Real Estate Investing

Out here in the streets, I’ve already talked about how people are facing major struggles to find mortgage relief from lenders even after the foreclosure rescue plan has been put into place by the administration of President Obama.  Apparently the problem is widespread as indicated in an article published by CNNMoney.com.  The news agency published the experiences that home owners have shared with them in seeking relief and in reading through them, it appear that most have been either told “No.” directly or are still waiting for an answer after being given the runaround.  For example Jose Rivera was seeking a lower interest rate,

Rivera hit roadblocks from the start. He never received a call back from the first customer service agent at Bank of America, which bought Countrywide, despite leaving three messages. In May, he requested a different agent and was told because he has private mortgage insurance, he couldn’t apply until the end of May. He called back in early June and was told to try again at the end of July. Now that interest rates are rising, he’s concerned it won’t be worth it to refinance.

According to the article, the plan allows people with little or no equity in their home to refinance so they can have lower mortgage interest rates. “The plan waives the requirement that homeowners have at least 20% equity in their home, allowing them to participate even if they have loans of up to 105% of the value of their property, as long as they meet other criteria. This aids those who are current in their payments but have seen their home values decline.”

However people making their payments - even though they struggle - are the low man on the totem pole so are not finding help.  This is why one of my friends skipped her December payment …. so she could move up on the priority list.  In January she was able to refinance at a much lower rate.

This is a sorry state of affairs when people do try to hold on, but get such negative responses such as those experienced by Jeffrey Huegel,

It’s been nothing but a runaround. They just don’t care. Rather than let me stay in my home at an affordable interest rate, the bank would rather foreclose and receive nothing. I guess it’s better just to let them foreclose because I am fighting a losing battle trying to stay.

Tsk tsk.  Read the full CNN article here.

I can’t not link to Miranda Marquit’s post about paying your mortgage over at Loan Shak, Baby.  Miranda said she often gets the question in her inbox asking advice on whether the consumer should pay their mortgage or pay their credit cards.   Her answer: pay your mortgage first,

The answer to this question is very simple: Pay your mortgage first. You should make your mortgage payment your first priority. Your credit card debt is unsecured. Your mortgage, on the other hand, is secured by your home. Your credit score may be in trouble if you miss credit card payments, but it will be in much worse shape if you go through foreclosure. And you could lose your home.

First, I’m NOT a financial planner, adviser, attorney, therapist, hand-holder, etc.  BUT if I had to put in numerical order how my bills would be paid here’s what we’d see:

1. Mortgage
2. Car (you have to be able to get to work to earn money to pay your mortgage).
3. Electric, Gas,Water bill
4. Food (don’t eat out … cook to save money)
5. Insurance
6. Phone
7. Medical
8. Credit Cards
9. Cable (I really wanted this near the top, but realistically you can live without cable)
10. Internet

This doesn’t account for court-ordered payments like child support, alimony, judgments, etc.  If the court orders payment on anything, I’d put those payments up to number 4 or 5.  What do you think?  What have we forgotten?

Several days ago - before I disappeared for part of the week to attend my oldest daughter’s summer orientation for college - I caught this article from the New York Times and bookmarked it for readers here at Banks.com.   Financial writer Edmund Andrews wrote a riveting, heart-wrenching story about his personal credit crisis through a mortgage catastrophe.

Mr. Andrews found himself in a situation where he wanted to buy a home but because he was paying alimony and child support - and because his fiancee wasn’t yet working - he needed one of those *special* loans that dominated the 2005-06 buying years.

I thought I knew a lot about go-go mortgages. I had already written several articles about the explosive growth of liar’s loans, no-money-down loans, interest-only loans and other even more exotic mortgages. I had interviewed people with very modest incomes who had taken out big loans. Yet for all that, I was stunned at how much money people were willing to throw at me.

Mr. Andrews first found himself moving toward a “stated income” loan where he could declare what his income was with no paycheck receipts or tax returns produced as evidence of his earnings.   However, he quickly learned that his name was still on the mortgage being paid by his ex-wife so this plan put his debt to income ratio over the limit.

Bob didn’t get flustered. If Plan A didn’t work, he would simply move down another step on the ladder of credibility. Instead of “stating” my income without documenting it, I would take out a “no ratio” mortgage and not state my income at all. For the price of a slightly higher interest rate, American Home would verify my assets, but that was it. Because I wasn’t stating my income, I couldn’t have a debt-to-income ratio, and therefore, I couldn’t have too much debt. I could have had four other mortgages, and it wouldn’t have mattered. American Home was practically begging me to take the money.

Years later the family financial situation is sinking.  Mr. Andrews managed to save his marriage with his new bride, but they are bracing themselves for either foreclosure - or maybe they’ll be able to work with the lender to refinance.  For now they wait.  It’s been eight months since he made a mortgage payment.  Eight months without knowing what will happen would be torturous to me.  I can’t imagine how he and millions of others are feeling right now.

Go read Mr. Andrews full story.