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Pay to prepare your loan mod package

By Jack Guttentag, Monday, February 6, 2012.

<a href="http://www.shutterstock.com/gallery-100760p1.html" target=blank>Loan mod sign</a> via Shutterstock.com.

Some borrowers, following the guidance provided in last month's article, "6 tips for a successful loan mod," can handle the modification process entirely by themselves. Other borrowers need help. Unfortunately, as with all disasters, scamsters have emerged to feed on the afflicted by collecting fees for services they promise but don't deliver.

You are safe from scamsters if you follow my cardinal rule: Select your service provider; don't allow a service provider to select you. This article is about the options from which you can make a selection. more...

6 tips for a successful loan mod

By Jack Guttentag, Monday, January 30, 2012.

<a href="http://www.shutterstock.com/gallery-100760p1.html">Loan modification sign image</a> via Shutterstock.com.

Millions of mortgage borrowers who can no longer afford their mortgage payments but can afford a lower payment can avoid foreclosure by getting a modification of their loan contract. While the path to a modification remains torturous, it is not quite as bad as when I wrote addressed the issue in a 2009 column.

Are you unqualified?

It is not possible for borrowers acting on their own to determine whether they qualify for a modification because they don't have access to all the criteria. Some is kept under wraps by loan servicers. However, borrowers can determine that they are not qualified for a government-supported modification by accessing a questionnaire provided by the U.S. Treasury Department. more...

Refinance or modify while it's still possible

By Jack Guttentag, Monday, January 23, 2012.

<a href="http://www.shutterstock.com/gallery-142054p1.html" target=blank>Road sign image</a> via Shutterstock.com.

Interest rates have been very low for several years, and right now they are lower than ever, yet millions of mortgage borrowers who could profit from a refinance haven't.

Similarly, millions of borrowers who are having trouble making their mortgage payments but want to remain in their homes could have their mortgages modified to make the payment affordable but haven't. more...

What you should know about balloon loans

By Jack Guttentag, Monday, January 16, 2012.

<a href="http://www.shutterstock.com/gallery-705394p1.html">House and balloons image</a> via Shutterstock.com.

A balloon mortgage is one on which the outstanding balance is due at some point before amortization has paid off the balance in full. Aside from the repayment obligation, balloon loans are identical to standard fixed-rate mortgages (FRMs).

For example, if a five-year balloon loan for $100,000 is at 5 percent for 30 years, the initial payment of $537 would be the same as on an FRM with the same rate and term. The difference is that on the balloon loan, the balance of $91,829 after five years must be repaid. At that point, the loan may be extended at the current market rate, or refinanced with the current or a different lender. more...

Must-knows about mortgage rate/fee combos

By Jack Guttentag, Monday, January 9, 2012.

<a href="http://www.shutterstock.com/gallery-280171p1.html" target=blank>Mortgage calculator house image</a> via Shutterstock.com.

Last week I discussed a new integrated calculator on my website that uses current and personalized mortgage price data to help borrowers select the type of mortgage that would minimize their net costs. This article introduces a second integrated calculator that helps borrowers select the best combination of interest rate and lender fees on their preferred type of mortgage.

Before describing this new approach, it is instructive to consider how the rate/fee combination is selected now. more...

A better mortgage fit: fixed or adjustable?

By Jack Guttentag, Monday, January 2, 2012.

<a href="http://www.shutterstock.com/gallery-707365p1.html" target=blank>House and interest rates image</a> via Shutterstock.com.

In many, if not most, countries, borrowers are offered one type of mortgage: Take it or leave it. Borrowers in the U.S., however, can choose from a large menu of mortgage types designed to meet different borrower and lender needs.

These include fixed-rate mortgages (FRMs) with terms ranging from 10 to 40 years, and adjustable-rate mortgages (ARMs) with 30-year terms but initial rate periods ranging from one to 10 years. Many of these mortgages have an interest-only payment option for the first five or 10 years. And all are offered with multiple combinations of interest rate and lender fees. more...

5 truths about mortgage shopping

By Jack Guttentag, Tuesday, December 27, 2011.

Anyone completing a course in microeconomics would find great difficulty applying what he or she learned about competition to the home mortgage market. The market meets the major requirement of a competitive market in having many buyers and many sellers, but the benefits associated with competitive markets are conspicuously lacking. Instead of the expected single price that barely covers the sellers' costs and is available to all buyers, mortgage prices are all over the lot. Some borrowers pay competitive prices, but many pay more.

Why competition doesn't work

The core reason that competition in the home mortgage market doesn't generate the benefits that the textbooks lead us to expect is that most mortgage borrowers are required to select a lender before they know the price. No market will function well under that condition. more...

8 things you should know about down payments

By Jack Guttentag, Monday, December 19, 2011.

