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Mortgage aid cut ‘will see disabled people lose homes’
Benefit that pays interest on loans to be halved from October 65,000 at risk of losing property, housing associations say Almost 65,000 disabled people, including those with profound mental health problems, are at risk of losing their homes because of a cut in mortgage payment support for vulnerable people, according to the body representing housing associations. The benefit, which pays the …

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Summer Rerun: How Bad Might It Get?
This post first appeared on August 24, 2007 This credit contraction is still young, yet we already have the spectacle of a full blown seize up in the money markets which has central bankers flummoxed. Normally, you expect this sort of panic after a few major financial train wrecks and weakness in the real economy. One can [...]

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Race to the bottom
Three months ago, when Europe’s debt crisis had markets panicking about sovereign risk, it seemed that all roads led to…

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As their home equity erodes, borrowers resist paying
By David Streitfeld, New York Times Friday, August 13, 2010 PHOENIX During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent, and struggling borrowers are unable or unwilling to pay it back. The delinquency rate on home equity loans is higher than all other types of consumer …

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If the FMV of the property declines by 10%, there may not be any remaining equity in the home, and with another 5% market decline, the homeowner will be “upside down” in his mortgage.

While this example is entirely legal, it becomes an issue when the homeowner gets an equity line and never makes another mortgage payment and goes straight into foreclosure. This is a fairly common practice of what I calling “selling to the bank” since the bank will have to buy the home at the auction for the amount owed on the mortgage.

It may be difficult to prove the homeowner”s motive was to scam the lender, but some lenders have brought legal actions against homeowners for this practice, usually on grounds that the homeowner falsified the loan documents.

Another form of equity stripping, which is illegal, is when a homeowner in foreclosure rents his mortgaged property and doesn”t make the mortgage payments. Eventually the renter will get the foreclosure notice, stop making the rent payments, and be evicted and lose his rent paid and his deposits.

Even worse is when investors do a lease option with a renter/buyer, take an “option consideration” of 5% of the strike price of the option and collect lease payments until the lender forecloses and evicts the tenant.

In the example of the lease option, if the lessee (renter) agrees to a purchase price of $200,000 and puts down a $10,000 (5%) “option consideration”, he will lose his $10,000 plus all his lease payments when the lender evicts him from the home after the foreclosure.

It is common for the investor to tell the lessee that he got into financial trouble and is going into bankruptcy and it wasn’t intentional that he is losing the perspective buyer’s home to foreclosure. The investor will probably offer the buyer a deed to the property, but the deed is worthless as the lender’s foreclosure action will nullify the deed and the buyer name may become associated with the foreclosure action in the public records. The buyer may have specific criminal action against the investor, depending on the state in which the property is located.

The most common form of equity stripping is when the homeowner is moving out of his home before the auction or before the eviction, and he “strips” the home of everything that can be removed. This includes all the appliances, the kitchen and bathroom cabinets and in some cases, he may even take out windows and doors. This may be an act of revenge or desperation, but it is common to most foreclosures to varying degrees.

The lender is not entitled to personal items and it becomes vague whether they are entitled to anything in the house. I looked at a property a week ago where the tenants got so angry that they jacked up the property and lowered it to crack the support joists. The result was the home was “broken” and the floor was cracked and wavy and the door frames were all out of alignment so the doors couldn’t close.

In summary, equity stripping takes many forms from very simple to vindictive. If you decide to equity strip your home before foreclosure you should get legal advice about the consequences.

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Money essentials: What’s hot with mortgages?
As mortgage rates continue to hover near all-time lows, experts say there’s never been a better time to secure a home loan. Read the following to learn what’s hot with mortgages today.

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Refinancing your mortgage is still smart – From the Poughkeepsie Journal
At the height of the housing boom, refinancing was doubly rewarding: You could lower your monthly payment and extract some cash to spiff up the kitchen.

