Businesses always face issues that impede its growth regularly and GSEs are not an exemption. In fact, Fannie Mae and Freddie Mac are always being watched out by the critics, primarily because it is backed by the government and its failure means that the taxpayers’ money has also failed. Huge controversies hounded the Fannie Mae and Freddie Mac after the new millennium and there are a lot of problems faced by the institution in the last years that impedes the recovery of the already slow growth of the housing sector.

The subprime mortgage crisis of 2003 left the housing sector in a huge deficit in Fannie Mae until the end of 2010. In the effort of Fannie Mae, Freddie Mac and Federal Home Loan Banks to provide affordable housing and reach out to low-income Americans, it provides affordable methods such as low down payment and fixed-mortgage rates. Financial institutions wanted to earn more, so they slowly shifted to private level securitization operated by investment banks. Private level securitization (PLS) means that it provides nontraditional, adjustable mortgage rates which are riskier for borrowers. Fannie Mae lowered its standards to compete with PLS and please its shareholders. The unregulated standards led to a lot of borrowers in debt due to poor credit with adjustable mortgage rates which resulted in home foreclosures. The effects of this crisis are still being felt by consumers to date and lately, the bailout of Fannie Mae and Freddie Mac would likely cost the government around $300 million.

In 2004, high ranking Fannie Mae officials were held under the scrutiny of the Congress because it has been reported that these officials are manipulating accounting reports for their personal gain. Civil charges were filed to get back $115 million in bonuses from 1998-2004.

The robo-signing case took the housing sector into more debt than it already has. In 2008, employees of financial institutions such as Bank of America and JP Morgan Chase were found to approve foreclosures without sufficient facts and documents. This forced the banks to suspend foreclosure and investigate the matter first which forced the GSEs to implement strict guidelines regarding Fannie Mae foreclosures.

In order to regulate the standards, Fannie Mae released Loan Quality Initiative (LQI) to detect issues with compliance on Fannie Mae standards before foreclosure. This would force the banks to adhere to the underwriting standards and double check all requirements prior to delinquency.

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The housing market is improving. The trend is not very dramatic. This was revealed by Kenneth Rosen, a Haas School of Business professor. However, the unemployment rate of the state is still high at 12.4 per cent. Even the demand for housing is still very weak. However, there will be trouble soon. Many mortgages that are of adjustable rate will be reset and that too, at higher rates in the future. This was revealed by Rick Sharga, a senior official of RealtyTrac. If borrowers are unable to make the escalated payments, foreclosures would increase again.

Sharga said, “You have the three-headed monster of high unemployment, a weak economy and problem loans.” He said that foreclosures would surpass that of last year and even that of ’09, which was considered to be the peak year. Take for instance, Guy Vernikovsky. There has been a foreclosure filing on his Torrance home. He has tried to adjust his loans many times and has applied for low interest rates.

Thirty two year old Vernikovsky said he is currently without a job. However, he tried his level best to be current on two mortgages. Subsequently, he has buried himself in debt of credit card. However, now he has moved with parents and has got himself a new job. He said that he would now be able to make the loan payment if banks reduce his loan interest rates. Vernikovsky said, “I applied two or three different times and they would not modify my loans. I wasn’t looking to turn a fast buck on a real estate market that was hot at the time. I was really looking to own that home for the next 20 to 30 years.”

It may be pointed out here that above a million homes in California are facing some kind of foreclosure activity. This includes bank takeovers and default notices. Of these filings, 173,175 properties have been reclaimed by banks once again.

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The Mortgage Bankers Association echoes these sentiments. Except for a few states, the overall numbers of foreclosures have dropped since the first quarter of 2007. In fact, figures will soon be released showing, that compared to the last ten years, the numbers of foreclosure would have been below the average if it had not been for a large increase in foreclosures in a few states – California, Florida, Nevada, and Arizona.

The first stage in the foreclosure process is the pre-foreclosure filing.  A pre-foreclosure filing is a notice that is issued stating that a property is now in foreclosure for a loan that is unpaid. In the second stage, the notice of auction is given fixing the date. In some states like Arizona, these two stages are combined into one. In the third stage, a REO or real-estate/bank has the property handed over to either the new owner or returned to the original borrower if the latter has been able to meet his dues.

