Bankrate.com 

• 30 Year Fixed Rate: 4.63 percent
• 30 Year Fixed Rate Jumbo: 5.26 percent
• 15 Year Fixed Rate: 4.11 percent
• 5/1 ARM (Adjustable): 3.95 percent
• 1 Year ARM (Adjustable): 4.80 percent 

According to the Mortgage Bankers Association:

• Mortgage applications rose 13 percent when compared to a week earlier
• Refinance applications shot up 17.1 percent when compared to a week earlier
• Applications for new purchases fell 3.4 percent

From our experience, this number is just too low, and the time it takes to complete a loan modification is still shocking.  Clearly, there is not enough being done by the lenders to expedite the process of loan modifications. However, at Loan Modification Advocates, we are doing everything in our power to put you, the homeowner, in the best particular situation to obtain a loan modification.

When you become a client of Loan Modification Advocates, we perform a detailed analysis on your particular situation.  Our goal is to determine your likelihood of obtaining a loan modification based on our experience with past clients and our knowledge of the guidelines established by the lenders for determining whether a homeowner “qualifies” for a loan modification. Before turning in your file, we work with you to execute a strategy that maximizes the completeness of your file.  Once we believe your file is in the best shape possible, the file is turned in. One would assume that submitting a well-analyzed and guideline-specific file would result in a fast and efficient turnaround by the lender.  Unfortunately, in some situations that is not the case.

Here are some of the scenarios that we battle everyday:

• The lender receives the package and incorrectly enters the information into their system. This most typically occurs with the income portion of the file.  For example, some analysts do not understand how to read the income from self-employed homeowners.  The incorrect input results in a rejection by the system.
• The file is sent in and goes immediately into a stack of files.  Time passes and all the information becomes stale.  Once the file is picked up to process, all new updating is needed.
• The lender changes their criteria/policies mid-stream in the process and does not let the homeowner or third parties know of the changes.  This results in a further delay in the process.

In the lender’s defense, the problems do not only exist with the banks.  Homeowners also have contributed to the number of homeowners dropping out of the Obama administration’s main mortgage assistance plan.  In order to complete the program, borrowers must make at least three trial payments on time. In many cases, homeowners are delinquent with their payment or do not pay the full modified amount – both result in being let go from the program. The Treasury Department also reports that about 277,000 homeowners, or 23 percent of those enrolled, have dropped out during this trial phase. 

Another problem is that, initially, borrowers were able to state their income verbally and then provide proof of their income later. This delay in providing a complete set of documents at the beginning of the process resulted in a bottle neck in the system.  This gives credence to why we at Loan Modification Advocates take steps to fully prepare the file before submittal.

Bankrate.com

• 30 Year Fixed Rate: 5.12 percent
• 30 Year Fixed Rate Jumbo: 5.94 percent
• 15 Year Fixed Rate: 4.49 percent
• 5/1 ARM (Adjustable): 4.31 percent
• 1 Year ARM (Adjustable): 4.91 percent 

Mortgage applications rose.

Applications for new purchases jumped.

Refinancing activity slipped.

Pending home sales rose.

Short sales and foreclosures are happening due to the combination of falling home prices and a borrower’s unforeseen circumstances (ie unemployment, reduction of hours, medical condition, etc,). Borrowers who can’t obtain a loan modification and are having difficulty maintaining their payments have to sell their homes for what they owe. As a result, they are being forced to short sell or foreclose.  Unfortunately, these homeowners who head down the path of short sale or foreclosure are unfamiliar with the pitfalls that may follow.  Besides credit implications, possible deficiency judgments could occur long after the homeowner has concluded their transaction.

In a recent article, Les Christie describes two scenarios where homeowners were forced into involuntary homeowner monetary contributions after the completion of their transaction – one related to short sales and the other related to foreclosure. We recommend that you read this entire article by clicking on the link above to further understand these potential consequences. 

