Beginning Jan. 1, home buyers 62 and older will be able to buy a house using a reverse mortgage, as long as it's their primary residence.
Traditionally, people obtained reverse mortgages to take equity out of their existing homes to help them meet expenses, pay off the mortgage or pay the property taxes.
But staff members at the Federal Housing Administration noticed an increasing number of seniors selling their homes, buying new homes and then getting a reverse mortgage to pay off the new home, said Meg Burns, director, FHA office of single-family program development.
"They were going through two mortgage transactions and paying all those fees," she said. "Seniors need to keep their money in their pocket."
When the FHA staff members looked further, they found that the traditional reverse mortgage program designed to keep seniors in their home wasn't helping those who wanted to downsize, move to a house without stairs, move closer to their kids or move into active adult housing.
Burns said a program allowing a Home Equity Conversion Mortgage for purchase "came from us internally" as a way to accommodate that kind of consumer.
Fannie Mae launched a reverse mortgage program for purchase in 1997 called a Home Keeper for Home Purchase, but Burns said it was not used much because of borrowing limits.
With a reverse mortgage, the borrower takes the equity out of the home either as a lump sum, a line of credit, in a monthly payment or as a combination of these. The loan is repaid when the borrower sells the house or the last homeowner dies or moves out. The amount of the loan is based on the home's value and the youngest borrower's age.
A Cap On Fees
A new law that went into effect this fall imposed a $6,000 cap on origination fees, and that law applies to the HECM for purchase loan. Lenders can charge 2 percent of the first $200,000 of loan value plus 1 percent of any additional loan value. Consumers are still charged 2 percent for FHA insurance.
The FHA insurance protects both the borrower and the lender. If the bank should go under, consumers still will receive their reverse mortgage. And if the home's value drops below the original loan amount when the senior dies or moves out, the insurance protects the lender.
Consumers should expect to pay fees similar to a traditional reverse mortgage, with the additional fees relating to a purchase of a home such as recording fees and transfer taxes. Borrowers are still required to meet with a third-party, HUD-approved consumer counselor so they understand their options.
Those using a HECM loan for purchase must buy a one- to four-family house. The HECM for purchase may be used for new construction that has been completed and received a certificate of occupancy. Purchasers must move in within 60 days of closing.
"We talk to seniors. The folks we've talked to agree that it makes sense," Burns said. "I feel like this product is going to address a social issue for them."
Sunday, December 21, 2008
Thursday, December 11, 2008
Refinancing applications boost home-loan volume
WASHINGTON – The number of home-loan applications filed nationwide rose last week compared with a year ago, according to a report today from the Mortgage Bankers Association.
In the week ended Dec. 5, the trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan application volume – was 796.8 points (March 16, 1990 = 100 points). That represented a decline of 7.1 percent from the 857.7 points of the week ended Nov. 28 (after adjustment for the Thanksgiving-shortened work week), but an increase of 99.90 percent from the eight-year low of the week ended Nov. 15 (READ MORE) and a year-over-year increase of 2.2 percent.
The MBA survey, conducted weekly since 1990, covers about half of all U.S. retail home mortgage applications.
Its seasonally adjusted Purchase Index fell 17.4 percent week-over-week to 298.1 points, after rising 38.0 percent the week ended Nov. 28 and 5.3 percent the week before that. Applications to purchase a home using Federal Housing Authority (FHA) and other government-backed loans fell 21.3 percent last week while applications for non-government backed loans fell 15.5 percent, the MBA said.
The Refinance Index dipped 0.9 percent last week to 3,767.3 points, after surging 203.3 percent Thanksgiving week and falling 2.1 percent the week ended Nov. 21. Refinancing was the goal of nearly three-quarters of loan applications last week – 73.7 percent – up from 69.1 percent in the week ended Nov. 28 and 49.3 percent in the week ended Nov. 21, the MBA said.
The share of mortgage applicants who were seeking adjustable-rate mortgages (ARMs) – rather than conventional fixed-rate loans – fell to 1.1 percent last week from 1.4 percent Thanksgiving week and 3.0 percent of applications filed in the week ended Nov. 21.
The average contract interest rate for a 30-year, fixed-rate mortgage dipped to 5.45 percent last week from the previous week’s from 5.47 percent, while the contract interest rate on a 15-year, fixed-rate loan declined to 5.09 percent from the previous 5.13 percent. But the average contract rate on a one-year ARM rose to 6.76 percent from the preceding week’s 6.61-percent average.
Still, by historical standards, “mortgage applications for purchases remain subdued,” Anna Piretti, a senior economist at BNP Paribas in New York, told Bloomberg News. And, she added, “tighter credit standards suggest actual lending remains constrained, weighing on sales.”
