4 November 2009 ?Bonds opened today 3bps up and have ceded some ground this afternoon. They ended the day down 6bps. After the highly anticipated Federal Open Market Committee meeting, the Fed announced it will keep the Fed Funds Rate low for an extended period of time. Many economists predict the rates will stay close to zero well into 2010, but they also fear that this monetary policy may bring about inflation. With rates still low, mortgage applications have risen 8.2%, the refinance index 14.5%, and the purchase index 1.8% just in the past few weeks. The number of refinances has certainly been fueled by the Fed maintaining low interest rates. As was expected, the stock market was up big today, fueled by commodities (most notably gold), a weaker dollar, and companies who reported 3Q profits. With the Fed?s announcement, expect the market to continue to gain this week and trend upwards, as it traditionally does in the month of November. Mortgage Rates are at 4.875% (4.875% apr) on the 30yr and 4.25% (4.309% apr) on the 15yr.

7 July 2009 ? Bonds opened down today by 16 bps, however they have turned the corner and are now up 12bps. There is concern that inflation may be looming down the road as Vice President Joe Biden stated that more stimulus packages may be needed to curtail the unemployment rate. The current administration miscalculated the severity of the job losses, which have brought unemployment close to 10%. The Dow is down 106 right now, which may help the bond market and mortgage rates. The 30-year fixed rate remains around 5% to 5.375% as reported yesterday in the update. We have not been able to move below the 5% range at this time. The tip for today, did you know that you can refinance to a lower rate even if your loan to value is 105%? Consult your mortgage professional today to take advantage of the low rates and the DU Refi Plus program for Homeowner?s who have seen a decrease in property value.

So, you are facing foreclosure, and are worried and scared and don?t know what to do? Well, you are not alone. Millions of people nationwide have been foreclosed on or will be soon. There?s been all kinds of blame and finger-pointing (see my Who?s to Blame post for further info on that), but that’s not what this article is about. Something happened, and you got behind on your mortgage (and surely a lot of other things), and now you?re in a pickle.

What is foreclosure?

You Can Push Back on Foreclosures...Despite What You're Told

Foreclosure, or FC for short, is when a bank or lender takes steps to take your house away because you have not made the payments. You took out a loan, and for whatever reason fell behind on your payments, and the bank is trying to cut their losses by taking the house and selling it. It?s perfectly legal, and although it may appear that they are your nemesis, they aren?t necessarily the bad guys. I?m not taking the banks? side or defending them, I?m just telling you that they are in business to make money, like any business. Some time ago, you signed a promissory note saying you would send them a check every month, and for whatever reason, you couldn?t hold up your end of the bargain. I?m not here to judge; it happens to a lot of people, but if you don?t make your payments, they get to take your house. Maybe it?s not really your fault, and there were circumstances out of your control, but that?s just the way it is.

What is the Foreclosure Process?

I want to start off by saying don?t panic too soon. Some people think that if they are 15 or 30 days late on a payment, the hammer is going to get dropped on them, but this just isn?t so. Banks don?t want to foreclose on a house. Almost all of the time, they are going to lose money on a foreclosure. They would much rather get your monthly check and go about their business. Banks don?t want to take your house; they have to take it because they aren?t getting the money that was promised to them.

Typically, the foreclosure process doesn?t get started until the homeowner is 120 or 150 days past due. So, if you become 30 days past due, but keep sending in one payment every month, that is called a ?rolling 30?, and you honestly aren?t in any risk of foreclosure at that point, despite what the schmuck from the collections department is telling you. I have heard of times when a homeowner is 60 days down, and they offer up one month payment, but the lender refuses it. If you are 30 days down, they may take only one payment, but once you become 60 days delinquent, the answer is ?No, you cannot give us one payment, you now owe us two, and it?s two or nothing.? This one has always mystified me; it just doesn?t make sense. So, the moral is, if you can prevent becoming 60 days late by hook or crook, do it. I don?t want to throw out bank names for fear of getting sued for libel or slander, but some of the big names are guilty of this.

