The first step in the homebuying process is to find out what you can afford to pay for a house, condo or co-op. This will depend on the amount of cash you have available for a down payment, your credit, income, assets and overall financial situation.
Mortgage qualification is easier for buyers who work as employees whose income can be easily verified. Self-employed individuals or buyers with income from investments may find the qualification process more difficult.

A wrinkle in the financing end of the homebuying process is that it’s not as easy to get a preapproval letter from your mortgage broker or loan agent as it used to be. As of Jan. 1, 2010, the Department of Housing and Urban Development (HUD) began requiring lenders and mortgages brokers to issue a binding Good Faith Estimate (GFE) within three days of receiving a loan application.

Before then, buyers shopped around for a mortgage. When they saw a house they wanted to buy, they asked their loan agent or broker to provide a preapproval letter to accompany their purchase offer. The loan person would run a credit check and verify the buyers’ income and assets without, in many cases, taking a formal loan application. On the basis of this information, a preapproval letter was written.

Read the full article here

Additionally; this article fits in well with the Orange County Market Update Video that we shoot weekly, and it’s our tip of the week. Check out our Anaheim Hills Market Update here…

Real Estate: Finally a good investment?
The housing market still looks pretty bleak: There were a record 1 million foreclosures last year, home prices are still falling in many regions, and the number of “underwater” properties is at a record high.

And things don’t look much better in other areas of real estate. The number of construction jobs continues to decline, even as other parts of the economy have added jobs. And mortgage rates have moved higher as long-term Treasury yields have backed up during the past few months.

Basically, the real estate market remains a mess.

Real estate encompasses a wide range of markets – homes, apartments, hospitals, office buildings, strip malls, dormitories and other properties. But for our purposes, let’s focus on residential real estate, or homes. Here are four reasons to think residential real estate might represent a bargain – with one big caveat.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Everyone hates homes – When the housing market is in the doldrums, people tend to avoid thinking about the value of their home. Sellers complain they’re not getting offers and buyers bemoan the strict lending requirements. However, prospective buyers should be contrarian and take advantage of a down housing market.

• Smart people are buying real estate – A prominent hedge-fund manager said in a speech last fall: “If you don’t own a home, buy one. If you own a home, buy another one, and if you own two homes, buy a third and lend your relatives the money to buy a home.” He believes that interest rates and home prices will rise this year, so real estate bargains won’t last much longer.

• Real estate performs well during inflation – Convention says Treasury Inflation Protected Securities, commodities, and real estate do well in an inflationary environment. Real estate performed well during the period in the 1970s, when persistent inflation and high unemployment occurred.

• Demand may be coming back – Job creation and getting people employed are the two major factors in the housing rebound. There’s much debate about when the job market will recovery. Optimists say the recovery will happen this year, while pessimists say it won’t happen for several years.

Read the full story… click here.

In a kind of crisis intervention, IndiSoft is working on computer programs that track borrower behavior so that if a life-changing event occurs, steps can be taken to ensure timely payments are made.

By Lew Sichelman-December 12, 2010
Reporting from Washington —

The day is coming when lenders will no longer turn their clients loose after they leave the closing table, never to be heard from again unless someone misses a payment or two.

Think of it as crisis intervention. Rather than waiting for previously solid borrowers to ask for help, lenders will monitor their borrowers over the life of their loans, looking for signs of trouble before borrowers even realize a problem is at hand.

It won’t happen this year, or even next. Lenders are too busy right now cleaning up the current mess of bad loans. But Sanjeev Dahiwadkar, president and chief executive of IndiSoft, a Columbia, Md., mortgage-technology company, believes it won’t be too long before lenders begin keeping tabs on their customers for as long as their loans are on the books.
“That ship has already started sailing,” Dahiwadkar says. “Historically, servicers have always waited for problems to materialize before trying to do something about them. But they are going to be watching their portfolios much more closely in the future.”

IndiSoft writes computer programs for the default-management business, the underbelly of the lending community that works to turn nonperforming loans into performing assets. The company’s clients include everyone who has a stake in saving problem loans: the investor that purchases the loan from the funding lender, the servicer that collects the payments on behalf of the investor and the insurance company that promises to cover part of the investor’s losses should the borrower stop paying.

