Oct. 1 (Bloomberg) -- Washington Mutual Inc., the largest U.S. savings and loan, is requiring that mortgage brokers show they disclosed lending terms to borrowers as a record number of Americans face losing their homes to foreclosure.
Brokers who do business with Washington Mutual must provide evidence that they revealed their compensation and explained terms of the loan they recommended including amounts, prepayment penalties, and whether interest rates or payments may change, the Seattle-based lender said in a statement today. Washington Mutual also said it would try to call every borrower represented by a broker to review the terms of a loan before closing.
Mortgage brokers have been criticized in Congress and by consumer advocates who say insufficient disclosure, deceptive lending practices and lax regulation helped raise foreclosures on U.S. homes to a record high in August. Rising interest rates squeezed homebuyers with poor credit histories prompting the worst housing slump in 16 years.
``This is a step in the right direction and it's very important this is done to avert future problems,'' said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America, a Washington-based advocacy group. ``Lenders in general need to play more of an oversight role if they use brokers.''
Washington Mutual rose 38 cents, or 1 percent, to $35.69 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has dropped 21 percent this year.
Proposed Legislation
About 59 percent of all mortgages last year were arranged through brokers, according to Columbia, Maryland-based Wholesale Access Mortgage Research & Consulting Inc.
``These efforts are about further simplifying the process of obtaining a home loan for our customers and helping to ensure that our customers fully understand the various choices available to them,'' Alan Gulick, a Washington Mutual spokesman, said in an e-mailed statement. The changes go into effect Oct. 9, he said.
U.S. House Financial Services Committee Chairman Barney Frank said that he's writing legislation to halt predatory mortgage lending and increase consumer protection.
Frank, a Massachusetts Democrat, circulated an outline of a plan last week that would require mortgage brokers to be licensed and registered under state or federal law. He may also propose eliminating incentive pay to brokers based on a customers' choice of mortgage terms.
Brokers serve as middlemen while lenders are responsible for reviewing applications as well as making approval and funding decisions that lead to bad mortgages, George Hanzimanolis, president of the National Association of Mortgage Brokers, said in an interview last month.
`Already Required'
``Brokers are already required to do this,'' Hanzimanolis said today in commenting on disclosures to borrowers. ``The government requires us to do it. Maybe they are just trying to reiterate what the rules are.''
U.S. Representative Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, introduced legislation July 12 to create a national registration system and a new licensing standard for brokers. Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat seeking his party's presidential nomination, unveiled legislation Sept. 5 that would bar brokers from steering borrowers into costly loans.
``Any lender that is buying loans from anyone has quality control, has full underwriting capabilities,'' Hanzimanolis said today. ``If there are loans that are bad, those are things they should be identifying up front.''
Showing posts with label lending. Show all posts
Showing posts with label lending. Show all posts
Tuesday, October 2, 2007
Thursday, June 7, 2007
Economist: Record Foreclosures Could Hit Maryland
BALTIMORE - Maryland's foreclosure rates have been among the lowest in the country, but a local economist says the worst is still to come.
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country.
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures." (www.examiner.com)
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country.
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures." (www.examiner.com)
Monday, June 4, 2007
Economist: Record foreclosures could hit Maryland
BALTIMORE — Maryland's foreclosure rates have been among the lowest in the country, but a local economist says the worst is still to come.
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country. (www.delmarvanow.com)
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures."
Anirban Basu warns of increased "blood in the water" as the impact of the housing downturn hits the state.
"Thus far the rate of foreclosures in Maryland has not had an effect overall because we have not yet seen a period of elevated foreclosure rates," said Basu, chief executive of Sage Policy Group, an economic consulting company in Baltimore. "However they are rising fast and the worst period is in front of us, not behind."
So far, Maryland has avoided the record foreclosures on both the prime and subprime markets in other parts of the country. (www.delmarvanow.com)
"Maryland's foreclosure inventory rate of .5 percent and new foreclosure rate of .31 percent are well below the national rates of 1.19 percent and .57 percent," said Doug Duncan, chief economist and senior vice president of research at the Mortgage Bankers Association.
Basu told The Baltimore Examiner that the increase in housing stock in Maryland is due to "the resettling of adjustable mortgage rates and the fact that people can't make those high interest payments. In addition, people over did it on the amount of debt they took on, not only with homes, but car and credit card debt and loans with has translated into increased delinquencies, and sadly, involuntary (foreclosure) home sales."
The Maryland Bankers Association says that while nearly 70 percent of Americans own their own homes, many that qualified did so with adjustable rate loans or subprime loans whose high interest rates borrowers can no longer afford.