Try to See Trouble Coming Before It’s Too Late

If you had some unexpected expenses, and it looks like you might not be able to make a payment, but you are still working, and you aren?t late yet, and your credit is still OK, you can possibly refinance. There are programs out there for people who have current loans with Fannie Mae, Freddie Mac, or FHA that allow people to refinance with little or no equity. You do need to have a job, though. If it?s the end of May, and you don?t think you are going to be able to make you June payment, call to do a refinance NOW. Even if you can only lower your rate and payment just a little bit, you can likely skip one or two mortgage payments, maybe get an escrow refund, and have a new, lower payment. It may be just enough of a shot in the arm to keep out of trouble.

How Can I Fight Foreclosure?

So, 120 days passes. You get a knock on the door from the sheriff, or maybe a bonded messenger because there are too many being served for the sheriff?s department to handle. This can be a scary moment and very intimidating. ?Are you Joe Homeowner?? he asks. ?Umm, yes I am,? you reply. He hands you the envelope with court papers and your heart sinks. Maybe you want to cry. This would be one of the times that it is OK for a grown man to cry. After you are done sulking, inevitably you will say, ?What now?? That?s what I want to help with.

Sometimes the papers will have a court date already assigned. Most of the time, it will give you 30 days to file a response with the court. And then if a response hasn?t been filed (it will cost over $100 to file, by the way), the plaintiff (bank and their attorneys) will file for a default judgment of foreclosure because of a failure to respond, which you will get a copy of, along with the date and time of the court hearing. GO TO YOUR COURT HEARING. On your first time through, the judge will almost always grant another 28 or 30 days continuance to respond, but usually only once.

So what kind of ?responses? can you file? Well, I want to start off by saying that I am not an attorney, but I know what I know because I talk to a lot of people, and kind of know the ropes. Two of the most common, and most effective, are alleging RESPA violations, and requesting that the servicer, ?produce the note,? which I will get into shortly. There are many things that can count as RESPA (Real Estate Settlement Procedure Act) violations, many of them small technicalities, but enough to help your case. I can tell you from experience that most loan officers aren?t terribly detail orientated. This means there can be small mistakes on your paperwork you can use to your advantage. The documents you?d likely want to focus on are the Truth-in-Lending disclosure, the Good Faith Estimate, the Servicing Disclosure, and the HUD-1 Settlement Statement. If you are going to try this route, it may be wise to get an attorney, as they will know what mistakes are ?fatal blows? and which ones aren?t. These mistakes are more common than you might expect.

If you do nothing, a default judgment of foreclosure will be entered. With the judgment comes a 90 day ?redemption period?, meaning that you get 3 months to get caught up, should you win the lottery, get a big bonus, or maybe an inheritance. Assuming you haven?t gotten any windfall, after the 90 days is up, they can set a sale date for your house to be sold. They must give you a minimum of 60 days notice prior to the sale date. After the sale you have a minimum of 30 days after to get out, or risk being thrown out, which you really, really don?t want to happen. If the sheriff knocks on your door with an eviction order, you have about 15 minutes to get your bare essentials, and they change the locks, and put your stuff in storage, which you can pick up later. This is a very ugly scene you want to avoid. So, from the time you get papers, you should have a minimum of 7 or 8 months to get out (30 days to file a response, 30 days continuance, 90 days redemption, 60 days for sale, and 30 to eviction), and like I mentioned earlier, you don?t get papers until you are 4 or 5 months down, so you are probably looking at a year or more from the time you made your last payment until you have to get out. Another sad fact is that after foreclosure, many houses sit vacant for a year or more. There was even one non-profit agency advocating the evicted break back in and take back their house because it ?s better for the neighborhood to have an occupied house than a vacant house. Not that I?m recommending anybody do anything illegal, but if you resume residence, and can prove it (with utility bills and such), they have to go back through the whole eviction process again, even though the house isn?t yours anymore.

