More Homeowners Struggling As Option ARMs Reset Higher!!

Mark Koba S.E.


Thousands of American homeowners are starting to see their monthly mortgage payments skyrocket, dealing a fresh blow to the already shaky housing recovery.

The widely feared reset of thousands of option adjustable-rate mortgages—where both interest and principal payments rise sharply—is already leaving many homeowners struggling to keep a roof over their head.

"It's going to kill off housing," warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. "We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet."

Option ARM mortgages, which have been around since 1981 and are aimed primarily for people who had fluctuating incomes, became popular during the housing boom. Terms of the loan usually allowed the borrower to make low monthly payments initially—sometimes by just paying interest only.

But as the terms of those mortgages now readjust, homeowners are facing much higher mortgage payments at a time when the value of their house has plummeted and many are out of work. In some cases, homeowners who chose a very low starting interest rate have actually seen the overall amount of their mortgage increase—known as negative amoritization—putting them even deeper in debt.

"Option ARMs have been a disaster from day one and a lot of them have already defaulted," says Greg McBride, senior financial analyst with Bankrate.com. "This is a very big issue because interest rates are rising." Reduce your principle balance with Affinity Lending Group Shortrefiusa.com


There are no specific numbers on how many option ARM loans there are. But analysts estimate that as many as 1.3 million borrowers took out $389 billion in option ARMs in 2004 and 2005 alone.

Many of those option ARM loans have already re-adjusted to higher payments, but more are on the way. Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings.

And there's more misery. If the Fed increases rates in the months ahead to fight inflation, rates tied to option ARM indexes will rise further—causing more payments to adjust up even sooner. And while Option ARM borrowers might want to re-finance, they often can't because of falling home values and tighter credit restrictions.

"I don’t see how the option ARM problem is not a huge issue," says Sylvia Alayon, vice president and director of operations for the Consumer Mortgage Audit Center, which provides auditing services to advocacy groups. "This is a major hit for housing. It will continue to feed the excess supply of housing with more foreclosures."

But Mark Zandi, chief economist at Moody's, says the option ARM problem is just one of many for housing.

"It's more of a bump in the road," Zandi says. "Many of these loans defaulted before they even got to higher payments. "I think the jobless situation is hurting more and the increase in interest rates. Add that with the coming ending of the home buyer tax credit and those are the bigger problems facing housing."

And David Adamo, ceo of mortgage banking firm Luxury Mortgage, says lenders are helping to ease the situation.

"Many of the good ones are entering into agreements to help borrowers ease their payments," says Adamo. "I don’t think that the re-casting of option ARMs will have any greater effect on housing than any other troubles facing borrowers."

In fact, some 21,000 home loans modified in the third quarter of 2009 included a principal reduction or deferral, according to Mortgage Metrics.

But that's not nearly enough says Loan Fraud Investigations Pulatie and getting most lenders to help now is not that easy. He also says they were part of the problem from the beginning. "They were pushing option ARMs. Anytime they sold to Wall Street, they received 3-4 points in commission," Pulatie said. "If you have $500,000 loan you’re talking about $15,000 in your pocket. That's why Wall Street liked them."

As for borrowers, Adamo says they need to do some honest personal appraisals when applying for a loan. "A lot of option ARM loans should not have been made in the first place, " Adamo says. "Many of them had lower stated income levels than should have been listed. Both the lenders and borrowers are at fault for that."

As the option ARM implosion hits housing, solutions seem few and far between. Homeowners are advised to work with their lenders in reducing loans payments if they are behind or can't re-finance. The White House has been increasing pressure on banks to help borrowers, but it's still up to the banks to decide if they will.

And there is HARP, the government program designed to help homeowners refinance an existing mortgage with lower mortgage rate or to refinance to lower monthly payments. But this too has had limited effect with tough restrictions and qualifiers.
Affinity Lending Group is one of the leaders offering shortpay refinancing. Please view this testimonial of a California couple that refinanced through Affinity Lending Group http://www.youtube.com/watch?v=WY7MToO1fdM


While the number of foreclosures has slowed somewhat, it could reach 4 million in the US in 2010 according to RealtyTrac. Numbers like that, says one analyst, mean housing needs a major financial overhaul.

