Posts Tagged ‘Mortgage loan’

Using common sense when you buy will keep your home from plunging ‘under water’

CONSUMER FORUM

By Russ Van Arsdale, executive director Northeast CONTACT
Posted March 09, 2014, at 8:50 a.m.

DowneastGuide-to...yourMainehomeWe’ve all heard the ads urging us to buy, since “interest rates are near historically low levels.” With spring approaching (at least on the calendar) and those low rates expected to hold for a while, many renters are thinking about buying a home.

Many may think twice, wondering if all those horror stories about houses going “under water,” or costing more than they’re worth, might come back to bite them. Those with second thoughts might want to spend some time with a new publication from the Maine Bureau of Consumer Credit Protection.

It’s called The Downeaster Common Sense Guide to Finding, Buying and Keeping Your Maine Home. The 32-page guide was written by the bureau’s principal examiner, David Leach, and senior consumer credit examiner, Edward Myslik.

It starts in exactly the right place: asking if you should buy a home or continue to rent. Once you’ve determined that your best bet is to buy, the real work begins.

The best piece of advice in the guide is not to buy more home than you can afford. You figure affordability through a debt-to-income ratio. The “front-end ratio” is figured by dividing the monthly mortgage payment (principal, interest, taxes and insurance) by the borrower’s total monthly income. The ratio should not be more than 28 percent.

What’s termed the “back-end ratio” is a measure of income against the mortgage cost plus the cost of all other loans.

The guide cautions against allowing this ratio to go higher than 43 percent.

New federal lending rules are aimed at ensuring that borrowers will be able to make payments on schedule; those rules make it unlikely that a loan will be approved if the back-end ratio exceeds 43 percent.

Once you’ve ordered an up-to-date credit report ( www.AnnualCreditReport.com, 877-322-8228) you’ll have an idea what your credit score will be. The score is not part of the report; it’s a number generated by Fair Issue Corporation, also known as FICO.

The scores provided to each of the three credit reporting bureaus may be different, and lenders will use the lowest number when offering an annual percentage rate, also known as APR, on a loan.

When shopping for a mortgage, you need to decide between conventional loans and Federal Housing Authority, also known as FHA, backed loans. Under the latter type, the FHA provides a guarantee to investors should a borrower default. The guide advises that, while FHA loans are priced about the same as conventional loans, the mortgage insurance costs more (meaning higher APRs).

The guide has lots of nuts-and-bolts info on shopping for mortgages. Note rate vs. APR, mortgage points, disclosure, home inspections and other concerns are all covered. The authors also caution against falling for three advance payments that guarantee a low APR. Advance fee loans are always scams and are illegal in the U.S. and Canada.

Read the guide online at www.Credit.Maine.gov and go to “Consumer Guides.”

Maine residents can also request a free printed copy by calling 800-332-8529. For a real estate professional’s take on home mortgages, visit www.realtor.com/home-finance/mortgages/how-to-get-best-interest-rate.aspx?source=web.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer 04412, visit http://necontact.wordpress.com or email contacexdir@live.com.

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State’s Bureau of Consumer Credit Protection Issues Comprehensive Home Mortgage Guide

GARDINER — Maine’s Bureau of Consumer Credit Protection, an agency within the Department of Professional and Financial Regulation, announces the release of a new, comprehensive mortgage guide, titled The Downeaster Common Sense Guide to Finding, Buying and Keeping Your Maine Home. Free to Maine residents, this 32-page booklet provides information for those contemplating the purchase and financing of a home. Covered topics include:

  • How to evaluate whether renting or buying makes the most sense, given income and future plans;

  • How to use current income, debt load and credit reports to predict if a loan may be approved;
  • How to select a mortgage lender or loan broker;
  • How to choose the type of loan product that best fits your needs; and
  • Understanding your obligations after the loan closes

Governor Paul R. LePage commented on the timeliness of the guide and the information it offers. “With interest rates near historically low levels and the Maine economy improving, this is an excellent time to purchase a home,” Governor LePage said.  “But it’s important to know if you’re in a good position to make a significant purchase of this kind and to fully understand the home-buying process.  This new booklet provides thorough, step-by-step guidance.”

“This publication will help Maine residents to become better-informed mortgage borrowers,” David Leach, principal examiner with the Bureau and one of the booklet’s co-authors, said. “One thing we’ve learned from assisting hundreds of homeowners avoid foreclosure is that some did not know the right questions to ask when they were deciding to get a mortgage.”

An online copy can be found at www.Credit.Maine.gov by clicking “Publications” or “Consumer Guides” (directly at www.maine.gov/pfr/consumercredit/documents/MortgageGuide_RevisedOnline.pdf). Printed copies are available free of charge by calling the Bureau at 1-800-332-8529 (toll-free in Maine).