Also, to get further educated on your particular situation you can contact Greg Jewell at 925.463.6164.  Greg specializes in short sale coordination and has direct experience with numerous short sale transactions.  Contacting a real estate attorney, bankruptcy attorney or a tax consultant is also important to clearly understand the types of loans you have – recourse vs. non-recourse and the possible implications involved.

Bankrate.com

• 30 Year Fixed Rate: 5.15 percent
• 30 Year Fixed Rate Jumbo: 5.93 percent
• 15 Year Fixed Rate: 4.56 percent
• 5/1 ARM (Adjustable): 4.63 percent
• 1 Year ARM (Adjustable): 4.92 percent 

Mortgage applications rose compared to a week earlier, according to the Mortgage Bankers Association.

Refinancing activity surged and applications for new home purchases increased.

In a recent Associated Press article on this matter, Treasury Department officials said they will step up pressure on all the companies participating in the government’s $75 billion effort to stem the foreclosure crisis. At Loan Mitigation Advocates, we feel that it is about time. Despite having completed numerous successful loan modifications, we have been frustrated at the inability of lenders to turn around loan modifications in an effective and efficient manner.  Unfortunately, we don’t see this changing unless the lenders are more heavily scrutinized for their lack of effort and thus held accountable with direct consequences.

To turn the lenders around, it appears the government will start by sending a three person team to monitor the eight largest companies’ work and then that team will send twice-daily reports on their progress. Also, the Treasury Department will publish a list of the mortgage companies that are lagging.

“In our judgment, servicers to date have not done a good enough job” of making the modifications permanent, said Michael Barr, an assistant Treasury secretary. Companies, he said, “that don’t meet their obligations under the program are going to suffer consequences.”

In the Tri-Valley of Northern California, the area that Loan Mitigation Advocates has our headquarters, default and distress properties have been waning. The last few months have seen less foreclosure and short sale properties come on to the market.  Six months to over a year ago, these default and distressed homes where primarily found in the lower to middle price ranges. Many of the homeowners in this price range had secured subprime mortgages which later resulted in big problems and consequently led to foreclosures and short sales. Now, things are beginning to shift away from the lower to middle priced homes.  More homes at the middle to upper price ranges are expected to become default and distress sales according to a recent New York Times article.  “Plenty of pain yet to come,” said Joseph Shapiro, chief United States economist for MFR.

At Loan Mitigation Advocates, we are always trying to stay abreast of current market trends.  In talking to homeowners, we have identified that some homeowners at the higher price points have been more equipped financially to survive the downturn in the market.  Despite job losses or reduction in income, they have been able to live off savings or the liquidation of stock for a longer period of time.  Some have been able to adjust their lifestyle while others have found jobs to replace lost income. However, for those who have not been able to overcome their hardship, they are faced with the grim reality that their life savings is being wiped out.  They may be left with no choice but to consider giving up their home to short sale or foreclosure.

On top of the potential for more default and distressed sales, another factor that could weigh in on home sales is a rise in interest rates.  Rates have been maintained at an artificial level for some time due to the Federal Reserves purchase of mortgage-backed securities.  Once this halts, interest rates could float higher which could limit a buyer’s purchase power and in some cases remove them as a candidate to purchase a home.  Less demand results in fewer transactions.  Less transactions results in home sellers’ inability to move their product.  And, if you can’t sell your home, then lowering your price may be the only option.

A third item for consideration is the tax credit for new home buyers. As of this article, the tax credit is vigorously being debated. However, there are signs that the tax credit may be extended for first-time homebuyers and also expanded for existing homeowners who are looking to purchase. If this bill passes, it may be just what the doctor ordered to counteract the items mentioned above and prevent a downward slide for home sales in the future.

In a recent article by Strategic Equity, Dave Muti, author of “Mortgages:  What You Need to Know,” was asked how a credit score is calculated and tips for increasing it. The Fair Isaac Corporation created the most common credit score used today – the FICO score.  It ranges between 350 and 850.  The higher the score, the better the interest rate you can secure.  720 is the credit score threshold that you don’t want to drop below in order to secure the best rates.  If you drop below 500, you may not even be able to secure a mortgage.