"We need to have these option ARM loans modified and help homeowners pay them off," says Alayon. "People who say 'don't help my neighbor because I made my payments' are missing the point. Missed mortgage payments mean foreclosures and falling home values. This effects us all."

Hi, and Thank for your continued support. If you have any questions or are just curious at what the banks are doing for solutions to this mortgage crisis. Please contact me at 562-685-8159

Thank you
Robert Vaughan
Vice President
Affinity Lending Group

Foreclosures Weigh On Home Appraisals

LOS ANGELES - It wasn't the first time that Katherine Scheri ruined a real estate agent's day with a low property appraisal.

Scheri, a real estate appraiser, had sized up a three-bedroom, two-bath house in Santa Ana, Calif., for $30,000 less than what the buyers offered to pay. A typical deal-killer for a seller.

The agent urged the lender to force Scheri to consider several other properties that could back up the original $310,000 sale price. Then he tried good old-fashioned guilt, telling Scheri her appraisal was going to ruin the buyers' shot at the American Dream.

"That's what he laid on me," Scheri recalled. "And I said, 'Don't you care they could be potentially spending $30,000 too much for a house?"

Across the country, agents and homebuilders are complaining too many appraisals are coming in low, scuttling deals.

The National Association of Realtors says nearly one in four of its members has reported clients losing a sale due to botched appraisals. The National Association of Home Builders, meanwhile, said low appraisals were sinking a quarter of all new home sales and argues it's not fair to compare distressed properties to brand-new homes.

And that gets to the heart of the problem.

Roughly 40 percent of all home sales this year were foreclosures or short sales, meaning the property sold for less than the mortgage. In some markets, like Las Vegas and Phoenix, they've hit more than 50 percent.

Appraisers determine the value of a property by looking at recent sales of comparable homes. They take an apples-to-apples approach, excluding or making adjustments for certain features, such as a swimming pool or finished basement. And generally, a foreclosure isn't used as a comparison for a standard sale.

But in some areas, appraisers like Scheri contend they are only sizing up homes according to the reality of the market, though they concede its becoming increasingly harder pinpoint what a home is worth.

Home prices in many large metro areas, including Los Angeles and San Diego, hit bottom earlier this year and are recovering, data last week showed. Yet there are many neighborhoods across the country where foreclosures and other financially distressed sales are still rising.

"It used to be a very infrequent thing that you did an appraisal and the value wasn't supported," says Scheri, who is based in San Diego. "Now, it's more common than not."

So, if you're trying to sell your home in a neighborhood where foreclosures and short sales are predominant, an appraiser could determine your home is actually worth less than what some buyers may be willing to pay.

Part of the problem, critics contend, is that many real estate appraisers are now hired under new industry rules. Designed to limit conflicts of interest that can bias an appraisal, the rules bar mortgage brokers from ordering appraisals themselves, forcing them to do so through a mortgage lender.

Lenders may order appraisals through in-house staff or appraisers hired by outside firms known as appraisal-management companies. But neither may talk to the appraisers about the value of the property they're evaluating.

The result, however, can mean that low-cost appraisers are hired from outside the area and don't have the local knowledge to find homes that can be a better benchmark for regular homes.

Chris Heller, agent-owner of Keller Williams Realty in northern San Diego, recently had the sale of a home nearly botched for the second time because of a low appraisal.

The three-bedroom, two-bath house in the Poway suburb of San Diego was appraised for $55,000 less than what the buyer agreed to pay. The seller wasn't willing to drop the price down to $400,000, but knocked off $20,000 when the buyer agreed to come up with $35,000 in cash.

"The seller is taking less because of the appraisal," Heller said, noting that almost all of the comparable homes used to gauge the property's value were distressed sales.

Still, the buyer is paying a premium not to have to deal with the risks involved in buying a foreclosed home or a short sale, which can take several months to close.

So, should distressed homes sales be compared with other homes? Is one inherently worth more than the other?

A new analysis of foreclosure and non-foreclosure sales by checking AffinityLendingGroup.com found that even when most of the market is made up of bank-owned homes, non-foreclosures sell for as much as 30 percent more. Another study by Harvard's Joint Center for Housing Studies came up with a similar conclusion.