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Ally Financial posts $565M profit in 2Q
NEW YORK (AP) Ally Financial Inc. is reporting net income of $565 million for the second quarter, driven by improvements in its home mortgage business and higher demand for auto loans.

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Allied Irish, BA, BP, Cookson Group, EasyJet: U.K., Irish Equity Preview
The following is a list of companies whose shares may have unusual price changes in U.K. and Irish markets. Stock symbols are in parentheses and prices are from the last market close.

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There are some clear advantages to this type of creative financing. The most frequent use is that a commercial second mortgage reduces the LTV (loan to value) of the first mortgage in order to allow you to more easily qualify for the first mortgage. An example would be where the primary lender (first mortgage holder) will only lend 70% LTV and you only have a 20% (or less) down payment. A commercial second mortgage can be used to make up the difference. Other uses for a commercial second mortgage are to finance business expansion and construction, working capital, to consolidate debts, pay tax arrears (lets face it, this does happen), or for renovations.

There are a variety of options available to you such as: interest only payments, annual payments, exit fees, etc. that will help keep your immediate payments down and defer the costs of the commercial second mortgage. The idea is to give the property time to appreciate and thereby allow you to refinance and consolidate both the first and second mortgages at a later date at a then lower LTV.

One main reason for getting a commercial equity mortgage loan is to obtain a line of credit. A line of credit is an amount of money made available for you to borrow from whenever you wish. When you get a line of credit with a commercial equity mortgage loan, what you’re actually doing is getting a new ‘mortgage-loan’ on your commercial real estate for a particular amount. For example, instead of taking that amount, say $500,000 out of your commercial real estate in cash, you leave that cash in, but make it available as a line of credit. Of course, this line of credit is accessible whenever you need it, paying interest only on the amount you use, and only when you are using the line of credit. If you took the $500,000 out in cash, you would have to pay interest on that full $500,000 until you completely paid it back. So a line of credit is a money-saving option as opposed to getting full ‘cash out’ with a commercial equity mortgage loan, especially if you don’t need to use the entire amount of equity in your commercial real estate all at once. If you get a line of credit by getting a commercial equity loan, it can act as a safety blanket for you in case of financial emergencies. Also, you can get a line of credit with a commercial secured equity loan far cheaper than you can get a regular line of credit from a bank.

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Theres less gloom in the office market
Although vacancies are rising and rents are dropping, San Diegos commercial real estate markets may be nearing the bottom.

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Grisham Says His Aim Is Making Justice Available For All
Attorney Art Grisham, who is running for a Chancery Court post as an Independent in the Aug. 5 election, said his aim is to make justice available for all.

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Building trust is goal of new Charter One exec
In light of the subprime-mortgage meltdown that has strangled the nations economy over the last two years, the banking industry must regain Americas trust, says Kenneth E. Marblestone, the new president of Charter Ones Ohio region.

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Air Arabia, Agility, Masraf Al Rayan, NBK: Gulf Equity Preview
June 2 (Bloomberg) — The following stocks may rise or fall in Persian Gulf markets. Stock symbols are in parentheses and prices are from the last close.

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S&P Cuts to Junk Home-Mortgage Bonds Given AAA Ratings in 2009
Standard & Poors cut to junk ratings certain securities, backed by U.S. mortgage bonds, that it granted AAA grades when Credit Suisse Group, Jefferies Group Inc. and Royal Bank of Scotland Group Plc sold them last year.

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Dicks Sporting, Saks, Textron, Wal-Mart: U.S. Equity Preview
Shares of the following companies may have unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 8:25 a.m. in New York.

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Beazer, Fidelity National, Saks, Wal-Mart: U.S. Equity Movers
May 18 (Bloomberg) — Shares of the following companies are having unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 9:35 a.m. in New York.

