.”
Where there is job and population growth, there will be a rebound. While right now may not be the best time to be selling a property, it’s a fantastic time to buy. If you have a reason to move (bigger house, more bedrooms, etc.) you have lots of selection and every seller wants to be your best friend. Negotiate a great deal on the house you really want to live in. We would love to help you find a great deal on your new loan and also connect you with motivated sellers though our network of investors, sellers, and Realtors. If you are interested in buying now, please give us a call - 1-888-2LEND-FAST.
BREAKING NEWS - Yesterday The House of Representatives Passed HR3915 Mortgage Reform and Anti-Predatory Lending Act of 2007. This Law, should it eventually be passed, would bring new rules for lending standards, predatory lending, and Mortgage Broker Licensing.
From a Licensing standpoint, there are items in the bill that would serve to protect the public, including a National Registry for all Mortgage Originators, so that bad apples that break the law can be tracked should they try to move from company to company or state to state. Background checks of all originators (except employees of federal-depository institutions) would become mandatory.
There will also be a much higher level that lenders will be held to in determining a borrower’s ability to repay a loan. We have said previously that this sounds like a smart thing to keep people who shouldn’t have gotten a loan over the past few years from getting a loan going forward, but there are serious concerns. People who have had a setback temporarily that affected their credit and cash flow may be unable to borrow money they put into their property if they cannot meet the ability to repay.
In fact, within the past several days we received word of lending changes already occurring in the state of Massachusetts:
The Massachusetts Attorney General has significantly revised existing mortgage regulations to require that lenders determine whether a borrower has the ability to repay a loan…. No Doc, No Income, No Asset (NINA), No Income, Full Assets (NIFA), Limited Doc and Stated Income documentation will no longer be permitted in Massachusetts.
While all of this definitely serves to keep people who should not be borrowing from doing so, it certainly will keep people who really should be allowed to borrow from doing so as well. People who could be possibly impacted by this law include:
· People with cash flow rich, but very tax-efficient businesses (real estate investors for one)
· People who have a lot of their savings in their house but lose their income for a time
· People who may have income they cannot “prove” from family or overseas
· Those with new businesses
· Certainly others, these just come top of mind
If I have a brand new business with no track record, but a ton of cash in the bank and I want to buy a home, I may no longer be able to purchase using a No-Doc loan in Massachusetts.
What this could do is keep people who really never did anything wrong, expect try to save on their tax bill, or be entrepreneurial, or unfortunately get very ill, or get laid off, etc..from now having the option of paying the lenders price to borrow money against the asset they currently own or want to own.
2 things you should do now!
1. Contact Your Senator and tell them you OPPOSE this bill if it has to be accepted in its entirety – the bill has to clear the Senate where changes may be made! http://www.senate.gov/general/contact_information/senators_cfm.cfm
2. Call us TODAY, to get the best rate, get cash out, or buy your next property. We have hard money available for investment deals or we can get you the best bank deal through one of institutional lenders. You have many options available to take advantage of this “Buyers Market”. Sieze opportunities today because with all the shake ups in the Banking and Legislative world you may not get a chance tomorrow. ….hope is not a strategy – call today 954-217-9518
The latest study by the University Florida shows that the new housing market is actually stabalizing. This is a move in the right direction, as markets will tend to stabalize before they can move back up. The report indicated that the Florida market is different from most states in the nation. In spite of lots of press to the contrary and the increase in the number of people moving away, Florida continues to grow.
Archer does believes the owner-occupied single family homes are still good investments. While prices may continue to drop in some markets, he did not see widespread declines.
While this is excellent news that is supportive of our housing market, there is some concern regarding some legislative activity that is going on in Washington DC right now. Activity that could affect some us sitting in our Florida homes.
The government, in their quest to “appear” to be doing something about the Real Estate problems throughout the country, have decided that they must blame someone and punish them. They have chosen to blame and punish Mortgage Companies, and have proposed a bill (Mortgage Reform Act HR 3915) that, if enacted the way initially presented, would make Mortgage Lenders prove that someone has the ability to repay in order for them to be able to legally borrow money against their home.
At first glance this doesn’t seem too unreasonable, after all, one of the problems in the market today was that people were lent money that they were unable to repay, and those resulting foreclosures are putting a strain on the marketplace. But looking more closely this is very frightening.
Everyone knows that bad things happen to good people.
Imagine you have been trying to pay off your mortgage as fast as possible (not something we recommend, but that’s another story/another time) and have been for years making extra principal payments on your mortgage. Your payment history is great, credit is good, but the mistake you made was you put too much money into your house. One day, through no fault of your own, the company you work for goes bankrupt and you are out of a job. Your savings account was mostly located in your home, and before too long your bank account is next to nothing. You would try to take back the hard earned money you “deposited” into your home so that you can live until you get your income situation settled. Your Lender’s response to your loan request is:
I’m sorry – there are no legal options available….
since you have no proof of income.
