When talking about your career, try to avoid using these limiting words.
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Image by Casey Serin via Flickr
DIVORCED homeowners wrangling with the task of removing a former spouse’s name from the mortgage after buying out his or her equity stake in the marital house may think that refinancing is the only choice.
There is another, little-known option that can avoid refinancing and its costs, which generally run 3 to 6 percent of the outstanding loan principal, according to LendingTree. You simply ask your lender to remove the former spouse’s name, leaving the loan note in your name only.
The problem is that not all lenders or mortgage servicers offer this option, known as release of liability. The lenders and servicers that do will most likely run a separate credit check on you — requiring, for example, that you meet minimum credit scores (typically from Fannie Mae, the giant government buyer of loans), and ensuring that you are current with the monthly mortgage payments. They may also require that any investors in the loan, after it is sold off, agree to the deal.
And if you are “under water,” and owe more on the mortgage than the home is currently worth, this process is not an option.
“This is a common and often messy business,” said Jack Guttentag, a mortgage expert and emeritus finance professor at the Wharton School of Business at the University of Pennsylvania. “Lenders seldom have a reason to take a co-borrower’s name off the note.”
But, he added, if a homeowner can prove that he or she can afford the payments and meet the required credit criteria — typically those of the investor in the loan — then release of liability may work.
Neil B. Garfinkel, a real estate and banking lawyer at Abrams Garfinkel Margolis Bergson in New York, says the lender “will require the borrower to prove that the borrower is able to support the monthly payments without the co-borrower spouse,” typically through monthly bank statements, annual tax returns and investment statements.
Having the name removed protects the credit of both parties, actually. If the former spouse failed to pay other debts, a lien could be placed on the home, and if you were delinquent on the mortgage payments, your former spouse’s credit could be hurt.
Most divorce settlements stipulate one of two outcomes for marital property. Either the house must be sold, or the person wanting to keep the property must buy out the other’s share, usually within months of the date of the settlement, and get the other party’s name off the mortgage — either through refinancing or a release of liability — typically within a year.
Under the second option, the former spouse signs a quit-claim deed at the divorce settlement, relinquishing his or her claim to the property. But while that action takes the former spouse off the house’s title and leaves it in one name only, it does nothing to remove his or her name from the actual mortgage.
Lenders or servicers typically charge $300 to $1,000 to execute a release of liability and require the property owner to pay an additional, nonrefundable application fee, typically $250 to $500. The process can take from 30 to 90 days, mortgage experts say.
One mortgage servicer, PHH Mortgage of Mount Laurel, N.J., requires that a homeowner with a loan sold to Fannie Mae have a minimum FICO credit score of 620 and a debt-to-income ratio of 50 percent or below (the ratio measures the amount of gross monthly income that goes to paying off all debts).
Still, a lender or servicer “generally has no obligation to release one of the borrowers,” Mr. Garfinkel said.
But Mr. Guttentag says homeowners may have one point of leverage. He suggested that qualified borrowers not accorded the release they seek tell their servicer or lender that unless a release of liability can be executed, the borrower will refinance the mortgage — at another lender.
“In such cases,” he said, “the servicer might agree to do it.”
Patricia Griecci Pancreatic Cancer Foundation
PlayMore Publishing Dog Our Books
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Today the Labor Department reported another big drop in weekly jobless claims –cheering economists and investors who use the indicator to get a quick read on the economy. The 366,000 unemployed Americans who filed initial claims last week marked a three-and-a-half year low.
The general rule of thumb is that when claims fall below 400,000, the economy is adding jobs. But recent data suggest the gauge is likely higher. The economy has steadily been adding jobs since October 2010, but over that same period weekly claims were near or above 400,000.
The following chart shows the relationship. The blue line represents the number of people who filed for jobless claims subtracted from 400,000, so the line is in positive territory when initial application are lower than the threshold and its negative when more than 400,000 people are applying. The red bars represent the number of jobs lost or gained in the corresponding month. Generally when claims are greater than 400,000, the economy is losing jobs.
