I was shocked to hear that a public service announcement was in use as a way of letting people know that it is illegal to discriminate against others who want to borrow money to buy a home.  Really, this is 2008 and perhaps it is a bit naive to think that this is something that is finished.  The fact is, the law is clear.  You should not be discriminated against for any reason, especially your race, your religion, your familial status, your national original, your color or a disability.

What Is That About?

HUD announced that it was putting in place a public service announcement that would begin airing throughout the country on television as well as radio.  The goal is to educate minorities of their right to own a home. According to the official press release out of the U. S. Department of Housing and Urban Development, the service announcement will feel Denis Haysbert, who you may know better as President Palmer on the television show “24.” 

Here’s how the public service announcement will play out, according to the press release, “The PSA shows Haysbert, sitting in a café, drawing his dream home on a napkin and explaining that it is illegal to discriminate in lending because of someone’s race, color, national origin, religion, sex, familial status, or disability.  The PSA ends with the tagline “HUD - One Call.  Many Answers,” and encourages people to call HUD’s fair housing hotline, 1 (800) 669-9777, or log onto HUD’s Web site, www.hud.gov/fairhousing, if they believe they have experienced lending discrimination. “

Discrimination in Lending

If you feel that you have been discriminated against, now is the ideal time to step up.  Even more so, if you feel that your lender is not doing enough to help you get into the right mortgage for you, I urge you to take action.  FHA is an ideal program for those that are low income but able to make home mortgage payments.  It is also an ideal way to get out of those subprime loans. 

According to the press release, African Americans and Hispanics receive less information regarding the loan terms as well as often charged a higher fee.  They are often told not to apply for the loan.  Legally, it is unlawful to do these things.  If they are happening to you, the Fair Housing Assistance Program can help you.  You can contact them at 800 669-9777.

If you are struggling with a lender, give them a call.  Alternatively, contact a lender that is willing to work with you.  While there is discrimination out there, it does not come from all lenders. 

The worry that many people have, that I have encountered, is that now is the worst time to get into a home.  It is not.  Now, that has not to say that it is the best time either.  There are opportunities in the housing market and with the approval of FHA loans even more readily available, it makes sense that more people than ever would be interested in getting loans.  Those that are leery are the people who are worried about mortgage lenders going under or not qualifying for the loan.  Let us look at the advantages.

I was recently asked, “Isn’t the mortgage industry too shaky to get into?  I don’t want a lender to drop out of my loan if I buy now.”  They went on to tell me that they planned to hold off buying until the real estate market improved.  It stepped back, looked dumbfounded for a second, and then explained a few pointers.

First, the risks in the current housing market are not necessarily in the lenders themselves.  While some of the bigger companies who did a lot of lending through subprime loans are shaking, it is highly unlikely that they will pull all mortgage notes they have.  More than likely, they would be sold to another lender.  However, that is not the risks with these two friends of mine.

You see, they have decent credit and after getting married a year ago, have managed to get a sizable down payment together for a home.  They are worried about all mortgage lenders.  Most lenders are suffering from the housing crisis, but they are not going out of business.  In addition, what they know and you should know is that once the housing market straightens out and house values start coming up (which most experts believe will happen towards the end of 2008 and the beginning of 2009) the long-term outlook looks good.

Since this particular couple is looking for a family home and doesn’t plan to move too much, chances are they can get a pretty low priced home now and watch the property value rise on it over the next five, ten or even thirty years. It may not be the best time for short-term loans, granted, especially in areas where house prices are dropping by 10 to 15 percent.  However, it is an ideal time for many others.

If you are not sure if now is the right time for you to purchase a home, I highly recommend that you talk about FHA loans to your lenders.  These are backed and secure loans, ideal for many homebuyers.

At HomesSales.gov, you can find a listing of some of the most current homes for sale from the US Government.  Now, before you worry too much, consider what these homes are on the market for.  Many times, taxes go unpaid, seizes happen, or the properties are simply turned over to the government for other reasons.  Yes, in some cases, it has to do with criminal situations, but the government is selling these homes through a public auction, which means that you could get them for next to nothing.

Is The Price Right?

Some of the homes available are quite low in price simply because the government needs to sell them.  Just as if banks have homes that they have foreclosed on and are trying to sell as quickly as possible, the same is true for these US Government homes for sale.  When you visit their website, you can click on the state of your choice and see the properties in question.