As scary as this is, the bill has been presented. In fact, some States have already outlawed certain types of mortgages that cater to self employed people. We do not know one way of the other if the bill will go through in this format, a modified format, or any format at all, but that it got presented this way is concerning. This is because the people in charge of making laws are not necessarily experts in the fields that they can make laws regarding.
Take control of your money and your house while you can!
We all hope that cooler, informed heads will prevail and this will not come to pass, but we don't know. We don't know the different things that could be coming to pass in our market over the next 12 months. It would be very wise right now to do an equity and mortgage evaluation to determine if you have any opportunity to improve your financial house right now, before the market or the goverment tell you you can't.
I finally saw a positive spin on the housing market in the Sun-Sentinel late last week. Instead of talking about the difficult time that sellers of properties are having right now, the article spoke about the great deals that are available out there right now if you are a buyer. Sellers and developers are bending over backwards to accommodate qualified buyers. If you need more room this is a fantastic time to upgrade your residence. The article even specifically spoke about the strategy of doing the opposite of what most people are doing as a way to get ahead. We have been talking about this for a while with our friends and customers. See our Report on how to get money from a seller to buy their home:
http://www.bridgecapitallending.com/upto68000
I recently got 2 of South Florida's most prolific real estate investors to sit down and record some thoughts on why now is a great time to get into real estate investment and how to get started. We should have this available as a free download very soon.
Craig
Its been a whole long time since I posted, but I am glad to be back in the posting saddle!
The topic I am touching on today is in regards to property values. Broward County is one of the latest counties to be put on a list that some lenders are using that indicates this is a market where values are "Significantly Depreciating". Broward joins the following counties on this list:
Brevard, Charlotte, Citrus, Collier, Escambia, Hernando, Hillsboro, Indian River, Lee, Manatee, Martin, Monroe, Okaloosa, Palm Beach, Pasco, Pinellas, Santa Rosa, Sarasota, St. Lucie, and Volusia
What does this mean to homeowners here?
Lenders base all of their lending practices on some basic items, one of which is the value of the collateral (your house) vs the amount borrowed against it. This is known in LoanSpeak as your LTV (Loan -To-Value). Contrary to popular beleif, the property does not simply have to appraise for what you are wanting to borrow for you to get approved. There are entirely different approval rules depending on that LTV percentage. If you are at 100% LTV - this means you are looking for a loan for the same amount of money as the property is worth. This was getting very commonplace before the massive changes and fallout in the mortgage business this year. Traditionally this was tough to get, because the lender always should be looking at the worst-case scenario - you may not pay them back in a timely fashion. In this worse-case scenario they would have to foreclose on the property, and then sell it - a business they do not want to be in. Lenders really want to loan the money and get back regular monthly payments as agreed upon, not take back properties with equity in them, even a lot of equity!
Back on topic - the lower your LTV the more likely you may get a loan. While there are still 100% financing programs available (we have these) it is much more difficult to come by that was last year. As you try to borrow less the guidelines relax. So someone that may not be able to obtain a 100% loan will have a better shot at a 95% or 90% or 80% loan. But there are circumstances where the most someone can borrow is 65% of the value of the property (current loan is in default). And there is going to be a maximum LTV that people can get. Now - the declining markets "tag" comes into play here - what lenders are doing is reducing the maximum LTV% that you can get if your property is in one of these counties. This is especially true if you are a self employed person and need to use a No Income Verification Program.
What this does, in effect is really hurt some peoples chances right now of getting a loan that might better their situation. If the maximum LTV they qualified for considering their credit and income situation was 80%, they will only be lent 75% perhaps just because their property is in one of these counties! Not only are homeowners having to contend with the property value declining, but they are reducing it even further for some borrowers! The danger this represents is that with all of the foreclosures that are hitting the market, things are likely to get worse in the short term. These foreclosures can really hurt the comparable sales in a neighborhood - thereby reducing your value on paper right now. Long term the market will rebound, but in the immediate future (next 12 months) things are uncertain. If you have an ARM loan that is set to adjust in the next 12 months it would be very wise to look at your options right now if you are concerned about what your payment might become once the loan adjusts.
It is possible that waiting until later, in the short term, could seriously limit the kind of mortgage that you can get later - either due to further mortgage industry difficulties, or declining values in your neighborhood. If you don't do something now you are putting the control of your future options in the hands of the people in your neighborhood who currently have their homes on the market. If someone decides they just want to dump their property, or they cant pay and get foreclosed on, this could hurt your chances of changing loans in the future. If you want to check out your options now, we would be glad to help - rates are very good right now on fixed rate loans - please contact the office - 877-8GO-GREEN or 954-217-9518 or email craig@bridgecapitallending.com.
It's all over the news. Subprime mortgage companies are in the midst of a true crisis! According to The New York Times, over two dozen lenders have already closed their doors for good. In fact, more than half of the top 25 mortgage companies from 2006 have either reported serious losses, been sold off to other companies, or have filed for bankruptcy!
