Home prices may rise soon as more and more people start filling out mortgage application forms. If you’re putting off plans to buy a home, hoping for lower mortgage rates, then now may be time to reconsider.

In a recent Reuters report, consumer demand for housing and refinancing loans rose in the week ended January 6, indicating a potentially bullish market throughout the year.

The Mortgage Bankers Association’s (MBA) mortgage application index, a major gauge of ongoing housing market activity, went up by almost 5 percent last week.

Despite a modest increase of 4 basis points for 30-year mortgage rates (4.7 to 4.11 percent) in the last week of 2011, refinancing applications still grew more than 3 percent while home purchase loan applications rose by a whopping 8.1 percent.

Statistics also show that the share of refinancing in total amount of mortgage loans dropped by 1.1 percent, indicating a strengthening national economy.

The MBA survey covers three-fourths of the entire US housing market.

The Good News and the Bad

Positive development in the housing market serves as a major indicator of the economic improvement, a welcome respite for the average American who has been tormented by a stagnant economy since it crashed in 2008.

However, with the simple law of supply and demand, a constantly increasing number of mortgage applications will inevitably cause another housing boom, which will drive home prices up north.

Citing an earlier post, mortgage rates was already at a historic 60-year low in the last weeks of 2011. However, recent developments indicate that this record may not be broken anytime soon. That is, the 6-month forecast of stable home prices may be cut short.  These figures may go up in no time.

When is the right time?

There are many other factors to take into account before you start filling out forms, such as your current employment situation, your current debts, and other financial contingencies. However, considering the probability of a near-term housing boom, delaying the purchase of a home may translate into higher interest payments, coupled with subsequent increases in real estate prices.

If you need more help in deciding when to buy a home, Paradigm Mortgage Services will be glad to help.

A federal housing agency considers temporarily eliminating interest in mortgage debts held by bankrupt homeowners.

In a report from the Financial Times, the Federal Housing Finance Agency (FHFA) said it was seriously considering proposals for setting interest rates to zero for mortgage loans for borrowers who:

1. Are undergoing Chapter 13 Bankruptcy proceedings
2. Owe more than their home’s value
3. Acquired the loan via government-controlled home loan financier, AND
4. Secures approval from the pertinent bankruptcy judge

The proposal, called the “principal paydown plan”, will relieve debt-ridden Americans from interest rate payment for a period of five years. Through several studies, real estate market research firm CoreLogic found out that almost 11 million US homeowners – or 25 percent – have negative equity on their homes. This translates to more than two-thirds of a billion dollars worth of negative equity in the entire United States.

Principal Paydown Plan: The Pros and Cons

A Boost for the Debt-Ridden

Of course, this plan is good news for those who are underwater. Zero interest loans, while not entirely erasing debt, is a great way to help distressed Americans make ends meet. Moreover, studies show that many housing experts feel that this proposal may even serve as the panacea for today’s national economic woes.

Lack of incentive for lenders et Al

However, the proposal seems to be a zero-sum game. Yes, it may help borrowers but what’s in it for lenders and the rest of the pack? Financial institutions are businesses that care about their bottom-line, so this plan may actually serve as an impetus for these money managers to find new and more creative ways to get around the law.

There’s no other choice

Eleven million families are already underwater, and very few of them know how to swim. For advocates, the proposal serves a middle ground between the interest of these debtors and that of corporate America. In short, it’s better than no relief at all.

The Principal is still there

Others argue that the problem is like having four flat tires on an SUV in the middle of nowhere. The spare tire won’t be enough to put the car back on the road. The proposal addresses nothing but the interest and rate a miniscule part of the debt equation vis-à-vis borrowed principal. That is, it’s not quite enough.

Status Quo

The FHFA told the media is already under discussion in back rooms of Congress, but it still has a long way to go before it gets signed into law. However, for an extremely large number of Americans, this proposal may actually serve as their long awaited glimmer of hope.

The Federal Reserve now officially blames mortgage servicers for the chronically problematic housing sector, saying these companies make the housing market harder to fix.

In a United Press International Report, Federal Reserve Governor Sarah Bloom Raskin said, “Severe misconduct that has been uncovered in the mortgage servicing sector [should] be addressed,”  adding that an alarming number of  mortgage servicers are negligent and misleading in their business practices.

What are Mortgage Servicers?