Currently, IndiSoft’s technology comes into play the day a borrower stops paying. But Dahiwadkarsays the company is working on programs that monitor borrower behavior so that if a life-changing event such as a divorce or layoff occurs, an IndiSoft client can take whatever steps are necessary to make sure the borrower continues to make timely payments as promised.

The client might choose to simply monitor a particular loan more closely than it would otherwise, perhaps sending a friendly reminder a few days after a payment is due rather than waiting until it is 30 or 60 days late. Or it could take bolder steps such as calling the borrower to make sure that all is well and offering help right away instead of when the borrower is 90 days behind.

Right now servicers are so overwhelmed trying to work through the millions of mortgages that are in some stage of the foreclosure process that slow-paying or minimally late-paying loans are getting little or no attention.

Worse, most borrowers tend to stick their heads in the sand when they get behind, figuring that they’ll solve their problems on their own. But even when borrowers call in an attempt to avert a potential crisis, short-handed servicers typically relegate them to the end of the line because they have their hands full with more extreme situations.

Eventually, though, the foreclosure mess will clear. And when that happens, Dahiwadkar believes that stakeholders will become far more proactive in managing risk than they are now. Instead of reacting to problems as they occur, he says, they will look for a pattern of behavior — clues, if you will — that indicate a problem is on the horizon.

This goes far beyond the latest underwriting wrinkle of reevaluating a would-be borrower’s credit just before the mortgage closes to make sure that the person hasn’t taken out any other loans or run up other bills that would impinge on the ability to make house payments. And it could go way beyond monitoring for life events such as a major medical issue.

For example, the lender might ask you to sign a document at settlement that gives the servicer the right to run periodic credit reports to see whether you are having any difficulty paying your bills. If the servicer knows you’ve missed a couple of credit card payments or you are late on your auto loan, it might call to find out what’s up.

But permission to monitor your credit goes even deeper than that. If all of a sudden you start paying your bills on the 15th of the month instead of the first, for example, programs developed by IndiSoft or other technology companies will alert the servicer, which can then step up its surveillance.

“There are different ways to analyze risk,” Dahiwadkar says. “A change in behavior is something to be cautious about. So if a payment pattern changes, it could be a trigger for putting a loan on a ‘watch’ list.”

Then, if you don’t seem to be handling your finances well, the company might offer credit counseling so you don’t also fall behind on your mortgage. Or if you’ve been laid off, the servicer could offer to rework your loan or allow you to miss a few payments until you get back on your feet.

But Dahiwadkar says servicers and other stakeholders will be watching their borrowers’ behavior much more closely so they also can separate those who are truly experiencing financial difficulties from deadbeats simply refusing to pay.

If someone stops paying the mortgage but continues to make credit card payments on time or takes on new debt — a second mortgage, for example, a car loan or a loan from a finance company — the IndiSoft executive says, “It’s pretty certain you are dealing with a borrower who is not paying because he doesn’t want to, not because he can’t.”

lsichelman@aol.com
Distributed by United Feature Syndicate.- Copyright © 2010, Los Angeles Times

While Southland housing values overall have rebounded from recent lows, those in the upper end of the market may not yet have hit bottom. Some experts don’t see a turnaround for at least another year.

Author Anne Rice has reduced the asking price on her Rancho Mirage home by $350,000, to $2.95 million, because she wants a smaller residence. (Mariah Tauger, Los Angeles Times / November 19, 2010)

Photos: Author Anne Rice downsizing from luxury home
By Lauren Beale, Los Angeles Times

On its glittering surface, the Southern California luxury housing market still has plenty of pizzazz.

A 48,000-square-foot Versailles-style estate in Bel-Air that sold for $50 million is believed to be the highest-priced sale in the nation this year. Actor Sacha Baron Cohen spent $18.9 million on a Mediterranean villa in the Hollywood Hills, a record for that area.

Luxury housing: In the Dec. 13 Section A, a graphic with an article about problems in the luxury housing market listed ZIP Codes for the highest-priced homes in Southern California. It showed two locations for Rancho Santa Fe on a map: the correct one in San Diego County and an incorrect one in Los Angeles County. —

These trophy deals, however, are masking a larger malaise in the luxury market. Most mansions put up for sale are lingering for months without nibbles from buyers, real estate agents say. And although Southland home prices overall have rebounded from lows hit last year, the luxury market is still trending downward.

