Citi follows in the footsteps of JPMorgan Chase, Wells Fargo, and Bank of America, all of which have already to committed to participate in 2MP.

Under 2MP, Citi can offer loan modifications that reduce payments on second mortgages for homeowners who are struggling to avoid foreclosure on underwater homes.

See full article from DailyFinance

Although it generally costs a bank more to foreclose on a house than it does for the lender to lower the mortgage payments, lenders have proven remarkably reluctant to modify many loans. As part of the Obama administration’s $75 billion foreclosure prevention program, 2MP will help homeowners avoid foreclosure by making lenders more willing to remodify.

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While there have been some suggestions that the Fed may extend and expand the program beyond the end of next month, nothing has been said officially. Assuming it ends on March 31st as planned, the laws of supply-and-demand would seem to indicate that the MBS market is headed for a heap of trouble. Why? The Fed has been the biggest buyer of residential mortgage-backed securities by far over the past year or so.

That means yields and/or spreads on mortgage-related borrowings have only one way to go. As it happens, a quick read of the chart of the 30-year fixed-rate mortgage yield less its government bond market counterpart lends further weight to that view. That is, it looks rather bullish — which is bad for borrowers.

In fact, based on what happened following the similar technical pattern that developed in the early 1990s, we may well be on the cusp of a secular rise in the cost of mortgage-related financing costs. Another reason, perhaps, to bet against a near-term recovery in house prices.

source – The Big Picture

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The unkept secret has been that banks would like to avoid foreclosure at all possible costs as it can be more costly for both parties involved. With foreclosures on the rise, more and more banks/lenders are leaning towards short sales.

Short sales are when the lender agrees to let a homeowner unload a house for less than what is owed on the mortgage. The transaction recognizes that the home isn’t worth what the owner paid for it. A study by Amherst Securities Group found that prime loans took an average loss of 45% in a foreclosure as opposed to 35% in a short sale.

Lenders, which can withhold approval of a short sale if they don’t like the price, have resisted such sales because they are difficult to execute, particularly when multiple creditors and other parties are involved. And short sales lock in losses that might be reduced if the sale is delayed until the market improves.

But that resistance is softening. With more Americans losing jobs and missing mortgage payments, banks and investors increasingly are agreeing to short sales as a less costly alternative to foreclosure.

Short sales approved by Fannie Mae and Freddie Mac, which own 57% of U.S. mortgages, nearly quadrupled in the first nine months of 2009 compared with the same period in 2008. At the nation’s largest mortgage servicers, short sales soared 165% to 74,513 in the first nine months of 2009 from the year-earlier period.

Short sales are still few compared with foreclosures, but policymakers are looking at such sales to shrink the number of bank-owned homes on the market.

Late last year, the Obama administration added incentives to get short sales done if a borrower is unable to qualify for a modified mortgage as part of the government’s $75-billion effort to help troubled homeowners. Starting in April, the government will pay incentives to lenders and borrowers when a sale is completed.

Many economists view short sales as a way to address a problem that mortgage relief hasn’t fixed: properties that are “under water,” carrying more debt than the home is worth.

“Making short sales easier would go a long way to freeing up the market,” said Richard Green, director of the Lusk Center for Real Estate. “Right now, if people are under water on their house, they are really stuck.”

While short sales seem like a simple solution, those with a second mortgage can prove to be faced with a more difficult challenge as different lenders tend to have a hard time cooperating.

To learn more about short sales, consider finding a local mortgage broker that specializes in these type of transactions.

Source – LA Times

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According to the Home Builders Index, 70.8 percent of homes that were sold in the last quarter of 2009 were sold at an affordable price for families that earned an annual income of $64,000. “With interest rates still hovering at low levels and the economy beginning to rebound, the federal housing tax credit will encourage even more first-time and repeat home buyers to enter the market and help further stabilize housing and the economy by creating new jobs, stimulating home sales and reducing foreclosures,” stated Bob Jones, NAHB Chairman and a home builder from Bloomfield Hills, Michigan.

Source: National Association of Home Builders

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“Mortgage rates eased for the second week, while economic data releases suggest that the housing market may be in a slow state of recovery,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a news release.

