Blackstocks.com: In the Know

National Civil Rights Groups Call for immediate Moratorium on Foreclosure

According to the Center for Responsible Lending, National civil rights groups, including the Leadership Conference on Civil Rights, the NAACP, the National Fair Housing Alliance, the National Council of La Raza, and the Center for Responsible Lending called today for mortgage lenders, loan servicers and loan investors to institute an immediate six-month moratorium on subprime home foreclosures resulting from reckless and unaffordable loans in the subprime market.

The groups want to stop home losses for families that received unaffordable subprime mortgages with "payment shock."  The predominant loan type marketed by subprime lenders in recent years are hybrid subprime mortgages, which begin with a temporary fixed interest rate that changes to a much more costly adjustable-rate mortgage (ARM). These "exploding" ARMs, as well as other types of non-traditional mortgages, have been a driving force in massive foreclosures occurring today.

As foreclosures continue to rise on subprime mortgages, a disproportionate share of the harm falls on African-American and Latino homeowners and the neighborhoods where they live.  Forty percent of Latino families and over half of African Americans who receive home loans get higher-cost mortgages, predominately subprime loans.  To prevent further home losses in vulnerable communities, industry must work actively with homeowners to help them keep their homes by transitioning these borrowers into affordable loan products. 

Mortgage Cost Expenses for Black Americans

MORTAGE CRISIS
According to Reuters, for years, political leaders touted rising homeownership rates as a sign the "American Dream" was being fulfilled but more than a million looming foreclosures have called the dream into question.

"We no longer have a problem with loan availability ... but a lot of our homeowners are one crisis away from losing their home," said Hope Wilson, a housing counselor at Working in Neighborhoods, a nonprofit trying to boost homeownership in inner-city Cincinnati.

There is no shortage these days of tragic stories of homeowners caught in America's subprime mortgage meltdown, as risky borrowing, reckless lending and a slump in the housing market drives millions into foreclosure.

But while statistics show poor and minority homeowners are bearing the brunt of the crisis, the belief that every American can or should own their own home remains so pervasive few politicians admit that it just might not be true.

"The more people who own their home, the better off America is," President George W. Bush said in a 2004 speech. "See, we want more people owning something because when somebody owns something, they have a vital stake in the future of the country."

After stagnating at about 65 percent for much of the 1960s, '70s and '80s, the U.S. homeownership rate has risen slowly in the past 15 years to nearly 69 percent -- a point of pride for Democrats and Republicans alike.

But with an estimated 1.5 million homeowners facing foreclosure this year, Congress is now looking at tighter lending standards to protect unwary Americans from taking on loans they cannot afford.

NOT READY

Despite the crisis, Massachusetts Democratic Rep. Barney Frank, who heads the House Financial Services Committee that likely will set new lending rules, is one of the few politicians willing to admit that homeownership is not for everyone.

"Not everyone is ready ever. A lot are not economically ready now," Frank said in an interview with Reuters.

Average rates on 30-year, fixed-rate mortgages edged up slightly

According to the AP, average rates on 30-year, fixed-rate mortgages edged up slightly to 6.16% this week but remained near the lowest level for the year, mortgage giant Freddie Mac said Thursday.

Join Blackstocks/ShareBuilder

Thirty-year mortgages averaged 6.14%, the low for 2007, the two previous weeks.

That's the lowest for 30-year mortgages since they averaged 6.13% the week of Dec. 21.

Analysts said financial markets received conflicting news over the past week with worse-than-expected readings on inflation, which could cause interest rates to rise, followed by Wednesday's decision by the Federal Reserve to signal that rate cuts were possible later this year if the economy remains sluggish.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, edged up slightly this week as well, averaging 5.90%, from 5.88%.

Five-year adjustable rate mortgages averaged 5.91%, up from 5.90% last week.

One-year adjustable mortgages dipped to 5.40%, down from 5.42% last week.

The mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages both carried a nationwide average fee of 0.4 point. The five-year mortgage had an average fee of 0.6 point while the one-year mortgage carried a 0.7 point average fee.

A year ago, average rates on 30-year mortgages stood at 6.32% while 15-year mortgages were at 5.97%, five-year adjustable rate mortgages averaged 5.96% and one-year ARMs were at 5.41%.