The troubles at the top may seem small compared with the huge housing declines seen in areas such as the Inland Empire. But a turnaround in the luxury market was the first indicator of recovery in the 1990s down cycle. And many experts say the housing market won’t be healthy again as long as mansion prices are falling — which could be the case for at least another year.

“Good locations will be the first out, and luxury is generally in good locations,” said economist John Burns, who heads a real estate consulting firm in Irvine.

Why the continuing funk? Analysts say the foreclosures and short sales that depressed home prices in general are finally catching up with the high-end market. The day of reckoning just took more time.

“Formerly affluent people who borrowed far too much money” are running out of staying power, Burns said.

The Times examined monthly sales data in 20 Southland ZIP Codes with the highest home prices, from Beverly Hills to Solana Beach, using information provided by research firm MDA DataQuick of San Diego.

In 10 of those areas, home values are still lower than they were a year ago, suggesting that they have yet to hit bottom. Median prices were basically unchanged in five areas and showed modest gains in five. Overall, 19 of the 20 communities are still below their high points.

Anne Rice said she feels a little awkward complaining about the real estate market. As a bestselling novelist, she realizes she is far more fortunate than most.

Even so, Rice isn’t thrilled that she has had to reduce the asking price on her primary home in Rancho Mirage, near Palm Springs, by $350,000.

She hopes the new price of $2.95 million will attract a buyer, but it means taking a greater loss. Rice bought the six-bedroom, seven-bath home in gated Thunderbird Heights for $3.6 million in 2005.

“The market has been hard on us,” said Rice, who wants to downsize. “All my high-earning years, I invested in real estate…. I have lost money now on two — quite dramatically — selling an $8-million property in La Jolla for $6.5 million and a property in New Orleans for less than cost and improvements.”

Southland home values plunged 51% from 2007 to 2009. But they’ve shown steady improvement over the last 18 months, gaining back about 15%.

In contrast, home values at the upper end have not fallen as far but have shown few signs of recovery, according to MDA DataQuick figures.

There are 44 ZIP Codes in Los Angeles, Orange, Santa Barbara and San Diego counties where median prices exceed $1 million. Prices in these high-end communities dropped nearly 26% from their January 2008 peak to April 2010. They have gained back 5% since then.

Prices in Rancho Santa Fe, ranked by Forbes as the third most expensive community in the nation, have fallen nearly 31% since their 2005 peak, and they have yet to turn the corner.

Through October, Beverly Hills 90210 had the highest median of these top-priced neighborhoods at $2.7 million. That’s down a mere 18.7% from the 2008 crest, but it too has not shown any rebound.

While the overall drop in value has not been as severe as that at the lower end of the market, the fact that prices in many areas continue to fall acts as a brake on sales — as buyers hold off making purchases out of fear their investment will immediately decline in value.

Luxury real estate brokers are feeling the pinch, as fat commissions are fewer and further between.

“We’re seeing a lot more sales in the $1 million and below range,” said John McMonigle, president of McMonigle Group, an Orange County firm that specializes in selling luxury properties. “We had 121 homes close escrow in Newport Beach in September at an average of $1.15 million, but when you drill down, one thing is concerning: There was only one house over $5 million.”

Malibu’s Billionaires’ Beach enclave can boast of a $37-million closing in October, one of the highest prices there ever. But that and other marquee sales can’t make up for weakness elsewhere in the market.

“Malibu has taken the worst hit,” said Sandra Miller, an agent who tracks $1-million-plus sales on the Westside. Less than a third of listed properties are selling, she said, and median prices are down about 25%.

When will the market turn around, and what will it take?

Burns, the economist, believes that the housing market overall is headed back toward 2002 price levels, on grounds that the gains seen over the last year or so will be reversed as a new flood of foreclosures and short sales hit the market.

That would mean a small retreat for the general market, in which prices are now at 2003 levels. It would be a more dramatic downturn at the high end, where prices are about where they were in 2005. He predicted they won’t hit bottom till 2012.

Real estate agents say one reason the high-end market has taken longer to reach bottom can be summed up in one three-letter word: ego. Wealthy sellers may not need the money and refuse to reduce their price for fear they’ll look like they are in financial trouble, said Bob Hurwitz of Hurwitz James Co. in Beverly Hills.

The message he tries to hammer into unrealistic sellers these days: “You wouldn’t buy this house for this price yourself.”

