Filed under: Mortgage servicing

When you make the decision to purchase a home, there are generally three types of financing you can opt to use to pay for the home: Cash, owner-carry, or obtaining a loan from a mortgage broker, lender, or loan officer. Chances are that you are least likely to pay cash, finding an owner to finance the purchase limits your choices in which home you would like to buy, which leaves the most popular choice: a mortgage loan. There is one very important thing to remember when looking for a lender or mortgage company - they are in the “sales” business. This is not to say that there aren’t honest mortgage professionals in the industry - because there are many truly honest mortgage professionals. But because your purchase means part of your purchase price will include the paychecks of several individuals.

There are many loan officers and brokers that would like you to believe that they are not in a sales related industry, but that would be far from the truth. The reality is that all mortgage brokers, lenders, and loan officers have products that they offer, and if they are a successful sales person, their customers will “buy” their products. I have been involved in the mortgage industry for a long time, however, I believe that consumers have the right to make an informed decision about their purchases. I found a very commonly worded advertisement on Craigslist.org this evening, and thought that I would share something that I found interesting (and common) in the ad.

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There are many types of mortgage fraud, but to raise awareness about this extremely rampant crime - we all need to be aware of the different types of fraud that are used. As one of our readers pointed out, there are FBI agents that are currently pursuing individuals and groups who are not only committing crimes with full intention of defrauding their customers, but they are also actively investigating common documentation “errors” that can be construed as mortgage fraud.

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There’s been quite a bit of talk over the exotic loans and their affects on homeowners’ equity lately. The more “leveling” we see in home values and prices over the next few years will have a great impact on how the loans will affect the borrower, and their ability to pay off the mortgage. Combine the “correcting” home values with the lack of payments toward the principal amount, factor in the borrowers’ stretched incomes, and you have a recipe for disaster.

The interest only or I/O loan was originally set up and geared towards someone who is financially set and well prepared for the purchase of a home. However, many borrowers “stretched their buying power” with the interest loan, using the bulk of their monthly income to pay the mortgage payments. People who would not otherwise have qualified for a loan - instantly became qualified. The changes and adjustments that the rates may bring, added to the fact that many of these loans are in areas with inflated housing prices, may cause many homeowners to lose their homes and walk away with nothing due to lack of equity built up during the I/O period.

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Filed under: Mortgage servicing

So over the next few years, many mortgage holders will find that their mailboxes may be filling up with offers to help you refinance your mortgage. This is a serious time to consider your options. If you have a mortgage that has a low introductory rate, and you are nervous that your interest rate may rise out of control - you may actually be a prime candidate for the opportunity to break out of the adjustable rate mortgage. Although there are many people that are actually benefiting from the ARM - if your payments are already as much as you can handle - consider your options before the mortgage resets. When this happens, (for many borrowers, this could as much as double the payments) the payment shock can be overwhelming, and many borrowers could be in danger of default.

There are options that can prevent the drastic rate hike, and talking to a lender or broker that you trust can be the best option available. If you don’t already have someone you trust, ask your friends and family. If you still don’t have anyone you can talk to, the best thing you could do would be to talk to several mortgage and loan companies. (more…)

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