Much being said….and much read about sub-prime lending

There is much being said….and much read about sub-prime lending. Back in December before the press and the population in general picked the story up, we posted information entitled a”Study Predicts Foreclosure for 1 in 5 Subprime Loans and that Minorities are Hit Hardestt.”

The study clearly showed about one in five subprime mortgages made in the last two years are likely to go into foreclosure, according to the report, ending the dream of homeownership for millions of Americans.

Join Blackstocks/ShareBuilder

Instead of focusing on the obvious, that is things have gone way off course, we need to focus on why and what can be done to turn things around.

Well as the study suggest the reason why things went off course is not only because the mortgage industry pushed people into bad deals, but a lot of the blame belongs square on the shoulders of those toting buy this home, the American dream, without dealing with the consequences of debt.

The bad deal was here is a home. You can buy it for very little down. In fact we are going to set you up with a very low interest rate deal. As the housing market keeps ticking along, you can get yourself together, and refinance. When you do you’ll have equity in the deal and be able to lower the interest rate and your monthly payment.

Not knowing that they were given an unsuspecting time bomb, a lot of people – thousands in fact, jumped at this bad deal.

The solution, would have clearly been, instead of focusing on getting into bad deals, the focus should have been on getting ones credit together, so interest payments would not be nearly twice the rate of someone with decent credit.

So all of the organizations that are now crying foul, and a year or two ago was pumping buy this home, the American dream, should have been focusing on credit, and educating consumers on to use credit to their benefit.

Join Blackstocks/ShareBuilder

In fact, I believe that the major challenge that most minorities especially African Americans face is economic; and the most demanding challenge in dealing with economics is the access to and proper use of credit.

So the focus now and in the immedaite future should be on just that - access to and the proper use of credit personally, and in the business world.

See our section on Credit

 

Technorati tags: Alton Perkins, www.blackstocks.com, mortgage strategy 2007, interest rate, income, refinance, house, www.anothervoice.com, interest-only and pay option ARMs, mortgage broker, adjustable rate, loan, debt, credit, subprime, lenders, Subprime

Subprime mortgage sector rattles markets

According to Reuters, U.S. financial markets were rattled by news on Tuesday that late payments on U.S. mortgages had reached their highest level in 3-1/2 years, while regulators began a probe of subprime mortgage lending and called for legislation.

U.S. lenders specializing in making loans to high-risk borrowers have been struggling with rising defaults and foreclosures on home mortgages as home prices began to fall in the past year after interest rates rose in 2005.

U.S. stocks fell sharply and bond prices rose on Tuesday after the Mortgage Bankers Association reported delinquencies rose in 49 states and among all loan types in the fourth quarter of 2006, with the steepest increase in defaults seen in subprime adjustable-rate loans.

The industry association also revised its forecast for when the U.S. housing sector will recover until late 2007 from mid-year.

The major U.S. stock market indexes, the Dow Jones industry average, Nasdaq Composite Index, and Standard and Poor's 500 Index, each fell about 2.0 percent as investors sold riskier assets.

Think location when It comes to the Market

Housing market up or down?

According to bankrate.com, one of the most important things about the real estate market is that it can look entirely different, depending on where you're standing. National trends are meaningful, but what's happening in your state affects you more directly. What's going on in your county is even more important. And in your town far more important than the county. And so on, right down to your street and the houses adjacent to you.

The more locally you regard it, the more you will know about real estate and its impact on your life. That's what "location, location, location" is all about.

We all hear the real estate market is down, depressed, lethargic, bursting, deflating ... whatever. Last fall, homeowners in New York, Rhode Island, New Hampshire and Massachusetts saw prices fall from the previous quarter. But from September 2005 to September 2006, homes in Idaho, Utah, Oregon and Arizona enjoyed double-digit appreciation of close to or above 17 percent.

Sales

What Bankers Don't Tell You! " What Bankers Don't Tell You!

Let's look at the deal. We have found a fabulous deal on a single family home for $130,000. With 7.69% down a lender will set us up with a 30 year mortgage with an interest rate of 10%.  

In obtaining our dream many people do not stop and ask, "Hey, what is this really costing me?"