The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.MortgageBankers.org.
In the week ended Dec. 5, the trade group’s seasonally adjusted Market Composite Index – a measure of overall mortgage loan application volume – was 796.8 points (March 16, 1990 = 100 points). That represented a decline of 7.1 percent from the 857.7 points of the week ended Nov. 28 (after adjustment for the Thanksgiving-shortened work week), but an increase of 99.90 percent from the eight-year low of the week ended Nov. 15 (READ MORE) and a year-over-year increase of 2.2 percent.
The MBA survey, conducted weekly since 1990, covers about half of all U.S. retail home mortgage applications.
Its seasonally adjusted Purchase Index fell 17.4 percent week-over-week to 298.1 points, after rising 38.0 percent the week ended Nov. 28 and 5.3 percent the week before that. Applications to purchase a home using Federal Housing Authority (FHA) and other government-backed loans fell 21.3 percent last week while applications for non-government backed loans fell 15.5 percent, the MBA said.
The Refinance Index dipped 0.9 percent last week to 3,767.3 points, after surging 203.3 percent Thanksgiving week and falling 2.1 percent the week ended Nov. 21. Refinancing was the goal of nearly three-quarters of loan applications last week – 73.7 percent – up from 69.1 percent in the week ended Nov. 28 and 49.3 percent in the week ended Nov. 21, the MBA said.
The share of mortgage applicants who were seeking adjustable-rate mortgages (ARMs) – rather than conventional fixed-rate loans – fell to 1.1 percent last week from 1.4 percent Thanksgiving week and 3.0 percent of applications filed in the week ended Nov. 21.
The average contract interest rate for a 30-year, fixed-rate mortgage dipped to 5.45 percent last week from the previous week’s from 5.47 percent, while the contract interest rate on a 15-year, fixed-rate loan declined to 5.09 percent from the previous 5.13 percent. But the average contract rate on a one-year ARM rose to 6.76 percent from the preceding week’s 6.61-percent average.
Still, by historical standards, “mortgage applications for purchases remain subdued,” Anna Piretti, a senior economist at BNP Paribas in New York, told Bloomberg News. And, she added, “tighter credit standards suggest actual lending remains constrained, weighing on sales.”
The Mortgage Bankers Association is a trade group representing the real estate finance industry. Its 3,000 member companies include mortgage firms, commercial banks, thrifts, life insurance companies and others. Additional information, including the MBA’s Weekly Application Survey, is available at www.MortgageBankers.org.
Tuesday, December 2, 2008
Home Insurance
Insurance is a contract between the insured and an insurance company that protects against the risk of large and calamitous loss.
The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.
The major risks covered by home owner’s insurance are:
Damage or loss to the home and other structures included on the property
Damage or loss to personal property items in the home
Injury or harm to third parties who come to your home
The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.
There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.
Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.
Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.
The title insurance company conducts a search to find out what liens, encumbrances and defects are present to the title as it stands in the hands of the seller before you can obtain the loan. Once the title insurance coverage is obtained, the Title Company guarantees that the buyer has marketable title to the property after the purchase. Any liens, encumbrances and other defects to the title that occur during your ownership of the property, however, are not covered by this insurance
William Brister - http://www.businessproguide.com - A guide to all your business needs. http://www.insuranceproguide.com - Everything you should know about insurance
Article Source: http://EzineArticles.com/?expert=William_Brister
The importance of home insurance cannot be undermined. There are two primary reasons why home owners buy home insurance. Firstly, a home is the most important asset belonging to a home owner, and the need to protect it is imperative. Secondly, mortgage lenders require home owners to own insurance to protect the lender’s investment form damage or loss.
The major risks covered by home owner’s insurance are:
Damage or loss to the home and other structures included on the property
Damage or loss to personal property items in the home
Injury or harm to third parties who come to your home
The home insurance covers the person insured and the members of his home. Third parties who come to your home are also covered through the liability portion of the insurance policy for injuries. Additionally, you and your family members also have some liability protection to others even while you were away from your home.
There are two distinct types of insurance under home insurance - Title insurance and Homeowner's insurance. They protect against totally different types of risks.
Homeowner's insurance covers loss or damage to the home, structures on the property, personal contents of the home, as well as third-party liability.
Title insurance, on the other hand protects ownership interests in the real property. Title insurance is purchased to guarantee that the home owner has a good and marketable title to the property. When purchasing a home by means of a loan, lenders require you to obtain title insurance. That way they know that you have clear ownership of the real property and the home.