Produce the Note Defense

The other defense I like is the ?produce the note? strategy. As you probably know, your mortgage note can, and probably has, be sold one or more times. A common scenario is you close with mortgage company XYZ. Within the first month, they sell the servicing (who takes your checks) to mortgage company ABC. ABC might sell it again to mortgage company DEF. Now, theoretically, all the paperwork gets moved with the sale or transfer. But, in reality, many times it does not. And, even if it does get transferred, it may be lost, or may be stashed in a warehouse with tens of thousands of others, and very difficult to locate. There are a few steps to this process. First you have to mail a legal request to the lender and their attorney to ?produce the note,? and file this request with the county. After that you wait 30 days and file a ?motion to compel? asking the judge to order the bank to come up with the original promissory note. They then have 30 days to produce it. If this is done before the judgment of foreclosure, it may not make it to foreclosure. There was a story on TV about a lady who was basically living free for 2 years because the lender couldn?t come up with the note, and about a judge who threw out many foreclosures because of this. They have to prove you owe them the money. If you do this after the judgment has been entered, and the note is not produced, you may have to file an appeal, or a motion to vacate the judgment, or a motion for a stay on the sale and eviction. If the judge grants a stay until they can produce the note, you are still technically ?in foreclosure,? but your house won?t get sold, and you won?t be evicted. It?s sort of ?in limbo,? but it beats getting kicked out. And, if they do produce the note, you go back to the 60 days notice before sale, and another 30 to vacate, so it?s not like they can just come up and throw you out with no warning. There is a great site that details how to mount this defense, and has template forms you can fill in.  Again, you can probably do most of this on your own, but it?s not a bad idea to hire some legal help.

Loan Modification Can Help

One other option may be loan modification. This is where a lender agrees to modify the original loan terms to allow for you to stay in the home under new terms. These can be hard to get, and I have heard stories where a servicer has agreed to a modification over the phone, the homeowner has signed the papers and sent them in, but their house has gone into foreclosure or continues through the process in the meantime. The right hand may not know what the left hand is doing, so don?t put all of your proverbial eggs in the ?loan modification? basket, because the lender likely isn?t. You can try to make a loan mod go through, but don?t ignore the above advice either. It?s also noteworthy that above defensesw (produce the note and RESPA violations) can be used as leverage to force the bank into a modification.

Ownership Defense

Another option is called term ownership. It?s something between renting and owning, and relies on an obscure aspect of the law known as conditional ownership. A good description of the system can be found at www.termownership.com. Stephen Weeks is the attorney that developed this defense. I?ve corresponded with him a bit, and his a good guy, and very knowledgeable. He can be contacted at Weeks@WeeksLaird.com

Final Option: Bankruptcy

One last option is bankruptcy. There are two kinds of bankruptcy, or BK. One is a Chapter 13. This is where the court mandates a repayment plan over the course of 3 or 5 years, and all of your debt is included. You must prove the ability to repay for the court to approve a Chapter 13. And if you fail to make the required payments, the bankruptcy can be dismissed, and the foreclosure is back on. Most BK attorneys will give a free consultation to those interested in filing. Chapter 7 is where all of your ?unsecured? debt (credit cards, etc-not mortgages or car loans) is wiped out. You must be current on your mortgage if you plan on keeping your house, and there are very tight income requirements now (as opposed to a few years ago) for filing Chapter 7.

As you can see, there are several ways to help you fight foreclosure. I hope I?ve given you a better understanding of the process of foreclosure, and maybe some hope for those of you in trouble now. I also want to ask any of you who are behind on your mortgage or facing FC to take a hard, honest look at your situation. For many people, if you lost your job and have been out of work for several months, or had some sort of medical problem where you couldn?t work, but now are back on track, fighting to save your home may be a good idea. For some, if you are just in over your head, you have to ?know when to fold ?em?. Don?t let your emotional attachment to your house cloud your logic. Sure, you love your house. It?s your home. You have memories built there. But if you are making much less now than you were previously, or maybe just bit off more than you could chew, you might want to consider the steps here as a stall, so you can save up as much as possible so that when it comes time to move, you have money for a security deposit and all the other costs associated with moving, and be in a better position when it?s ?go time.? Yes, uprooting your life and you family to move to a new (and probably much smaller) place is no fun, but having to move with no money saved up and no plan in place is even worse.

I sincerely wish the best for anybody reading this. I know we are living in trying times right now.

We would like to thank redjar for sharing today’s photo via the Creative Commons License.