Happy New Year from the entire Affinity Team. We are here to assist you with any questions you have about about your real estate needs. Visit our website www.shortrefiusa.com We Thank you for a great year 2009. We saved hundreds of homes facing foreclosure this past year and we gained a solid communications with all the major banks. If you have any questions please contact my office at (562) 685-8159 and ask for Robert.

Thank you,
Robert Vaughan
Vice President
Affinity Lending Group

Could FHA raise 3.5% minimum downpayment to 5%???

Homebuyers getting FHA loans too easily

While most lenders have tightened standards for down payments — usually requiring at least 10% down and 20% for the best rates — the Federal Housing Administration has continued to offer loans to borrowers putting down as little as 3.5%. On Thursday the House Financial Services Committee is considering whether to boost the minimum down payment requirement to 5%.

I think the move is overdue, especially since FHA mortgage defaults are at a record high and the agency's reserve fund is at a record low. As a soon-to-be homebuyer myself, I appreciate how hard it is to save money for a down payment. And I recognize that increasing the down payment requirement from 3.5% to 5% will mean that some people may have to put off home ownership in order to save a bit longer. What I don't realize is what's so wrong with that. Getting a home for 5% down is still pretty good deal in my book.

On a $178,000 home (the median in the third quarter, according to the National Association of Realtors), the down payment under the new rules would increase $2,670, from $6,230 to $8,900. That's no small sum, but in the grand scheme of purchasing a home it's not wildly unrealistic, especially for first-time homebuyers (more than half of whom use FHA loans) who will get an $8,000 housewarming gift from the federal government courtesy of the first-time homebuyer tax credit.

One lesson of the foreclosure crisis is that buyers with little of their own cash invested in their homes are more likely to walk away from them, and critics are already making comparisons between the FHA and subprime lenders. Increasing down payment requirements is one way the FHA could prove them wrong.

If you have any questions about what the banks are doing for payment solutions to your mortgage please contact me if you need any assistance.

Robert Vaughan
Affinity Lending Group
www.shortrefiusa.com

Avoid Foreclosure: Rent your own Home!!

Fannie Mae implements deed-for-lease program that allows troubled borrowers who don't qualify for loan modifications to stay in their homes.

NEW YORK (CNNMoney.com) -- Giving troubled borrowers yet another way to avoid foreclosure, Fannie Mae said on Thursday it would allow eligible homeowners to rent their own homes.

The Deed for Lease program lets homeowners transfer the deed back to their lender and then sign a lease to remain in the home. The effort is aimed at borrowers with mortgages owned or guaranteed by Fannie Mae who do not qualify for or cannot sustain a loan modification. Borrowers must live in the home as their primary residence and must be released from any subordinate liens.

The program aims to reduce the number of foreclosed properties being abandoned because they often fall into disrepair and hurt the surrounding homes' values. Also, it keeps a roof over troubled borrowers' heads and a steady stream of income coming from the property. Tenants of homeowners may also be eligible for leases.

"This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities," said Jay Ryan, vice president of Fannie Mae, a mortgage-guarantee firm under federal government control.

Homeowners must show they can afford market rent, but that payment cannot be more than 31% of the borrower's pre-tax income. Leases may be up to 12 months, with the possibility of renewal or month-to-month extensions. If the property is sold, the new owner picks up the lease.

"It really buys them time," said Paul Habibi, real estate professor at UCLA's Anderson School of Management.

Stopping foreclosures
But in the long-run the program only delays the inevitable sale of the distressed properties.

While this initiative is not part of the Obama administration's loan modification program, the White House is leaning heavily on Fannie Mae and its sister firm, Freddie Mac, to assist in stemming the foreclosure crisis.

Freddie Mac launched a program in January that allowed borrowers to stay in their homes on a month-to-month basis after they go through foreclosure.

Despite the government and financial industry initiatives, foreclosures hit an all-time high in the third quarter. During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, according to RealtyTrac.

Last month, Treasury officials announced that 500,000 troubled borrowers have been put into trial modifications under the president's plan. The program calls for eligible homeowners to pay no more than 31% of their pre-tax income toward their mortgages.