The title insurance company conducts a search to find out what liens, encumbrances and defects are present to the title as it stands in the hands of the seller before you can obtain the loan. Once the title insurance coverage is obtained, the Title Company guarantees that the buyer has marketable title to the property after the purchase. Any liens, encumbrances and other defects to the title that occur during your ownership of the property, however, are not covered by this insurance
William Brister - http://www.businessproguide.com - A guide to all your business needs. http://www.insuranceproguide.com - Everything you should know about insurance
Article Source: http://EzineArticles.com/?expert=William_Brister
Wednesday, November 12, 2008
Home Owners Insurance Covers More Than Just the Home
Let us look at a scenario for a minute. It has been snowing for three days straight and you have not had the time to shovel the sidewalk free from snow. The mail person tries to deliver a package to your front door and slips and falls in an ice patch on your front porch. There is a broken leg and medical bills through the roof. Who is going to pay for the medical bills associated with that broken leg? The homeowner if they do not have homeowners insurance.
Homeowners insurance and renters insurance cover more than the physical home and the homes belongings. This insurance is there in case something happens to a person on your property. While you may not be directly at fault for the injury, legally if the injury occurred on your lands due to a "negligence", all medical bills can fall into your lap.
Depending on the location of the home, the insurance rates will vary widely. Some areas, such as central North Carolina, carry very low homeowners and renters insurance rates. Other parts of the United States, like Key West, Florida, will carry rates far higher due to the increased risk of hurricane and flood damage.
It is important to speak with your insurance representative about the homeowners insurance policy and the medical coverage in the policy. When the homeowner is renting out the home, it is important for the renter to carry insurance on the home as well. This will provide double coverage in the case that something goes wrong and the homeowner is facing a huge stack of medical bills through no fault of their own.
Julia Vakulenko is a licensed broker associate with Tampa4U.com Realty. She has one of the hardest working Tampa Real Estate team in Florida specializing in Tampa Condos and also in2Va Team for Northern Virginia Real Estate.
Article Source: http://EzineArticles.com/?expert=Julia_Vakulenko
Homeowners insurance and renters insurance cover more than the physical home and the homes belongings. This insurance is there in case something happens to a person on your property. While you may not be directly at fault for the injury, legally if the injury occurred on your lands due to a "negligence", all medical bills can fall into your lap.
Depending on the location of the home, the insurance rates will vary widely. Some areas, such as central North Carolina, carry very low homeowners and renters insurance rates. Other parts of the United States, like Key West, Florida, will carry rates far higher due to the increased risk of hurricane and flood damage.
It is important to speak with your insurance representative about the homeowners insurance policy and the medical coverage in the policy. When the homeowner is renting out the home, it is important for the renter to carry insurance on the home as well. This will provide double coverage in the case that something goes wrong and the homeowner is facing a huge stack of medical bills through no fault of their own.
Julia Vakulenko is a licensed broker associate with Tampa4U.com Realty. She has one of the hardest working Tampa Real Estate team in Florida specializing in Tampa Condos and also in2Va Team for Northern Virginia Real Estate.
Article Source: http://EzineArticles.com/?expert=Julia_Vakulenko
Saturday, October 4, 2008
Getting The Protection That You Need With Loan Insurance
Loan insurance has always supposedly been designed to offer individual borrowers the peace of mind they need to feel safe n the knowledge that their debt is protected against ill health and unemployment. However, investigations into the payment protection insurance industry by the finance industry regulator Financial Services Authority have proved this not to be the case in the last year or so.
Instead of protecting the consumer, loan insurance was a cash cow for high street banks and lenders, providing them with a decent profit as a result of the strict terms and conditions that contain several exclusions. As a result of those very exclusions, many individuals were unable to claim on their loan insurance as and when they needed to. This may have resulted in their debts becoming even more severe and most certainly brought on financial difficulty through no fault of their own. As a result, in some cases, loan insurance represented very bad value indeed.
Some of the exclusions contained within the loan insurance small print should have been highlighted by sales representatives that sold the loan insurance to individuals in, but profits were apparently more important. This simply serves to highlight the fact that the general public needs to be more informed about loan insurance and what it can do for them.
It is most definitely up to the consumer to read the terms and conditions associated with the loan insurance that they are considering to make sure that they would qualify for a payout should they need to claim. This is absolutely necessary for peace of mind and also to escape the individuals that would dupe them for profits and results. Instead of being a statistic, consumers need to be pro active and help themselves because, as far as loan insurance is concerned, there are very organizations that will do it for them.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan insurance, mortgage payment protection insurance and income protection insurance.