One reason that may be happening is the take-up rate — the percentage of jobless workers who apply for benefits — has climbed dramatically during this recovery, standing now at about half of the unemployed, when it previously was about a third, economists say.
More people may be applying for benefits because they have become more generous. The 2009 stimulus law temporarily boosted benefits by $25 weekly and exempted the first $2,400 in benefits from federal income taxes. Congress has also repeatedly raised the maximum duration of benefits to a current 99 weeks.
At the same time, this recovery has been weaker than in the past. That has led not only to exceptionally high unemployment, but also an elevated rate of long-term unemployment. Thus, many Americans who now lose their jobs are expecting to have a tougher time finding a new one and are more likely to apply for benefits than they would have in the past.
Economist Jared Bernstein, for one, agrees the threshold for determining job growth is now higher than 400,000. “I think the [increased] take-up has just a lot more to do with the persistence of the recession and the fact that people really need benefits,” said Mr. Bernstein, a former adviser to Vice President Joe Biden who is now a senior fellow at the Center on Budget and Policy Priorities.
It’s also important to note that not all unemployed workers get benefits. Many workers don’t qualify (i.e. they were fired instead of laid off, or they are recent college graduates with no work experience). Others, for whatever reason, simply don’t bother applying for benefits.
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The National Endowment for Financial Education, NEFE, a nonprofit organization in Denver, is warning consumers about the pitfalls of so-called debt consolidation loans.
A recent online poll, commissioned by NEFE, found that 75 percent of U.S. adults said they had debt and 51 percent said they were worried about the amount they owed.
The poll of 2,525
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NEW YORK — City politicians are calling on federal regulators to start making use of a little-known provision in the sweeping financial reform bill passed last year that could help protect housing for low-income residents.
Local politicians, residents and housing activists gathered outside a dilapidated Bronx building Thursday to launch the opening salvo in a battle against New York State’s biggest savings and loan — which, they say, is exacerbating the growing threat to affordable housing in New York City.
New York Community Bank has been accused of trying to profit from the seizure of foreclosed apartment buildings in the area, selling the buildings at prices reminiscent of the height of the housing boom. But property prices have taken a hit, and tenants say conditions at the buildings — run-down even during the market’s flush years — have deteriorated further.
The bank’s representatives did not respond to calls for comment.
Politicians have accused the bank of trying to claw back every penny of the bad mortgages it initiated while the housing bubble inflated, regardless of the consequences.
“Instead of selling them at the price that they’re worth, making it clear that major repairs need to be done, New York Community Bank was only trying to make a quick buck,” New York City Council Speaker Christine Quinn said, adding that regulators like the Federal Deposit Insurance Corporation should examine the “inflated fake numbers faceless, greedy bankers use to make a profit.”
A provision in the Dodd-Frank financial reform bill passed last year calls on federal agencies to protect apartment buildings in foreclosure. Politicians said they are still unsure what form the provision will take, but said the law gave the FDIC the power to intervene in bad deals.
Specifically, Quinn said, the FDIC should force New York Community Bank to disclose its finances and the buildings’ repair costs.
At the height of the financial crisis, roughly 100,000 apartments in low-income neighborhoods in New York were bought by investors who planned to raise the rents or flip the properties, according to affordable housing advocates. Many of the apartment buildings fell into foreclosure, leaving tenants in limbo — a situation politicians tried to address in the financial reform bill.
Long-term residents of the Bronx brought their neighborhoods back from the ruin of the 1970s and 1980s, only to watch speculators and banks make a quick buck then walk away, according to Ruben Diaz Jr, the borough’s president. “It’s downright criminal,” he said. “We’re calling on the FDIC to stop New York Community Bank from profiteering at the expense of Bronxites, all while their buildings fall apart around them.”
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April 7 (Bloomberg) — Colin McLean, chief executive
officer of SVM Asset Management Ltd. in Edinburgh, says an aid
package to Portugal will have “lots of strings attached” and
require “tough austerity measures.”