Holding firm on an asking price keeps up the illusion that the house is worth more, Hurwitz said. “Some sellers are dreaming.”

Southern California’s posh neighborhoods are littered with examples of properties stuck at outdated prices. The most noticeable on the landscape is Fleur de Lys, a 12-bedroom estate in Holmby Hills that was listed at $125 million for 940 days before being pulled off the Multiple Listing Service late last year. The French Beaux Arts mansion on 5 acres is still being marketed on agents’ websites.

By comparison, its competition — the nearby $150-million Spelling estate — has been on the market only since March 2009. There has been no price drop on this 56,500-square-foot manse either, however.

The moneyed market of the Palos Verdes Peninsula is no different. Linda D’Ambrosi of Keller Williams had the listing on a turn-key ocean-view house that lingered on the market for more than a year with nary a price cut. Home prices on the peninsula are down 12.9% from their 2008 peak.

“The seller,” she said, “just couldn’t come to terms with today’s value.”

lauren.beale@latimes.com
Copyright © 2010, Los Angeles Times

Make sure that you pay careful attention to this… MID Has Boosted Homeownership. Chairs of the President’s Deficit Reduction Commission recently leaked a draft of suggestions for reducing the deficit. Among the many proposals are recommendations that would reduce or eliminate the Mortgage Interest Deduction. This could negatively impact real estate transactions. The leaked draft was intended to show that drastic changes are needed if the deficit is to be reduced. The leaked draft is NOT the Commission’s final recommendation. A formal report is expected on December 1. Recommendations in it will become formal only if 14 of the 18 commissioners vote in favor of the proposal. Etc.

Deficit Commission Chairs Release Draft MID Proposal

The concepts in the draft range from full repeal of the MID to other, various reductions. One proposal would reduce the cap on interest deductions from its current level of $1 million of mortgage debt to $500,000 of debt. The MID for home equity lines would be repealed, and the deduction for second homes would be repealed. Another version does not target MID specifically, but would rather reduce all itemized deductions by a fixed percentage. For example, if an individual’s combined MID, state and local taxes and charitable contributions were $15,000 and a 20% reduction was imposed, that individual would be permitted to deduct $12,000 ($15,000 x 0.8). A third group of proposal would retain the MID and some benefits for low-income families.

The revenues derived from cutting or eliminating the MID would facilitate the reduction of tax rates from its current 35% top rate to top rates of 23 – 26%, depending on the depth of the MID reduction. NAR and PWR will continue to monitor this situation as it develops and the full Committee report is released. We strongly oppose any changes to the MID or any plan that makes it more difficult for people to achieve the American dream of homeownership.

It also varies depending on which of the three main credit repositories you check. Each has a different scoring formula and different information in its files. – By Lew Sichelman – October 24, 2010 – Reporting from Washington —

Here is a scenario that happens all too frequently: A would-be home buyer applies online to obtain his all-important credit score. It comes back at a healthy 720, good enough to qualify for the best rate in the mortgage market. But then, when he applies for a loan with a local lender, his score is much lower. So low, in fact, that he might not qualify, even at less favorable terms.

What gives? How can your credit score be one number on one day and a different figure the next? And why does your score vary from one company to another?

A lot of things could be at play here. Let’s start with the basics.
A credit score is a three-digit number that is considered an accurate predictor of whether you will make your house payments on time every month. The higher the number, the safer the bet that you will repay.

But your score is based on the information contained in your credit record. And because what’s in your file is fluid, so is your score.

“Credit is dynamic information,” says Greg Holmes, national director of sales and marketing at Credit Plus, a Salisbury, Md., company that serves the mortgage business. “It’s constantly changing. It’s up and down and constantly moving.”

Your record changes every time the company that has your car loan reports an on-time payment — or more important, a missed payment that’s now more than 30 days late. It changes each time your credit card balance changes. It changes every time you apply for new credit. And it changes when an old bankruptcy finally falls into the abyss, never to be reported again.

Because a credit record is a moving target, shifting on a daily or even hourly basis, your credit score is nothing more than a numerical snapshot of your file at the moment it is calculated. As such it can change from one moment to the next.

“It depends on how much information is coming and going in and out of that credit report,” Holmes says. “It’s whatever time of day and month you pull the report. There’s even a difference between an account that’s less than six months old and one that’s older.”