Article Source: http://EzineArticles.com/?expert=Simon_Lance_Burgess
Instead of protecting the consumer, loan insurance was a cash cow for high street banks and lenders, providing them with a decent profit as a result of the strict terms and conditions that contain several exclusions. As a result of those very exclusions, many individuals were unable to claim on their loan insurance as and when they needed to. This may have resulted in their debts becoming even more severe and most certainly brought on financial difficulty through no fault of their own. As a result, in some cases, loan insurance represented very bad value indeed.
Some of the exclusions contained within the loan insurance small print should have been highlighted by sales representatives that sold the loan insurance to individuals in, but profits were apparently more important. This simply serves to highlight the fact that the general public needs to be more informed about loan insurance and what it can do for them.
It is most definitely up to the consumer to read the terms and conditions associated with the loan insurance that they are considering to make sure that they would qualify for a payout should they need to claim. This is absolutely necessary for peace of mind and also to escape the individuals that would dupe them for profits and results. Instead of being a statistic, consumers need to be pro active and help themselves because, as far as loan insurance is concerned, there are very organizations that will do it for them.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan insurance, mortgage payment protection insurance and income protection insurance.
Article Source: http://EzineArticles.com/?expert=Simon_Lance_Burgess
Friday, September 19, 2008
Insurance to cover your Home Loan Payments
In this era of cut throat competition, where banks are introducing new schemes day after day, the insurance companies are not left behind. Private sector insurance companies have come up with innovative scheme where one can have a security of repayment of a loan if the borrower expires suddenly.
People do not prefer to take a home loan because of the risks associated with it. They are more worried about the uncertainties of life that holds them back from taking such a loan. Long loan tenure and repayment are among some of the top risks that come to the mind while opting for a housing loan.
As people are becoming more conscious about the uncertainties of life it make sense to pay a little extra and be secure of unexpected risks in the future. Introduction of schemes that protects a person against such risks is now becoming common.
Now-a-day the market is concentrated with several insurance products and innovation of home loan insurance schemes is the new attraction amongst the people. These schemes provide a wide range of choice for a person who wants to protect his home loan. Majority of these products currently available in the market are flexible enough and the premiums paid against them are eligible for tax exemption under the Income Tax Act.
Insurance schemes offered in the market have multiple options and a person can choose one that suits him the best. A variety of options can be combined together so that the policies can be modified to meet the specific requirement of a person. The premiums and returns differ according to the service provided under the policy
The insurance cover can be taken for entirely insurance purposes or for insurance and investment combined.
The policies that are based on entirely insurance purpose covers only the risk of non-payment due to a sudden demise of the borrower. Once the loan is repaid the insurance cover comes to an end and the borrower does not get anything. On the term's expiry, the borrower only gets the sum assured and the cover ceases without any maturity benefits. This is because term insurance plans are pure risk covers without any investment dimensions. Therefore, premiums under these plans are the lowest.
http://www.rupeetimes.com/news/home_loans/insurance_to_cover_your_home_loan_payments_1633.html
People do not prefer to take a home loan because of the risks associated with it. They are more worried about the uncertainties of life that holds them back from taking such a loan. Long loan tenure and repayment are among some of the top risks that come to the mind while opting for a housing loan.
As people are becoming more conscious about the uncertainties of life it make sense to pay a little extra and be secure of unexpected risks in the future. Introduction of schemes that protects a person against such risks is now becoming common.
Now-a-day the market is concentrated with several insurance products and innovation of home loan insurance schemes is the new attraction amongst the people. These schemes provide a wide range of choice for a person who wants to protect his home loan. Majority of these products currently available in the market are flexible enough and the premiums paid against them are eligible for tax exemption under the Income Tax Act.
Insurance schemes offered in the market have multiple options and a person can choose one that suits him the best. A variety of options can be combined together so that the policies can be modified to meet the specific requirement of a person. The premiums and returns differ according to the service provided under the policy
The insurance cover can be taken for entirely insurance purposes or for insurance and investment combined.
The policies that are based on entirely insurance purpose covers only the risk of non-payment due to a sudden demise of the borrower. Once the loan is repaid the insurance cover comes to an end and the borrower does not get anything. On the term's expiry, the borrower only gets the sum assured and the cover ceases without any maturity benefits. This is because term insurance plans are pure risk covers without any investment dimensions. Therefore, premiums under these plans are the lowest.
http://www.rupeetimes.com/news/home_loans/insurance_to_cover_your_home_loan_payments_1633.html
Sunday, August 10, 2008
Credit crunch: Insurers refuse coverage of some home loans, in areas
WASHINGTON -- Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow -- even for those with good credit.
Mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.
That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J. -- and houses in Utah's St. George.
