Monday

 

Homeowners Falling Behind on Mortgage Payments

Homeowners Falling Behind on Mortgage Payments

More American homeowners are slipping behind on their monthly mortgage payments, especially those who had subprime credit histories and scores when they applied for their homeloans. Roughly one of every 20 homeowners with a mortgage -- 4.7 percent -- was at least 30 days late during the third quarter, according to the Mortgage Bankers Association's national delinquency survey released last week. The survey examined payment performances on over 42.6 million active home mortgages.

One of every eight borrowers with subprime credit histories was late during the same quarter. Subprime borrowers who took out adjustable rate mortgages were even more likely to be behind -- one in every seven were delinquent last quarter.

In economically hard-hit areas, such as the industrial upper Midwest, late payments were far more commonplace. In Michigan, for example, 21.5 percent of all subprime homeowners with adjustable-rate loans were delinquent, and one of every 10 were in the process of foreclosure. In Indiana and Ohio, 17.5 percent of subprime ARM borrowers were late, and more than 10 percent of them in foreclosure.

Katrina-ravaged Mississippi homeowners(27.3 percent delinquency rate) and Louisiana homeowners(24 percent) also registered exceptionally high rates of late payments on subprime ARMs.

Even homeowners with the best credit -- so called prime borrowers -- saw their delinquency rates inch up in the latest survey: 2.4 percent were 30 days late or more during the third quarter versus 2.3 percent in the preceding quarter. Prime borrowers in a handful of states -- primarily in the Western region -- continued to lead the nation in on-time mortgage payment performance.

In California homeowners just 1.1 percent of prime-credit homeowners were late on their monthly payments -- less than half the national delinquency rate. In Hawaii, the rate was 1.2 percent and in Oregon 1.3 percent.

Contrast that with prime borrowers in Puerto Rico, where 8 percent were delinquent by 30 days or more. Or Mississippi (6.1 percent), Louisiana (5.6 percent), Michigan (3.8 percent), Ohio (3.7 percent) and Indiana (3.6 percent.)

Though the overall trend in delinquencies is upward, Mortgage Bankers Association chief economist Doug Duncan said the slightly higher rates were expected as the housing boom wound down. They are also well below the recent high points reached during the 2001-2002 period.

The subprime late payment jumps, however, "were noticeably larger" than projected, "particularly for subprime adjustable rate mortgages." The reason for the spike: "subprime borrowers are more likely to be susceptible to the cumulative increases in (short-term) rates we've experienced, and the slowing of home price appreciation that has resulted," said Duncan.

But "it is important to remember," he added, "that delinquency and foreclosure rates have been quite low the last two years."

The national foreclosure rate of 1.05 percent during the third quarter was up slightly compared with the same period the year before. But today's rate is well below the 1.6 percent level reached in early 2002, when subprime foreclosures hit 8 percent.

The practical effect of the higher delinquency rates in the subprime sector: Higher rate quotes for new subprime mortgage applicants. Subprime loans traditionally have been priced at 2 to 3 percentage points above prime. Now that gap is likely to increase, said Duncan, as "investors demand higher returns in the form of wider credit spreads, particularly for (subprime) loans originated in the second half of 2006."

Wednesday

 

Foreclosure Scams

Foreclosure Scams

How to avoid being the next victim to lose your house to "consultants" who claims they will pay your mortgage.

More than 1 million borrowers have seen their homes put in foreclosure so far this year. And with more foreclosures, "foreclosure rescue" scams are also on the rise.

1: How it works
First, let's take a look at what the trends are. There is a triple-digit percentage gains of foreclosures from last year in places like Nevada, Wyoming and Alabama. Generally, areas under economic stress tend to have more foreclosures.

As a general rule of thumb, foreclosure rates tend to go up in colder months simply because fewer houses are sold, according to Rick Sharga of RealtyTrac.

Foreclosure rescue scams are deals that proclaim to "save your house" or "pay your mortgage." Don't be fooled.

In one foreclosure scam scenario, the homeowner surrenders the title to your house thinking you'll become a renter and buy the house back over a few years.

For the most part, you'll lose your house and won't be able to buy it back...and the scam artists walk away with all your equity. Sometimes homeowners just sign a bunch of documents, not even realizing they've signed over ownership of the house.

In other cases, scammers will call themselves foreclosure consultants. They'll promise to persuade your lender to negotiate, or they promise to find a buyer for the house.

2: Contact your lender stat
If you have received a foreclosure notice, or even if you feel you won't be able to make your mortgage payments, contact your lender immediately. You may be able to negotiate your payment schedule.

Lenders do not want to foreclose because it's expensive for them.

3: Know the warning signs
The Department of Justice outlines a few red flags that you should keep in mind if you find yourself behind on your mortgage payments or facing foreclosure.

First, be suspicious of any person or company that calls itself a mortgage consultant or a "foreclosure service."

Be wary of marketing procedures. Don't trust anyone who uses flyers or solicits for business door-to-door. Be suspicious of offers to lease back your home, so you can buy it back over time. These offers are weighted against you.

And of course, don't fall for promises that seem too good to be true. Watch for promises that lure homeowners into deals. These offers may include promises to "save your credit" or maybe the company promises to "find a buyer within seven days."

4: Get it in writing
Never be pressured to sign a contract. Review the paperwork with a lawyer and don't sign anything that has any blank lines or spaces. Information could be added later and you won't know about it.

Remember, verbal agreements don't mean anything. You'll want to get everything in writing and make copies of the paperwork. You can also check out the company at bbb.org.

Remember, legitimate companies will sit down with a homeowner and collect documentation. They will put together a package and present it to your lender.


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