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April 7 (Bloomberg) — James Knightley, an economist at ING
Financial Markets in London, says “there is growing confidence”
that Portugal will be the last of the European Union nations to
ask for a bailout.
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5.5%: E-Commerce’s share of total retail sales in the fourth quarter of 2011.
It’s no secret that more Americans are shopping online, but the speed at which sales are moving to the Web is striking.
According to a recent report from the Commerce Department, $61.8 billion of retail sales were transacted on the Internet in the fourth quarter of last year. That represented a 16% increase from 2010 and accounted for 5.5% of all retail activity over the holiday period. E-commerce’s market share has soared eightfold since 1999, and even over the deep recession only experienced a brief lull not a retreat.
Online shopping is particularly popular during the holidays, but even accounting for seasonal variation nearly 5 cents of every retail dollar spent went online. And that figure leaves out money spent on services like travel, financial brokers or ticket agencies.
“Cyber sales are soaring since more people feel comfortable buying online, and the real game changer this past holiday season has been the increased use of smart phones, tablets, and iPads to shop online,” said economist Chris Christopher of IHS Global Insight. “Online retailers are starting to make a dent in the brick-and-mortar business model. Many chain stores are looking to cyber space to supplement weak in-store sales.”
This is especially true of retailers that sell media or electronics. A separate Commerce report shows that sporting goods, hobby, book, and music stores have seen their share of all retail sales flat-lining at around 2%, while electronics and appliance stores also are losing share — down to 2.1% from 2.5% prior to the recession. Things look even worse for brick-and-mortar establishments when you take into account that their online sales are counted in that report. Take away their Web sales and their share of all retail sales is surely falling.
But there are still some brick-and-mortar retailers who have little to fear from the Internet. In the fourth quarter of 2011, gas stations represented 11% of all retail sales, up from 10% during the recession and 7% in 1999. Part of that is due to rising prices at the pump, but gas also is something you still have to go out to purchase.
Of course, the more people can do from home the less use they will have for their cars. So maybe gas stations aren’t totally immune after all.
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Image by Getty Images via @daylife
The real deal is that real estate is much more affordable than it used to be, but the barriers to entry are higher, and the days in which you could get something for nothing are over. Here are five real estate and mortgage urban legends, and the truth which lies beneath.
Urban Legend #1: Got bad credit? Get seller financing. Does seller financing exist? Of course. Is it as easy to get – or desirable – as they make it seem in the infomercials? Not even close.
Here’s the real deal: most sellers who have a mortgage they obtained in the last 10 years or so also have a due on sale clause which requires them to pay it off when they sell the property. Financing the sale themselves, vs. requiring the buyer to obtain mortgage or other financing to pay for the property, prevents them from having the cash to pay their mortgage off, as required. And the vast majority of those who don’t have a mortgage of recent vintage need the proceeds from the sale of their homes to buy their next home or invest in their next property.
What’s more, even the few sellers who don’t need the cash often don’t want to take on the long-term risk and hassle involved with having to collect payments from a buyer for 10, 15, or 30 years. The sellers who can and will agree to seller financing usually want a premium price and interest rate for it – and the smart ones will require some type of credit check and a deeper down payment than a traditional lender.
And seller financing, as sweet as it sounds, poses risks for buyers, too. If the seller keeps a bank mortgage on the property and fails to make the payment, the seller-financed buyer could end up losing the home they’ve paid for to foreclosure. Best targets for seller-financing are investor sellers who are looking to avoid capital gains, and best practice is to get a local real estate attorney involved in drafting and recording the transfer and financing documentation.
Urban Legend # 2: Buyers save big bucks on cosmetic fixers. Sellers aren’t stupid – and neither are their agents. There might have been a day and time in which you could find listings that were deeply discounted because they needed a little cosmetic refresh. But those days are long gone – even in today’s down market, sellers expect to invest a little cash into paint and carpet to stage and spruce up their biggest asset and get as much as humanly possible for it. Today’s sellers also know that homes not in tip-top shape may not sell at all these days, so they go to great lengths to do make their homes shine. (And those who can’t afford to aren’t slashing tens of thousands off their homes’ list prices, though some will offer buyers a credit at closing.)
