Questions And Answers About Foreclosures
What happens when I miss my mortgage payments?
Foreclosure may occur. This means your lender can legally repossess (take over) your home. When this happens, you must move out of your house. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment could be pursued, meaning you would not only lose your home, you also would owe HUD money.
Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit in the future. So you should avoid foreclosure if at all possible.
What should I do?
Do not ignore letters from your lender. If you are having problems making your payments, call or write to your lender’s loss mitigation department immediately. Explain your situation. Be prepared to provide financial information, such as you-r monthly income and expenses. Without this information, they may not be able to help.
Stay in your home for now. You may not qualify for assistance if you abandon your property.
Contact a HUD-approved foreclosure housing counseling agency. Call toll free 1-800-569-4287 or TDD (800) 877-8339 for the housing counseling agency nearest you. These agencies are valuable resources. They have information on services and programs offered by government agencies and private and community organizations that might be able to help you. The housing counseling agency may also offer credit counseling. These services are usually free of charge.
Who is my lender? How do I make contact?
Look at your monthly mortgage coupons or billing statements for the lender’s name and contact information.
I don’t remember what type of mortgage I have. How can I find this information?
Look on the original mortgage documents or call your mortgage lender.
Do I need to keep living in my house to qualify for assistance?
Usually yes, but call your lender to discuss your specific circumstances and get advice on options that may be available.
My employer has already announced layoffs in the coming month. What can I do now?
You have started learning about available options here. Now, figure out if a layoff will make it hard for your family to make your mortgage payments. If so, consider other resources you have to pay your mortgage. Review your spending habits and see where you can reduce spending. If you have a lot of other debt, consider contacting a nonprofit, consumer credit counseling agency. Take advantage of any help your employer offers. If you still believe you will have trouble making your mortgage payments, contact your lender right away.
What are the key points to remember?
Don’t lose your home and damage your credit history
Call or write your mortgage lender immediately and be honest about your financial situation
Stay in your home to make sure you qualify for assistance
Arrange an appointment with a HUD-approved housing counselor to explore your options toll free at (800) 569-4287 or TDD (800) 877-8339
Cooperate with the counselor or lender trying to help you
Explore every alternative to keep your home
Beware of scams
Never sign anything you don’t understand. And remember that signing over the deed to someone else does not necessarily relieve you of your loan obligation
Act now. Delaying can’t help. If you do nothing, you will lose your home and your good credit rating!
What precautions can I take?
These precautions can help you avoid being “taken” by a scam artist:
Don’t sign any papers you don’t fully understand.
Make sure you get all “promises” in writing.
Beware of any sales contract that assumes the loan where you are not formally released from liability (responsibility) for your mortgage debt.
Check with a lawyer or your mortgage company before entering into any deal involving your home.
If you’re selling the house yourself to avoid foreclosure, check to see if there are any complaints against the prospective buyer. You can contact your state’s Attorney General, the State Real Estate Commission, or the local District Attorney’s Consumer Fraud Unit for this type of information.
Will I be responsible for any out-of-pocket expenses if I am approved for a workout option?
You may have to pay expenses such as recording fees for a loan modification. Because every situation is different, contact your lender for more information. But, if a lender has no contact with you and has to start foreclosure, you may have to pay very high legal fees. To avoid this, call your lender as soon as you realize you might have trouble.
Mortgage lenders
The mortgage lenders listed below have voluntarily joined the federal government to assist homeowners who are concerned about the future or have suffered due to recent changes in the economy. If your lender is listed here, you can help protect your home by contacting them immediately!
Bank of America
Chase Home Finance
Chase Home Finance
CitiMortgage
Countrywide
HSBC Mortgage Corporation
Irwin Mortgage Corporation
James B. Nutter & Company
Midland Mortgage
Mortgage Service
National City Mortgage
Nationwide Advantage Mortgage
Principal Residential Mortgage, Inc.
Sun Trust Mortgage
Wells Fargo Mortgage
Wendover Financial Services Corporation
Washington Mutual Home Loans, Inc.
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PMI – Private Mortgage Insurance
Many a first-time homebuyer has grumbled about paying private mortgage insurance. This article discusses the particulars of private mortgage insurance, also known as “PMI.”
Private Mortgage Insurance
Unless they owners are insane, every business in the United States carries some form of insurance to protect against losses. The various lending institutions that issue home loans, equity lines and refinances to borrowers are no different. The insurance they carry is private mortgage insurance.
Private mortgage insurance protects a lending institution from losses if you default on your loan and a home goes into foreclosure. Essentially, the lending institution is going to be covered for any shortages between the cost of liquidating the home and the amount of the loan. This is of particular importance to a lender when the housing market pulls back from high valuations. In such a pull back, it is not uncommon to see the total mortgage balance exceed the value of the home. Obviously, this makes lenders uncomfortable.