If you asked someone to pull your credit score today, exactly six months and 29 days after you closed a department store account, for example, the number would be different than if you asked tomorrow, when it has been seven months since the account was shut down. Maybe not by much, but perhaps enough to alter your chances to obtain financing.

But there’s more to your score than what’s in it. Another big factor is what’s not in it. Not every creditor reports information to each of the three main credit repositories.

Say your auto lender is a local bank that reports only to Experian because Experian has a bigger presence in your state. In that case, neither TransUnion nor Equifax will know whether you are current on your car payments. They wouldn’t know about your car loan at all. As a result, a credit score based on your Experian file will be different from one based on the records maintained by the other two big bureaus.

Also, each repository has its own credit-scoring formula. A Minneapolis analytics company known as FICO (formerly Fair, Isaac and Co.), from which the term “FICO score” comes, created all the formulas. But the algorithm used by each credit bureau is slightly different based on factors that each believes to be a more or less important component of risk.

So not only is TransUnion’s score different from Equifax’s and Experian’s because it is based on information only in its records; it’s also different because it uses a different analytical model. And even if each depository maintained the same files, their scores would be different because they use different formulas.

Next, it’s important to know that the mortgage industry isn’t the only business to use credit scoring to rate potential borrowers. Actually, housing finance came somewhat late to the technique. The insurance business has been grading potential customers for decades, and now auto lenders, finance companies, banks, employers and dozens of others use credit scoring to make decisions.

The key is that each business has its own scoring formula. And a score that may be acceptable to, say, the finance company offering to lend you $5,000 for a new roof probably won’t be acceptable to a mortgage company trying to decide whether to lend you $500,000 to buy a new house.

So if you received your score from one of the Internet sites that provide a free score — but try to hook you into paying a monthly fee to monitor your credit file — it’s a safe bet that the number, accurate or not, won’t be worth much if you are in the market to buy a house.

If you’re buying a house, you’ll want an industry-specific mortgage score. No other score will do.

“Anybody can calculate a score,” Holmes says. “Who accepts it is what really matters. Even the scores used in the mortgage industry wouldn’t mean anything if Fannie Mae or Freddie Mac didn’t accept them. Or if JPMorgan Chase or Wells Fargo or Bank of America didn’t accept them.”

You can obtain a free copy of your credit record from each of the three major credit bureaus at http://www.annualcreditreport.com. The law entitles you to one free report every 12 months from each repository, but there’s nowhere I know of to obtain a free credit score.

Many outfits offer “free” credit scores, but in most cases, you have to sign up — for a monthly fee — for a credit-monitoring service. You usually can opt out of the service after a trial period. But the companies are hoping that you won’t, or that you’ll forget and won’t pay much attention to your credit card bill when it arrives in the mail.

But remember, not every score is acceptable to mortgage lenders. I’m aware of only one online service that fits the bill: http://www.myfico.com. But even then, you’ll have to sign up for the Score Watch monitoring service that FICO offers in conjunction with Equifax. You’ll just have to remember to cancel the service before the free trial period runs out.

Beyond that, would-be home buyers can obtain meaningful credit scores by applying for a mortgage, either directly with a lender or with a broker who deals with several lenders. Once you apply, lenders are obligated by law to share the score they used as a basis to decide whether you qualify.

And once you obtain a satisfactory credit score, make sure that you don’t do anything credit-wise that will change it, at least not until after the loan closes. Remember, a credit score is a moving target, so if you run out and buy new furniture using credit, your score will suffer, and you may no longer qualify for a mortgage to buy your house.

lsichelman@aol.com – Distributed by United Feature Syndicate. Copyright © 2010, Los Angeles Times

Hope you find this article helpful… have a great day and thank you for checking back in.

CALIFORNIA ASSOCIATION OF REALTORS® releases its California Housing Market Forecast for 2011:
Small increases projected in both home sales and median home price

LOS ANGELES (Oct. 4) – A weaker-than-expected economic recovery will result in a projected decline in California home sales for 2010, although home sales are expected to edge up slightly in 2011, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) “2011 California Housing Market Forecast” released today.

California home sales for 2010 are forecast to decline 10 percent from the 2009 sales figure of 546,500 homes sold. Sales in 2011 are projected to increase a lackluster 2 percent to 502,000 units compared with 492,000 units (projected) in 2010. After two consecutive years of record-setting price declines, the median home price in California will climb 11.5 percent in 2010 to $306,500 and increase another 2 percent in 2011 to $312,500, according to the forecast.