Drop After Drop Adds Up

In the first articles I showed how you can save energy and money and have a positive impact on the environment by going green and I showed how important an energy audit is for providing a road map to going green in your own home.

Now that I?ve laid some of the groundwork, most people want to know how to pay for it. My basic tenet is that there is a shade of green for every project and every budget?. Finding the right shade for your individual lifestyle and budget will mean some compromises along the way. But making the most of your energy audit is important. You only have the mental and physical fortitude to undergo disruption to your daily life so many times. So making the most of the time you devote to any home renovation project, green or otherwise, is critical.

In the US, the bulk of the homes that are currently being occupied were built during the housing boom of the 1970?s and 1980?s. These homes are nearing architectural and mechanical obsolescence. Also, these structures account for over 40% of energy consumption and 75% of electricity consumption annually. Can you imagine the impact to our economy if we could reduce those numbers by 10%? The way to do that is to renovate existing buildings, starting with residences.

Let’s Assume You Aren’t Rich and Want to Go Green

I’m going to assume that the family interested in going green does not have the cash available to pay for all the costs of an energy efficiency renovation all at once. You don?t want to use a credit card to finance the purchase, as the interest that you would pay makes the entire process much more costly than needed. So where can you turn?

There are federal and state programs available to help offset the costs of going green. There are local incentives, grants, and rebate programs available to help people achieve energy efficiency improvements, and there are various types of lending programs, from home equity loans to personal lines of credit available form many different sources that are specifically geared to the energy efficiency market. I will give you the ?get started? information to help you find the right program for you.

Federal Resources for Helping to Pay for Going Green

At the federal level, the American Recovery and Revitalization Act (ARRA) passed on February 17, 2009 included billions of dollars in stimulus funds for energy efficiency improvements. Chief among these are the federal tax credits that are available to take for energy efficiency upgrades to your own home for 2009 and 2010 tax years. In summary, the federal government will repay you up to $1500 (previously limited to $750) of the costs of energy efficiency improvements for windows and doors, roofing material, water heaters, insulation, and biomass stoves. In addition, the federal government will pay for 30% of the installed costs of renewable energy upgrades like solar power, geothermal heating and cooling, solar hot water heating, small wind energy systems, and fuel cell technology. Previously the allowable tax credit was capped at $2000. Now, it is uncapped, so they will pay for a full 30% of the costs!

Builders, developers, and commercial property owners can take advantage of these credits as well, but in this care they are based on square footage, not on costs. See the IRS website or the above link for the details.

State-based Resources for Going Green

In addition to the rebates available from the federal government, there are programs from the state that are available to offset costs of energy efficiency improvements. If you visit DSIRE (Database of State Initiatives for Renewables and Efficiency), you can click on any state and find out what rebates and incentives are available. For the Chicago area, the state will rebate up to 30% of the costs of solar power installations. The program is administered through the Illinois Department of Commerce and funded through the Illinois Renewable Energy Trust Fund. The current plan expired on May 1, 2009, but the next round of funding will begin July 1, 2009. The city of Chicago also encourages green building and will fast-track permits and waive up to $25,000 in fees for green certified projects.

For those of you in Wisconsin, you hit the jackpot! There is a fantastic program available for renewable energy and efficiency upgrades called Focus on Energy. This program will offset costs for a host of renewable energy products up to 25% of costs or a maximum of $35,000. Its current funding expires June 30, 2009, but will renew.

Energy Companies Help You Go Green

Grants and rebates are available from the utility companies as well. People’s Gas and NorthShore Gas both have rebate programs that they have extended until October 31, 2009. This program will cover costs of insulation up to $750, clothes washers up to $100, water heaters up to $75 – $400, gas furnaces up to $450, and gas boilers up to $600. It requires professional installation of everything, and you can apply for the rebate online.

ComEd does not have as much of a program available. They will sell you discounted CFL bulbs, can help arrange a home energy audit, and can set up electricity cycling programs for you. Also, they will pay you $25 to recycle that old refrigerator that you plan on replacing with a new, EnergyStar® model.

For those of you in southern Illinois or some of the western suburbs, Ameren has a different set of programs, much better than ComEd. They will help with heating, air-conditioning, lighting, and with the home energy audit, as well as refrigerator recycling.