McGee stresses that the real villains are the homebuyers that buy homes that they cannot really afford. The hope is that the prices of real estate would rise but, when this did not happen, the reality is harsh. When interest on a house rises, it leaves the homeowner no other alternative but foreclosure. Statistics can be confusing because the same property can account for multiply filings at every stage of the foreclosure process. That is why the per capita analysis of McGee is much more precise.

The rising numbers of foreclosures is indeed sad but it should not lead to mass hysteria all across the nation about national collapse of the economy. This situation will not develop in to anything near the economic crisis that occurred in the 1990’s. These numbers must take into account the many Americans that pay their mortgage payments regularly. 69% of USA citizens live in their own homes, according to a census taken recently. The truth is that foreclosures are only small portions of total US mortgage debts and not everyone, even in the sub-prime zone, defaults. Federal Chairman Bernake agrees with this view.

Via Rismedia

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When a person obtains a secured loan with the intention of replacing or consolidating other secured loans procured with the very same assets, the transaction is termed as refinancing. A home mortgage loan refinancing is the most common example of this. Such refinancing is invariably resorted for a few reasons that provide some amount of financial relief to the borrower.

A debtor desiring to get his interest payment costs to be reduced goes in for refinancing. A person who wishes to pay off certain other debts owned by him plans for such refinancing. A borrower who wants to increase the period of repayment in order to reduce the monthly installments paid arranges for a longer-term loan. One who would like to dispose of a portion or the all of the property also resorts to such refinancing.

Interest calculation is one of the most important factors that has to be taken into consideration in refinancing process. There are several refinance calculators that are in practice. An understanding of these refinance calculators will provide the borrower with a clear idea of what he/she is getting into and plan for easy and hassle-free repayment. The effective interest rate is termed as annual percentage rate (APR). The APR also takes into account the total loan amount as well as the one-time fees like processing fee, documentation charges, etc.

Let us consider an example of an effective annual interest rate of 10% to understand refinance calculators. This interest rate can be expressed in more than one way. A lender might say the effective monthly interest rate is 0.7974%. Otherwise, he might mention that the annual interest rate compounded monthly is 9.569%. Alternatively, he might reveal that the advance annual interest rate is 9.091%. It has to be understood that a few lenders would try to express the effective interest rate as 9.1% annual rate in advance, to make the rate look cheaper. In cases where the interest rates are much higher, such a way of mentioning could give the impression of a large difference in the actual rate charged. The borrower should not get led away by this and be very clear about refinance calculators.

To cite a few more examples to clarify this, let us assume that a loan of $100,000 is repaid in 12 monthly installments of $8,771.56. The total amount paid would be $105,258.72. This does not mean that that effective APR is 5.26%, simply because the principal amount was being repaid every month and not at the end of twelfth month.

Further, let us assume that the loan of $100,000 includes a $1,000 processing fee, and that the monthly installments are $946.01 for 240 months at an interest rate of 9.569% compounded monthly. In such a case, the effective APR works out to 10.31% and not 10%.

From the above, it is obvious that a borrower should make a careful analysis of the various interest rates offered by understanding the underlying principle of refinance calculators to arrive at an informed decision.

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When you acquire a 20 year fixed rate loan, you pay the similar interest rate for the complete life of the loan. Moreover, homeowner’s insurance payments and your property tax will change, and your bank may perhaps require you to put together these payments with the loan payment. Nevertheless, you know what your interest payment and principal will be on condition that you maintain that loan. Nearly all-permanent rate mortgage loans are set for 30 years, even though you can obtain them for 20 years which is also known as 20 year fixed rate loan.

The big disadvantage to 20 year fixed rate loans is that they in general have bigger initial interest rates compared to Adjustable Rate Mortgages. You meet the requirements for a home loan referred to your ability to clear the initial payment amount, so it is more often than not more tricky to acquire a 20 year fixed rate loan.

A 20-year fixed rate loan shields you from hiking costs of money. Keep this in mind, if rates go up, then your payment will remain the same. However, if rates go down, the payment will still remain the same. On the other hand, you can refinance your property and get these lower rates for yourself.

