Easy Money, Hard Times
Florida real estate fluxates sometimes annually and unfortunately many new home buyers middle class and higher get stuck with bad mortgages that have higher interest rates because they are new to the game.
Studies indicate that more than 2,000 families are in danger of foreclosure after mortgages they signed have them paying more now than they were at the beginning.
As the state’s red-hot real estate market grew hotter, thousands of new brokers and brokerages obtained licenses to operate in Florida. That coincided with the availability of new types of loans, which gave far too many middle-income buyers who couldn’t afford it a shot at living in a half million-dollar home.
Far from the rock-bottom interest rates of recent years, many local loans started off with hefty double-digit rates, which are now creeping upward.
One couple in Greenacres did not realize until they were before a judge that they might have gotten a better deal. They were able to work out an agreement with the lender while they caught up on back payments.
“When we went to the foreclosure hearing, the lawyer asked us if this was our first house,” recalled the 30-something homeowner, who asked not to be identified because she is embarrassed.
“We said yes, and he just said, ‘You should never have been put into that mortgage.’ ” The couple had taken out a $212,000 adjustable-rate mortgage that starts at 7.8 percent, and goes up from there. They had taken a second mortgage, known as a “piggyback loan” because it is on top of another loan, to make the down payment.
There’s evidence thousands of wide-eyed borrowers fell prey to the lure of easy money:
• A St. Andrews Country Club home fell into foreclosure only 60 days after its owner took out a $1.9 million loan.
• A Boynton Beach man was in his $248,000 villa just four months before the $1,845.74 monthly payment proved too much for him.
• A Lake Worth couple slipped into default one month after refinancing at an 11.99 percent interest rate.
Thousands of new brokers have made thousands of new home loans.
“In 2000, there were about 28,000 licensed brokers,” said Schneider, noting that the number had more than doubled in five years, and now, “an average of 4,000 people a month were taking the exam.”
More than $106 million in home loans collapsed in Palm Beach, Martin and St. Lucie counties in the first quarter of this year alone, according to a Palm Beach Post analysis of data collected by RealeSTAT.com, a local commercial firm that gathers foreclosure and default records. A little more than $68 million in mortgages defaulted in the first quarter of 2005.
Single Women and Mortgage
In the past decade there has been a rise in single women buying homes for themselves. Many of these women say that they want to the freedom and want to pay their own mortgage instead of spending years paying rent for an apartment.
Many of these women are also focused more on their career and tend to get married and have children later in life, if at all. Add to the career they are also planning ahead for their futures and security with stock and portfolios setup.
Some of the women are also not even first-time home buyers. A few are moving up from smaller or better homes due to the fact that they are financially secure enough to do so.
Hawaii Mortgage Rates Ease
The mortgage rates in Hawaii had been on the rise for some time now. I can understand that, who doesn’t want a home in beautiful Hawaii? I would move their if I could afford it, but alas I can’t and the way that rates were going up, it appears that many others couldn’t as well.
That has now eased as two of the largest banks in Hawaii and a few others in the mortgage industry have lowered their 30-year home loan to 6.25%.
10 Arrested In Mortgage Fraud
Ten men were arrested with charges ranging from conspiracy to mail fraud. They scammed millions in a real estate/mortgage fraud in which one person would buy a house, a partner would appraise it at a much higher value and flip it (sell it), usually the very same day.
Patrick McGee, Thomas Griffin, Edward Young and Fransene Berry were charged in a 12-count indictment with conspiracy and mail fraud charges involving 30 fraudulent mortgage loans totaling more than $10 million.
Leroy Garrett was charged with mail fraud in a separate six-count indictment involving five fraudulent mortgage loans totaling about $2 million. Kelvin Brooks was charged with three counts of mail fraud involving two loans totaling more than $500,000.
The other defendants, Marvin Dawson, Anthony Burroughs, Lyndon Posey and Tellis McLin have waived indictment and were charged by information.
Dawson and Burroughs are charged with conspiracy to commit mail fraud involving 30 loans worth more than $10 million, Posey was charged with mail fraud involving three loans worth $1.4 million and McLin is charged with mail fraud involving a loan worth $343,000.
They are accused of “flipping” – the buying and selling of the same property on the same day.
“Flipping homes based upon inflated appraisals is a fraudulent practice which harms not only lenders but those homeowners who live near these properties,” Lampton said.
Lampton and Supervisory Postal Inspector Guy Robinson announced the charges Thursday.
According to prosecutors, McGee, Burroughs, Griffin, McLin, Posey and Garrett purchased homes costing between $200,000 and $600,000; Young and Berry provided inflated appraisals to lenders; Dawson, operating as Premier Mortgage, brokered the loans; and Brooks was involved in purchasing at least one of the properties.
Prosecutors say they then divided the profits – of up to several hundred thousand dollars – from the flip.
Each charge of conspiracy carries a maximum of five years in prison, and each mail fraud charge carries a maximum penalty of 30 years behind bars.
Erase the middle, owner finance and offer a mortgage yourself …
Of course, this only works if you own the home fully yourself (well, only works to the best benefit) … but why pay a commission to a mortgage agency or bank? Offer the mortgage to the buyer yourself. Grab your lawyer, set up an amortization statement and statement of purchase, and take the down payment, and set up the monthly payments. I did it with my land and home, and they paid it off just under a year ago. Working with them, often they would increase their payments and it was really nice doing the old fashioned traditional way. You maximize your profit and its pretty simple to do. Of course there is risk that you’ll lose out if they stop paying and that’s where some agencies can help … but if you set up your contract properly, enforced through your lawyer, if they miss payments, then they default, and you get your home back to sell to someone else, though that would be pretty foul to do. But its a safety valve.
Freddie Mac Expands
The second largest home mortgage company Freddie Mac is going to expand their mortgage website. They will be adding more products that will be available only online via the site.
It is also expanding its flagship suite of affordable mortgage products, known as Home Possible, by adding a special 40-year fixed-rate option and providing lenders with more competitive selling options.
Freddie Mac introduced Home Possible mortgages last year. They were designed to expand affordable homeownership opportunities by enabling qualified borrowers to finance single-family properties with as little as $500 for down payments or closing costs.
Ameriquest Shuts Its Doors
In a shocking move Ameriquest a large mortgage provider, has closed 229 retail branches. They are also laying off more than 3,800 workers.
The company said it will consolidate its branch operations into four regional mortgage production centers in Arizona, California, Connecticut and Illinois, and handle more corporate matters from its headquarters in Orange, Calif.
”The drive for this is that the company sees a fundamental shift going on in how consumers buy mortgage loans with a move away from bricks and mortar and more towards technology,” a spokesman for ACH said.
In a nationwide lawsuit settled in January, Ameriquest agreed to pay $325 million to the states for predatory lending practices that costs consumers tens of millions of dollars.
It should not be a surprise to anyone that people are greedy. This company was doing great until they decided to bilk customers out of millions and now they have to pay back so much money it could cost them the entire business. Ethical is as ethical does I guess.