Pay-Now-or-Later Mortgages

Chicago Tribune ^ | ( February 10) | Melia, Marilyn Kennedy

[apackof2]

Debt is bondage---pay off your mortage

[Dubya]

OK but everyone can.

[Dubya]

Pending Settlement Reveals Predatory Lending

( February 10) -- Reverse mortgages allow senior property owners to transform their equity into supplemental income that is not repaid until they sell the home, move, or pass away. Most are insured by the Federal Housing Administration; but several private lenders are cashing in on versions that include "shared appreciation" clauses, which let them claim a portion of the home's appreciated value. The potentially costly nature of such offers is being exposed in a class-action lawsuit has been filed against Transamerica Corp. and Financial Freedom Senior Funding Corp. regarding a reverse mortgage program offered in the 1990s that forced senior homeowners or their estates to turn over 50 percent of the property's appreciation--as well as interest, an annuity purchase, and other excessive fees--when the loans came due. As part of a settlement, Transamerica, Financial Freedom, and annuity provider Metropolitan Life Insurance Co. will refund $8 million to more than 1,500 homeowners and estates.

Source: San Diego Union-Tribune (02/09/03); Harney, Kenneth R.

[Dubya]

NAR: Positive Interest Rate Outlook Should Support Strong Home Sales

( February 10) -- While the economy is expected to improve gradually this year, mortgage interest rates should remain favorable and help to sustain strong levels of home sales, according to the NATIONAL ASSOCIATION OF REALTORS.

David Lereah, NAR's chief economist, said weak economic growth at the end of 2002 means it will take a little longer for momentum to build this year. "Growth in the U.S. gross domestic product should rise to 2.9 percent this year from 2.4 percent in 2002; however, we project the GDP will pick up steam and reach an annual growth rate of 4.1 percent in the fourth quarter," he said. "The silver lining will be a continuation of affordable mortgage interest rates, especially during the first half of this year, which will help to sustain the strong momentum we currently have in the housing market."

Lereah expects the 30-year fixed mortgage interest rate to average 6.2 percent during the first half of 2003 before rising to 6.6 percent in the fourth quarter. NAR forecasts 5.40 million existing-home sales in 2003, second only to 5.56 million sales in 2002. At the same time NAR expects 959,000 new-home sales, which would be down modestly from a record 976,000 sales last year. Housing starts are forecast at 1.69 million units this year, slightly below the 1.71 million units recorded in 2002.

The rise in the national median existing-home price is expected to slow this year, but with a persistence of lean inventories of homes available for sale it should continue to rise at a rate above historic norms. "We expect the median existing home price to increase 4.8 percent in 2003 to $165,800," Lereah said. "At the same time, consumer price inflation should be only 2.5 percent – so home price appreciation will remain a little above the historic norm of one-to-two percentage points above inflation." The median new-home price is likely to rise 4.2 percent in 2003 to $192,900.

Lereah projects the unemployment rate to gradually decline to 5.6 percent by the end of the year. Inflation-adjusted disposable personal income is seen to grow 3.5 percent in 2003 following a 4.5 percent rise last year, while the consumer confidence index is expected to rise from an estimated fourth-quarter 2002 reading of 82 to an index of 113 by the end of this year.

More detailed information about the association's economic outlook, as well as other analysis of real estate industry statistics, can be found in the February issue of NAR's Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

Source: NAR

[Dubya]

Insignia Financial Group Inc. and CB Richard Ellis Discuss Merger

( February 10) -- Insignia Financial Group Inc. of New York is now negotiating with CB Richard Ellis Inc. about a possible merger. Such a deal between the two commercial-property services firm would create the nation's largest commercial real estate brokerage.

Insignia presently employs 1,500 property brokers systemwide, while Los Angeles-based CB Richard Ellis has an estimated 4,500 on the payroll. Real Capital Analytics Inc. President Robert White observes, "It would be a pretty significant consolidation in an industry that's acting pretty fragmented right now. It would really cement [CB Richard Ellis'] position as clearly dominant in the industry." The two firms have talked previously on combining their respective operations.

