Navigating the Mortgage Minefield: Your Complete Guide to Avoiding Costly Problems and Finding the Right Loan in Today’s Market

Book Description

The mortgage market is in a state of crisis, and the recent takeovers of Freddie Mac and Fannie Mae have made it even more daunting. Now, more than ever, borrowers need to take responsibility for their financing choices. As an expert in the mortgage industry, Richard Giannamore has helped thousands of people avoid the traps that can cost them a fortune. Now, in Navigating the Mortgage Minefield he shows anyone considering the purchase or refinancing of a hom…
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How to Get the Best Home Loan, 2nd Edition

Save Time and Money–and Get the Loan That’s Right for You Ever-changing mortgage guidelines . . . confusing financial forms . . . if you’re buying or refinancing a home, you know all too well how overwhelming and intimidating the mortgage process can be. This revised edition of How to Get the Best Home Loan guides you through all the critical issues and demystifies the mechanics of mortgage lending–everything from disclosures and fees to closing costs, points, and maki…
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The Foreclosure of America: The Inside Story of the Rise and Fall of Countrywide Home Loans, the Mortgage Crisis, and the Default of the American Dream

From Countrywide’s former Senior VP of Marketing, the first engrossing inside look at Countrywide Home Loans, how the mortgage crisis started-and where it may end. In July 2004, Adam Michaelson entered “The Vault”-an underground bunker at Countrywide headquarters-for a meeting about a new loan product that would allow borrowers to pay less than their minimum monthly payment. After the “finance jocks” proudly made their case, Michaelson asked one question: “Are you nuts?” Countryw…
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Ponzi Finance And The Fed

The Federal Reserve reported that as of June 30, 2009 downright U. S. debt was $52. 8 trillion. Total U. S. debt includes government, corporate and consumer debt. Importantly, however, it does not include a few trillion in “off balance sheet” financing, contingent unfunded pension plans for corporate and state and local governments, or unfunded liabilities of the U. S. dominion for such items as Medicare, Social Security and other programs. Currently GDP stands at $14. 2 trillion, so there is approximately $3. 73 in debt for every dollar of output in the United States, a level unprecedented in our record. Normally, debt levels as a percent of GDP would be uninteresting and immaterial; however, the present level of obligation is unique in two ways. First, the asset side of the balance sheet purchased by the obligation is falling in price. Second, the cash that was borrowed to purchase those assets was often fraudulently expended. Neither the borrower nor the lender really expected the obligation to be serviced. Rather, each party expected the asset cost to rise extinguishing the debt. This type of lending arrangement was correctly analyzed by the famous American economist Hyman Minsky in his paper, “Financial Instability Hypothesis”, in which he described three phases of debt financing. The first is “hedge finance”, where the lender expects a return on both principal and interest. The second is “speculative finance” where the lender expects to get interest on the loan but perhaps not the principal. The third case, where the lender expects neither the principal nor interest to be returned, is referred to as “ponzi finance”. This was typified in the last business cycle by loans issued defenseless documentation, no feeling payment home loans, deafening low cap rates on commercial real estate, and the high leverage borrowing ratio of private equity funds. Even ponzi debt works as long as asset prices are rising. But once the bubble is pricked, the debtor is left with declining asset values that preclude the rollover of their obligations. Presently, in this worst of all post-war recessions we are witnessing the collapse of asset prices that were inflated by the speculation of earlier years. The aftermath of that speculation and its impact on the economy has been thoroughly studied prior to our current company cycle by the economists of yesteryear who marveled directly the mania in the collective mindset of private citizens and their elected representatives who produced such bubbles. The most famous of these economists was Irving Fisher (1867-1947), who in 1933 wrote about this problem of over-indebtedness (Irving Fisher, 1933, Econometrica, “The Debt-Deflation Theory of Great Depressions”). He stated flatly that over-indebtedness was the dissimilarity between normal company cycles (recessions), which occur frequently through “over-production, inventory misjudgment, or commodity price fluctuations” and extreme company cycle fluctuations (depressions). Based on his analysis of the great depressions of 1837, 1873, and 1929 he outlined a pattern of economic developments that will take sediment when the obligation cycle is broken. Seemingly old news, but it is interesting to apply his sequence of events to today’s economic developments as there are disquieting similarities.

