Who Gets The Freeze? A Primer

Ruth Simon at the Wall Street Journal Online has provided a pretty succinct and easy to follow Q&A explaining the newly announced mortgage plan:

"The mortgage plan outlined by the Bush administration should help some borrowers with subprime adjustable-rate mortgages. But other borrowers who are having trouble making their payments won't qualify for the "fast-track" interest-rate freeze outlined yesterday. Here's a look at the agreement:
Which mortgages does the plan cover?
The agreement covers only a subset of borrowers. These are borrowers who took out subprime ARMs that were originated between Jan. 1, 2005, and July 31, 2007, and whose interest rates will reset for the first time between Jan. 1, 2008, and July 31, 2010. It applies only to loans that have been packaged into securities and not those that are held by banks on their own books. Homeowners should call their servicer to determine if their mortgage is covered by the plan. It doesn't apply to borrowers with subprime ARMs that have already faced their first rate reset. It also doesn't cover loans that are seriously delinquent, fixed-rate mortgages or ARMs issued to borrowers with good credit.
How do I know if I have a subprime mortgage?
The agreement doesn't provide a specific definition of subprime ARMs because it isn't always clear. Typically, subprime ARMs carry a fixed interest rate for the first two or three years, then adjust annually. Borrowers who aren't sure whether or not they have a subprime ARM can ask the company that collects their loan payments.
What are mortgage companies doing for these borrowers?
Mortgage companies are setting up guidelines for who may qualify for a fast-track program that would freeze the interest rate at the introductory rate for five years. Some borrowers who don't qualify for fast-track may be eligible to refinance into a new mortgage, based on their credit score and the amount of equity in their home. Mortgage companies have been encouraged to "take all reasonable steps" to facilitate a refinancing.
Who qualifies for the rate freeze?
To qualify, borrowers must live in their home and face a payment increase of more than 10% when the rate on their ARM resets for the first time. The program is designed to help borrowers who aren't good candidates for refinancing because of a poor credit score, have little or no equity in their homes or a history of late payments. To qualify for the fast-track program, borrowers must have a credit score of less than 660 and it can't have improved by more than 10% since the mortgage was originated.
What if I've missed a mortgage payment?
Missing one mortgage payment won't automatically disqualify borrowers from the program. Borrowers can't have more than 60 days late more than once in the last 12 months.
What if I can't qualify for the fast-track freeze?
Some borrowers may be able to refinance into Federal Housing Administration loans or other mortgage programs. Borrowers who don't qualify for a refinance or who don't meet the criteria for the fast-track program will be dealt with on a case-by-case basis by their mortgage-servicing company. In some cases, these borrowers may be able to obtain a lower rate or a reduction in the amount owed. Other options include a short sale, in which the house is sold for less than the amount owed with the lender forgiving the balance, or foreclosure.
Whom should I call if I have questions?
Borrowers are encouraged to contact the mortgage-servicing company that collects their loan payments. They can also call 1-888-995-HOPE, which provides counseling to homeowners with mortgage problems.

20 Questions to Ask Your Mortgage Broker

A good list posted on the Inman Wiki. The list was compiled by the California Department of Corporations, but the questions are relevant no matter where you live. See the full article for full explanation of the questions.

1. Do you represent a mortgage broker, mortgage banker or lender, consumer finance company or a financial institution?
2. If working with a mortgage broker, ask: Are you licensed by the state?
3. What is the interest rate you are offering to me and is it a fixed or variable rate? Is this the best possible rate based on my credit score?
4. Are you locking my interest rate and, if so, for how long?
5. What would be my Annual Percentage Rate (APR)?
6. As a mortgage broker or banker, how much money would you be paid?
7. What other costs besides your fees will be associated with this loan?
8. What is the principal balance of my loan?
9. How much will the monthly payments be? Does this amount include escrow for property taxes and homeowner’s insurance or will I be responsible for paying these expenses on my own?
10. When would my payments be due? What is the grace period?
11. What is the length of the loan? Is there a balloon payment at the end of the loan?
12. Who would be my lender?
13. What are the chances that my loan would get sold?
14. If I pay off the loan early, would I be charged a prepayment penalty? If yes, what is the amount of the prepayment penalty? How many years into the loan would the prepayment penalty expire?
15. What is the appraised value of the property?
16. If I pay for the appraisal, how do I obtain a copy of it?
17. If I pay for the credit report, how do I obtain a copy of it?
18. Am I required to have Private Mortgage Insurance (PMI)? If so, when will it be removed and what do I need to do to have it removed?
19. Who are you planning on using as the title agency? Are you or your company affiliated with the title company? Should I purchase owner’s title insurance?
20. Who do I contact to obtain the closing documents for the loan 24 hours in advance of the closing?

Full Article

New unit available at Durham Kress

The Durham Kress has just announced a new listing. Their description:

"This incredible loft-style penthouse features a private 300 sf terrace with views of the downtown skyline. The entrance on the building’s third floor leads to a spacious kitchen/dining area, living room, and study nook. A full bath with shower on this floor provides convenience when friends and family stay overnight. Sconces line the wall as you ascend the stairs to the fourth floor, which offers an airy master suite with huge walk-in closet, laundry room, and master bath with double sinks, tiled shower with glass door, and built-in cabinets. "

Unit 301/401 is listed at 1,231 square feet, 1 bedroom, 2 baths, priced at $351,500. Should be ready for occupancy by February 2008.

Lenders agree to five year freeze on ARMS

This just in from Inman News:

"A coalition of lenders, loan servicers and investors have reportedly agreed to a plan that would freeze interest rates on some subprime mortgage loans for five years.
Borrowers with loans made between Jan. 1, 2005, through July 30 of this year who face interest rate resets between Jan. 1, 2008, and July 31, 2010, would be eligible for interest rate freeze, the Associated Press reported, citing unnamed sources including Congressional aides.
An official announcement of the plan's details is scheduled for Thursday, AP reported.
Treasury Secretary Henry Paulson said Monday the plan would help homeowners who are current on their payments but cannot afford a higher adjusted rate.
Debate over the plan has centered around the length of any interest rate freeze, AP reported, with federal regulators pushing for a seven-year freeze, and the industry holding out for a one- to two-year reprieve.
See the Associated Press report

Mortgage help is on the way...sort of

The Treasury Department, along with a group of major lenders calling themselves the Hope Now Alliance, are negotiating a plan to freeze interest rates on adjustable mortgages. The framework of the plan is to freeze rates for up to seven years for borrowers that can afford their teaser rate and have been paying their mortgage on time. Homeowners that can't even afford the teaser rate and have been late on their payment are left out, as are those who can afford the rate increase. This seems to pacify both sides of the table. They get to save the day for less risky borrowers that have held up their side of the bargain so far by paying on time, but they avoid "bailing out" borrowers who knew from day one they had bought a home they couldn't afford. Politically and financially expedient - I'm interested to see how this plays out.

Fortunately, the local market isn't quite at this point yet. This photo came from Todd Carpenter, mortgage pro, website designer, and blogger. He's in the Denver area, and says this sign went up near his home. In the grand scheme of property appreciation, we've been much more the tortoise than the hare. Get rich quick real estate deals aren't in our DNA (unless your name is James Webb), but then neither are sales pitches that look like the marquee at McDonald's.