Inherit home, refi immediately?

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DEAR BENNY: My husband and I inherited a home from my husband’s uncle who passed away a few weeks ago. Will the lender expect us to refinance the home or can we just assume it even if it is a conventional loan? –Karen

DEAR KAREN: Unless the existing loan was from a private person, it is most likely covered under the Garn-St. Germain Depository Institutions Act of 1982. This federal law puts restrictions on the ability of a lender to exercise the “due on sale” clause that exists in most mortgages (also called deeds of trust). One of these restrictions reads as follows: “With respect to a real property loan secured by a lien on residential real property containing less than five dwelling units, including a lien on the stock allocated to a dwelling unit in a cooperative housing corporation, or on a residential manufactured home, a lender may not exercise its option pursuant to a due-on-sale clause upon … (5) a transfer to a relative resulting from the death of a borrower. …”

Accordingly, you should advise the lender of the death, and just continue paying under the terms and conditions of the old mortgage.
However, do you know what the interest rate is on that property? Rates are currently very low, and if you can get a better rate — and assuming that you and your husband can qualify for a new loan — you should consider refinancing.

DEAR BENNY: My father co-signed on my mortgage approximately 12 years ago. We are both listed on the title/loan papers, although I have been the only one actually paying the mortgage all this time. If one of us died would the property automatically go to the other party or do we need to make further arrangements for that to happen and stay out of the probate process? Any help that you could give me would be greatly appreciated. –Kimberly

DEAR KIMBERLY: The answer depends on how title is held. This answer must be general in nature, because different states have different procedures. If you were married, you and your spouse would generally hold title as tenants by the entireties; on the death of one, the survivor would own the entire house.

But clearly you are not married to your father. Thus, you can hold title as joint tenants with rights of survivorship — which means that on the death of one joint owner, the survivor owns the entire property, and probate regarding the house is not necessary. However, if you and your dad hold title as tenants in common, on the death of one owner, his/her share of the property will have to go through probate. On the death of one tenant in common, his/her share is distributed according to the last will and testament, or if there is no such will, then according to the laws of intestacy in your state. But probate is required for this type of title.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column.

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Always look before you leap!

Why did you sign the divorce papers? Get your name off of that loan!

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DEAR BENNY: I am recently divorced. We had two houses. In the divorce, I got one and he got one. We both signed quitclaim deeds to each other. However, I needed to refinance mine to pay off the bills I accumulated just to get my house back into livable shape. (It was a rental while we were married.) Both houses have mortgage loans: Mine carries a rate of 6 percent and his is at 5.75 percent interest. Needless to say, there is no incentive for him to refinance that favorable loan rate.

My ex is not the healthiest man, and my name is still on his loan. I told my lawyer several times through the divorce process that I wanted it stated in the divorce agreement that we both have to refinance. It did not happen.

Even though a quitclaim was signed, what is my exposure if something happens to my ex, considering my name is still on the loan? –Becky

DEAR BECKY: Why did you sign the divorce papers when they did not require your ex to refinance so that your name will get off of that loan? You might want to explore whether your lawyer did not properly represent you — although there may be legitimate reasons why that did not happen.

Should your ex die, his estate will most likely have to be probated. The most likely outcome will be either that the heirs to the property will assume the mortgage and keep the property, or will arrange to have it sold. Under either scenario, you are protected.

However, if your ex stops making the monthly mortgage payments, and goes into default, since your name is still on the loan, the lender has the right to either foreclose on the property — which will be a blemish on your credit rating — or sue you for the balance of the note. I assume that when you were married and borrowed the money, you signed a promissory note, which indicated that you were both — jointly and severally — obligated to repay the loan.

You should immediately contact the other lender and advise them that you no longer own the property. Make sure that you provide them with your current mailing address, so that any notices of default will go to you as well as to your ex. Should that happen, you should immediately retain a lawyer (a different one) who can take all appropriate steps to protect you, including filing suit against your ex.

You have a problem that at the present time can be resolved only if your husband refinances.

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Rising Mortgage Rates Could End Refi Boom – Get Qualfied

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Monday, June 1, 2009 10:10 AM

NEW YORK – Roger Wald recently discovered he would save $25,000 a year if he refinanced or sought a loan modification for his five-year mortgage at 4.75 percent. Wald, an auto body repairman in Sarasota, Fla., could have gotten that rate last month.

But like many homeowners, he waited for rates to fall further. Now, he’s worried he missed his chance.

Mortgage rates at some lenders spiked by as much as 1 percent on Wednesday and saw little relief on Thursday, according to mortgage brokers.

“The 4.75 percent my broker quoted two weeks ago? There’s no way I’m going to get that now,” said Wald, 49.

The fear dogging homeowners and investors alike is that April’s record lows in mortgage rates may have come and gone.

The stock market has rallied since early March on the assumption the economy will rebound later this year. Federal Reserve Chairman Ben Bernanke has been calling early signs of economic stabilization “green shoots” — and one of those shoots was a pickup in refinancing activity caused by tumbling mortgage rates.