The following are five critical credit criteria reported in the article:

1. Payment History – This pertains to your track record for paying your bills. It makes up 35% of your score. Essentially, this means paying your bills on time. A mortgage “late” is much more serious than a credit card “late”
2. Credit Ratio – How much you owe is 30% of your score. Just because you owe less does not translate to having a better score.  This score is determined between the various types of credit you have opened (see #3 below). There needs to be a balance between how much you owe and how much you have available to you.  Having too many credit cards can be a negative and having only one could be as well. The goal is to have a lot of credit available to you, and to then use that credit, while at the same time not maintaining a high balance.
3. Credit Type – The type of accounts you have makes up 10%. These are mortgage, car loans and credit cards.
4. Credit Maturity – The length of time you have maintained your individual credit accounts is 15% of your score.  This does not mean how long you have been involved with credit.  It is specific to each individual account and the length of time that you have maintained each particular account is the key.
5. New Credit – recent history makes up 10% of your score. 

The bottom line is to be proactive in maintaining your credit.  Plan ahead and check your scores at least two times a year.  It is important to think carefully about all of your financial moves in order to maintain and build your credit score.  That score can be a gateway to many things we all would like to obtain in life.

Here are a few recent reasons in support of a market recovery:

New Home Builds

• Based on a government report, new home building increased in August.  The Census Bureau reported that builders broke ground for 598,000 new homes during August, up 1.5% from a revised 589,000 in July.
• Building permits rose 2.7% to 579,000.
• The National Association of Home Builders reported their index of homebuilder confidence had risen a point to 19, its highest level since May 2008.

Resale Homes

At Loan Mitigation Advocates, part of our job is to stay abreast of trends in the real estate market.  We pay particular attention to inventory numbers and the ratio of normal sales to REO/short sale transactions.  In our local area of Northern California, inventory numbers are reaching staggering low numbers in some areas.  There have been cases of multiple offers and homes selling for more than their asking price.  We have also noticed less foreclosures and short sales coming on to the real estate market over the past few months.

On the flip side, there are some potential pitfalls in the near future that could put a damper on the recovery:

Recasting Loans, Foreclosures and Short Sales

According to CNNMoney.com, a large number of non-conventional mortgage loans, including interest-only mortgages and option ARMS, will reset over the next year or so. These resets will lead to increases in the monthly mortgage payments for homeowners. Many people will not be able to afford the increases.

The interest-only loans specifically pose a large threat.  These are homeowners who are paying only the interest payment for a fixed number of months.  Once the number of fixed months is up, the payment is based on principal and a new interest rate, resulting in a much higher payment in most cases.  There were a number of these type of loans created back in 2005 that are set to recast in 2010.

Besides the threat of interest-only loans, option ARMs could create problems as well.  The option ARM loan has provided a borrower the ability to make minimum payments every month.  Sometimes these payments are less than their monthly interest charges which tack on the difference between the lower payment and the interest-only payment onto the mortgage balance.  The problem occurs when the balance reaches between 110% and 125% of the original loan balance.  The loan will reset into a fully amortizing mortgage where monthly payments considerably rise and present a huge problem for the borrower to make the new payment.

If these borrowers do not pursue loan modifications, they could be left with no choice but to short sale their house or eventually foreclosure. All of these foreclosed and short sale homes will flood the market and increase inventory and further drive down prices.

Bankrate.com

• 30 Year Fixed Rate: 5.52 percent
• 30 Year Fixed Rate Jumbo: 6.44 percent
• 15 Year Fixed Rate: 4.84 percent
• 5/1 ARM (Adjustable): 4.86 percent
• 1 Year ARM (Adjustable): 5.19 percent 

Mortgage applications were higher for the week for new purchases and resale.  Refinancing activity also rose, according to the Mortgage Bankers Association.

According to RealtyTrac, foreclosure activity was up 7 percent during July. One in every 355 U.S. housing units received a foreclosure notice during the month.