“With federal regulators setting tougher borrowing standards this year for so-called ‘qualified mortgages’ (QMs), it’s more important than ever that potential borrowers understand how lenders calculate debt-to-income ratios,” Edward Myslik, Bureau senior consumer credit examiner and co-author of the guide, said. “This booklet demystifies the process. Understanding how current debt loads factor into lenders’ decisions will help consumers make prudent decisions, such as avoiding taking on additional financial obligations if they plan to apply for a mortgage.”

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The Bureau of Consumer Credit Protection, which is part of the Maine Department of Professional and Financial Regulation, was established in 1975 to administer the state’s consumer financial services laws.  The agency investigates consumer complaints, conducts compliance examinations, licenses companies that offer financial products to Maine residents, and performs outreach to advise consumers and creditors of their legal rights and responsibilities.

 

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Reverse Mortgage Consideration – WABI-TV

Video of interview featured January 7th WABI-5 Morning News

This morning, Russ Van Arsdale with Northeast Contact discussed reverse mortgages also known as a home equity conversion mortgage.

It’s a financing arrangement for people 62 and older who own their homes outright or have a small mortgage. Instead of you making payments, a reverse mortgage allows you to receive money, based on the equity of your home.

Russ warned our viewers that the deal can be too good to be true.

He advises folks to log onto www.hud.gov and search for reverse mortgage.

Also, if you are approved for a reverse mortgage, you still need to pay for normal maintenance on the home, pay for property taxes and homeowners insurance, pay the mortgage insurance premium, and pay loan orientation and servicing fees and closing costs.

You’ll also probably pay a $125 feed for counseling with an organization approved by the U.S Department of Housing and Urban Development. That’s required to get a reverse mortgage, although the fee can be waived.

Loan modification problems with the wrong company can cost consumers money

CONSUMER FORUM

By Russ Van Arsdale, executive director, Northeast Contact
Posted July 15, 2012, at 11:26 a.m

A weary consumer from midcoast Maine wrote to us recently in hopes that others could benefit from her experience. She had sought some relief from her mortgage payment in the form of what is becoming a nasty twist on advance fee schemes.

Many homeowners have had their loans renegotiated with satisfactory results. Others, like our consumer, had been swayed by a company against which the Federal Trade Commission recently filed a complaint.

The company, calling itself Advocates For Consumer Affairs, had promised a number of clients that it could lower their interest rates and cut monthly payments on the order of 50-80 percent. It could do this, it claimed, using a tool called a forensic mortgage loan audit.

The FTC cites claims on the company’s website (now defunct) which claimed “up to 95 percent of mortgages may be legally unenforceable due to defects like lost documents, improper notices, appraisal and/or predatory lending.” The forensic audit could find these defects and use them as leverage to broker a better deal with the holder of the mortgage.

All the client had to do was pay the company several hundred dollars (in our consumer’s case, $1,800) up front. It was only later that the hard truth became clear.

The FTC reports that it’s found no evidence that forensic loan audits help with a loan modification or any other form of foreclosure relief. That’s the case even if the audit is undertaken by a trained, licensed, legitimate auditor, mortgage professional or lawyer.

Some federal laws make it possible to sue your lender based on errors in loan documents. Even if you sue and win, though, your lender doesn’t have to adjust the terms of your loan to make it more affordable.

If you cancel your loan, you’ll have to return the borrowed money; that makes losing your home a real possibility.

People who are in default or are facing foreclosure are likely targets for foreclosure rescue scams. The midcoast consumer had entered into a business relationship with Advocates just weeks before the FTC hit the firm with, first, a temporary restraining order, then a preliminary injunction.

In its complaint, the FTC charged the firm:

• Did not secure interest rates or payment reductions that it promised.

• Either didn’t contact lenders or, if it did, failed to follow up.

• Failed to return phone or email inquiries seeking updates on clients’ cases.

• Didn’t give refunds to customers requesting them.

• Put consumers at risk of losing their homes and having their credit ratings damaged.

The case is pending, and the midcoast consumer, along with many others in similar situations, is out a lot of money. We would urge people with mortgage woes to visit our blog and under the “education” tab find “foreclosure prevention kit,” a link to the Pine Tree Legal Assistance website and some excellent advice on how to really deal with mortgage problems.

You also may call 888-995-HOPE (1-888-995-4673) any time for free personalized advice from people in housing counseling agencies certified by HUD.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer 04412, visit necontact.wordpress.com or email contacexdir@live.com.

State Orders Lender to Cease Taking Applications and Transfer Pending Mortgage Files

GARDINER, Maine – The Bureau of Consumer Credit Protection has ordered Texas-based Allied Home Mortgage Corporation to cease accepting new mortgage applications from Maine consumers, and to transfer pending applications to other licensed lenders.

