Foreclosure Filings

Reverse mortgages are great income tax and estate planning tools. They also solve cash flow issues at times when cash may be hard to come by. Depending on the income and credit rating, cash flow needs, and other considerations of the borrower, a reverse mortgage is not only competitive to other alternatives, but many times beats them hands down. A favorite saying goes like this: “Everyone over 50 years old should know about reverse mortgages but not everyone will need one.” Potential borrowers should talk to their advisors, friends, relatives, or others they trust to help them determine if a reverse mortgage is the best answer in their circumstances. This is one reason why California state law encourages borrowers to do this and requires borrowers to receive counseling from a HUD-approved independent nonprofit organization before any reverse mortgage cost can be incurred.

Pitfalls of the Reverse Mortgage Loan

Reverse Mortgages are an option for homeowners age 62 or older who are seeking cash to manage their living expenses or just live a little bit better in retirement. To avoid some of the pitfalls; ask questions, do the program homework, and don’;t get swayed by a salesperson. The basics of a reverse mortgage is that it allows an eligible homeowner to borrow from their home’;s equity in a lump sum, line of credit, or regular payments, while not having to pay a monthly mortgage. The homeowner retains title and property taxes while living there. Once the homeowner dies or vacates the home for 12 months, the loan and fees are due. The home is usually sold, and the proceeds from the sale are used to pay off the loan and interest and any fees. Most homeowners own the home outright or have a low mortgage balance. Many who take a reverse mortgage or monthly payments are on a fixed income. Nationally, the reverse mortgage industry is growing. Married seniors should both be listed on the deed, so the surviving spouse can continue with the reverse mortgage. A reverse mortgage should be a last resort. Partly because of the high fees associated with the loans. A reverse mortgage means the home will probably be sold at the end of the loan mainly because the homeowner, or an heir if a death is involved, will be looking for each to pay off the mortgage. Seniors who want to leave their home to their children may not want to enter in to a reverse mortgage. It is not a good idea to take cash from a reverse mortgage and use it to fund an investment. Fees and costs associated with a reverse mortgage can be up to 4% to 8% of the total loan amount. Always ask enough questions to satisfy your concerns. There has been an uptick in reverse mortgage cases as part of mortgage fraud inquiries. Success is not an accident.

Further Mortgage Troubles

Half of the 1.5 million home foreclosures started in 2007 were on subprime loans given to borrowers with low credit and low income. Some relief efforts are under way, but foreclosures are likely to rise for quite awhile longer. Debt relief for those who got in over their head may not sit well with those who took out mortgages that they could afford. Foreclosures are expensive for the lender and homeowner. This is an opportunity for the knowledgeable investor to help out the homeowner and the lender. The homeowner walks away with some move out cash, possible tax breaks and their self esteem. The lender avoids another REO - Real estate owned property.

Opportunity Knocking at the Door

The number of homeowners who are upside and down in their loans are growing. If you bought your home in 2005, 2006, 2007 you are under water, unless there was a large down payment. If you bought about five years ago, you may still have equity in your home provided you didn’;t take out the equity. Falling home prices are increasing the affordability for some home buyers. Many lenders will take less then what’;s owed on a property. Remember lenders are in the lending business not in the business of real estate. Opportunity Is Knocking!

Foreclosure Crisis - Mortgage Company Coalition

Last October, the Bush Administration jump-started a plan to aid troubled borrower in the housing market. “Hope-Now;” a mortgage industry coalition has been playing catch up at a pace that may never match the foreclosure crisis. Loan services have intensified efforts to modify troubled loans, but foreclosures are still piling up and homeowners are lining up for help. Housing counselors say getting someone on the line that can truly help is tough, the lack of man power for “Hope Now” is one possible reason; It’;s been designed in a way that only a small percentage of people qualify for help. Given these snags, homeowners have found little hope. More than 223,000 homes across the nation received foreclosure notices in February. If February’;s pace continues through 2008; around 2.7 million U.S. homes will face foreclosure, which is more than double from 2007.

Good News! If you are investing in a place to live, you can buy smarter and cheaper. If you are buying a foreclosure property in the default period there is a good opportunity to discount junior liens and buy below market value. Lenders aren’;t cutting everyone off. They’;re reverting to sanity after years of making bad loans; there is a huge supply of foreclosures that have gone back to the lenders (REOs). Lenders, sellers and builders are eager to unload unoccupied houses, giving buyers lower prices. Location is always important, focus on good schools districts, crime statistics could increase or decrease the value of your property. Look for a property that is lower than its 2004 price. Economists predict an overall slide to 20% or more before the housing market bottoms.