The 30-year fixed-rate mortgage averaged 4.97% last week and 5.04% a year ago.

Fifteen-year fixed-rate mortgages averaged 4.33% for the week ending Feb. 18, down from 4.34% last week and 4.68% a year ago.

In his comments, Nothaft pointed out recent signs of recovery in the housing market.

“The National Association of Realtors reported that existing home sales rose in 48 states and the District of Columbia between the third and fourth quarters of 2009; 32 states experienced double-digit growth. In addition, 67 metropolitan areas saw positive annual house price growth in the fourth quarter, more than double than in the third quarter, according to the NAR,” he said.

Meanwhile, there are signs that new home construction is improving, he added.

“One-family housing starts rose to an annual pace of 484,000 homes in January, which is up almost 36% from January 2009, based on the U.S. Census figures. Moreover, homebuilder assessments of market conditions over the first half of 2010 improved in February, according to National Association of Home Builders/Wells Fargo Housing Market Index,” he said.

In separate survey results released on Wednesday, the Mortgage Bankers Association reported that the volume of mortgage applications filed for the week ending Feb. 12 fell a seasonally adjusted 2.1%, compared with the week before.

source – Marketwatch

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While some people call it an absolue personal finance blunder, others see it as strategic business decision to prevent themselves from throwing more money at a lost investment.

An interesting article looks at this very issue, and discusses why it is in the best interest of both you and your mortgage lender to find another solution.

Is it okay to walk away from your mortgage for no other reason than it doesn’t make financial sense to keep throwing your hard-earned money away?

There’s no universal answer here, but in most cases, the answer is “Yes.”

Importantly, the reason is not that “Wall Street deserves it” or “We’ve got to teach the banks a lesson” or any of the other bogus “retribution” logic being thrown around.  The reason is that you and your lender engaged in an arms-length transaction in which you balanced your competing interests and spelled out your agreement and obligations in a clear contract. And unless that contract states that you have a “moral obligation to pay,” you don’t.

Specifically, when you borrowed money to buy your house, the bank or mortgage-lender evaluated the risk of the transaction and concluded that the risk of your not paying was a risk worth taking. To protect its money, the lender also required that you pledge the house as collateral, and it required you to have some equity in the house as an additional cushion. In the event that you didn’t pay, the lender retained the right to seize the house, sell it, and pay itself off before you got your equity. The lender loaned you the money because it concluded that this was a smart business decision.

You, meanwhile, also made a business decision. You decided to borrow money to buy your house even though it meant risking your equity, home, and credit rating.

And now it turns out that both of you made a bad decision.

Read full article on The Business Insider.

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The Pending Home Sales Index, a forward-looking indicator based on contracts signed in November, fell a higher-than-expected 16% to 96 from an upwardly revised 114.3 in October, according to the National Association of Realtors.

The figures come in far worse than market expectations of a modest 2% loss and economist projections of a 2% gain in sales, with the thought-to-be-expired housing tax credit having taken a huge chunk out of the demand equation.

Some analysts are attempting to compare the release to November 2008, but that was a time before quantitative easing was in effect, with rates of around 6%, prices were still in freefall, and lending guidelines were still relatively unchanged and unregulated.

Instead, economists point out that this report provides a glimpse into the new “normal” in housing, with stimulus money gone and an anticipated rate increase. This could represent a problem for homebuilders as a lack of demand would lead to further reduced profits.

Even a modest recovery in the housing market could require both a reduction in foreclosures and continued low interest rates. Foreclosures in particular accounted for 40% of sales in 2009 and are seeing the most demand, and that is a trend that could continue into 2010.

This will be the final extension of the housing tax credit. As it stands now, buyers who meet the income eligibility requirements have until midnight April 30, 2010, to ink a deal and must close by midnight June 30 to qualify.

Under the housing tax credit, first-time home buyers receive $8,000, while move-up buyers receive $6,50 in credit.

source – http://sumfolio.com/pending-home-sales-unveil-troubling-truth-127/

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A foreclosure occurs when the borrower of the mortgage cannot afford to make the payments to the lender, also known as defaulting on the loan. This often results in the bank or lender seizing the property and usually selling it through auction at a significantly lower price than what the current market dictates. Foreclosure also negatively effects the credit score of the borrower.