At the same time as it tries to ramp up its loan modification program, the administration is looking for ways to help those not eligible for adjustments. In May, officials unveiled a program to incent borrowers and loan servicers to participate in short sales and deeds in lieu. Under that initiative, borrowers get up to $1,500 to assist with relocation expenses and Treasury pays servicers $1,000 when the deal is completed.

Short sales, in which the home is sold for less than the mortgage balance and loan servicers may forgive the difference, and deeds in lieu, in which borrowers voluntarily forfeit the deed and the debt may be erased, are faster and cheaper than foreclosure.

If you have any questions about new programs or solutions to stop foreclosure please contact Robert Vaughan at 562-673-1136

Affinity Lending Group is making head way as Citi Boosts Mortgage HELP!

Some 108,000 Citi customers avoid foreclosure in second quarter, up 30% from previous period. But delinquencies are up too.

NEW YORK (CNNMoney.com) -- The good news is that Citigroup helped 108,000 people avoid foreclosure during the second quarter, a nearly 30% increase from the previous period.

The bad news is that the number of its borrowers at least 90 days behind in payments surged to 4.7%, up from 3.9% in the first quarter.

Still, CitiMortgage CEO Sanjiv Das feels the bank's ramped-up foreclosure prevention efforts can help stem the number of its borrowers falling behind.

"You keep plugging away at the early stages of delinquency and that's how you slow down the number of foreclosures," Das said in an interview.

Citigroup (C, Fortune 500) reported Tuesday that for every completed foreclosure, 12 at-risk borrowers get to stay in their homes. Six months ago, the ratio was 1 to 6.

The bank's loss mitigation initiatives include repayment plans, payment extensions, forbearance, and loan modifications.

When borrowers can't afford to stay in their homes, Citi also helps them avoid foreclosure through short sales -- in which a homeowner sells the property for less than what's owed -- and deeds-in-lieu-of-foreclosure, in which a homeowner signs over the house to the bank. The 1 to 12 ratio that it reported Tuesday does not include short sales or deeds-in-lieu.

Total modifications decreased by 5% during the quarter as the bank ramped up its implementation of the Obama administration's loan modification program. The president's program, which gives banks incentive payments to modify loans, requires that borrowers be put into a three-month trial period before the modification is finalized. Citi also has its own modification programs.

Tuesday's report, the 7th issued by Citi, is the first to include the Obama modification program, which began in April.

The bank, one-third of which is owned by U.S. taxpayers, said the redefault rates for modified loans continued to decline. Only 6.54% of loans adjusted in the first quarter were delinquent after 30 days, compared to 7.67% of loans modified in the fourth quarter and 10.86% of those adjusted in the third quarter.

More troubling, however, is the fact that foreclosures and delinquencies continue to rise. The number of foreclosures in process for Citi-serviced loans increased about 10% from the first quarter, though foreclosures initiated dropped by 14%. Completed foreclosures rose by 5%.

The rising unemployment rate is keeping foreclosure and delinquency rates on the upswing, troubling housing counselors and policymakers.

Like other banks, Citi is under pressure to increase aid to its troubled borrowers

To some extent, the bank is under even more scrutiny since it has received more support from the federal government than other financial institutions. Last month, Citi converted $25 billion of preferred shares the government acquired into common shares. The government funneled a total of $45 billion into the bank.

As for putting people into trial modifications under the Obama plan, Citi came in the middle of the pack. It placed 15% of its eligible delinquent loans into trial modifications, according to a Treasury Department report issued earlier this month.

Citi trails competitors such as JPMorgan Chase (JPM, Fortune 500) and GMAC Mortgage, each of which placed 20% of their troubled clients in trial modifications. But it led rivals such as Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), which assisted 6% and 4% of borrowers, respectively.

Das said the bank has picked up the pace of putting borrowers into the Obama plan. The number now exceeds 20%.

Citi uses a wide definition of helping borrowers avoid foreclosure. The bulk of its efforts involve modifications and extensions, which tack on late payments to the end of the mortgage.

Going forward, modifications will make up the bulk of the bank's foreclosure prevention efforts, Das said. Extensions will be offered to those who don't qualify for a modification.