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Dicks Sporting, Saks, Textron, Wal-Mart: U.S. Equity Preview
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However, with the occurrences of the past three years, regulators have stepped up the disclosures that mortgage brokers are require to give you when quoting prices on HELOC Equity and other credit facilities. These can be complex documents, and with any major financial undertaking, objective third party advice should be sought prior to signing anything. The documents relating to mortgages and credit lines should be reviewed by a real estate attorney (and your CPA) so that you can have a clear understanding of the terms and fees associated with your HELOC Equity line.

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Memorial to Lost Miners in Beauty Shop
Catherine Kinsey owns Cathie’s Hair Care & Tanning in Wayne. In the corner of her salon is a display for the 29 miners whose lives were lost at the Upper Big Branch Mine in Raleigh County, W.Va.

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Hartford Sells Mortgage Assets as Valuations Improves (Update1)
Hartford Financial Services Group Inc., the insurer that repaid a $3.4 billion U.S. bailout in March, is opportunistically selling some commercial mortgage assets as the market improves, said Chief Executive Officer Liam McGee.

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Capitol Bancorp Reports First Quarter Results
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Emergency fund may calm home equity fears
Dear Dr. Don, I currently own a high-end home in California with a first mortgage at 5.75 percent ( conventional loan ) and a home equity line of credit currently at 2.75 percent. The total for both loans is approximately $740,000 but I’m not upside down in the home.

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Ramco-Gershenson Properties gets $31.3 million loan for retail projects
Farmington Hills-based Ramco-Gershenson Properties Trust has refinanced two retail developments, including West Oaks II in Novi under a $31.3 million loan.

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Silver Thursday Plus 30
The USEconomy is bifurcated, with price inflation advancing on the cost side while price deflation harms on the asset side, to produce a nasty storm that is unlikely to abate. When high pressure zones clash with low pressure zones, hurricanes and tornadoes occur.

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Your South Lake County Calendar
Find out all the events going on in your community, and planyour weeks activities with The Times.

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TRECAP Buys Capmark’s Real Estate Equity Advisory Business
TRECAP Partners LLC has acquired the real estate equity investment advisory business of Capmark Inve…

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With the emergence of a housing affordability crisis in Australia the new shared equity mortgage scheme for first home buyers and families is being touted as the new life line for prospective home owners.

A recent first home buyer survey in Australia conducted by Genworth Financial on 2000 adults discovered that 70% of participants surveyed would like to purchase a home within the next 3 years however only 43% of this group expect to be able to do so. A further 29% of non property owners in this group admitted that they believed it was unlikely they could save a deposit and cited rising rental costs as the main reason. Almost 66% of the first home buyers surveyed rent privately and one in four still live with their parents, the average age of the first home buyer was 27.

The survey findings concur with what many Australians already know that home ownership has become out of reach for the average Australian family and a helping hand is definitely needed to overcome this stigma.

One of the most recent housing affordability strategies is the Shared Equity Mortgage. Shared equity loans enable borrowers to purchase a bigger and better home than they would normally be able to afford. These types of loans are generally available for first home buyers and existing home owners who need relief from their mortgage repayments. The home owner takes out a 20% Equity Finance Mortgage (up to 40% is available) which effectively lowers their monthly loan repayments and frees up their cash flow.

When paying off the loan the borrower must pay the lender the original 20% plus 20% of the homes appreciation as a substitute for no interest being charged on this portion of the loan over the loan term. If there has been no property growth or the property has declined in value then the lender will not receive any return on the loan or they may receive less than was initially lent to the borrower. Thus the lender shares in both the capital gains and the capital losses on the property. Because the shared equity loan is a mortgage product the lender never actually owns any part of the borrowers property.

The upside of the shared equity loan product is that first home buyers, individuals and families that faced little prospect of owning their own home do now have a life line available to them and this loan product may just be the one to realize the aussie dream of owning their own home. The downside is that you will need to share any equity gains in the property over the term of the loan or on the sale of the property with the lender. Ultimately the decision lays with the first home owner, if faced with a life time of renting the shared equity mortgage offers a viable option to home ownership.

Rob Donald, Altrust Finance Group 30th August 2007
www.altrust.com.au

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