For example, through a quick search, I found that a four-bedroom home for sale in Anaheim California is at under $370,000.  That is good for that area.  It tells me why the home is in the hands of the government (in this cases it was forfeited.) and it tells me many of the specs of the home.  As you can see, the process is simple to do, but you cannot make your purchase on that website (this is not eBay after all.)

Getting Into The Homes

Rather, you do have to work with a real estate agent that has approval to sell through HUD.  Many (if not most) are.  When you work with the agent, you will be able to get even more details and find out when the auctions are held.  In most situations, these government homes for sale auction through real estate agents, though some do allow the public to come and make their bidding happen.

Funding for such a purpose can be complete in a number of ways.  It is usually necessary to have a detailed document from your lender approving you for the loan in the amount of at least as much as the auction price.  Most auctions do require that you have preapproval for a loan or show that you have the necessary cash to pay for the property.

Should You Buy This Way?

Some people may believe that purchasing foreclosed or government seized property is in bad taste, but it is one of the best investments you can make.  Most of these properties are in decent shape, having working systems throughout them and are a good value.  If you couple this with an affordable loan (you may qualify for an FHA loan), you could be saving yourself a substantial amount of money in the process.

Before purchasing any home, you should have the opportunity to see it and inspect it.  Contingencies are allowable on most auctions.  While this sounds like a great opportunity for an investor, and it is, it can work well for any homebuyer looking for an affordable way to get into a home of their dreams.  There are no guarantees about the overall condition of any home, of course, as each is different.

The plan is for the government to back some of the more risky mortgages that have put so many lenders in trouble.  While it may not sound bad, the problem is how such a program would work, beneficially.  Key questions need answers, for example, who would qualify for such help?  What would borrowers (as well as lenders) have to do to get into the program?

What is In The Works?

The House has passed a bill that would give the Federal Housing Administration the ability to insure mortgages to those people who are at risk of losing their home to foreclosure.  Another bill is in the Senate, and that one gives us a better idea of how the process would work.

In these bills, to qualify, the homeowner would need to be a full time occupant of the property.  They must have a debt to income ratio of more than 35 percent.  Lenders and borrowers have voluntary participation.  Borrowers can contact lenders and lenders can contact borrowers.  The lender gets the final say, though, in if the borrower may participate.

Here are a few more points to keep in mind:

 ·         If a homeowner has a second mortgage, the holder of the second loan must eliminate the debt.

·         FHA backed loan qualifying individuals may be excluded from the program is the lender believes there is too much risk involved.

·         No borrower is turned away just because they are delinquent on the existing mortgage they have or because of their credit score (solely.) 

·         The lenders must be willing to accept no more than 85 percent of the appraised value of the home (which will include loan fees and closing costs factored in.)

      ·         All FHA backed mortgages must be 30 year fixed rates to qualify.

Look at the math.

A home now valued at $200,000, with a borrower that has an upside down mortgage owing $220,000.  The owner’s debt to income ratio has to be over 35 percent, so that means if he makes $4,000 a month, his mortgage debt must be more than $1400.  Once he qualifies like this, the process moves on.

The FHA program would guarantee 90 percent of the appraised value.  This means that the new loan would have to be written down by the lender to $180,000.  The remaining value gives the homeowner equity of 10 percent. 

Also, the lender will need to pay the FHA 3 percent of the loan amount to participate in the program as well as providing another 2 percent for closing costs.  That amounts to an additional, $9000 on this particular loan.

When everything boils down here, the lender loses $29,000.

The borrower also has to pay the FHA 1.5 percent in an annual premium to the FHA.  The amount of this will diminish over time as the principal on the home falls.  An exit fee may also be on the loan, which would be more than 3 percent of the FHA loan amount originally.  From the borrower’s look, there is a high risk of being able to get out of the loan affordable if they sell the property over time.

Perhaps the most troubling aspect of this Congress made loan process is that it is so confusing.  While costly to the lender and to some borrowers, the FHA loan offer here may be an option for some situations.  Nevertheless, it has not become law and President Bush has threatened to veto it.  He and other critics believe that the taxpayer is being asked to pay some $300 billion worth of poorly backed, bad loans through the program.  President Bush has called in irresponsible for both lenders and borrowers.

