For homeowners with too much debt to handle there may be a new option. Mortgage lenders Fannie Mae and Freddie Mac have issued some new guidelines for underwater borrowers that might allow them to surrender their home and wipe out the debt, provided they have kept up with their payments.
If the borrower can prove a hardship, like an illness, job change, or other situation that requires moving, they can apply for a deed-in-lieu transaction. Those eligible also must have a 55 percent debt-to-income ratio and must leave the property good condition.
“The goal is to make sure people who have suffered a hardship have the appropriate options to prevent foreclosure,” says Andrew Wilson, spokesman for Fannie Mae.
“Home owners applying for deed-in-lieu transactions may be asked to make cash contributions of up to 20 percent of their financial reserves, excluding retirement accounts,” Bloomberg reports about the guidelines. “Or, they may be asked to sign a promissory note for future no-interest repayments. The amount and terms can be negotiated.”
“It’s an extraordinarily generous approach for companies still in debt to American taxpayers,” Phillip Swagel, a professor at the University of Maryland’s School of Public Policy, told Bloomberg. “We’re giving people an incentive to walk away, right when the housing market is starting to right itself.”
Some feel that past programs penalized borrowers on the brink of foreclosure who kept making their payments, says Julia Gordon, director of housing finance and policy at the Center for American Progress. In some cases, servicers even advised that borrowers stop making their house payment so they might qualify for more assistance.
Gordon went on to say, “Fannie and Freddie are finally recognizing that some people are stuck in their homes. There are a lot of families who need to move who can’t do it if they’re going to have debt hanging over their heads. There’s no winner when someone is forced to default on their mortgage -- not the investor, not the home owner, and certainly not the neighborhood.”
Source: “Bloomberg
FHA raising premiums on mortgages
FHA announced a rise of 10 basis points on the majority of its new mortgages. The change, it is believed, will add $13 a month to the average borrower’s monthly payment. With most of its loans made for first-time homeowners, FHA is the largest insurer of low down payment loans.
Larger borrowers who take out jumbo loans of $625,000 or more will also see a hike of 5 basis points, and the minimum down payment on a jumbo will rise from 3.5 to 5 percent.
FHA also reported that it will now require most borrowers to pay insurance premiums for the life of the loan, no longer allowing borrowers to cancel premium payments once their debt falls below 78 percent of the principal balance. Those borrowers who have paid more than 10 percent down will be excluded.
For lenders, they must be able to document why a borrower with less than a 620 credit score and a total debt-to-income ratio above 43 percent was approved.
It was not announced when the new rates will take effect.
Source: CNN Money and Inman News
What the ladies must have in a home
As often as not, women have the final say on the purchase of a house.
Consumer research experts from Coldwell Banker Real Estate, John Burns Real Estate, and others weighed in to women’s home preferences and came up with six musts:
• Big closets.
• A great kitchen: More than ever it’s the focal point of a home. You need space to not only dine, but entertain, do homework and just hang out.
• Great location: It seems that women care more about where than how large.
• A comfortable place for socializing.
• Low maintenance.
• A two-car garage: Us guys won’t argue with that.
Source: MSN