The Real Folsom Blog

Help for Mortgage Woes in Sacramento Area

Another depressing story in today's SacBee about scam artists preying on homeowners struggling to keep up with their mortgage payments. I hate to read these stories but on the other hand it helps get the word out so other homeowners aren't victimized by these sleazeballs. At the end of the article, "Home scam suspected," there is some information about some legitimate groups that may be able to help you in the greater Sacramento area if you are having trouble with your mortgage. Here are the groups:

• NeighborWorks Homeownership Center, (916) 452-5356, www.nwsac.org
• Home Loan Counseling Center of Sacramento, (916) 646-2005, www.hlcc.net
• NeighborWorks America and Home Ownership Preservation Foundation national hotline, (888) 995-4673.
• ByDesign Financial Solutions, Sacramento, (800) 750-2227, www.bydesignsolutions.org.
• Sacramento Mutual Housing Association, (916) 453-8400, ext. 43. They can accommodate Russian, Hmong, Vietnamese, and Mien speakers.

New Hotline Help for Homeowners Facing Foreclosure

We've been fortunate in Folsom regarding foreclosure as we have a much lower percentage of foreclosed homes than in other Sacramento areas. But that said, some Folsom homeowners are struggling as their ARM loans reset. Now they can get some help thanks to a new hotline set up especially for them. The HOPE NOW Alliance announced earlier this week the establishment of a consumer hotline for homeowners facing foreclosure. The HOPE Homeowner's hotline is being managed by the Homeownership Preservation Foundation, and provides free, independent, bilingual, HUD-approved counseling and advice 24 hours a day for homeowners who have questions about their mortgage loans, and may be in danger of losing their homes. According to their Web site, HOPE NOW is a cooperative effort between counselors, investors, and lenders to maximize outreach efforts to homeowners in distress.

New Way To Tap in Your Home Equity

You may want to check out the interesting article in today's Business Section of the Sac Bee entitled Slicing up home equity pie, which takes a look at a new real estate investment group that is offering homeowners cash in exchange for a percentage of their home's future value. Rex & Co. basically offers qualifying homeowners cash based on the home's value today in exchange for sharing a percentage of the home's value when it's sold.It's sort of like a home equity loan but without the monthly payments. As with all deals involving money and your house (and home), you should always read the fine print very carefully and not sign anything unless you truly understand how the deal would play out under different scenarios. You can find more information on Rex & Co.online.

Wachovia Offering a New Down Payment Assistance Program

This one sounds like it's worth checking out if you are planning to purchase a home. Wachovia Mortgage Corporation has a new down payment assistance program offering up to $25,000 down payment assistance--and this money does not have to be repaid and can be used for closing costs or a down payment. Here are the guidelines:

• A 65% debt to income ratio
• A FICO score of at least 600
• Maximum income limits between $53,750 and $70,950
• No distressed properties
• Full documentation and a 30-year fixed loan

So if you are planning to purchase a home in the near future, it may be worth your while to check out this down payment assistance program.

Make it a great day!

Beware of Foreclosure Rescue Scams

CNNMoney.com had an informative article recently on how scammers are coming out of the woodwork and taking advantage of homeowners who are struggling to keep up with their mortgage payments (posted Aug. 24). As foreclosure rates are rising, it appears the number of rescue scams is also increasing. The most common form of foreclosure rescue scam, according to the CNNMoney.com article is one where the scammer takes an up-front fee to solve the victim's foreclosure problems--and then does nothing. Another common scam is "equity stripping." In this situation, the scammer promises to save your home by taking title, renting the home back to you and then selling it back sometime later. What actually happens is the scammer strips the equity by charging excessive fees, doing phony renovations and not making the mortgage payments. According to the article, there is a handful of legitimate companies out there that do try to help but you should never trust anyone who has contacted you unsolicited. The best advice to the homeowner struggling with mortgage payments is to call your lender immediately and try to work out a plan [see my Aug. 14 blog entry for more help on this]. In the end, it's the proverbial "buyer beware".

Missed Mortgage Payment Trauma Part Two

Continuing on yesterday's blog entry about missed mortgage payments... More homeowners these days (in large part as a result of subprime loans and adjustable rate mortgage loans now resetting to higher payments) are facing the trauma of having missed a few mortgage payments and wondering if they're headed for foreclosure. My first piece of advice is: don't automatically assume that because you've fallen behind on your mortgage you will lose your home. My second piece of advice is: don't bury your head in the sand and pretend you're not in a bind. Quick action may help you save your home.

First step: The first thing you should do is sit down and carefully analyze your spending and see if you can reduce your expenses. Or maybe you can take a second job if the money crunch that led to your mortgage woes is temporary.

Second step: Make a detailed account of your financial situation--outlining your debts, housing and living expenses, income, how much equity you do have in your home, and an explanation of why you are behind on mortgage payments. The Housing Education Program of the Consumer Credit Counseling Service of San Francisco has a good worksheet you can use. You can find it at www.housingeducation.org/edi/pdf/edi_worksheet.pdf. 