The Bush Administration released information on the program last week.  They said some 200,000 homeowners have been able to refinance since the program’s startup and during that time, many of the subprime loans people could not afford refinanced into affordable home loans.  The program is not for everyone; in fact it is designed only for those that are at the bottom of the line, have subprime loans and need to refinance quickly to stay in their homes.

The FHA announced that it actually has refinanced 100,000 of those loans in the past three months (February through April.)  Struggling homeowners right now can still get this type of help.  The FHA is likely to help another 500,000 homeowners this year alone to help get out of subprime loans and into loans they keep them in their homes.

Getting Help

If you are one of the many struggling homeowners, I encourage you to reach out to the FHA representatives who have it in their ability to help many in struggling positions.  There is some controversy over who qualifies for the FHASecure program.  Originally, the program had a design to help those who were already delinquent in their subprime mortgages and were struggling with the resets of those loans.  However, some believe there has been a shift in that many of those qualifying for FHASecure are those that are trying to avoid programs and that want to get into the lower costing loan.

Some officials from HUD and the FHASecure program have said that this is a good thing in that these borrowers receiving help are a better credit risk than those already behind. 

The Bush Administration announced some changes as of May 7^th in the hopes of avoiding even more worry of the changing focus of the program.  The guidelines have expanded so that they now include more borrowers who are delinquent which have had a mortgage reset recently and have missed their payments due to it.

Other requirements also have had introduction in the way of late payments on record.  Those homeowners with a Loan to Value ratio that is 90 percent or less will be able to have a 90-day late payment on their record prior to the rate reset and can still qualify for FHASecure.  In the past, this wasn’t clearly outlined.  Additionally, all borrowers behind on their mortgage payments and that have reset adjustable rate mortgages and have a 60 day late payment on their record are also still able to qualify.

What To Do

If you are struggling with your subprime loan, for any reason, or believe you will be struggling for it in the short term, the FHASecure program may be able to help you.  Talk to lenders to find out what can be done to keep you from falling behind.  While the government is working to include more homeowners that are on the verge of missing payments and entering foreclosure, they are still heavily working to improve the situation for those that have already had resets of their loans.

Of course, FHASecure has a long way to go, and it most definitely can be helpful to some.  For other homebuyers, it may be possible to refinance into a standard new FHA loan through a standard lender. 

For many people who have FHA insured loans, there is some relief available.  According to the guidelines of most FHA loans, the lenders are not able to press you for payment in such circumstances.  They cannot file for foreclosure on your home until a fully 90 days has past.  This gives you time to get things back into place, at least financially speaking, or to find another option.

If your home had damage or destruction, this type of FHA loan backing can be quite helpful (perhaps yet, another reason to consider FHA loans over other types whenever you qualify.)  Now, not all thunderstorms will qualify for this type of help.  It is meant to be in use in only a handful of the worst situations.  Areas that the President has declared to be a disaster area are those that will qualify for this relief.

In addition to this, if your place of employment has been damaged or destroyed at the hands of such weather occurrences or manmade events (like wildfire for example) you too may qualify for such protections even if your home hasn’t been damaged at all.

The FHA insurance on your home is there to help protect you from losing your home, but you still need to talk with your lenders and get into the necessary programs.  Because most lenders are more than willing to keep a good paying customer in their current mortgage, they are likely to have some solution for you.  This can drastically help them save you as a customer and the FHA programs are there to help provide reassurance.

If you believe you may qualify for this type of backing, contact your lender today.  Find out if your particular situation qualifies.  You can also contact your local HUD offices to learn more about the help that is available to you here.  Chances are, there is protection available o you through your FHA loan.

We used a random number generator and the lucky winner of the $500 participation prize is Peter Toner and his San Diego Real Estate blog.

For editor’s choice, the prize goes to Rich Rosa of the Massachusetts Home Buyer Guide. We really like Rich’s mix of analytical market related posts and local interest pieces.

The popular vote winner is NJ Real Estate Report.  This was a tight race between first and second but as of Sunday, June 1 at 12:00 A.M. NJ was in the lead.  James, the author of NJREreport.com, has graciously asked us to send his $500 prize to the Newark Chapter of Habitat for Humanity.