That’s not to say you can’t get a discount on a place that needs some work. But the meatiest discounts are on the places that need the most work; roof leaks, old windows and laundry-list long pest inspection reports are much more likely to get you a big price break than scuffed walls and grungy carpeting on a home in otherwise sound condition.
Urban Legend #3: 100 percent financing for first-time buyers. Most of the national first-time buyer programs are mere figments of our collective mortgage memory. But during the subprime mortgage era, 100 percent financing was available to pretty much everyone, not just first-timers. And the post-bubble first-time buyer programs tended to be tax credits that could defray some of the up front investment required to buy a home, rather than zero-down home loans.
FHA loans, which are extremely popular with first-time buyers, are available to any buyer who can qualify, whether or not they have owned homes before or own one now. Most of the state and local first-time buyer programs that still exist involve some level of down payment or closing cost assistance, but the vast majority also require that the buyer put some of their own cash into the transaction. The prevailing theory today is that homeowners who have put their own hard-earned cash into their homes are less likely to walk away from it later, whether or not they are first-time buyers. It has also become clear that the financial management skills and discipline it takes to save up for a down payment or closing costs are skills and habits that stand prospective buyers in good stead for the rest of their lifetimes as homeowners.
Long story short, while virgin homebuyers can and should seek out the assistance programs available to them (local real estate and mortgage pros often know the ins and outs), they should also tuck their pennies away and expect to have to put some of their own financial skin in the game.
Urban Legend #4: Nearly free foreclosures. We’ve all heard the line that banks don’t want to be in the business of owning homes. That may be true, but they are in that business, whether or not they want to be. As a result, they’re not giving houses away at pennies on the dollar. In fact, bank-owned homes, as a rule, must be sold at as close as possible to their fair market value. Banks and their Wall Street mortgage investors do this by exposing the property fully to the market, rarely accepting lowball offers, and only lowering list prices in fairly small increments after a listing fails to sell after 60 or 90 days (plus) at the pre-reduction price.
While foreclosed homes do sell for less, on average, than their “regular” sale counterparts, they are also often in worse condition. And banks are virtually always less negotiable on pricing, repairs and other terms than individual sellers. The fact of the matter is that some of the best deals on today’s market are to be had via negotiations with realistic owners of non-distressed properties who are ready, willing and able to make a deal.
Urban Legend #5: Distressed owners who will sign their home over to you, gratis. This one is fantasy of the highest level. First off, very few assumable home loans even exist anymore; most mortgage are due on sale, which means that new buyers have to qualify for and secure their own loans. Secondly, many mortgages that ARE assumable have much higher interest rates than today’s home loans. Third, most homeowners who are in a distressed position on their home are in that position because their home has declined in value and they now owe more on it than it’s worth, which stops them from pulling off a traditional sale or refinancing it at today’s lower rate.
Ask yourself: why would you, a buyer, want to assume a mortgage balance vastly greater than the property is worth, even if you could? It’s just not worth it, even if you think you’re getting a shortcut around the mortgage qualifying rigmarole.
Add to that the fact that many states have consumer protection laws dramatically limiting the sort of ‘bailout’ that is even legal to propose to a homeowner who is in some stage of the foreclosure process. In addition, many homeowners who have received foreclosure notices are in the process of trying to work out their distress with their lender or staying put without making payments as long as possible before losing their homes. These folks might be slightly miffed at your intrusion, to put it politely, if you ring them up, send them a note or knock on their door trying to pitch yourself (and your signature) as their mortgage distress solution.