Highest Retail Price Ever in September For a Gound-floor Retail Condo in D.c.

Back in Richmond, John Gentry, who heads up a new asset-recovery initiative for Grubb and Ellis, said his firm was involved in a foreclosure sale that saw a Charlottesville group of investors buy an older 1,286-unit apartment complex for $24 million. The original loan amount was $52 million, he says. Multifamily projects tend to move well, adds Gentry, because buyers can still get financing through federal supported agencies such as Fannie Mae and Freddie Mac. Paula C. Squires In 2010, the biggest game in commercial real estate may be the handling of distressed assets. Across Virginia, real estate investment and management companies have assembled asset-recovery teams to tap into an expected boost in business from defaults, workouts and foreclosures as banks restructure maturing loans. Investors also are jumping in. A Richmond investment group recently put together $50 million and 45 partners from across the country to start a private equity fund. The sole purpose of E/Class MB Partners Fund I? To provide incremental capital and management solutions for distressed properties. Bryan Kornblau, a partner in E/Class and chairman of Eagle Construction in Richmond, says that by working with existing owners and lenders, the fund creates an asset plan to “pull a project out of the ditch. ” In its first deal, the fund plans to make an initial investment of $8. 7 million in West Broad Village in Henrico County. Work on the $300 million mixed-used development had ground to a halt because of more than $5 million in liens and lawsuits. The infusion of capital should settle the litigation, allowing the project ? in a prime corridor near Short Pump’s retail center ? to move forward. The fund is looking at opportunities throughout the mid-Atlantic. “Even preferred projects are starving for sources of capital,” says Kornblau. “We provide the capital to help the bank exit the asset without taking a huge haircut. That’s the difference between what we do and what vulture investors do. They’re looking to buy something cheap. ” Activity around distressed assets will boost transactional volume. “It’s going to be good for the brokerage community,” says Steve Gentil, chairman of Grubb & Ellis/Harrison & Bates in Richmond. “If a property was worth $150 a foot two or three years ago and someone buys it for $80 a foot, it’s still a transaction. ” But there will be plenty of pain to go around, too. If 2009 was the year of “pretend and extend” as banks put off dealing with overleveraged commercial loans by extending terms, 2010 is shaping up as the year when the hammer comes down. And lots of banks and borrowers could get clobbered. Troubled commercial real estate loans figured in Virginia’s first bank failure last month. The Federal Deposit Insurance Corp. took over Reston-based Greater Atlantic Bank. “Both the commercial real estate loans that they made and the commercial real estate loans that they purchased played a role in the bank’s closing,” says David Barr, a spokesman for the FDIC in Washington. By mid-year 2009, data gathered by the Richmond Federal Reserve Bank showed that nonperforming, delinquent commercial real estate loans (90 days or more past due) represented 8 percent of the total amount of commercial real estate loans in the portfolios of banks in the Fed’s five-state district, including Virginia. “What we’re seeing in the Fifth District looks pretty similar to national numbers,” says John Weinburg, senior vice president and director of research at the bank. For the sake of comparison, the level is on par with delinquent loan rates banks saw in the early ’90s ? the last major downturn for commercial real estate. For construction and land development loans, the district’s non-performing loan percentage is even higher, 12 percent, notes Weinburg. The Fed has characterized the risk of bank exposure to troubled commercial real estate loans as manageable. Yet, defaults are expected to increase as the first of more than $150 billion worth of commercial-mortgage-backed security loans comes due between now and 2012. The initial wave is expected by the second quarter. Many property owners are finding it hard to refinance, because property values have plunged ? by as much as 40 percent from 2007 market peaks in some markets. Consequently, some loans are underwater. This occurs when the value of the property being used as collateral on a loan is less than the debt owed. Virginia has seen its share of foreclosures including the empty, 300,000-square-foot Circuit City corporate headquarters in Richmond. With U. S. office vacancy rates projected to rise to as much as 18 percent this year, it’s no wonder The Urban Land Institute predicts a “survival of the fittest” environment. In its annual industry survey, it looks for commercial markets to bottom out, paving the way for a protracted recovery that may not gain traction until late 2011 or 2012. Virginia tends to weather market downturns better than many states because of a big federal government presence in Northern Virginia and Hampton Roads. Still, Gentil looks for the state to share in the coming losses. “A lot of the properties developed, acquired or financed from 2002 onward have too much debt,” he says. “The underwriting was too loose and the property was overvalued in