There will be closing costs whenever you refinance, but there will be two major reasons on why this should not worry you very much. Firstly, as noted previously, costs for 20 year fixed rate loans are frequently lower. Secondly, if you have verified to the bank that you are a first-class credit risk and if your loan is excellent for them, the bank will try hard to maintain your business. At this time, the bank wants you. The bank’s business depends on keeping and getting good customers. For that reason, if you refinance your property at the same bank that is your mortgage, you will most likely save a bit of money.

Furthermore, it might be the best, or in other word, least expensive, to acquire Adjustable Rate Mortgages or any changeable rate type loans if you have plan to repeatedly sell and buy your properties. If you plan to furnish and decorate your new home gradually just the way you prefer, and wish to form a relationship with your neighbors – mainly enjoy your pleasure of ownership there for few years, the long-standing security that a 20 year fixed rate loan offers is definitely for you.

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Federal Housing Administration (FHA) is a part of the Housing and Urban Development (HUD). FHA offers different insured mortgages programs such as Section 203b Insured Mortgage, Section 255 Home Equity Conversion Mortgage (HECM)-Reverse Mortgage, Insurance Premium refunds, Graduate Payment mortgage Insurance (Section 245) etc. FHA also offers Down payment grants such as the AmeriDream, Nehemiah Program, Housing Action Resource Trust (HART), Consumer Debt Solutions and Partners in Charity. The FHA loan rates offered are 6.128% APR for 30 year fixed and 6.241% APR, for 15 Year Fixed.

Let us now consider some of the individual programs that are offered by FHA. The 203 (b) mortgage Insurance provides mortgage insurance for individuals who are going to purchase or refinance a property. The loan sanctioned is offered by a lending institution or a bank and it is insured by FHA (HUD). The Section 255 Home Equity Conversion Mortgage or reverse mortgage offered by the FHA can help senior homeowners age 62 and above to convert the equity of their home into a regular stream of income which is repaid when they no longer occupy the home. The FHA Premium refunds and Distributive share is a program under which the FHA commissioner decides how much of the premium should be refunded when a loan is terminated. There are certain criteria for qualifying under the premium refund program. The eligibility are that the loan should be acquired after 1st September 1983, paid-up an upfront mortgage premium at closing and a non-defaulter on the mortgage installments.

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Foreclosed Home Listings all about foreclosed homes and their lists.

It is quite evident now to know about foreclosure. A foreclosure happens when a homeowner couldn’t continue paying heir mortgage. But, the lender still needs to recover the debt. In order to do so the lender files for foreclosure. It is a public notice and is called a Notice of Default.

Usually the foreclosures are sold in the open market, by public auction. But, at times the bank, which has taken the repossession, also sells it privately.

There are varieties of foreclosed homes. We have foreclosed homes from the banks, mortgage companies, HUD (Housing and Urban Development), Fannie Mae, Freddie Mac and the Government.

But, going ahead to buy the property, you need go through the following routine:

a) Finding the home

b) Have your offer accepted

c) Finance the purchase amount and lastly,

d) Close the deal

Just a word of caution!! Before buying the property get the property inspected by a professional. And also calculate the cost of repairs and renovations required for the property, since they are usually not in their best shapes.

Now the question arises where to find such homes. This is where the lists come to help. As mentioned earlier we have different foreclosed homes from banks, mortgage companies, HUD etc. Such lists are available with the property agents. Advertisement in papers also has lists of such homes. Even, the local lender can provide you with a list of a few foreclosed homes. Bu, apart from these traditional ways, you do have the Internet at your service. Here you can view houses sold online, even can take a virtual tour. This service comes handy especially if you are relocating to another city.

There are a number of local and nationwide home listings sites along with sites from the brokerage houses. A few of them are here for your reference:

• www.realtor.com: The website for The National Association of Realtors has more than 2 million listings
• www.ired.com: The International Real Estate Directory
• www.homegain.com: Use this website to search by the state and the area.

Among all these information the good news is that the cost of foreclosed homes are at least 20-50% less than similar houses. Hence, it is a great opportunity to buy large properties at reasonable costs and enjoy the benefits of a owned house.

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