The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada -- which have seen the highest foreclosure rates and the worst price declines -- are blackballed on some mortgage insurers' lists. Twenty-two zip codes in the St. George area were included on lists this month from AIG United Guaranty and Radian Guaranty that flagged "declining markets."
Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.
For new homebuyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.
"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.
The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.
Lenders' growing leeriness threatens to dampen sellers' already soggy prospects for the spring homebuying season -- and that means more pain for the already battered housing sector and the broader economy.
In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans -- those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.
With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.
Don Brekke, an equipment operator from Colorado Springs, Colo., tried to buy a bank-owned 1950s ranch home for $113,000. At first, he couldn't get a loan because the house was in a potentially declining market and lenders required a 10 percent down payment, more than he could afford.
Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.
"It was a bunch of headaches -- going around and around to get this done," Brekke said.
The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.
Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he's still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago. Once appraised for $1.1 million, Broussard's lender now says it's worth about $300,000 less.
He does not yet owe more than the property is worth, but Broussard worries that is a possibility.
"The way the market's going, you know, who knows?" he said.
Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home's value by 15 percent, he feels betrayed by the lender's unwillingness to negotiate better terms.
The stinginess of banks is showing up in home loan statistics: The value of all new mortgages plummeted to $450 billion in the fourth quarter of 2007, down 38 percent from a year earlier, according to trade publication Inside Mortgage Finance.
Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.
There is a silver lining: The Federal Reserve has repeatedly cut interest rates, helping borrowers whose mortgages were just about to reset to higher rates and people with student loans. Reflecting the Fed's efforts, rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month.
But the long-term impact of the Fed's move is far from certain, and the central bank's actions could end up feeding inflation and pushing up long-term rates.
http://findarticles.com
Mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.
That encompasses a wide variety of neighborhoods: McMansions in Scottsdale, Ariz.; luxury Miami condos; 1960 ranch houses in Flint, Mich.; and early 20th century kit homes in Metuchen, N.J. -- and houses in Utah's St. George.
The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada -- which have seen the highest foreclosure rates and the worst price declines -- are blackballed on some mortgage insurers' lists. Twenty-two zip codes in the St. George area were included on lists this month from AIG United Guaranty and Radian Guaranty that flagged "declining markets."
Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.
For new homebuyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune.
"We're in the midst of an epic, broad, sweeping change in the mortgage industry," said Chris Sipe, a loan officer with America East Mortgage in Frederick, Md.
The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.
Lenders' growing leeriness threatens to dampen sellers' already soggy prospects for the spring homebuying season -- and that means more pain for the already battered housing sector and the broader economy.
In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans -- those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.
With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void.
Don Brekke, an equipment operator from Colorado Springs, Colo., tried to buy a bank-owned 1950s ranch home for $113,000. At first, he couldn't get a loan because the house was in a potentially declining market and lenders required a 10 percent down payment, more than he could afford.
Ultimately, he was able to qualify for a 100 percent loan from Colorado's state financing authority, and he plans to close in the coming days.
"It was a bunch of headaches -- going around and around to get this done," Brekke said.
The combination of sinking home prices and tighter lending standards has been a major aggravation for Ron Broussard, a 38-year- old sales representative for a home builder.
Broussard took advantage of soaring Southern California property prices three years ago to refinance a loan on a house he had owned since the late 1990s. Today he's still stuck with a $720,000 mortgage and has been renting it out since moving with his family to Texas a year ago. Once appraised for $1.1 million, Broussard's lender now says it's worth about $300,000 less.
He does not yet owe more than the property is worth, but Broussard worries that is a possibility.
"The way the market's going, you know, who knows?" he said.
Broussard has found little sympathy from his lender, Countrywide Financial Corp. While Broussard accepts responsibility for taking out a mortgage whose monthly payments are due to skyrocket once the unpaid principal exceeds the home's value by 15 percent, he feels betrayed by the lender's unwillingness to negotiate better terms.
The stinginess of banks is showing up in home loan statistics: The value of all new mortgages plummeted to $450 billion in the fourth quarter of 2007, down 38 percent from a year earlier, according to trade publication Inside Mortgage Finance.
Subprime loans, made to borrowers with poor credit, virtually disappeared from the market, plummeting 90 percent to $13.5 billion in the October-December quarter.
There is a silver lining: The Federal Reserve has repeatedly cut interest rates, helping borrowers whose mortgages were just about to reset to higher rates and people with student loans. Reflecting the Fed's efforts, rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month.
But the long-term impact of the Fed's move is far from certain, and the central bank's actions could end up feeding inflation and pushing up long-term rates.
http://findarticles.com
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