Ways To Avoid Foreclosure

Refinancing – If you have trouble making payments on your loan, then talk with your lender before any drastic actions happen. In most situations lenders do not want to seize your house and are more likely to modify your payments than actually seize your home.

Short sale – Because foreclosure can be costly for both the borrower and lender, on occasions the lender may agree to sell the home for a loss in lue of paying the expensive fees associated with foreclosure. A short sale also prevents the borrower from a ruined credit score.

Bankruptcy – Bankruptcy will push back the foreclosure process 3-4 months, which could allow the borrower more time to acquire the necessary funds or work out a deal with the lender. Chapter 13 bankruptcy lets you pay off the “arrearage” (late, unpaid payments) over the length of a repayment plan you propose–five years in some cases. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.

Before ultimately deciding to default on your loan and dive into foreclosure consider all your options and utilize the expertise of a local mortgage broker as the recent housing crisis has created many more solutions for struggling borrowers to stay in their home.

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A reverse mortgage allows people over the age of 62 years to convert part of the equity they have in their home into tax free income without having to sell or take out a monthly conventional mortgage.

How Does A Reverse Mortgage Work?

First and foremost, reverse mortgages are available to senior citizens ages 62 and above in which they are given a loan based on the equity of their home. In other words you receive payments based on what your house is worth.

For example, if you have completely paid off your house that is worth $400,000, then you can get a reverse mortgage for that same amount of $400,000. So instead of making payments to a lender you are receiving payments; hence the term “reverse.” This is the main difference between a traditional and reverse mortgage.

Borrowers of reverse mortgages must own their primary residence and continue to pay property taxes and have homeowner’s insurance on the house, in addition to keeping the house maintained.

If something happens to the initial borrower, the loan is left to their heir(s); however, the heir(s) will never owe more than the value of the borrowers house, even if the amount they borrowed exceeds the value of his or her’s house. If the amount owed is less than the value of the borrower’s house, the additional equity goes to the heirs instead of the lenders.

Borrowers can receive payments in one giant lump sum or more traditional monthly payments. At some point though you will have to cover your reverse mortgage. This can either be done by selling your home or paying back the amount borrowed through your own private money.

Typical interest rate and administration fees still apply to reverse mortgages.

Basic features of a reverse mortgages:

• The borrower must be a homeowner of at least 62 years of age.
• The home owner never gives up ownership/title to the home.
• The home owner(s) must continue to pay all property taxes and insurance on the home while maintaining the property.

With reverse mortgages you can never owe more than what your house is worth. This protects you in the event of a housing slump.

What Steps Are Needed Take Out A Reverse Mortgage

The Internet is a great place to start researching possible solutions for your reverse mortgage; however, you can always utilize the services of a mortgage broker or lender to help you understand the requirements and where you can find the best rates for a reverse mortgage.

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Reason to Refinance Your Mortage

1. Lower My Monthly Payment - Due to fluctuations in interest rates, refinancing gives you the ability to lock in a lower interest rates than what your mortgage loan originally started with
2. Get Cash Back – By refinancing, you ultimately can save money, thus getting cash back in your pocket.
3. Consolidate Debt – Take multiple loans and consolidate them into one easy payment.
4. My Credit Score Improved - If your credit score has recently improved, you can be eligible for a lower interest rate on your mortgage.

Benefits of Refinancing

• Refinancing to a shorter term (10, 15, or 20 years) mortgage can save you thousands of dollars in interest.
• Refinance to a new lower rate and maintain your original loan payment thus, more of your payment is going toward principal allowing you to build equity faster.
• Refinance for a higher amount than the principal and use the extra cash to pay for kids college, consolidate debts, home renovations, or anything you may need
• Pay off a higher interest rate loan with a lower rate refinance loan rate. This may also lower your monthly payment and help you save money.

When Should I Refinance

While everybody has their own situation, a couple reasons to consider refinancing your mortgage home loan include:

• There is a change in your financial situation
• When mortgage interest rates fall
• To consolidate debt

Find a mortgage broker to help you refinance your loan.

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