Third step: Contact your lender immediately. Present them with your detailed analysis (prepared in step two above). They may be willing to work with you on a repayment plan you can afford. Among the options the lender may consider are: allowing you to make a lower payment for, say, three to six months (which you'll make up later), reducing your interest rate and/or extending the loan terms so you have a smaller monthly payment, or even allowing you to do a "short refinance", where you refinance and the original lender accepts a payoff less than you owe.

So, remember, as soon as you realize you are falling behind on your mortgage payments, act fast.

Missed Mortgage Payment Trauma Part One

While dining with a friend last night, she mentioned she had recently heard from a friend who had gone underground for a while. Concerned that her friend was troubled by something, she pressed her for details. Turns out the friend had an adjustable rate mortgage loan that had reset recently and the mortgage payment was now more than she could manage and in fact she had just missed a payment. When she took out the loan a couple of years ago she just had not understood how high the payment might go, she told my friend. And, apparently, she is not alone in being confused about the loan she had gotten. A recent study by the Federal Trade Commission found that consumers are in the dark about their home mortgages. The report, "Improving Consumer Mortgage Disclosures," said that 87% of participants could not identify their loan's total upfront costs; 68% were unaware of pre-payment penalties; 21 percent couldn't identify the required monthly payment; and 20 percent could not identify their loan's annual percentage rate. And I can just imagine how confusing the concept of adjustable rate mortgages and how they work is to consumers. But confused or not my friend's friend is now terrified at the prospect of losing her home. As a real estate agent selling homes in Folsom, I have a bit of an insider's track on understanding that missing a few payments doesn't automatically mean you will lose your home. In fact, quick action can help you keep your property.  Tomorrow, I'll talk about what you can do to avoid foreclosure. Until then regards!

Why You Should Care About Your Credit Rating

Yet another story in the Bee's Business section today about how risky home loans are disappearing. Why should you care you think to yourself if you're safely ensconced in a conventional loan. Well, I'm finding, even standing on the sidelines, that it's hard to no get splattered with mud from the home loan debacle. Bottom line lenders aren't just tightening loan documentation requirements, ceasing to take risky loans, etc., they are also scrutinizing conventional loans more carefully. Why? One reason is investors are pulling out of the mortgage market so there is less money available for loans. In turn lenders have raised the minimum credit score that qualifies for financing and you will need a pristine credit rating to get a mortgage at a fairly low rate. All this to say, you should care about making sure your credit score is as good as it can be. Because when the time comes for you to shop a loan you will increase your chances of getting a better rate. Here are a few tips for improving your credit rating, courtesy of the Fanny Mae Foundation:

1.      Check for and correct errors in your credit report. Mistakes happen, and you could be paying for someone else’s poor financial management.

2.      Pay down credit card bills. If possible, pay off the entire balance every month. However, transferring credit card debt from one card to another could lower your score.

3.      Don’t charge your credit cards to the maximum limit.

4.      Wait 12 months after credit difficulties to apply for a mortgage. You’re penalized less for problems after a year.

5.      Don’t purchase big-ticket items for your new home on credit cards until after the loan is approved. The amounts will add to your debt.

6.      Don’t open new credit card accounts before applying for a mortgage. Having too much available credit can lower your score.

7.      Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8.      Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

To obtain a complete copy of the publication, “Knowing and Understanding Your Credit,” visit http://www.homebuyingguide.org.

Small Percentage of Loans Now Subprime

In the "I could see this one coming from a mile away" category comes the news from the National Association of Morgage Brokers that subprime loans are accounting for only a small percentage of loans originated in 2007. Subprime loans are non-traditional loans created for home buyers with credit scores lower than 620. Subprimes have been taking a big hit in the blame department when it comes to explaining our current housing slump. The NAMB says this latest update, based on a recent survey of mortgage brokers nationwide, confirms the trend toward more traditional loans in 2007 as the market corrects from a decade-long housing expansion. I think we can all agree this is good news all the way around.

Good news also for all you quilters out there, the Folsom History Museum's yearly Quilt show exhibit opens today and runs through September 30. Over 40 handmade quilts made before 1940 are on display. You can find the museum at 823 Sutter Street. And don't forget Folsom's Thursday night market on Sutter Street in old town. It starts around 6 going to about 9. It's a relaxing way to start the weekend early.

Financial Friday update

Well, it looks like the tighter lending criteria that went into effect earlier this year are continuning to have an impact on housing activity. There is however a silver lining: as Lawrence Yun, the senior economist for the National Association of Realtors, pointed out in a press release earlier this week, better supervised lending will put housing in a fundamentally healthier state of the long term. Because of an accumulated pent-up demand, he projects home sales should stay close to their present levels in the coming months.

Did you know...

• The California median home price in May was $591,180, with the highest median price found in the Santa Barbara South Coast area ($1,325,000) and the lowest median price in the High Desert (a measily $313,550).