But mortgage rates have rebounded sharply over the past few days as the nation’s growing debt raises concerns that government-backed assets could lose some of their value. It’s a trend that could slow both refinancing and home buying if it continues. Higher mortgage rates won’t necessarily derail the economy’s recovery, analysts say, but it certainly won’t help.

“If the Fed does not step in, you are going to see the ‘green shoots’ get frost bite,” said T.J. Marta, founder of financial research firm Marta on the Markets.

The average rate for a 30-year fixed mortgage is back at 4.91 percent this week, up from 4.82 percent last week, Freddie Mac said Thursday.

The 30-year fixed mortgage rate hit a record low of 4.78 percent in April thanks in large part to the Fed’s decision this year to buy as much as $1.25 trillion in mortgage securities and $300 billion in Treasury notes. So far, the Fed has bought $130.5 billion in government debt and more than $431 billion in mortgage securities.

Lower rates led to a surge in mortgage applications. Applications rose for five straight weeks between early March and early April, according to the Mortgage Bankers Association. And sales of both existing and new homes ticked higher from March to April, according to data released this week.

The Fed’s moves, however, have recently lost their effectiveness in the market. The yields on the 10-year and 30-year Treasury notes have surged to a six-month high, and are nearly where they were a year ago. That’s significant because Treasury yields, or their annual rates of return, help set mortgage rates.

Mortgage activity is already starting to decline. Mortgage applications tumbled 14 percent in the week ended May 22 from the previous week, the Mortgage Bankers Association said Wednesday. Applications to refinance a loan were down almost 19 percent.

The Fed has many tools to bring rates down again. It could increase how much it intends to spend on Treasury purchases or mortgage-backed securities. It could also decide to simply buy longer-dated Treasurys, said David Ader, government bond strategist at RBS Greenwich Capital. Recently, the Fed has been focusing on buying shorter-term government debt.

But if the Fed buys more Treasurys, some investors worry the central bank’s moves could have unintended consequences. That’s because when the Fed buys the debt that the government issues, it is essentially creating money. And that can cause inflation and weaken the value of the dollar against other major currencies.

A plunge in the dollar and high inflation might scare away foreign investors from buying U.S. debt, said Mike Larson, a real estate analyst with Weiss Research. And that would cause Treasury yields to rise eventually anyway, he said.

“The Fed is really backed into a corner,” Larson said.

It would be preferable if the 10-year Treasury yield fell back to 3 percent, from its current 3.75, said Mark Zandi, chief economist at Moody’s Economy.com. Such a pullback would help bring down mortgage rates and motivate people to refinance and buy homes.

When borrowers refinance to lower rates their monthly payments goes down so they have more free cash to spend on other things they need and want. And that’s good for businesses — consumer spending in accounts for about two-thirds of economic activity.

Dan Lawrence, Wald’s mortgage broker in Florida, said clients of his who have refinanced to a lower rate averaged between $300 and $400 in savings on their monthly mortgage payments, and almost assuredly pump some of those savings back into the economy.

“They’re going to go out dinner more. They’re going to buy shoes,” he said.

But many analysts, including Larson at Weiss Research, expect mortgage rates to head back toward 6 percent. The question, they say, is how fast.

Blogger: If you intend to buy hurry. Don’t wait for the bottom of the market to be in your rear view mirror. And if you are investing in deals then examine Foreclosures.

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Divorceee pleads: Help me keep my home and free myself of the quitclaim deed.

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DEAR BENNY: I am a recently divorced woman. After many years of marriage in the same residence, I was decreed full ownership of the family home. However, I had to secure a substantial loan on the home to give to my ex-husband in order for him to move out. Because of my financial situation, I could not secure the loan without keeping him on the loan and on the deed. However, in the divorce settlement there is a quitclaim deed stating that I have five years to refinance the loan and get my ex-husband’s name off the loan and off the house deed.

I will not quality for a loan myself. However, I have a son, a recent college graduate, who has an excellent job and salary, and who is living downstairs and helping to pay the mortgage.

Should I go ahead and record the quitclaim deed? My name has been changed. Would the mortgage company be alerted and would they then require the loan to be paid in full? Would I then be forced to sell sooner than the five years? Also, I know my ex-husband’s name would still be on the loan. They may make me refinance with my name alone (I would not qualify), but maybe with my son’s credit I could qualify, making him part owner with his name on the deed. Could you please clarify the most prudent steps for me to take to keep my home and free myself of the quitclaim deed? –Amy

DEAR AMY: First, federal law does not permit the lender to call your loan just because you changed your name or add your son to title.

I suggest the following: Assuming that your son qualifies for a loan, have him buy half of the house. You then will both apply for a new loan, which if approved will pay off the existing loan, and your ex will be out of the picture.

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Talk to a loan modification expert, save your home from Foreclosure

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If you can’t beat them, then fight them with Foreclosure Fighter and modify your loan. They are one option worth exploring of the few I may point you to. The Home Foreclosure Fighter website is simple, informative, and user friendly.