“California’s housing market will see small increases in both home sales and the median price in 2011 as the housing market and general economy struggle to find their sea legs,” said C.A.R. President Steve Goddard. “The minor improvement in the housing market next year will be driven by the slow pace of recovery in the economy and modest job growth. Distressed properties will figure prominently in the market next year, but we also expect to see discretionary sellers play a larger role,” he said.

“As the U.S. economy continues its tepid recovery, we’ll see some improvement in California’s economy,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “We expect a net jobs increase of approximately 1.4 million jobs in California for the year to come and an improvement in unemployment figures,” she said.

“The situation in the California housing market continues to be a tale of two housing markets,” said Goddard. The segment of the market under $500,000 has been driven by distressed sales, while higher-priced areas of the state have been constrained by restricted financing options, and increasingly have experienced an increase in the number of distressed properties. Sales in the low end have been constrained by a lack of inventory, putting upward pressure on prices. Multiple offers on lower-end homes have been very common, according to Goddard.

“A lean supply of available homes for sale will drive prices up at the low end, but larger inventories and limited, less attractive financing will cause continued softness at the high end,” said Appleton-Young. “There’s some indication that lenders will accelerate the number of foreclosures coming on market, further adding to the housing supply, but we do not anticipate that lenders will flood the market with distressed properties,” she said.

“The wild cards for 2011 include federal housing policies, actions of underwater homeowners, and the strength of the economic recovery,” said Appleton-Young. “What is certain is that favorable home prices and historically low interest rates will continue to make owning a home in California attractive for those who are in a position to buy,” she said.

An expanded forecast presentation will be presented Wednesday afternoon during the CALIFORNIA REALTOR® EXPO 2010 (http://expo.car.org/), running from Oct. 5-7 at the Anaheim Convention Center in Anaheim, Calif. The trade show attracts nearly 7,000 attendees and is the largest state real estate trade show in the nation.

Don’t miss “2010 Econ Panel: The Future of Real Estate Finance and Your Market in 2011” during CALIFORNIA REALTOR® EXPO 2010. C.A.R. Vice President and Chief Economist Leslie Appleton-Young will lead a panel of renowned economists as the experts share their predictions on what the changing economy means for real estate. Panelists include: Richard Green, professor and director of the USC Lusk Center for Real Estate; John Karevoll, housing analyst at Dataquick Information Systems; and Michael LaCour-Little, professor and director of the California State University, Fullerton Real Estate and Land Use Institute. The panel is scheduled to be held Thursday, Oct. 7, from 2 p.m. – 3:30 p.m. at the Anaheim Convention Center.

2011 FORECAST FACT SHEET

The C.A.R. Expo is this week at Anaheim Convention Center… Make sure you check out REBarCamp and Tech Tuesday! I’m sure these will be well worth your time! On a side note… what do you think as far as the projections and information presented above? I would love to hear your thoughts… simply send me a comment below.

Fraudulent foreclosure “rescue” professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.

In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

Nothing could be further from the truth. According to the FTC and its law enforcement partners:

• there is no evidence that forensic loan audits will help you get a loan modification or any
  other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor,
  mortgage professional or lawyer.
• some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.
• if you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

If you are in default on your mortgage or facing foreclosure, you may be targeted by a foreclosure rescue scam. The FTC wants you to know how to recognize the telltale signs and report them. If you are faced with foreclosure, the FTC says legitimate options are available to help you save your home.

Spotting a Scam

If you’re looking for foreclosure prevention help, avoid any business that:

• guarantees to stop the foreclosure process – no matter what your circumstances are
• instructs you not to contact your lender, lawyer or credit or housing counselor
• collects a fee before providing any services accepts payment only by cashier’s check or wire transfer
• encourages you to lease your home so you can buy it back over time
• recommends that you make your mortgage payments directly to it, rather than your lender
• urges you to transfer your property deed or title to it
• offers to buy your house for cash at a fixed price that is inappropriate for the housing market
• pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.

Finding Legitimate Help

Housing experts say that when you’re behind on your mortgage payments, maintaining communication with your lender is the most important thing you can do. Contact your lender or servicer immediately if you’re having trouble paying your mortgage or you have received a foreclosure notice. You may be able to negotiate a new repayment schedule.

