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.
Risks of Reverse Mortgages
Thinking about a reverse mortgage?
Before you sign that contract, make sure there aren’t any traps.
The Australian Consumers Association recently studied 19 lender contracts. It discovered default clauses that, if breached, could result in a call for the immediate repayment of the entire loan.
Property titles remain in the borrowers’ names and they are responsible for rates, repairs and maintenance. It is here where borrowers can find themselves in default, for example:
• REPAIRS not done after the lender has demanded them;
• RENOVATIONS made without the lender’s permission. “Renovations such as a wheelchair elevator or ramps may not be allowed because they may have a negative impact on the property’s value,” said the ACA;
• RATES, taxes not paid on time;
• PAPERWORK not maintained or done correctly, such as failing to give an annual statement declaring you still live in the home.
Once the borrower was in default, the lender could demand the immediate repayment of the loan and charge a penalty interest rate of 2 to 3 per cent more until it is repaid.
The Association also found that the contracts’ “no negative equity guarantee” (“where the lender covers any shortfall if the loan exceeds the proceeds from the sale of a home”) often gave virtually no protection to the borrower.
Source: News.com.au
Beware of these Mortgage Companies
Delinquency rates are on the rise. They jumped “more than 7%, to 4.7% in the fourth quarter of 2005, from the year before,” according to the Mortgage Bankers Association.
Despite this, many lenders aren’t cutting back on exotic mortgages — in fact, they’re “charging ahead on such high-risk loans full tilt.” They claim that cutthroat competition leaves them no other option.
But pushing the envelope today could lead to major problems tomorrow for these aggressive finance outfits. Be especially wary of the following companies:
- ECC Capital Corporation and New Century Financial Corporation “do big business in California, where the median house price jumped 16% last year, to reach a record $548,430.”
- Long Beach Mortgage Corporation (a unit of Washington Mutual) and NovaStar Financial “require only limited documentation and therefore may invite fraud.”
- Fieldstone Investment Corporation and First Franklin Financial Corporation “write lots of loans called interest-only or option adjustable-rate mortgages, which allow borrowers to postpone making repayments of principal and even add unpaid interest to the debt.”
Source: BusinessWeek
Mortgage Rate Woes
I saw a story the other night (which you can veiw by goint here and clicking on “Housing Hangover”) about the number of forclosures going up because people with adjustable rate mortgages now can’t pay their mortgages.
Adjustable rate mortgages typically have a lower interest rate than fixed rate mortgages for an introductory period. I emphasize this because after that initial period, which can be one, three, five, seven or 10 years, depending on your mortgage terms, the rate then adjusts every year based on what the current interest rate is.
Many people who bought homes with adjustable rate mortgages in the last few years, when interest rates across the board were low, are now facing that variable rate time (rates on adjustable rate mortgages typically change once a year). According to the story mentioned about, it’s estimated that a quarter of all mortgages will have an adjustment in interest rates in the next two years.
That means people who were barely making their payments before now can’t afford their mortgage payments. When they get behind they can default on their loans and go into foreclosure. Some experts are already seeing the rate of forclosures going up.
A woman profiled in the story is selling her home in Texas because her family couldn’t keep up wth payments after the introductory period. She said her mortgage payment went from $1,709 to $3,000, making their situation go “from bad to worse.”
That’s a telling statement. Things were already bad before the mortgage increase. That’s a pretty good indication that this family bought a house that was more expensive than they should have. They got a bigger loan, and thus a bigger mortgage payment, than they could comfortably afford. They chose an adjustable rate mortgage because it was cheaper at the time, and didn’t really think about the fact that they would have higher costs down the road.
It seems like more banks are willing to give huge loans to people, without much concern for whether the person can actually afford the payments. Of course they care somewhat because they lose money when a loan defaults, but it doesn’t seem like there’s enough credit counseling when it comes to a purchase as huge as a home.
So heed this advice if you’re looking for a home: don’t buy more home than you can afford. Your housing costs should be no more than 30 percent of your income. Consider carefully what an interest rate change would do to your ability to pay if you choose an adjustable rate mortgage, and think about any changes you might be thinking about making in your financial situation before you sign (for example, if one parent wants to stay home when you have kids, can you pay the mortgage on the other person’s salary?).
Review of LendingTree.com
Recently, we found a need to do some work on our house. Our roof had a leak, and the guys we had come take a look at it said they wouldn’t touch it without putting a whole new roof on. That, combined with a desire to lock in a fixed rate on our mortgage and also to do some work on our kitchen led us to start looking around to see what our options for refinancing our mortgage were.
We first contacted QuickenLoans since they had refinanced us once before and we had liked the process – quick and painless. We got a quote from our contact there, for a 15 year fixed rate loan taking out some of the equity from our house to pay for the roof and kitchen work.
Then, we also contacted LendingTree.com, since I had heard their ads on NPR about “when banks compete, you win”. The process of filling out their site was easy enough, but the real process didn’t begin until I got a call from one of their lending specialists.
He explained that basically, the banks that deal with LendingTree have an arrangement that says that if there is a better offer, they have to beat it. So, having an offer in-hand from the Quicken guy was helpful, and in the end we focused our attention on minimizing the closing costs, even if it meant a little bit higher interest rate.
We liked the overall process, it took about 3 1/2 weeks total from start to finish, and the check for our cash-out arrived just the other day. All in all, I’d have to say that LendingTree provided a good service and value, and we now have a solid new mortgage.
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