Thank you for checking out my Blog

Robert Vaughan
Vice President
(562) 673-1136

Mortgage Modifications Moving at Snail’s Pace!! Shortpay's Are Up!!

Bank of America, Wells Fargo get low marks on plan to help homeowners

WASHINGTON - The government's $50 billion program to ease the mortgage crisis is helping only a tiny fraction of struggling homeowners, and a list released Tuesday showed which lenders are laggards.

As of July, only 9 percent of eligible borrowers had seen their mortgage payments reduced with modified loans. And the first monthly progress report showed that 10 lenders had not changed a single mortgage.

The report indicated that lenders such as Bank of America Corp. and Wells Fargo and Co. have lagged behind government expectations. Both banks received billions in federal bailout money.

BofA modified just 4 percent of eligible loans, and Wells Fargo 6 percent. Wachovia Corp., which was taken over by Wells Fargo in December, modified only 2 percent.

"We think they could have ramped up better, faster, more consistently and done a better job serving borrowers and bringing stabilization to the broader mortgage markets and economy," said Michael Barr, the Treasury Department's assistant secretary for financial institutions. "We expect them to do more."

Wells Fargo says it plans to speed up its efforts, signing up most borrowers for the Obama plan with one phone call and sending customers a trial offer within two days.

If your loan is with Wells Fargo please contact me as soon as possible to see what Shortpay Refinnance Solution will do to your mortgage.

The report is "only part of the story" because the numbers do not reflect an additional 220,000 loans that Wells modified outside the Obama plan this year, a company executive said.

BofA said it would improve its "processes for reaching those in need" and continue working with the Treasury Department to help homeowners who fall outside the program's eligibility requirements.

We have good results with BofA please contact me at the information listed below

Increase in foreclosures
Meanwhile, foreclosures continue to rise. About 1.5 million households received at least one foreclosure-related notice in the first half of this year, according to RealtyTrac Inc.

"There are certainly more foreclosures going on in the country then there are modifications — by a long shot," said Bruce Dorpalen, director of housing counseling at Acorn Housing, a nonprofit housing group. He said his group has intervened to prevent about 500 foreclosure sales in cases where borrowers wanted to be considered for the Obama plan.

A housing counselor told 36-year-old Veronica Cassella she should qualify for a loan modification, but Green Tree Servicing LLC claims she does not. Cassella, who works at a hair and nails salon in Visalia, Calif., has seen her income shrink with the economy from $35,000 to $25,000.

Her husband still works, but their income is not enough to cover the $213,000 mortgage on their home, which has lost roughly half its value.

"My life has been a standstill with these people for at least half the year," Cassella said. Green Tree, which modified 4 percent of eligible loans, did not return calls for comment.

There are 38 companies participating in the government program, and some noticeable holdouts that control 15 percent of outstanding mortgages.

HomEq Servicing, owned by Barclays PLC, and Litton Loan Servicing, owned by Goldman Sachs, have yet to join. Spokesmen for both companies said they plan to do so soon.

Government partly to blame
So far, banks have extended only 400,000 offers among 2.7 million eligible borrowers who are more than two months behind on their payments. More than 235,000 of those borrowers have enrolled in three-month trials.

But the government is partly to blame for the languid start. The administration rolled out the guidelines gradually this year. Much of the program was not finished until mid-May, and the guidelines were updated again in early July.

The White House maintains it is on track to meet its goal of helping up to 4 million homeowners by 2012. Last week, the administration extracted a verbal promise from the mortgage industry to reach 500,000 borrowers by Nov. 1.

American Home Mortgage Servicing and PNC Financial Services Group Inc. were among the companies that had a zero next to their names on Tuesday's report.

In a statement, American Home Mortgage Servicing explained that it did not join the program until July 22 but had modified nearly 37,000 loans in the first six months of 2009.

David M. Friedman, president and CEO, said executives expect to help 60,000 customers, or about 40 percent of the company's eligible delinquent borrowers.

PNC, which owns National City Bank, began the process in early July.

If you know anyone that is upside down on the mortgage but they are current with there monthly payments call me to see if your lender is participating.

Robert Vaughan
Vice President
Affinity Lending Group
(562)673-1136