PMI – Premiums
Most homeowners can wrap their minds around the need for private mortgage insurance. The grumbling starts, however, when they find out who has to pay for the insurance. Yep, the homeowner is on the hook. As the homeowner, you are paying for insurance that will protect the lender if you default. While this may not seem fair, keep in mind the lender is giving you a rather sizable chunk of money. If you are still grumbling, there is a way to avoid paying mortgage insurance.
20 Percent Down
If you take out a home loan, the 20 percent figure will come front and center in your mind. Why? 20 percent is a magic figure in the world of home loans and mortgages. If you make a down payment of 20 percent, you are not required to obtain or pay for private mortgage insurance. With PMI premiums running $1,000 or more a year, it makes sense to pay 20 percent as a down payment if at all possible.
What if you can’t scrape together 20 percent of the home value for the down payment? Well, you’re stuck paying PMI, but not forever. Once your equity in the home reaches 20 percent of the valuation, you can cancel the PMI. Keep a close on your equity as lending institutions are under no duty to tell you when the magic 20 percent figure is reached. Oddly, they almost never seem to remember!
PMI
Private mortgage insurance is expensive, but you can avoid it with a sizeable deposit. If you can’t come up with that chunk of change, try to keep in mind the beautiful home and investment the loan let you acquire.
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Paying Off Your Mortgage: How To Run The Numbers
If you have Microsoft Excel running on your computer at home or work, you can use Excel’s NPER function to calculate how quickly you can pay off a loan such as a mortgage.
The NPER function calculates the term, or number of regular payments, on a loan given its interest rate, payment amount, present loan balance, balloon payment (if any), and, optionally, the type-of-annuity switch.
The type-of-annuity switch is a little complicated, but here’s how it works. If you set the type-of-annuity switch to 1, Excel assumes payments occur at the beginning of the period, following the annuity due convention. If you set the annuity switch to 0 or you omit the argument, Excel assumes payments occur at the end of the period following the ordinary annuity convention.
But let me show you how the function works in theory and in practice. All of this will become quite clear, I’m sure.
The function uses the following syntax:
=NPER(rate,pmt,pv,fv,type)
For example, to calculate the number of $1,000 monthly payments required to pay off a 9% mortgage that still has a $100,000 mortgage balance, you enter the following formula into an Excel worksheet cell:
=NPER(.09/12,-1000,100000,0,0)
The function returns the value 185.53, representing roughly 185 payments and then another roughly half payment. Notice that to convert the 9% annual interest to a period interest, the formula divides the annual interest rate by 12. Notice, too, that the payment amount, as a cash outflow, shows as a negative value while the loan balance, as an implicit cash inflow, shows as a positive value.
One final note: The NPER function rarely returns an integer, or whole-number result. As in the preceding example, it commonly returns a fractional value, indicating that after the last regular payment, an additional fractional payment will also need to be made.
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Online mortgage quote: Why You May Not Be Getting The Best Rate
While shopping online for online mortgage quote can be great in terms of saving time and convenience, it won’t necessarily get you the best deals available. What you save depends to a great extent on the way you negotiate with lenders for the online mortgage quote. Like with any negotiation, you get the upper hand when you are knowledgeable about how the industry works.
One of the main precautions to take on when looking for online mortgage quotes is to ensure that the brokers you deal with represent several different lending institutes and therefore can offer you a good variety of options. Beware of brokers who are merely lender agents in disguise. If a broker represents only one bank or lender, there is a great likelihood that you will not be offered the online mortgage quote that is most suitable for your needs.
In devising consumer protection laws for online mortgage quotes and increasing convenience, states have ultimately ended up having an adverse impact on competition, apart from making online mortgage costs higher than necessary.
Explaining The Costs
Most states do not require online mortgage businesses to have a brick and mortar presence. However about one third of all states make this a mandatory requirement. Due to this, the expenses increase. Laws of this nature have prevented mortgage brokers from being exclusively online and offering much lower rates.
It is mostly the existing brick and mortar mortgage brokers who are the blame for the laws in a bid to minimize competition. The laws have also led to a multi-state licensing system due to which national mortgage firms with a presence in all states get an unfair online advantage over the competition. These companies don’t have to put in money into costly infrastructure apart from enjoying lower transaction costs and can therefore offer lower rates to consumers.
The Bottom Line
The reality is that the online companies who face compulsion to bear the costs of renting offices, employing a workforce and infrastructure and equipment which they would otherwise not require, choose to avoid doing business in that particular state altogether.
The end result is that it is the consumer who is eventually at a disadvantage. Their options are limited further for sources of capital and the competition among lenders is also less intense.
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