How About Weatherization Help?

Now, for funding of weatherization improvements, the Illinois Home Weatherization Assistance Program is the place to start. On their web site you will be able to locate local programs. This is geared to low income families, but the information available is good, and at the very least, you can get a good contractor to help with your project. This is funded through the Department of Energy and the money is given to each state to distribute through its weatherization programs. This program will also cover the cost of the home energy audit in some cases.

Can I Get a Loan To Go Green?

The last topic I want to cover is funding though loans. The Department of Housing and Urban Development administers a huge number of programs that are designed to help average Americans finance, refinance, or improve their homes. There are a few income and home value limits, but a vast majority of Americans will fit into its broad criteria.

First, there is the Energy Efficiency Mortgage (EEM) which is a stand-alone product available to help cover the costs of home efficiency improvements. The maximum amount is 5% of the home?s value not to exceed $8000. Now, this may not seem like much, but the beauty of this program is that it can be added to any other FHA/HUD program without penalizing the owner/purchaser on the percentage of loan to value. So, say you want to borrow $250,000 to buy and renovate a home (or refinance an existing home). Though this program you can borrow $258,000 even if that additional $8000 would push your loan over the maximum loan to value. It?s a ?free? $8000 to use for energy efficiency upgrades.

Where this really works out is with the 203k loan program which is designed to encourage purchasers to either renovate their existing home or renovate a home they intend to purchase and live in. (See this previous The Chicago 77 post for more details.) The beauty of this program is that it looks at the value of the home as completed after the renovation, not the value at the time of purchase. The program will help pay for design, inspection, and the energy audit, as well as all the construction. Click here to see a visual overview of this program. There is also a limited repair program that provides $35,000 for home improvements to a home purchased. This additional $35,000 becomes part of the mortgage, allowing the buyer to do significant work to a home before moving in and paying for it over the life of the mortgage.

Fannie Mae also has innovative programs for renovation/purchase of single family homes.  This is called a HomePath® program. There is another program called HomeStyle®

Freddie Mac has a similar array of programs. The best bet is to contact an FHA/HUD approved lender to determine the best program for your situation.

In the more commercial market, Wells Fargo Bank has a variety of loan programs available that are geared toward energy efficiency and green living. There are others, but Wells Fargo seems to have the most developed program. The idea for all of these programs is that the lenders know that you will be saving significant amounts of money in utility costs and reward you with either a larger amount available to borrow based on your credit score, or a discount on the rate you are borrowing at.

That about covers what I know regarding funding, financing, rebates, and rewards for energy efficiency improvements.

For those who are immediately interested in upgrading their home, purchasing a new home, or renovating an existing home, make sure to read by bio below for ways I can help.

My thanks to Brad Walbrun for providing some background material on the 203k-mortgage program.

Going Green Series

[TABLE=7]

There are two things I?d like to cover: Why should I refinance? And, what is the process for refinancing? I think there are some misconceptions and confusion about these, and I?d like to help clear these up, or maybe just give you a better understanding.

Why should I refinance?

Hmmm...a bit much.

The obvious answer is that it will save you money. But it?s more than just your monthly payment going down. You might say, ?But Brad, I have no problem making my payments right now, why should I bother?? If I know you well enough, I might reply ?Hey, if a couple hundred dollars a month really doesn?t matter to you, just write out a check to me for $200 the first of every month, and I?ll come by and pick it up.? That sometimes gets me a laugh. So, let?s take an example. Let?s say you have a $250,000 mortgage, and your current interest rate is 6.5%. Late summer 2008, 6.5% wasn?t too bad. And for those of you too young to remember, in the late 90s, 8% was doing good, and when Carter was in office, mortgage rates were in the teens. So the P&I (principle and interest-payment for the mortgage only, not including taxes and insurance) would be $1,580 per month in this scenario. Now, let?s say we do 5% on this particular loan. For now, I am going to leave out closing costs and other expenses?we?ll get to those below. So $250,000 at 5% is $1,342 a month. That?s over $200 a month, and nothing to sneeze at.

