After having a long discussion with an agent with whom I work, I thought it would be helpful this Friday to offer a couple of tips for home owners considering or in the process of applying for a home loan modification.

1. Be as accurate as possible on your financial worksheet, but make sure your expenditures don’t greatly exceed your revenue.  The numbers must be pretty close.  My friend said she spent $200 p/month on groceries and was questioned by the lender.  She explained that she has a garden and clips a lot of coupons to keep that expense down.
2. Hand write your distress or application letter.  The lender isn’t interested in seeing a fancy, error free typed request.  They are there to help real people and a handwritten letter honestly written will appeal more to that person you’ll never meet than the cold, typed letter.
3. If you can get in the HAMP program (or Making Home Affordable) by the government, you’ll be well on your way to being approved for the loan modification.  For more information, click here.
4. Do not fail to be in touch with the lender at least ONCE a week - call to check the status, etc.  Make sure when you do contact them, document who you talked with, along with the date and time.

Good luck getting that loan modification.  You’re going to need it.

The Wall Street Journal recently requested data from a research firm about mortgage fraud and the results were unexpected.  Mortgage fraud has grown by a whopping 17 percent from last year, after having declined by 57 percent since its peak two years ago.  According to the newspaper,

No-doc loans are a thing of the past, and many lenders now require borrowers to furnish proof of employment, tax forms, credit reports, bank statements and other documents.

Fraudsters have adapted to the new restrictions. With banks less apt to lend to borrowers with shaky finances, criminals rely more on falsifying documents, recruiting loan officers and other bank insiders to work for them, and stealing identities to get loans, federal investigators and mortgage industry research reports.

The newspaper further reported on some of the most recent fraudulent activity, including a complex wire fraud scheme that involved 29 defendants that included real estate agents, bankers, lenders, and an appraiser.

A true picture of the losses is expected to be discovered as banks are forced to write off the fraudulent loans in the coming years.

An agent in my office told me today about her sister who is a Realtor in California.  She was excited because recently she’s receive at least two emails saying that to qualify for a home loan, you can opt in to a “No Income Documentation” loan.

My first instinct was to flinch because these are the loans that are now most at risk for foreclosure (if they haven’t already foreclosed).  However my friend was pretty excited about them because it means that the economy is starting to turn to the point that investors feel confident in releasing no-income loans.

The paperwork shows that a minimum FICO score of 620 is required and are 30-year fixed mortgages with no pre-payment penalties.  To verify that a buyer is able to make the payments, the lender will verify current employment but is not asking for pay check stubs, W-2’s, tax returns, 1099’s, or 4506 forms. One lender states the loan amount must be at least $220,000 but no greater than $729,750, while another offers a minimum loan amount of $100,00 with a maximum of $3 million.

The loans are available both for new purchases, home owners wishing to refinance, to purchase condos, or for non-owner occupied loans (at a higher interest rate, certainly).

This will be an interesting trend to follow - to see if it expands to the rest of the country.  If it does, it might just be the electric shock the heart of real estate needs to get going again.

My husband and I refinanced our mortgage several years ago in the heyday of real estate.  We bought our current home in 2003, then watched - amazed - as the value went up by $40,000 in just two years.  We thought, “Let’s refinance for the value and pay off our car and credit card!”

Bad move.  Our home is now worth only about $10,000 more than our original purchase price - only because we also added a sun room.  So in essence, we are about $50,000 underwater because we jumped right in the middle of the feeding frenzy of property values increasing like white lightning.  Hindsight… yea yea…

So is refinancing a good idea?  For us - even though we could decrease our interest rate from a 6.5 to a 4.5 percent rate - we can’t do it because the house won’t appraise for the refinance.  For others, it may still be a good option according to cashmoneylife.  Some of the reasons to refinance:

• Your credit score has improved.
• Mortgage interest rates increasing.
• Have trouble making your payments each month.
• Need to consolidate other debts.
• Making more money.

Again, proceed with caution if you decide to refinance, but the good news is if you bought your house before 2007, you are probably in good shape not getting in upside down.  Good luck!

If you aren’t investing in real estate right now, why not?  If you don’t have a job or if you have bad credit, okay.  That’s understandable.  But if your plan was to wait to buy until homes are affordable and loan rates are low, then now is the time.

From a local lender, here are the rates today:

30 Year Fixed Rate
Conforming Loan - 4.25
FHA Loan - 4.25

15 Year Fixed Rate
Conforming Loan - 3.875
FHA Loan - 4.0

These rates are amazing!  Consider now as a time to buy…

I just talked with one of my former clients who told me she is trying to get her Wells Fargo home loan modified. She has been very cooperative - a study in opposites from how the company has treated her.  She said the last round ended with her loan modification being denied because all of the paperwork she sent - every single page - hadn’t been signed and dated.  Never had they told her to do that.  She has finally hired attorneys to help her through the process because the company seems to be stalling in order to turn her down.  In the end, they will have a full year of every paycheck stub and bank statements.  Is that really necessary?