the first place. A lot of commercial real estate wealth will evaporate in 2010 and 2011 in the region and the country. It’s unavoidable. ” Yet the new year also brings opportunity for cash-rich investors. “There is an unprecedented amount of institutional and private capital on the sidelines actively pursuing lucrative acquisition opportunities,” says Jay Sloan, an investment adviser with Marcus & Millichap in Williamsburg. Sloan’s firm recently closed a deal on a 300-unit, townhouse-style apartment community. The Townes at Jones Run in Newport News, a 23-year-old project that was recently renovated, sold for $23 million, slightly less than its current assessment. The buyer was an institutional investor from Virginia Beach. Marcus & Millichap began to see an uptick in sales activity late last year. By October, the real estate investment firm had closed or listed $1. 4 billion worth of distressed asset properties throughout its 70 U. S. offices, according to David Feldman, regional manager for the company’s Washington, D. C. , office. “The real buyers are back,” he says. “It’s not just the vulture funds. ” Real estate experts say the economy and unemployment will drive commercial real estate in 2010. If the economy keeps shedding jobs, the market will continue to see falling demand as businesses reduce and sub-lease space. Financing also remains a challenge. Some people think it will take some form of government intervention to replace the collapsed commercial mortgage-backed securities market. While the big picture remains daunting, there are pockets of good news in Virginia. A short forecast on the major markets: Washington, D. C. /Northern Virginia As always, Uncle Sam cushions this market. With the federal government expanding, many agencies are signing big leases. Plus, $5. 5 billion in stimulus money is earmarked for public building services, from full-blown renovations to smaller jobs. Still, there’s plenty of surplus office inventory. Speculative buildings are standing vacant from Southeast Washington to Dulles. By the end of the third quarter of 2009, one estimate put the region’s vacant office space at 14 million square feet. In 2010, D. C. ’s vacancy rate is expected to hit 15 percent, according to a forecast by Jones Lang LaSalle. While the area needs time to absorb the space, it’s still considered a top investment market. Jonathan Hipp, president and CEO of Calkain Cos. , a real estate investment firm in Reston, says his company got its highest retail price ever in September for a ground-floor retail condo in D. C. ’s Logan Circle Metropole building. The 550-square-foot condo sold for $1,123 per square foot to an independent private investor. “Even in a market like this, people will stretch for good real estate,” says Hipp. Hampton Roads A strong military presence buoys this market. In October, unemployment was 6. 5 percent, well below the national average. Demand continues for office space in the medical and education sector, says Gerald S. Divaris, chairman and CEO of Virginia-Beach based Divaris Real Estate Inc. He’s also seeing more movement in retail. “Retailers that weren’t doing much have now released us to look for space. ” One area of expansion is The Town Center of Virginia Beach. It expects to break ground on a new hotel-office project in 2010. Norfolk also will get a new 23-story office tower that will house a new regional headquarters for Wells Fargo. Marketwide, commercial vacancy rates stood at about 12 percent by year-end. The area has taken some hits in the industrial sector, with the loss of a Ford truck plant in Norfolk and the expected closing of International Paper’s plant in Franklin. Richmond Compared with 2009 when the region lost three of its major employers, brokers are looking for a better 2010. Some companies saw an uptick in leases in the fourth quarter, particularly among smaller spaces. A couple of larger deals, such as BB&T’s 140,000-square-foot lease at Riverfront Plaza, help set the stage for optimism. Overall, office vacancy rates hovered at nearly 12 percent for Class A space by year-end. 2010 will remain a tenant’s market, with businesses demanding competitive rents and improvements. Jay Kraft, vice president for the Richmond office of Liberty Property Trust, expects a slow recovery, as the market take times to absorb the space dumped by former employers such as Circuit City Stores, LandAmerica Financial Group and Qimonda. Roanoke This up-and-coming market was busy enough even in 2009 for one real estate company to add four brokers. Dennis Cronk, president and CEO of Poe and Cronk Real Estate group, says his firm added staff to keep up with business. He says national retailers are going into six new locations in Roanoke, the New River Valley and Lynchburg. On the office side, much of the leasing is coming from the local, state and federal governments. The Social Security Administration just opened a new 65,000-square-foot office in Roanoke. “We’ve managed to keep things moving, and I’m cautiously optimistic for 2010,” says Cronk. A lot of his recent business has been in distressed assets. “We’ve had a cadre of investors who have been sitting back and waiting for the opportunities to purchase assets that have good value. I’ve sold vacant industrial buildings, vacant retail buildings and vacant mixed-used buildings. ” Paula C. Squires