But, let?s elaborate on this a little further. It?s not just a couple hundred of bucks a month. You are also chipping away at the principle faster. How much interest would it be on $250,000 at 6.5%? $250,000 x .065 = $16,250 in interest per year. Now, take $250,000 x .05. That?s only $12,500 in interest per year. If you take 12 payments at the higher rate ($1,580 x 12), that?s $18,960 per year, and at the lower rate ($1,342 x 12) it?s $16,104 per year. So, you?ve save almost $3,000 a year. But, if you subtract the interest from the payments, you can see how much more the principle would go down. At 6.5%, you?d take $18,960 (total payments) – $16,250 (interest paid) = $2,710 toward principle. Now take the 5% loan – $16,104 ? $12,500 = $3,604 applied toward principle. See that? Not only did you save a couple hundred dollars a month, but you paid 30% more toward the principle than you would?ve if you’d kept your old loan. And long term? 360 payments (30 years) times $1580 per month comes out to $568,800 (!) over the life of the loan. $1342 x 360 = $483,120. Not worth it? OK, I?ll stop by your place in 30 years and pick up my check for $85,000.

What else can refinancing do for me?

All right, so you are 40-something, and don?t want to start over with a new 30-year loan. ?Brad, I?ve already got 5 years into my current mortgage. I?d hate to go backwards that much, and I don?t have a problem making my payments where they are at.? Sure, that makes sense. Let?s do a 20 year mortgage. And, let?s make the rate 4.875%, since 15 or 20 year loans usually have a slightly lower rate. $250,000 at 4.875% on a 20-year note is $1,632 per month. So, now, you?ve kept the payments close to the same, but shaved five years off your term. And you?d save a whopping $177,000 over the life of the loan ($391,600 vs. $568,800). Don?t even get me started on what your money could do for you if you took the difference and invested it. And you can do the same thing with a 30-year mortgage. Let?s say you like the lifetime savings, but the payment scares you a bit. That?s $300 a month, you know. If you send in just one extra payment per year, you pay off your loan in about 24 years. So in our above example, send in $1,400 each year from your tax return, or send in $1,476 per month ($1,342+$134), which is still less than the $1,580 per month you were spending, and you save huge over the life of the loan. 24 years times 12 months is 288 months. At $1,476 per month, that?s $425,000 over the life of the loan, which saves you almost $60,000.

So why is my loan amount going up so much?

OK, Brad, you?ve convinced me that it?s worth it to refinance; what comes next? Let?s start off with the nuts and bolts.

Take Interest Into Account

Pay Less Green For Your House?

Your mortgage payoff is always going to be higher than your principle balance. Mortgage interest accrues daily, and is paid in arrears. When you made your April payment, it paid all of the interest that accrued from March 1- March 31, and your March 1 payment paid the interest from February 1 ? February 28, and so on. So, let?s say you started the refinancing process now, and plan on closing within the first half of May. If your mortgage statement says $249, 345, how much will your payoff be? So you?ve made the April payment, but since we?re closing early May, you can skip your May payment. Let?s say we close May 10, and the loan funds on May 15 (3 day rescission for refinances). We have daily interest then that will accrue from April 1 through May 15, a full month and a half. $250,000 (your original loan amount) x .065 (6.5% interest) = $18,960 of interest in a year, divide by 365 (sometimes 360 is used for this), and we have $51.95 per diem interest. Multiply that by 45 days, and we have $2,337.50 interest to be accounted for. $249,345 + $2,337.50 = a payoff of $251,682, and that?s if there is no escrow shortage or accrued late fees. Plus the title company usually pads the payoff by a couple of days, which you?d get refunded in a couple weeks.