Meanwhile, the process has decimated her credit score.  She had a conversation with Equifax, though, and that representative told her that credit scores are tanking throughout the country by nearly everyone.  So good luck in getting a new loan, which seem to be highly desirable right now according to MSNBC,

For homeowners who qualify, it’s a good time to refinance. The average rate on a 30-year fixed rate mortgage dipped this week to the lowest rate of the year — 4.84 percent, down from 4.93 percent a week earlier. Homeowners who took out adjustable-rate loans at 4.5 percent in 2005 are now seeing their rates fall to 3 percent to 3.25 percent, McBride says. As a result, they have extra cash to spend.

I’d rather see the economy in a strong, steady recovery, frankly.

Interest rates are still hovering just under 5 percent for a 30-year fixed rate loan.  However, they are expected to increase at the beginning of April when the Federal government stops buying mortgage backed securities.

Many buyers are thinking they can wait to make their purchases and get into a binding contract until the end of April to gain the tax credit (which is true), but what they may miss out on is a lower interest rate.  As a result, we are staring down the count-down clock to when the best time to buy will be.

At this point - March 23, 2010 - you have EIGHT days in order to get the most optimal deal…

• Tax credit of $8,000 for qualified first-time home buyers
• Tax credit of $6,500 for qualified previous home owners
• Lower mortgage rate before interest goes up because of government no longer purchasing mortgage-backed securities
• Lower MIP for FHA loans if case number assigned before April 5th (MIP go increase from 1.75 percent to 2.25 percent after April 5th)

This is it, buyers.  The countdown is on and we’re T-minus 8 until time to launch!

There are several real estate agents I follow on Twitter.  Some tend to get a bit self important when they constantly post everywhere they go using loopt or yfrog or foursquare, but they also link to interesting blog posts they’ve written or provide funny updates.

I tried to run a hash-tag (run a search for a subject with the pound sign in front of it - e.g., #mortgage) for mortgage companies to see what came up and my twitter account blew up with hungry lenders.  Lenders write about mortgage rates, loan modifications, short sales, who has plead guilty on loan fraud, federal actions, available tax credits, and much much more.  And then within a five minute period, 63 NEW tweets showed up under the #mortgage search criteria.

It makes me realize that lenders have fully integrated into the social media outlets to find new customers.  Most of the article links were to static web pages that showed things like “Three Steps to Loan Modification” or “(Name a State) Mortgage Refinance.” A lot just provided links to news articles that mention mortgages.  I wonder how many are automated … they’re throwing out the fishing lines to see if they can hook someone.

That’s why I always encourage people to go with word-of-mouth when finding a real estate agent or a lender or a plumber or a doctor.  These are the people who’ve actually had experience with the professionals and you’re more likely to know what you’re getting ahead of time.

Once you are ready to pick a lender, ask for a good faith estimate.  Then ask another lender for hers/his.  Look it over and ask lots of questions.  See who you feel comfortable with, see who is able to answer your questions, and pick the person who offers the best rates with the fewest “junk” fees (which should show up on the GFE).

Homeowners seeking help in modifying their home loans to more affordable payments are painfully aware of how slow the process is, and the federal government has taken notice.

The Department of Housing and Urban Development is making it easier for eligible homeowners currently in trial modifications to move into permanent modification status through a simple, straightforward paperwork documentation process.  According to HUD,

Over 900,000 Americans have begun trial modifications since the program’s inception and over 110,000 have been approved for permanent modifications as of December 31, 2009. The median monthly savings for individual homeowners is more than $500 per month.

The new guidelines also make it easier for people who are current on their mortgage payments to become eligible for a loan modification.  The eligibility is for a monthly payment to not exceed 31 percent of the monthly income.

In other news, the Shakadoo family wants to extend our appreciation to longtime writer Miranda Marquit.  Miranda has left the Shak family after providing wonderful stories, information, and news updates on the Loan Shak and Work Shak sites for several years.  We’ll miss you, but offer our best wishes for a happy, successful future.

The housing market continues to struggle as home prices fall and mortgage applications drop. The Market Composite Index, which measures the volume of mortgage applications each week, dropped this past week. One of the biggest reasons is the fact that the refinancing portion of the index dropped.

Apparently, even though mortgage rates are low, people are reluctant to refinance their homes. This is causing mortgage applications to drop. Perhaps some are waiting to see if mortgage interest rates will drop back below 5%, since mortgage rates rose last week. Another issue is that home values have not been rising, and do get the 80% loan to value ration that many mortgage lenders are asking for is difficult.

Those with mortgages serviced by Fannie Mae or Freddie Mac, though, can take advantage of a refinance program from the government that allows a 125% LTV.