Source: Wall Street Journal (02/10/03)

[Dubya]

Texas: Legislation Would Enact Construction Commission, Standards

( February 10) -- New legislation introduced on Thursday would create the Texas Residential Construction Commission, a nine-member board charged with developing standards for how homes in the state are built and how they should perform. Those standards would include recommended practices to limit residential mold, which the Texas Association of Builders reports is crippling the insurance and realty business; the group says that seven out of 10 property agents are experiencing closing delays because homebuyers cannot secure insurance coverage. In addition to construction standards, the bill--sponsored by Sen. Robert Duncan--also would map out a process for dissatisfied homeowners to resolve their grievances with homebuilders. Complainants first would have to allow their builder the opportunity to remedy a construction defect before taking the company to court.

Source: Associated Press (02/06/03); Gott, Natalie

[freeper12]

In response to concerns from some financial planners that consumers will abuse the offers, lenders insist that skip-payment privileges are extended to only those borrowers who have demonstrated the ability to make prudent financial decisions.

Shouldn't any type of mortgage be extended to only those peoiple that "have demonstrated the ability to make prudent financial decisions."?

[SamAdams76]

In response to concerns from some financial planners that consumers will abuse the offers, lenders insist that skip-payment privileges are extended to only those borrowers who have demonstrated the ability to make prudent financial decisions. What a joke. They are handing out mortgages (and credit cards) to anybody with a pulse these days. This promise by the lenders is as disingenous as the beer commercials when they say "drink responsibly." Of course they want the borrowers to "skip" a few payments. It jacks up the total interest paid over the loan and allows them to tack another 1/8 of a point on the interest rate (look for this increase to rise substantially once this type of mortgage takes off).

There is no doubt that people getting these kind of mortgages will skip payments so they can buy that big-screen TV or go on a shopping spree.

The only upside to having a mortgage like this is so that if you get laid off from your job, you can buy yourself a few months to get yourself back on your feet. But it's not worth the extra interest you will pay for it. You are better off saving up a "contingency" fund of cash that will do the job just as well. And the money sitting in the bank will earn interest for you instead of paying it to the mortgage company.

Like an earlier poster said, debt is slavery. Get out from under it just as quick as you can.

[Dubya]

That should be OK but not everyone can. Sorry.

If a person waits untill he can pay cash for a home there will be very few home owners. The debt is worth it to me have a home of my own.


Same on cars, trucks.

[freeper12]

>>Like an earlier poster said, debt is slavery

Absolutely...avoid it at all cost...if you need to use a mortgage to buy a home, buy one that is well under the max that the bank tells you you can afford, and then accelerate the payments to get out from under.

[Dubya]

I don't know about that. The lenders I work with do not want to repo homes. They claim they lose money doing that. I guess the lenders are looking for ways to decrease repos.

But, I do not really know. I am just a plain guy who sells repo real estate.

[american spirit]

Anyone hear of Mexicans getting mortgages in the range of 1-3%, no down payment, etc. If true, it sure smells like another ransom payment to Fox for whatever info he's been using for a whole lot of leverage on the fedgov. Any info would be appreciated.

[HairOfTheDog]

So the banks are willing to defer up to 10 months of payments over a 30 year mortage.... not cancel them, just defer them. This is not a bad deal for the bank. Banks really don't want to have to foreclose on a loan, and consumers are uncertain. This is the kind of 'insurance' that makes a lender attractive in uncertain times.

[Dubya]

There are loans for everyone except white men that will make your hair stand up stright.

[wtc911]

....and then leverage the equity to buy another one that you rent out for 125-150% of your costs, use the monthly overage to pay that one out early then do it again...start early enough and retire at fifty with rental income buying your freedom...

[Dubya]

You are right on. Many,many people are losing their jobs right now. It is better for all of them to work it out if they can.

If they don't work it out the owners can go to CH13 and stop it anyway.

Repoing a home is a sad thing.

[wtc911]

....and banks never redline? Come on...

[Hildy]

These and "no interest" loans are going to destroy our economy. Within the next five years you will see more bankruptcies than you'd ever have imagined in your wildest dreams.

[gogeo]

Banks really don't redline.