<a href="http://www.shutterstock.com/gallery-264874p1.html">House and calculator image</a> via Shutterstock.com.

Q: What is the down payment?

A: The down payment is the property value less the loan amount. It is not the same as the borrower's cash outlay if some of that outlay is used for settlement costs. On a newly constructed home, the land value can be part or all of the down payment.

Q: If the appraised value of a home exceeds the sale price, can the difference be applied to the down payment?

A: No, the property value upon which down payment requirements are based is the lower of sale price and appraised value. An appraisal higher than the price is disregarded. more...

11 must-knows about early mortgage payoff

By Jack Guttentag, Monday, December 12, 2011.

<a href="http://www.shutterstock.com/gallery-53077p1.html">Cash and clock image</a> via Shutterstock.com.

Q: Will I save money if I make my regular monthly payment early?

A: No, paying early merely allows the firm servicing your loan to earn interest on your money until the payment due date. This is not the case, however, if you have a simple interest mortgage (SIM). Because it accrues interest daily, the earlier you pay a SIM, the more interest you save. more...

Loan mod portals a win-win for real estate

By Jack Guttentag, Monday, December 5, 2011.

<a href="http://www.shutterstock.com/gallery-142054p1.html" target=blank>Road sign image</a> via Shutterstock.

"Will the rule that all mortgage servicers must designate one employee as a single point of contact for every borrower requesting a loan modification make the process easier for borrowers to navigate?"

The rule to which you refer was issued earlier this year by the Office of the Comptroller of the Currency (OCC). It was part of a package of enforcement actions taken against eight of the largest national bank mortgage servicers for unsafe and unsound practices related to mortgage servicing. more...

The truth behind failed loan mod program

By Jack Guttentag, Wednesday, November 30, 2011.

<a href="http://www.shutterstock.com/gallery-517480p1.html">Teekid</a>/<a href="http://www.shutterstock.com">Shutterstock</a>

"Who or what is responsible for the failure of the government's mortgage modification program to make a sizable dent in the volume of foreclosures?"

Many factors are involved in this complicated story, but in my view, there are two major factors. more...

Do I qualify for a mortgage?

By Jack Guttentag, Monday, November 21, 2011.

<a href="http://www.shutterstock.com/pic.mhtml?id=74459587" target=blank>iQoncept</a>/<a href="http://www.shutterstock.com" target=blank>Shutterstock</a>

One major difference between the housing finance system today and the system that prevailed prior to the financial crisis is in loan underwriting -- the set of rules and procedures governing who is approved for a loan and who is rejected. The swing has been from Lady Bountiful to Mr. Scrooge. Rules have been tightened across the board.

Where the major mistake before the crisis was approving loans to borrowers who should have been rejected, the major mistake today is rejecting loans that should be accepted. more...

Is lease-to-own home purchase worth the risk?

By Jack Guttentag, Monday, November 14, 2011.

<a href="http://www.shutterstock.com/gallery-74301p1.html" target=blank>Spectral-Design</a>/<a href="http://www.shutterstock.com" target=blank>Shutterstock</a>

A lease-to-own house purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually three years or less, at an agreed-upon price. Such arrangements have proliferated in the post-crisis market because many potential homebuyers can't meet the tougher loan qualification requirements today, and many potential sellers are unable to realize a satisfactory price in any other way.

Lease-purchase plans can be structured in such a way that both parties benefit. They can also be structured so that all the benefits flow to one of the parties and none to the other. Buyers especially need to be careful because they usually know less about the market than sellers, and the seller usually provides the contract. more...

4 ways to avoid refinance rejection

By Jack Guttentag, Monday, November 7, 2011.

<a href="http://www.shutterstock.com/gallery-100800p1.html" target=blank>kabby</a>/<a href="http://www.shutterstock.com" target=blank>Shutterstock</a>

"My application to refinance my $200,000 loan was recently turned down ... do I have any recourse?"

If by recourse you mean a third party of some standing who will direct the lender to make the loan, or attempt to persuade them to do it, the answer is "no." more...

Choice is power when shopping for mortgage

By Jack Guttentag, Monday, October 31, 2011.

<a href="http://www.shutterstock.com/gallery-363868p1.html">zzoplanet</a>/<a href="http://www.shutterstock.com">Shutterstock</a>

Mortgage lead generation websites (henceforth LGSs) have become a major part of the home mortgage distribution system. LGSs collect information from potential borrowers visiting the sites, and sell it to mortgage lenders. There are dozens of LGSs, perhaps hundreds; I haven't seen an exact count. Among the largest LGSs: LendingTree.com and LowerMyBills.com.

How lead generation sites work

An LGS attracts borrowers to its site primarily by promising to provide mortgages at attractive rates with one-stop shopping. more...

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