6 Big Questions on Obama’s Making Home Affordable Program

The Obama administration’s “Making Home Affordable” Program has been in the headlines since its announcement in early March. Attending to both refinancing and loan modifications, the program gives struggling homeowners additional options as they decide on the best options to lower their mortgage obligations, catch up on payments, and stay out of foreclosure. The program has also raised a lot of questions, so here are some of the more frequent ones being asked around the internet. Q) Which lenders are offering the program? A) The program was implemented first at FNMA and FHLMC and is expected to roll out to lenders across the country over the next several months. Lenders participation is voluntary unless they accepted FSA/TARP (bank bailout) funds. Those lenders will be required to offer refi’s and loan modifications under the program’s guidelines. Q) Is there a limit on the size of the mortgage that can either be refinanced or modified? A) A mortgage must be $797,000 or less to be eligible. Q) Will a loan modification or refinance hurt my credit score? A) Credit scores under the program won’t be affected as the homeowner’s mortgage is essentially being re-written. However, circumstances related to either refinancing or modifying could have an effect. For instance, missed payments leading to a modification would definitely hurt a credit score. On the upside, lower mortgage payments could give a homeowner the opportunity to pay down other debts, resulting in a better credit score over time.   Q) Is it possible that my mortgage payments could actually go up? A) It’s possible. Homeowners still in the “teaser rate” phase of their mortgage are one group that could see an increase. The program’s base rate of 2% and caps on the ratio of mortgage payments to income should mitigate the increase. Another group of homeowners that would be very likely to see a payment increase is the one with negative amortization loans. Re-working those mortgages into amortizing loans could raise payments significantly. Despite the potential of increased payment obligations under either option, it could still make sense to refi or modify if the change results in a “lesser of two evils” scenario where payments go up but as much as if the homeowner does nothing. Payments can be gauged at the government’s web site at http://www. makinghomeaffordable. gov Q) Does the program expire? A) Yes. The Making Home Affordable program expires on June 10, 2010, which gives homeowners, especially those mentioned in the situations in the previous question, some time to sit on their lower payment schedule before adjusting upward.   Q) Can I do a refinance or loan modification on my own? A) A qualified yes. Either can be done as a “do it yourself” but there are many issues to consider. One issue is simply the time involved in getting the project completed. Lender’s hours of operation are typically very similar to those of people working a regular 9 to 5 schedule. If a homeowner can’t put time in to the project during work hours it will require time over lunch and after work, if that’s possible at all. A do it yourselfer should allow for plenty of time to learn about each process, phone/hold time with the lender, and for paperwork. The second issue is that a refinance or loan modification is still a negotiation. Hiring an attorney to wring out the best terms possible could make the fees involved a very worthwhile investment.