If we're lucky enough to pay off the loan, the home will cost a lot more than $130,000. Over the life of the transaction, we would have paid more than 3 times the original price of the home. Here are the numbers: 

We will pay $120,000 in principal payments and $259,112.40 in interest. This totals $379,112.40; almost 300% more than the home's original price. Kind of like the credit card example that we mentioned earlier.

In this example, remember we are dealing with an asset (real estate) which often increases in value. Also, there are tax benefits attached to a home purchase that we can take advantage of.

What about a coat, car or furniture that we buy with credit? After you purchase these products normally their value immediately heads south. There are very few tax breaks associated with a car, TV or boat, unless you donate these items to Good Will or another charity. They say charity starts at home - I don't think they meant the Banker's home either.  

 

Technorati tags: Alton Perkins, www.blackstocks.com, mortgage strategy 2007, interest rate, income, refinance, house, www.anothervoice.com, interest-only and pay option ARMs, mortgage broker, adjustable rate, loan, debt, credit, subprime, lenders

How to Avoid 8 Big Mortgage Mistakes

Applying for a mortgage can be a daunting, miles of paper work, debt three times your annual income or more, fees, all kinds of terms, and much more.

According MSN Money.com it's easy to make some mistakes. Here are eight common ones that lenders and mortgage brokers see, and what you can do to prevent them.

1. Not fixing your credit

   Mortgage brokers say they're confounded at the number of buyers who apply for a mortgage with their fingers crossed, hoping their credit will allow them to qualify for a loan.

   Before you even think about applying for a mortgage, obtain copies of your credit report and your FICO credit score. Your FICO score is the three-digit number that's used in 75% of mortgage-lending decisions. You can order your FICO score on the Web for a fee of $14.95, which includes a copy of your credit report.

   Doing this at least six months in advance should give you plenty of time to challenge any errors on your report and ensure that they're removed by the time you're ready to apply for a loan. You can also see the legitimate factors that are hurting your score and do something about them, such as paying off an overdue bill or paying down credit card debt.

Shifting Housing Market Snubs Bad Credit

According to a recent article in the Associated Press, homeowners with troubled credit histories are finding it harder to get mortgages or refinance homes because softening in the housing market is making lenders less likely to handle riskier loans.

Several lenders of subprime mortgages - used primarily for home equity loans and for people with spotty credit - have shown signs of trouble after the housing bubble popped and more homeowners began defaulting high-interest mortgages.

On Wednesday, shares of Kansas City, Mo.-based Novastar Financial Inc. plunged more than 42 percent to $10.10 per share after the subprime lender posted fourth quarter losses of $14.4 million. Company officials set aside $45 million in anticipation of defaulting mortgages and said they were unsure Novastar would turn a profit in the next five years.

The shifting market is prompting investors to demand higher standards for loan approvals. Loans for 100 percent of a property's value required a minimum credit score of 580 last year, but now require at least a 600 score, said David Zionts, owner of Connecticut Mortgage Lenders LLC.

REITS 101 Part 2

See REITS part 1 here.

In the last few years, REITs have seen explosive growth, now owning 8.3% of the $1.3 trillion dollar commercial real estate market. Today, there are over 300 publicly traded REITs operating in the United States whose average daily dollar volume has more than quadrupled during the last three years, reaching over $260 million dollars.

REITs fall into three broad categories:

Equity REITs: (96.1%)
Equity REITS invest in and own properties (thus responsible for the equity or value of their real estate assets). Their revenues come principally from their properties' rents.

Mortgage REITs: (1.6%)
Mortgage REITs deal in investment and ownership of property mortgages. These REITs loan money for mortgages to owners of real estate, or invest in (purchase) existing mortgages or mortgage backed securities. Their revenues are generated primarily by the interest that they earn on the mortgage loans.

Hybrid REITs: (2.3%)
Hybrid REITs combine the investment strategies of Equity REITs and Mortgage REITs by investing in both properties and mortgages.

Individual REITs are able to distinguish themselves by specialization. REITs may focus their investments geographically (by region, state, or metropolitan area), or in property types (such as retail properties, industrial facilities, office buildings, apartments or healthcare facilities). Certain REITs choose a broader focus, investing in a variety of types of property and mortgage assets across a wider spectrum of locations.