When asked how many subprime lenders will be taken down by the current credit crunch, Bill Dallas, mortgage industry icon and former CEO of Ownit Mortgage Solutions, replied "all of them." When asked how many borrowers would be impacted by tightening credit standards, Dallas estimated anywhere from 10% to 40%, adding, "the coming shift in available products will be huge." This could negatively impact anyone seeking financing in the next 12 months.
How has this happened? And, more importantly, how does this affect your mortgage?
Over the past few years, credit standards loosened considerably. According to a recent article in Market Watch, this was partly due to home prices surging to record levels in recent years. This meant that many people, who would have been unable to purchase or refinance a home, could suddenly obtain more financing than ever before. In fact, even borrowers with serious credit deficiencies could obtain 100% financing without having to document their income.
Now, with more than 15% of these loans in default, the Wall Street bankers who bought the loans have sent them back, and the subprime mortgage companies have paid the price.
What should I do now?
If you or someone you know has a subprime loan, you need to speak with your mortgage professional right away. With loan guidelines and credit requirements tightening and property values still declining in many neighborhoods, you may not even qualify for a refinance if you wait too long. Even if your mortgage has a pre-payment penalty, it may be less expensive to absorb the penalty and refinance into a more affordable or stable mortgage. Fixed rate programs are currently approaching eighteen month lows.
In the event that you now owe more on your home than it’s currently worth, or if you don’t have enough equity to sell your home and cover expenses, help could still be available – but you have to act now. Don't wait until the guidelines change, and it becomes too late for you to do anything.
If you or anyone you know could use my help, please call me right away. As always, I will provide a free review of your mortgage, credit report, and finances, and help you find the right balance for your financial goals and needs.
There is a great debate within the inner-mortgage circles these days. Should we, as loan professionals, encourage clients to borrow as much money as possible? Or would consumers benefit more if we helped them to understand the advantages of 15-year amortization schedules and pre-paying principal? Let's examine the pros and cons of both strategies.
Leveraging Your Property. In order to understand why you'd want to borrow as much as possible for your home purchase, you must first grasp the concept that equity has a zero rate of return. Here's an example:If Consumer "A" buys a home for $300,000, and puts 20% down, then they have $60,000 in equity. Over the next 5 years, the property appreciates $100,000 in value. Consumer "A" now has $160,000 in equity.Consumer "B" buys a home for $300,000, and puts no money down. At the end of 5 years, that same home is now worth $400,000. Consumer "B" has $100,000 in equity, which is the same appreciation as Consumer "A", a net $100,000.
As you can see, your down payment has nothing to do with your rate of return. What becomes important is how you choose to manage the $60,000 you didn't use as a down payment. If you use it for frivolous activities, such as buying toys or going to Las Vegas, it would be more prudent for you to use that money as a down payment. Especially since this will enable you to obtain a lower interest rate.
However, if you were to invest the $60,000 in a vehicle that can out-earn the cost of that debt, then this could be a formula for success. This is why some lending professionals suggest putting as little down as you possibly can, maximizing your tax write-off, and investing the rest. This principle has been applied for many years in the life insurance game. The old saying goes, "Buy term and invest the rest." The key component is taking the money you would have used as a down payment and creating an asset accumulation account. This account should earn a significant enough rate of return to enable you to pay your mortgage off entirely and achieve the ultimate goal of being debt-free.
Paying Your Home Down Rapidly. There are very few times over the course of my career that I have seen a client with zero debt and no financial difficulties. Choosing to pay off all of your debt can reduce stress and help you to gain freedom of cash flow for investment opportunities. A 15-year mortgage or a bi-weekly payment strategy provides structure. It can also put you on track to have your mortgage paid off within a set timeframe. Simply put, it contains built-in discipline.
It's important, however, to understand that regardless of how rapidly you pay your home off, you're not getting any greater rate of return on your investment than if you paid it off slowly.
Conclusion. So how does one determine which scenario is best? The choice depends entirely upon the individual. Savvy consumers who are disciplined, and are comfortable taking chances from an investment perspective, would do well with the first scenario. Over the course of time, it's been proven that your rate of return over the long-haul will be far greater than the rate you'd pay for a mortgage in today's rate environment. It's important to seek the advice of a skilled investment advisor to ensure success with this strategy.
The second scenario is best for those who have a difficult time managing their money or who'll sleep easier at night knowing they have a plan in place to pay their loan off more rapidly. Be sure that your budget can handle accelerated payments. When consumers "bite off more than they can chew" with a 15-year mortgage, they frequently end up having to refinance back into a 30-year schedule.If you find this subject intriguing and would like to know more, I recommend that you read a book titled, Missed Fortune 101, by Douglas Andrew. It's an outstanding read that is very simplistic and goes into far greater detail than I can cover in this column. Douglas is a financial planner who advises safe-structured investments such as whole life policies and tax-free fixed income instruments.
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