The action is a result of Tuesday’s decisions by the U.S. Department of Housing and Urban Development (HUD) and Government National Mortgage Association (“Ginnie Mae”) to suspend Allied’s ability to originate or underwrite mortgages insured by the Federal Housing Administration (FHA). The Texas corporation is accused by federal authorities of unsafe lending practices leading to large numbers of defaults and forcing HUD to pay out millions of dollars in mortgage insurance.

The company maintained a licensed branch location in Scarborough, Maine. The office closed this week and most of the 7 employees plan to affiliate with another licensed lender or loan broker.

“We took this action in order to protect Maine’s consumers and prevent the company from accepting applications for mortgages that will likely not materialize,” Bureau Superintendent William N. Lund stated.

Lund said his office has been working with the principals of the Scarborough office this week to place pending applications with other lenders. “The loan originators at the local office have cooperated completely,” Lund commented. “They have provided a full report of all loans in the pipeline, and have provided updates several times each day.”

Licensed lenders must post a surety bond with the Bureau, and the proceeds would be available to compensate borrowers for provable losses as a result of the closing of the company. Any Maine consumers with questions about their pending applications or mortgage loans with Allied Home Mortgage Corporation can contact the Bureau of Consumer Credit Protection at 1-800-332-8529 for more information.

 

The Bureau of Consumer Credit Protection is part of Maine’s Department of Professional and Financial Regulation. The Bureau licenses lenders, creditors and collectors; conducts periodic examinations of creditors to determine compliance with state laws; and responds to consumer complaints and inquiries. The Office also conducts educational seminars to advise consumers and creditors of their legal rights and responsibilities.

Home Foreclosures Increase at State-Chartered Banks and Credit Unions at End of 2010

Foreclosure Numbers, However, Remain Relatively Low Among these Lenders and Do Not Pose Threat to Maine Financial Institutions

AUGUSTA, ME – Bureau of Financial Institutions Superintendent Lloyd P. LaFountain, III announced this week that fourth quarter 2010 data submitted by Maine-chartered banks and credit unions shows an increase in home foreclosure-related activity in Maine, a reversal of the decline occurring at state-chartered financial institutions in the prior three months.

The most recent data covers October through December 2010.  It pertains to residential real estate lending and was obtained from the 32 banks and credit unions that have been state-chartered in Maine from the end of 2006 through December 2010.  The Bureau has surveyed state-chartered financial institutions regarding foreclosure activity since October 2006.  The survey does not include data from entities not regulated by the Bureau which include federally-chartered banks, federally-chartered credit unions and mortgage companies licensed to do business in Maine.

According to fourth quarter survey results, the 32 state-chartered financial institutions held 82,289 mortgage loans at the end of December, consisting of 47,654 first mortgage loans and 34,635 junior lien mortgage loans (including home equity lines of credit).

Of those 82,289 loans, 303 (250 first mortgages and 53 junior lien mortgages) were in process of foreclosure (IPF), or one loan for every 272 mortgages (one for every 191 first mortgages).  At the end of the third quarter of 2010, 269 loans were in IPF status.  As a percentage of total mortgages, IPF loans at state-chartered banks and credit unions remain relatively low, 0.37% at the end of the fourth quarter (up slightly from 0.32% at the end of the third quarter of 2010).

In Process of Foreclosure (IFP):

IPF 12/06 12/07 12/08 12/09 3/10 6/10 9/10 12/10 # Loans
1st REM 62 120 148 226 226 234 216 250 47,654
Jr. REM 20 35 65 79 63 63 53 53 34,635
All REM 82 155 213 305 289 297 269 303 82,289
1st REM 0.15% 0.26% 0.31% 0.48% 0.48% 0.49% 0.45% 0.52%  
Jr. REM 0.08% 0.12% 0.17% 0.22% 0.18% 0.17% 0.15% 0.15%  
All REM 0.12% 0.20% 0.25% 0.37% 0.35% 0.36% 0.32% 0.37%  

 

Beginning with the 2008 first quarter survey (January-March, 2008), data on the number of foreclosures initiated in the current quarter was requested.  During the fourth quarter of 2010, foreclosure proceedings were started on 99 first mortgages, 0.21% of all outstanding first mortgages, or one for every 481 first mortgages.

This represents nearly double the number initiated in the third quarter and the highest number since the fourth quarter of 2009.  However, as a percentage of seriously delinquent first mortgages (90 days or more past due), the percentage of foreclosure starts in the fourth quarter was only nominally higher than the average for the prior seven quarters (16%).  Foreclosure proceedings initiated on junior mortgages increased slightly for the first time since the first quarter of 2010. Continue reading

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