Mortgage services are private companies who receive mortgage payments from homeowner-borrowers. They are the same companies that compute for interest rates in adjustable-rate loans, negotiate with borrowers who are on the verge of default, and administer foreclosures if need be. Contrary to popular belief, these institutions are usually distinct from the lender, as the latter typically sells mortgage loans to investor companies like Freddie Mac and Fannie Mae, who will then package these loans into mortgage-backed securities.

What did they do wrong?

Throughout the past several years, mortgage servicers have been grilled for shady business practices, to the detriment of borrowers and the economy as a whole.

Let’s cite the two most (in)famous issues:

• Unwillingness to lower rates despite high risk of default – In 2009, the New York Times reported the despite calls from the White House, mortgage servicers did little in the way of giving consideration for financially troubled borrowers, even if impending default is almost certain. Instead, these companies let borrowers stay delinquent for as long as possible, so that the former can milk the system through various fees like insurance and legal services. Furthermore, these companies may have actually encouraged foreclosures, since they get to keep all the payments made, the junk fees, and the proceeds from foreclosed homes –all at the same time.

•  Falsifying Legal Documents and Circumventing Legal Requirements – In another NY Times article, mortgage services were also castigated for “robo-signing” a countless number of mortgage foreclosures. Basically, independent research showed that thousands of foreclosure proceedings that were enacted in the peak of the subprime mortgage crisis were actually based on documents that were either dubious in nature or simply incomplete. Because of this, many people lost their homes without being afforded the right to due process.

Aside from these, some mortgage servicers even went so far as to defy the Servicemembers Civil Relief Act, which protects military personnel from civil suits while they are on active duty. Just last year, JP Mortgage Chase admitted to having overcharged thousands of active military personnel, and that’s just the tip of the iceberg. However, until recently, the Federal Reserve has stayed mum on these controversies.

Raskin’s announcement may be long overdue, but it is good news that the Federal Reserve – the bank of banks – is starting to crack down on these corporations who take advantage of the less fortunate.

Record low interest rates suggest that now is the best time for mortgage refinancing, says a Wall Street Journal (WSJ) report

Because of economic woes throughout Europe and the United States, investors all over the world have begun to stockpile US Treasury Bills, considered as the safest financial investment on earth. Consequently, this massive trend has severely dampened interest rates on mortgages. (more…)

The Securities and Exchange Commision sued six former executives of Fannie Mae and Freddie Mac for civil fraud, which allegedly precipitated the 2008 Global Financial Meltdown, a report from the Global Post said. The executives were said to have defrauded investors after understating the size of their companies’ subprime exposure. This led the whole an unabashed lending spree, which inevitably culminated into the 2008 global financial meltdown that is still felt up to this day.

Fannie and Freddie

Founded as a part of the New Deal, Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) engage in the secondary mortgage market. (more…)

In a recent Wall Street Journal report, it was said that in an attempt to boost consumer spending, the White House and the House of Representatives eye mortgage fees to offset payroll tax reduction. To the average would-be homeowner, this may mean earning more but paying more. Sounds contradictory? Read on.

A way to boost consumer spending is by letting consumers earn more money so they can spend more. In line with this, the federal government is looking into the possibility of implementing payroll tax cuts so that the average American worker can take home a larger chunk of his paycheck. (more…)

One of the most common questions a mortgage broker is asked is “Can I or should I refinance my investment property?”  Many investors with rental properties are under the impression that they might not be able to do so.

In actuality, property owners can refinance an investment property, but they will need to make sure that they go into the process with caution.  Property owners should consult with their mortgage broker first to make sure that refinancing will make sense to them in their greater financial strategy.  Additionally, they’ll want to make sure that they are getting the best possible loan terms for the property.  Even with today’s low interest rates, it is still important to shop around and be well advised.

An important point property owners should remember is that even though one lender may tell them that they are not eligible for a new mortgage on their investment property, they still may be eligible with the criteria used for loan approval by another lender.  That being said, there are some reasons a property owner may not want to refinance or may be denied a refinance by a lender.  The two most common reasons are having a loan-to-value ratio that is too high and having an interest rate already low enough.

When a loan-to-value ratio is “too high” this means that a property owner does not have enough equity in the home to meet loan to value restrictions.  Not all lenders have the same loan to value restrictions and a mortgage broker should always be consulted by the property owner if they are denied by one lender.  As mentioned, property owners should also consult a broker to get the real answer on whether or not their interest rate is already low enough and whether or not refinancing will be right for them. The experts at Paradigm Mortgage can help you to ascertain if now is a good time for you to consider refinancing your investment property.