Loan modification allows homeowners and lenders to change the terms of a loan in order to stop foreclosure. A loan modification is NOT a new loan. It is often the ONLY option for homeowners with bad credit that are behind on their mortgage.

Home Foreclosure Fighter matches people facing foreclosure with service providers who can help them keep their home by modifying their existing loan. Just this year this site has helped nearly 100,000 homeowners nationwide.

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A Break in The Clouds – The U.S. Realty Market

Quit buying the media’s sensationalistic bad news because there’s a break in the clouds for a limited time only. Anyone taking advantage of this fact will have bragging rights in their new homes at BBQs for years to come.

Here’s four reasons why to buy and even sell if you have to:

First, The real estate “bubble” is now gone. Home prices have already corrected completely, retreating from their irrational bubble levels back to their consistent historical and increasing average line of approx 4% annually. Real estate is priced correctly more everyday. The sell-off that’s most likely still to come will be over-selling, and prices will correct back up to the aforementioned moving average when the economy improves as the recession ends over roughly the next three to five years. Not much room for flipping homes for investors but more certainty for new buyers looking for a measured rate of return who see the merit of living in their investment particularly as stocks, commodities futures like ETFs and bonds fall prey to bearish psychology and government backroom deal making.

Second, we are currently enjoying a perfect opportunity in the real estate market as usually there is an inverse relationship between home prices and mortgage rates (high prices accompanying low rates, or low prices with high rates). Usually a buyer has only two options, either paying too much for their home in a seller’s market or paying too high a mortgage rate in a buyer’s market. This relationship between price and interest rate determines affordability. 2009 is an aberration, with both home prices and their interest rates are low at the same time. As a result, housing is very affordable right now, making 2009 the best buying opportunity we’ve seen since the ’70s and the best we’ll see until rates creep up. Nearly two-thirds of current sales are first-time home buyers. For anyone looking to get into the market for the first time, right now is your chance while housing is affordable. There will not be a better buying opportunity than this year for the duration of the Obama Administration particularly with all the regulation it proposes to permanently correct the behavioral human error that contributed to this aberration along with its already implemented first time home buyer tax incentives and relinquished moratorium on foreclosures from November 08′ to March 31st of this year urging such correction. There is even a push for innovative programs like Rent-to-own programs, in which a portion of rent goes toward a down payment, which are also are being revived in some communities with too many foreclosed homes. Expect rates to creep up folks. The opportunity gap is closing. The government wants to stimulate the economy through the housing market so that as consumers are encouraged to borrow more money then banks may tap demand and raise their rates ahead of that demand to make profits again so they can start paying back their TARP funds.

Third, today’s historically low interest rates offer a refinancing opportunity. If you are currently paying more than 5%, give us a call. I can size up your situation and get you into a lower monthly payment with minimal effort on your part with the largest and most consolidated player in the market emerging after May 1st: Bank Of America’s Countrywide. And If you have investments or cash of 500k or more, then I have a banker for you offering even better competitive rates and floaters.

Fourth, if you’re thinking of selling, you have an opportunity right now to get your home listed and sold while prices are firmed up and buying activity is strong and encouraged. We’re coming into the optimal selling season, Spring and Summer, and the bulk of your would-be competition (bank REOs) are on hold until approx the Fall since, “Fannie Mae said in a brief statement from spokesman Brian Faith that ‘Fannie Mae’s suspension of foreclosure-related evictions concludes as of March 31, 2009. The company has in place special foreclosure sale requirements that take into account the Making Home Affordable program. A foreclosure sale may not occur on any Fannie Mae loan until the loan servicer verifies that the borrower is ineligible for a Home Affordable Modification and all other foreclosure prevention alternatives have been exhausted.'” If you plan to keep your property for years, call us for a refinance as stated above instead. But if you’re thinking of selling any time in the next year or two, you would do well to list your property right now. I’ll help you make the most of this window of opportunity and get your property sold before the banks are allowed to process foreclosures again.

Remember to Invest with Vision!

 

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Federal Reserve Surprises Financial Markets

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Here we go again, with the talking heads on financial news misinterpreting the impact of the Fed‘s actions on home loan rates.

Here’s the scoop. What the Fed just announced is huge – they have committed to buy another $750B in Mortgage Backed Securities, and $300B in Treasuries.

But what does this mean and why do you care?

Their actions provide a demand for Mortgage Backed Securities, which should help keep a ceiling on home loan rates moving much higher in the foreseeable future. That’s good news, for homebuyers who are seeing the bargains out there and understanding that now is the time to act. Good news for those who are ready to refinance and fight foreclosure too.

But an important distinction – this does not mean rates may move significantly lower. Depending on exactly which coupons the Fed purchases when they go shopping for Mortgage Backed Securities, their actions may keep a lid on rates, but not push them very much lower. And based on what they’ve been buying since the beginning of this year when they started their purchasing program – that is exactly how it has played out.

Present home loan rates are within inches of historic lows. What is keeping you on the sidelines from acting now to refinance and get some dollars back into your own pocket, where they belong – or moving forward to buy the home of your dreams, while it is still on sale?

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