Patricia Griecci Pancreatic Cancer Foundation
PlayMore Publishing Dog Our Books
Tags: bankruptcy, divorce, fsbo, mobile home, mortgage notes, real estate, refinance
A federal jury has awarded a Georgia man more than $21 million in a lawsuit pitting the homeowner against one of the nation’s largest mortgage servicers.
U.S. Army sergeant David Brash was awarded the damages in March, after a Columbus, Ga. jury found that PHH Mortgage, the country’s eighth largest mortgage servicer, had incorrectly reported Brash to credit score companies as “seriously delinquent” despite the fact that all his mortgage payments had been automatically deducted from his paycheck.
According to court documents, Brash sent letters to the mortgage company that went unanswered, violating federal laws. When he called his mortgage company to find out why his payments were not going through, his attorneys said, he was repeatedly routed to overseas customer services staff who couldn’t answer his questions.
“PHH’s corporate representative testified that call center representatives had limited access to information,” Teresa Abell, one of Brash’s attorneys told The Huffington Post. Some of Brash’s calls — which were automatically recorded by PHH — were played in court, Abell explained. “The jury got a flavor of what would happen, he could be put on hold for 30, 45 or 55 minutes, then representatives would give him whatever story they had concocted,” she added. Different representatives told Brash different things, many of which were simply not true, Abell alleged. “They would tell him they would investigate and get back to him in 24 hours, he’d call back, and another representative would tell him “there is no investigation being done on your account.”"
Consumer websites are packed with homeowner complaints of mistakes by mortgage companies and banks that can be impossible to set right — in part thanks to unhelpful customer service departments. In the most extreme cases, these problems may have led to wrongful foreclosures. In January, JPMorgan Chase admitted to overcharging military families on their mortgages, illegally foreclosing on 14 families as a result. In February, The Huffington Post reported on a couple who were facing foreclosure despite having proof they had made every mortgage payment. In circumstances echoing Brash’s, PHH Mortgage reported that homeowner, Kendra Parker, to credit rating agencies for missing payments, destroying her credit rating.
An investigation by all 50 state attorneys general launched last fall when improper paperwork practices at banks and mortgage companies — like the “robo-signing” scandal — came to light found many banks and mortgage servicers violated numerous state laws in handling mortgages and foreclosures. While banks expect penalties, it is unclear whether homeowners affected by their banks’ actions will have any recourse.
Brash’s case remains one of a few in which homeowners have successfully established that their mortgage company was in the wrong, but lawyers say more are on the horizon.
Brash originally took out the $160,000 mortgage on his Columbus, Ga., home in November 2007, setting up automatic payments so his $1,300-a-month payments would be deducted from his army salary. During the trial, the jury heard the homeowner called the mortgage company twice to make sure the paperwork was correct. In court, representatives for PHH Mortgage testified that mistakes on these forms — which customer service staff had told Brash were correct — had caused the missing and late payments.
After 15 months, according to court documents, PHH Mortgage started sending late payment notices to Brash, and threatened to report his “serious delinquency” to credit scoring agencies. After “numerous, lengthy calls” to a customer service department in India went nowhere, Brash hired an attorney who wrote a formal letter to the president of PHH about the errors. Under the federal Real Estate Settlement and Procedures Act, mortgage companies and banks have to respond to written requests within 60 business days, which PHH failed to do, the attorneys said. They did however adjust Brash’s account.
In November 2009 PHH Mortgage sent more late payment notices, this time reporting Brash to three credit rating companies and seriously damaging his credit score, according to court documents. Brash, based in Fort Benning, Ga., sued the mortgage company for breaching the federal Real Estate Settlement and Procedures Act. He also sued under Georgia state loan servicing and breach of contract laws.
Attorneys representing PHH Mortgage did not return calls for comment, but told Georgia TV news station WTVM: “Although we respect the judicial process, we believe this verdict is not supported by the facts of the case or by applicable law, and that the award is grossly disproportionate to any damages Sgt. Brash may have sustained. We intend to seek further judicial review of the case.”
The Columbus-based Ledger-Enquirer originally reported Brash’s story.
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