Choosing a mortgage is not a decision that should be taken lightly.  There are many questions you’ll want to first discuss with your mortgage broker.  While asking those questions, remember to talk to your mortgage broker about whether a 15-year or a 30-year will be best for you.

To find out which is best, your broker will take into account how much financial flexibility you have.  Your monthly payments will, of course, be higher for a 15-year term than for a 30 year-term on the same property.  If you choose the 15-year mortgage, will a 15-year note and the higher payment leave you with enough wiggle room at the end of each month?  You’ll need to lay out your monthly budget taking all expenses into account to know for sure.

You’ll also want to consider how long you plan to stay in your house before determining what kind of mortgage term is best.  While a 15-year term mortgage should help you to build equity more quickly (which can be great if you plan on a short stay in your home), a 30-year term mortgage can leave you more financial flexibility and also some money left over for home improvements.  Taking into account your neighborhood, the housing market, and how long you’ll want to stay will help you to make the right choice.

The amount of space you’ll need or “how much house” you’ll need will likely also factor into the decision of which home to buy and at what mortgage term.  A 30-year mortgage could help you buy a bigger home than you’d be able to afford with a 15-year mortgage.  If more space is necessary for you, you’ll certainly want to take that into account.  Remember, you don’t need to make these difficult decisions on your own.  Contacting an expert mortgage broker can relieve the stress and uncertainty that comes with buying a new home and deciding whether you want a 15-year or 30-year mortgage.

When you’re looking to refinance your home, you need to do a bit of homework.  You’ll need to compare interest rates and loan terms and fees, as well as the customer service reputation of your lender.  Using an experienced mortgage broker can help you gain clarity through every step of that process.

What some consumers, and those looking to refinance their home, often don’t know is that mortgage brokers are equipped with a wealth of financial knowledge when it comes to deciphering state laws and loan regulations.  In many cases, what you don’t know could hurt you. The knowledge a mortgage broker provides can truly help to save you money both in the long run and on closing costs.

One place buyers might be able to save money when refinancing a home is on mortgage taxes.  For those who live in states where they are hit with mortgage recording taxes, costs can certainly add up at closing.  That’s why, if you’re looking into refinancing, you may want to ask your broker whether or not this tax will apply to you.  Although there are fees associated with the mortgage assignment process, a process which transfers a mortgage to a new lender, recording the loan as new, may help a buyer save on mortgage recording taxes.

New York Times reporter Vickie Elmer recently reported that mortgage experts advise that “it is important to inquire about a mortgage assignment at the very beginning of the refinancing process because locating and transferring all the necessary paperwork could be time-consuming.” A mortgage broker will be able to further explain the process of mortgage assignment and to help you determine if it is right for your needs.

Introducing our FREE Lunch and Learn Seminar “How To Get Your Best Mortgage”

The seminar is a FREE benefit you can offer to your employees. At NO cost or obligation to you, PARADIGM Mortgage will provide lunch and an informative presentation on home mortgages. We educate the consumer, give helpful practical advice, and answer questions. We begin with a summary of loan programs available today. We discuss credit scores, qualifying for a mortgage, and how to obtain your home and mortgage with the minimum costs.

What are people saying about the program?

Ms. Lynn Schneider, Director of Human Resources for National Data Corporation, said, “Employees not only got valuable information about mortgages in general, but also learned something about how to avoid unnecessary costs. We all benefited. The employees perceived these meetings as a benefit to them; National Data was on the receiving end of that employee good will; and the pizza was great, too!”

Ms. Karen Murray, Benefits Administrator for DCS Corporation, said, “Our employees really enjoyed your presentation. Due to overwhelming response from the employees who attended the seminar, we will want to present this to our employees again next year.”

What types of employers have held these seminars?

Is this a high pressure sales presentation?

Absolutely not. There is no commitment or obligation by either the host organization or the persons attending the presentation. PARADIGM will not contact any person in attendance unless invited to do so.

How long is the meeting?

It usually takes about 15 minutes to finish lunch, then about 40 minutes for the presentation. Typically, a few people stay longer to ask specific personal questions.

How can I schedule a seminar?

Call Paradigm today at 301-941-1992.