I am really concerned about my friend who lost her house to foreclosure about three months ago.  The relief she feels about the drama finally being over has evidenced itself physically (she’s lost weight and looks fantastic) and even her children are smiling again.  The whole family is flourishing - “When Momma’s happy, everyone’s happy!”

But I’m worried for her.  I recently wrote about lenders coming back to haunt former clients after years have passed.  They’ve come back for the money that was unpaid - sometimes on foreclosures, but mostly on short-sales.

Here’s the skinny,

If you live in one of the states named above and unless you have a letter from the lender specifically stating that you are fully released from any deficiency from the short-sale, you may be in for an ugly surprise sometime in your future.  Lenders typically have up to six years to come back after the seller and collect the deficiency – the amount that was forgiven or lost in the sale of the home.

Some states are non-recourse states meaning that when the short sale is over, it’s all over.  But if you live in one of 38 states (or DC or Puerto Rico), you’re out of luck.  Where are you safe? According to HELOC Basic, here’s the list:

• Alaska
• Arizona
• California
• Connecticut
• Florida
• Idaho
• Minnesota
• North Carolina
• North Dakota
• Texas
• Utah
• Washington

Good luck!

Loan rates had been creeping up these last few months, but for the second consecutive week they again remained under 5 percent.  The average interest on a 30-year fixed loan according to Freddie Mac came in at 4.95 percent (a .02 drop from the previous week).  On a 15-year fixed-rate loan, the interest rate averaged 4.32 percent.

Along with interest rates remaining low, there is optimism that the housing market is in a slow and steady recovery.  According to Kiplinger’s writer Richard DeKaser, a springtime thaw in the housing market is coming,

A springtime rebound ought to be just around the corner, if I’m right about the winter housing downturn being due to special factors. It’s too soon to say for sure, but tentative signs of an uptick are already emerging. According to the Mortgage Bankers Association, for example, home purchase applications increased in late February and early March, pushing them above the pre-blizzard levels of early February.

Good news all around!  On a personal level, the phone has started ringing again and one of my favorite lenders agrees that business seems to be on the upswing.

Photo from Electrical Resource.

Last week, mortgage applications rose by 8.5% according to the Mortgage Bankers Association, providing something for the housing market to be thankful for. This represents a return to the trend in mortgage applications, probably with a little help from the extension of the first time home buyer tax credit. However, most of the mortgage applications were for refinance efforts.

Indeed, refinancing remains rather popular right now, with record low rates. A 30-mortgage can be had for 4.88%, and a fifteen year fixed is at 4.33%. ARMs are still above 6% in many cases. However, in order to get the best home mortgage rates, you will likely have to pay points. This is an amount equal to 1% of the amount being financed.

If you have been thinking of refinancing your home, now is a good time to do it — if your credit is good enough to allow you the best mortgage loan interest rate.

It's not really a surprise, but the latest numbers show that mortgage delinquencies continue to rise. Indeed, as the economy continues to worsen, TransUnion reports that late mortgage payments rose by 53% over fourth quarter 2007 in the fourth quarter of 2008.

The rising tide of people who are having a hard time paying their bills increases. However, if you are having trouble paying your bills, your mortgage is not the one you should be late on. Instead, you should prioritize your bills, with the mortgage at the top of the list. Your home is likely the most expensive (and possibly valuable) thing you have. Avoid falling behind at all costs.

One of the ideas being floated by the Obama Administration is the idea of a stress test for struggling banking institutions. Banks that appear very close to insolvency would then be candidates for some sort of bank nationalization. Here is what MarketWatch reports about the stress test — and its possible outcomes:

It is an interesting possibility, and one that has plenty of people concerned about what happens when the government takes over a private institution. Others, though, figure that we've already nationalized the risks associated with failing banks, so the government might as well potentially profit.

Do you think bank nationalization is a good idea?

With tax season upon us, there are some pretty decent commercials out there addressing the subject. I like this one from H&R Block.

Happy Friday!

The new homebuyer tax credit in the final version of the current economic stimulus bill is not nearly as generous as first conceived in the Senate. Instead of applying to every homebuyer the credit now only applies to first time homebuyers. And it ends being only $8,000, instead of $15,000. Here is what CNN Money reports about some of the details of the credit in the economic stimulus bill:

To qualify for the credit, the purchase must be made between Jan. 1,
2009 and Nov. 30, 2009. Buyers may not have owned a home for the past
three years to qualify as "first time" buyer. They must also live in
the house for at least three years, or they will be obligated to pay
back the credit.

Additionally, there are income restrictions:
To qualify, buyers must make less than $75,000 for singles or $150,000
for couples. (Higher-income buyers may receive a partial credit.)

This will be a bit of a comedown for many — especially those who were looking to buy a home, but may already own. And it doesn't appear to alter the payback requirement for the $7,500 credit issued in an earlier economic stimulus bill — but I could be wrong on that.

Yes, I know that there is all sorts of economic stimulus news today. But rather than pontificate on mortgage subsidies and more aid for banks, I’m doing a fun video.

Happy Friday!

Today, amidst other bits of economic data, foreclosure numbers for January were released. Thanks to foreclosure moratoriums, foreclosures have been down (although that isn't much comfort in some places, where there is still a foreclosure a day).

CNN Money reports on the impact of foreclosure moratoriums:

"The extensive foreclosure efforts on the part of lenders and
government agencies appear to have impacted the January numbers,"
RealtyTrac CEO James Saccacio said in a prepared statement.

The trend toward foreclosure moratoriums has gained considerable momentum lately.

This trend is meant to help give at risk borrowers a chance to figure out what they can do to avoid foreclosure. Even Timothy Geithner's much maligned bank stabilization plan includes money aimed at foreclosure prevention.

But the real question is whether all this foreclosure moratorium is actually helpful. While it might be of use to some, in many cases all it does is delay the inevitable. In fact, the foreclosure moratorium craze just further illustrates the debate between these to views of economic recovery: Let it all fail now and get the effects over with v. let it fail in bits and pieces and stretch out the effects.

It appears, though, that we've already taken the stretch it out approach.

We hear a lot about things being "investments" — even when they aren't in actuality. And one of those things is buying a home. While we like to think that buying a home is making an investment (and for some, the real estate bubble made it so), having a home mortgage loan is not an investment.

If you plan to use your home as a primary residence and raise a family in it, you are not making an investment.

You can buy a home, financing it with a mortgage, and enjoy a number of benefits. Most of them are intangible:

All of these are nice things. But from a financial standpoint, paying a mortgage on your primary residence isn't making an investment. (Buying property that you plan to make money on, like a rental, is another story.) You do not get a regular return, and when you sell the home, chances are that even an appreciated home won't cover the real amount of money you've paid out when you add in interest, taxes and maintenance.

But it's still nice to have a home, even if it does come with mortgage. We have enjoyed our home. I just don't tell myself it's an investment. It's really a long-term purchase.