Closing Costs & Fees Happen

Now, we have to add in closing costs. These can vary widely, and depending on the situation and the rate, there may be points involved. But not counting points, you can figure a couple thousand dollar for closing costs. There is always going to be title fees, processing and/or underwriting, maybe some miscellaneous ?junk? fees, county recording fees, etc. Let?s not forget about the per diem interest on the new loan. If we have 15 days of interest (the loan is funding the 15th of May, and your first payment isn?t due until July 1, and interest is paid in arrears), and round to $50 a day, that?s another $750. And you want (or are required to have) escrows for the tax and insurance? Let?s say your taxes are $6,000 per year. That?s $500 per month. Let?s say your insurance is $900 a year, or $75 per month. In Cook County, taxes are due in March and October. (Most of the surrounding counties are June and September.) So, our loan funds in May, and your first payment is July. You make three payments (July, August, September) before your taxes are due. $3,000 is due, but you?ve only paid in $1,500. That means we need to set aside at least $1500 for ?reserves? into the escrow account. And almost always, they add another 2 months ?pad? in case the taxes go up, which does happen inevitably. So let?s make that $4,000 for tax reserves into escrow.

Don’t Forget Homeowner’s Insurance

Let?s say your homeowner?s insurance is also due October 1. Using the same formula as we did for taxes, $900 will be due, but you?ve only paid in $225 with your three payments. So that?s $675 needed in reserves, plus 2 months? pad, for $825 into escrow reserves for insurance. I?d like to mention here that you will likely be getting a refund from your current mortgage company for the monies in your current escrow, if you have one, and they would be close to what we are setting aside in reserves. So if you want to keep your new loan amount down, you could bring in $4800, and you?d be getting a check back for around that amount in 2 to 4 weeks after your current mortgage is paid off.

Bring It All Together

So, the question will pop into your mind ?Why is my mortgage going from $250k up to $260,000???? And the answer is this (rounding for easy math): $252,000 payoff to the current mortgage, plus $2,000 for closing costs, plus $1,000 for per diem interest, plus $5,000 into the escrow account, brings the loan to about $260k. And if it?s an FHA loan, you have 1.5% up-front Mortgage Insurance Premium (MIP), which goes to HUD. In this case that would be $3,900, bringing your loan up to almost $264,000. So that?s how your loan amount can go up ten grand with only a couple thousand in closing costs. But, you have almost as much in increased short term cash flow. Skip two payments (May and June), and that?s over $4k here (including taxes an insurance), and you?re getting almost $5k back from your old escrows. If you want to keep your loan amount down, you could come to the closing with that $9k, and you would not get the benefit of increased short term cash flow, but you wouldn?t have your loan amount going up so much, if that?s a concern. It?s your house, and your mortgage. You decide which way to go.

Oh, Those Underwriters?

Now, obviously I don?t want to scare anybody off from purchasing a home or refinancing; that?s how I make my living. But, I do want to set the right expectations. These days, investors (like Wall St., who buy the loans in bulk from the lenders), are a little skittish about investing in mortgages. So, every lender, every underwriter, and every appraisal reviewer out there wants to make sure they have done their due diligence. They want to make certain that nothing snuck past them on their watch. So it is possible, dare I say probable, that we will be required to produce additional documentation or support above and beyond what would ?normally? be required. Maybe they ask for tax returns or a written verification of employment in addition to 2 pay stubs and 2 W-2s. Maybe they ask for additional sales on the appraisal. Maybe they ask for something that doesn?t seem to make sense to you or me. But, there is likely some sort of reasoning behind it. And the bottom line is that they control the purse strings, and they can ask for whatever they want. They are trying to minimize their risk, and you and I simply have to deal with it. The loan might take a little longer to close. You might have to send a couple extra faxes. But, as long as you know this up front, it?s really not the end of the world. It might be a little more hassle, or a little more time, but 99% of the time, if I tell you I can get your loan done, then it gets done.

We’d like to thank Colin and WoodleyWonderWorks for today’s photo that he so kindly shared via the Creative Common’s License.

13 April 2009 ? Mortgage rates and home prices are still very attractive. Now is the time to buy or refinance your mortgage.

Fannie Mae?s ?Home Affordable? program is coming to fruition, allowing homeowner?s with a Fannie mortgage refinance up to 105% of the home value, and their mortgage insurance situation stays the same. For instance, if somebody had a mortgage at 80% with no mortgage insurance, the new loan will also have no mortgage insurance. Good stuff, for sure.

As of first thing Monday morning, the markets are down. There are talks of bankruptcy at GM, and of Chrysler just not making it.

Chicago-base aerospace giant Boeing announced less than expected first quarter profits.