With more than 5 million home owners unable to make their monthly mortgage or currently in default, lending giant Fannie Mae has started to get tough on strategic default.
At the end of June, Fannie Mae announced that it would no longer look the other way from borrowers who walk on their mortgage. They also announced that the penalty would be a seven year ban from the GSE (Government Sponsored Enterprise) program. Additionally, Fannie plans to take legal action against borrowers who strategically default on their loans.
While Fannie Mae is standing tough on their decision, the reality is that with unemployment still at 9.5% or higher in some regions and a sluggish economy is having many home owners feel that they have no choice but to walk away from mortgages that they have no hope of catching up on.
“We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, Fannie’s executive vice president for credit portfolio management. “Walking away from a mortgage is bad for borrowers and bad for communities and our approach is meant to deter the disturbing trend toward strategic defaulting. On the flip side, borrowers facing hardship who make a good faith effort to resolve their situation with their servicer will preserve the option to be considered for a future Fannie Mae loan in a shorter period of time.”
Here’s how Fannie breaks it out:
- Deed-in-Lieu of Foreclosure> — reduced from four years to two years with 20% down; four years with 10%.
- Pre Foreclosure Sale — two years with 20% down; four years with 10%.
- Short Sale— will be the same as pre-foreclosure sale
- Strategic Default (Walk Away) — seven years.
Many experts are fearful that this move will contribute to the already dismally depressed home market by cutting out the government backed borrowers. Fannie Mae and Freddie Mac, fund more than 90% of new mortgages and so far, Freddie has not followed suit.
Learn about the history and experience the thrill of the soap box derby’s heyday in Madison from the mid-1930s through the 1950s as well as the excitement of today’s derby-racing action. Visit Madison’s Wisconsin Historical Museum for this unique exhibit. See unique cars, mementos, souvenirs, photos, and film from the days when zooming down a hill in a home-built car was the most fun a kid could have.
This interesting exhibit will run from June 26, 2010 – September 11, 2010. Located on the Capitol Square in Madison, the Wisconsin Historical Museum is full of wonderful information about the State’s rich history. The museum is open from 9am-4pm daily and is located: 30 N Carroll St . Madison, Wisconsin 53703 and you can reach them by (608) 264-6555. Suggested Donation is $2.00/person
Homeowners who are concerned about the environment as well as saving money have many options when making upgrades to their home. One of the lastest in eco-friendly, efficient, and economical appliances are tankless water heaters. The Department of Energy or DOE tells us that hot water usage, specifically heating the water, is the 3rd largest day to day expense in the home. If you are looking to be more energy efficient and cut back on utility expenses, you may want to consider purchasing a tankless water heater.
If you are unfmailar on conventional water heaters work, they will keep your water hot 24/7, while an on-demand system, using the tankless approach, only heats water when you need it. An efficient gas burner quickly heats cold water traveling through the system to a preset temperature.
There are several common manufacturers of tankless water heaters – check out www.smarterhotwater.com, sponsored by Rheem. They tell us that annual costs for conventional water heating and storage (average) can be as much as $285, where the costs for tankless are more than $100 less per year on average.
So why haven’t we all converted? Tankless water heaters cost more up front – sometimes as much as twice more than traditional water systems. But adoption is growing as consumers become more and more concerned with efficiency and long term value for their dollars. Here’s a few reasons to consider going tankless:
1. Energy friendly and efficient. On demand systems can reduce energy costs as much as 25%.
2. Reliable and convenient. You get a continuous supply – imagine never running out of hot water!
3. Sleek and small. No more bulky tanks taking up valuable storage. Typical tankless heaters aren’t much bigger than a small suitcase.
4. Life expectancy. Tankless water eaters are built to last – 20 + years or more.
5. Versatility. It’s size and operating system allow you to place nearly anywhere in your home that is convenient for you.
Tankless water heaters are expensive, as noted and can be expensive to retrofit. If you are purchasing a new home that you plan to say in for a long time, the savings and benefits are worth the expense. If you are in a short term arrangement, the conventional water heaters may still be all you need for now. Also, avoid electric style tankless heaters – the gas units are much more efficient and affordable.
One of the requirements that mortgage lenders will request during the home buying process is a real estate appraisal. For many first time buyers, there may be some misconceptions as to exactly what this is. A real estate appraisal is a detailed report that is created by a licensed appraiser in your state and establishes the market value of a residential property. This is a very important aspect and several different considerations go into an official appraisal, and it forms the basis of the bank’s determination of the loan value. While appraisals do consider market comparisons, the actual appraisal value comes from much more than a market analysis.
Here are the components of a residential appraisal:
- Property details
- Comparisons to at least three similar properties
- Evaluation of the market conditions in the area
- Environmental conditions that could decrease the property’s value
- Structural issues that could decrease the property’s value
- Estimate of time on the market
- Status of the home site – new development, established neighborhood, acreage
- Appraisals aren’t the same as home inspections
- Appraisals are owned by the lender and not the buyer
- Assessed values don’t necessarily match market value
- Realtors do not provide appraisals
- Consumers do have the right to question appraisal facts and contest them
Understanding the neighborhood and ‘comps’ are an important part of your buying experience, but you are also bound to the official appraisal given to the lender. Work with your realtor, lender AND appraiser to make sure you understand all the details in the appraisal report of your new home.
The current real estate market is one that favors buyers. Record low interest rates, low home prices and a large inventory are all favorable for potential homebuyers looking for a new home. The problem facing thse homebuyers is that is obtaining financing for a new home can be a challenge in this difficult economy. Many mortgage lenders have tightened their requirements. However, it is important for homebuyers to realize that it isn’t always the lenders fault. Of course they would like potential customers to assume that they will be approved but the loan industry is a very risky one right now and they have to protect their assets.
Many potential homebuyers are finding that their application has been denied, so if you have been denied recently or in the past for a loan, it’s time to take control of the situation. Educate yourself, ask questions and do your research to help change that NO answer to a YES answer! Here, to help you out are some suggestions.
- Consider a co-signer if your income simply is not high enough to qualify for the actual loan. The co-signer’s income can possibly be considered as an amount towards your loan regardless if the person is living with you or helping you pay the actual bill. In many cases, the cosigner might also be able to compensate for your low credit. It is important however to understand that there are risks for your cosigner and if you default on your mortgage, the lender can actually in turn go after your cosigner for the full amount!
- Wait it out. Sometimes the best advice you can get, especially if the conditions in the housing market is slow or the economy is bad, is to simply wait. Oftentimes when conditions improve in the economy, the lenders will be more willing to let you “borrow” the money for your loan. While you are waiting, you can take this time to work on your credit score. While you are waiting, home prices could also drop!
- Consider a less expensive property. We all want what we want, but you might have a better chance of being approved if you switch to a less expensive option. For example, if you wanted a house, but you cannot wait and you cannot qualify for the loan, you might consider switching to a smaller home or to a town home instead. Later on down the line when your financial situation improves, then you can trade up the property and move to the location and home you really want to.
- Apply with a different lender. The world is full of lenders, if you don’t like what one says or you get denied – try someone else! However, if every single lender you go to denies you, you should become aware that it is for a reason – in fact, if they all list the same reason then you will know what you need to fix. Use common sense and stay away from predatory lenders. We have heard some pretty scary stories about these places – so just don’t do it. You could literally be signing your life away.
If you are denied, it is important to not give give up and keep trying! Work on your credit and then in a few months try again! With a little time, patience and understanding, you could be able to turn the situation around to your favor!