Call 1-888-995-HOPE for free personalized advice from housing counseling agencies certified by the U.S. Department of Housing and Urban Development (HUD). This national hotline – open 24/7 – is operated by the Homeownership Preservation Foundation, a nonprofit member of the HOPE NOW Alliance of mortgage industry members and HUD-certified counseling agencies. For free guidance online, visit www.hopenow.com. For free information on the President’s plan to help homeowners, visit www.makinghomeaffordable.gov.

To learn more about home mortgages and other credit-related issues, visit www.ftc.gov/ MoneyMatters. This site offers short, practical tips, videos, and links to reliable sources on a variety of topics from credit repair, debt collection, job hunting and job scams to vehicle repossession, managing mortgage payments and avoiding foreclosure rescue scams.

Reporting Fraud

If you think you’ve been dealing with a foreclosure fraudster, contact:

• Federal Trade Commission – www.ftc.gov
• Your state Attorney General – www.naag.org
• Your local Better Business Bureau – www.bbb.org

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace
and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free
information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

MILITARY veterans have long been accustomed to a relatively easy mortgage process. Even borrowers with no down payment or a low credit score were usually granted V.A. loans, in large part because the Department of Veterans Affairs insures a quarter of the loan amount.

But about two years ago, lenders began limiting the conditions under which they would offer these mortgages, and industry executives say that since the start of the year, all the nation’s major lenders have followed suit.

“It’s been a tightening across the board,” said Nathan Long, the chief executive of VAMortgageCenter.com, an online broker of V.A. mortgages.

Lenders will still offer V.A. loans with no down payment, he said, but “if you have a credit score of 610, the best thing to do is work on your credit and try again in a couple of months, because you don’t really have any options.”

Mr. Long says major lenders like Bank of America, Citigroup and JPMorgan Chase, typically will not offer V.A. loans to borrowers with credit scores below 610. Debora Blume, a spokeswoman for Wells Fargo, said the cutoff score for her bank’s V.A.-insured loans was 600.

The tighter credit policies also extend to the Streamline Refinance program, which allows borrowers with V.A. loans to refinance into another V.A. loan with very little paperwork and, until recently, no appraisal.

Mr. Long and V.A. representatives say that lenders are now requiring borrowers to pay for an appraisal, which can cost $300 or more depending on a home’s location. If the new loan amount is more than the value of the home, they will most likely reject the application.

Not surprisingly, V.A. loan volume has fallen so far this year. William White, the acting assistant director for loan policy at Veterans Affairs, said his agency was on pace to insure about 300,000 mortgages this fiscal year, which ends Sept. 30, versus 325,000 in 2009. The nation’s overall loan volume rose about 19 percent during the same period, according to the Mortgage Bankers Association, to $1.92 trillion from $1.62 trillion. (The trade group tracks only total dollar amount.)

Mr. White said he understood why lenders might be restricting the loans, as the V.A. insurance only covers 25 percent of the loan amount. But he added that borrowers of V.A. loans generally had a lower default rate than prime borrowers over all — 2.6 percent versus 3.4 percent, according to the Mortgage Bankers Association — despite the fact that their credit scores were typically lower.

V.A. mortgage borrowers tend to “show some discipline,” Mr. White said, offering one explanation, “and we think they try real hard to make their payments.”

The average credit score for a V.A. borrower last year was just over 700, while the average credit score for all borrowers was 750, according to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, the government-sponsored companies that establish underwriting standards.

Mr. Long noted that V.A. loans remain competitive with other loan products. Borrowers who qualify — they must prove 24 months of continuous active military duty, and cannot have experienced a dishonorable discharge, among other things — can secure rates of 4.75 percent on 30-year fixed-rate loans, he said. That is the case even for borrowers with 620 credit scores, he added. The average rate nationwide for all 30-year fixed-rate loans is around 4.70 percent.

There is a one-time insurance fee that varies according to the size of the loan and the borrower’s credit profile, but the average is about 1.75 percent of the loan amount. On a $200,000 mortgage the cost would be $3,500. About a quarter of applicants — disabled or retired veterans, for instance — qualify for exemptions from that payment.
A version of this article appeared in print on June 27, 2010, on page RE7 of the New York edition.

The owners are looking for a 12 Month Lease at $1975.00/Month.