Avail The Alternatives of Foreclosure to Accomplish Your Tasks in Hassles-Free Way

Foreclosure is a legal right of a mortgage holder or other third-party lien holder to sell the property and use the proceeds to pay off the mortgage. This legal right has a long history and became especially widespread during the current real estate bubble in North America and Europe. Some of the experts also consider foreclosure to be one of the main reasons of the current Mortgage Crisis. Foreclosure can be initiated at anytime after default on the mortgage and there are two main types of foreclosure: foreclosure by judicial sale, foreclosure by power of sale.

Bad Credit: Absolute Truth the Credit Industry Doesn’t Want You to Know

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6 Big Questions on Obama’s Making Home Affordable Program

The Obama administration’s “Making Home Affordable” Program has been in the headlines since its announcement in early March. Attending to both refinancing and loan modifications, the program gives struggling homeowners additional options as they decide on the best options to lower their mortgage obligations, catch up on payments, and stay out of foreclosure. The program has also raised a lot of questions, so here are some of the more frequent ones being asked around the internet. Q) Which lenders are offering the program? A) The program was implemented first at FNMA and FHLMC and is expected to roll out to lenders across the country over the next several months. Lenders participation is voluntary unless they accepted FSA/TARP (bank bailout) funds. Those lenders will be required to offer refi’s and loan modifications under the program’s guidelines. Q) Is there a limit on the size of the mortgage that can either be refinanced or modified? A) A mortgage must be $797,000 or less to be eligible. Q) Will a loan modification or refinance hurt my credit score? A) Credit scores under the program won’t be affected as the homeowner’s mortgage is essentially being re-written. However, circumstances related to either refinancing or modifying could have an effect. For instance, missed payments leading to a modification would definitely hurt a credit score. On the upside, lower mortgage payments could give a homeowner the opportunity to pay down other debts, resulting in a better credit score over time.   Q) Is it possible that my mortgage payments could actually go up? A) It’s possible. Homeowners still in the “teaser rate” phase of their mortgage are one group that could see an increase. The program’s base rate of 2% and caps on the ratio of mortgage payments to income should mitigate the increase. Another group of homeowners that would be very likely to see a payment increase is the one with negative amortization loans. Re-working those mortgages into amortizing loans could raise payments significantly. Despite the potential of increased payment obligations under either option, it could still make sense to refi or modify if the change results in a “lesser of two evils” scenario where payments go up but as much as if the homeowner does nothing. Payments can be gauged at the government’s web site at http://www. makinghomeaffordable. gov Q) Does the program expire? A) Yes. The Making Home Affordable program expires on June 10, 2010, which gives homeowners, especially those mentioned in the situations in the previous question, some time to sit on their lower payment schedule before adjusting upward.   Q) Can I do a refinance or loan modification on my own? A) A qualified yes. Either can be done as a “do it yourself” but there are many issues to consider. One issue is simply the time involved in getting the project completed. Lender’s hours of operation are typically very similar to those of people working a regular 9 to 5 schedule. If a homeowner can’t put time in to the project during work hours it will require time over lunch and after work, if that’s possible at all. A do it yourselfer should allow for plenty of time to learn about each process, phone/hold time with the lender, and for paperwork. The second issue is that a refinance or loan modification is still a negotiation. Hiring an attorney to wring out the best terms possible could make the fees involved a very worthwhile investment.

Close That Loan!: Originating and Processing Residential Real Estate Loan Applications

This book is designed to help those in residential real estate financing learn the details of originating and processing loans. This step by step guide was developed from insight gained in ten years of making and correcting mistakes. This book can be used to make experienced people more knowledgeable, and can help train new employees on the intricacies of loan processing. This book contains almost all you need to know about the mortgage process but the author realizes there is …
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