I have yet to receive any entries for the Real Estate Blog World addition to our contest.  It’s disappointing but we understand you may be too busy to attend a conference or write your thoughts on FHA mortgages.  Keep in mind we will be giving away 3 passes in June so you still have the opportunity to win those!  All you have to do is write a post detailing your opinions on FHA mortgages and email it to me (brandon at fhamortgagecenter dot com) and you will automatically be entered for a free conference pass.  At this point, if you write anything you’re one of the winners–so go for it!

Thanks again for all of the support in our networking efforts and please contact us if you ever have any FHA mortgage questions/issues.

So, as I look at the options available to the average baby boomer, one thing that astonishes me is that there aren’t more people interested in working through reverse mortgages.  There is no doubt that this type of lending has its controversy, but for some homeowners it is one of the better ways to pay for retirement, especially when there are not many other options.

A reverse mortgage, which the FHA calls a Home Equity Conversion Mortgage, is a loan that is backwards, so to speak.  After you reach retirement age, you are able to take out this mortgage on your home, which will pay YOU a monthly payment each month.  The amount has a basis on the overall value of your home now and into the future as well as your life expectancy.  When you pass away, your heirs have the ability to buy the home from the mortgage company (if they want to) through another loan or with cash, or the home will be sold to repay the mortgage.

Now, many seniors find this an ideal choice, but you should know the costs and know where to get such loans.  In terms of cost, there is interest to consider, which can be high in some situations.  As for where to get the reverse mortgage, a good place to start is with the FHA.  The Federal Housing Administration actually does insure the most common type of these loans (Home Equity Conversion Mortgages.)  Most FHA backed loans are more affordable, but again you want to shop around.

Other banks offer them as well.  National banks and local banks are willing to work with seniors to get this type of help to them.  You may also want to consider the options offered by Fannie Me, which is a reverse mortgage that gives you higher limits than the standard FHA reverse mortgage, in some situations.

Tips On Making A Wise Decision

Because the FHA or other reverse mortgage loans can be tricky, costly and can upset some heirs, it is important to consider this option for financing your retirement carefully. Here are some tips to do it right.

 ·         Realize that you cannot get your home’s full value through the reverse mortgage.  Rather, there are costs that come out of it.  Find a quality calculator to help you determine the amount you are likely to get.

·         Be careful with closing costs, they are often quite high.

·         Do not get into a reverse mortgage too young.  The older you are and the higher the value of your home is, the more money you will see monthly from the payout.

In addition, the reverse mortgage can be in use in various ways.  You do not have to have a monthly payment, but can use it as a lump sum or even as a line of credit. 

Consider your options here closely.  I recommend that you only use a reverse mortgage when you have to, but do not avoid using it if you need it.  While your children may want you to give them the home after you are gone, the fact that you can use those funds for medications, for trips around the world, or for anything else you may need, can be much more valuable.

 Here is a closer look at the problem.

 ·         Home prices continued to grow to some of the highest in the country, as demand for properties rose and it was easy to purchase an affordable loan

·         Lenders were offering jumbo loans, which are loans that are thousands of dollars more than the standard home loan in any other part of the country.

·         The housing market crisis hits when the Californian homebuyer is unable to pay his adjustable rate loan reset (blame it on whoever you want, but the bottom line is, it happened.)

·         Houses start to foreclose because homeowners simply cannot afford the new monthly mortgage payments.

·         Lenders are losing money hand over foot and in turn determine they will not be giving out any more risky loans, subprime loans came to a halt and for the first time in years, jumbo mortgages (which financed most of these large, Californian homes) are no longer available.

·         House prices fall as the properties around them foreclose.  Even people without risk of paying their mortgage are seeing their mortgages become upside down, where they owe more money on the home than it is worth.

·         Selling a home in California is next to impossible because of the upside down mortgage

As you can see, this is a very serious situation and there is no easy answer as to how to fix it.  FHA is trying to help.  They are offering more help to struggling homeowners who need loans that are more affordable.  They are also working with homeowners not yet defaulting that need to keep from doing so.  The Bush Administration and FHA raised the allowable amount that FHA could insure homes in this pricey neighborhood for.

 The risks are still there.  California is suffering, but there is hope for many who contact lenders to inquire about possible FHA help.