"The regulatory environment is shifting," said Basu. "Borrowers who could have accessed credit in 2002-2003 can't anymore. The subprime market is virtually shutdown. If the state's economy falters and unemployment rises there will be increased blood in the water in respect to foreclosures."
Saturday, May 26, 2007
Don't Get Duped by Hidden Mortgage Fees
Q: DEAR BOB: Which home mortgage fees are proper for a lender to charge borrowers? -- Stephen O.
A: DEAR STEPHEN: Some mortgage lenders are constantly working to create new names for unnecessary fees to impose on naive borrowers. Start shopping among at least a half-dozen mortgage lenders for a "no-cost, no-fee" home loan. In today's market, I recommend obtaining a fixed-rate mortgage.
However, if you are certain you won't keep your home more than five years, then an adjustable-rate mortgage fixed for five years can save you a few interest dollars. Be certain that it does not contain a prepayment penalty or negative amortization, whereby the interest rate adjusts monthly or semiannually and unpaid interest is added to your loan balance.
If you are dealing with a direct lender, such as Wells Fargo, Bank of America or Countrywide, the lender's good-faith estimate must reveal all loan charges. But you might be asked to pay legitimate fees to third parties, such as for the appraisal, credit report and lender's title insurance. That's fine. Those are not junk fees.
However, if you are dealing with a mortgage broker, his or her written good-faith estimate might be less reliable.
Watch out for previously undisclosed fees with such creative names as underwriting fee, document preparation fee, loan review fee, warehousing fee and loan origination fee.
If the lender asks you to pay a loan fee of 1 or 2 percent of the amount borrowed, usually called points, ask how much reduction you will receive in the interest rate. For each point paid, you should receive at least a one-eighth percentage-point reduction in your loan's interest rate for the life of the mortgage. Pay a loan fee only if you expect to stay in the house at least 10 years. Otherwise, take the no-cost, no-fee loan with all lender charges included in the interest rate.
DEAR BOB: Our condo homeowners association was assessed $6,000 each for replacement of roofs, which we have to pay even if we sell the condo. My roof was replaced last year, but they still want me to pay $6,000. What can I do? -- Rita S.
DEAR RITA: Your homeowners association was not assessed. Instead, the association has assessed condominium owners $6,000 each to replace the roofs. That's the way a homeowners association works. Even when your individual condo unit won't directly benefit, you are subject to special assessments, approved by the board of directors, that benefit the entire condo complex.
DEAR BOB: My widowed mother died recently, and the lawyer who prepared her trust wants to charge an outlandish fee to fill out the court papers for her small estate. Is it possible that I could file the papers myself with the court? Where do I obtain them? -- Eugene B.
DEAR EUGENE: If your mother left her major assets in a revocable living trust, no probate court proceedings are required. However, if she left a will with a testamentary or irrevocable trust, probate court proceedings are probably required. This is not a do-it-yourself project.
Shop around among probate lawyers. Although state law sets a maximum for probate legal fees based on the gross value of the estate, most probate lawyers will adjust their fees downward if you ask unless there are complications or a will contest involving the heirs.
DEAR BOB: Several days after we phoned our neighbor to ask him to quiet his barking dog, and to stop running his tractor and spewing carbon monoxide near my disabled daughter's room, he built a "spite fence." I live on a lake and had a nice view from my kitchen window for 28 years. What chance do I have to either remove part of the fence that blocks my lake view or cut it down by two feet? What recourse do I have? -- Elly W.
Use Local Explorer to learn about Washington, D.C., Maryland and Virginia communities.
DEAR ELLY: Unless your city or county has a view-protection ordinance, you have no legal right to a view. However, if the neighbor's tall fence is defined by local ordinance as a spite fence, usually 6 feet or taller and built without a required building permit, you may have a legal right to have the fence removed. Consult a lawyer for details.
DEAR BOB: In 1988, my husband and I bought a house together. In 1994, we got divorced, and I removed his name from the title. We remarried in May 2006. I added his name back to the title. If we sell our home within a year and file our income tax returns jointly for 2006, can we claim the $500,000 home-sale tax deduction? -- Rita R.
DEAR RITA: Not yet. For your husband to qualify for an additional $250,000 principal-residence-sale tax exemption, Internal Revenue Code 121 says he must occupy the principal residence at least 24 of the 60 months before its sale.
However, he does not have to be on the title if he meets the 24-month principal-residence-occupancy test and you file a joint income tax return in the year of principal residence sale. Consult a tax adviser for details.
DEAR BOB: I am interested in finding out who is buying the house next door to mine. The sale is pending. Is there any way to learn other than asking the buyers or realty agents directly? -- Carole B.
DEAR CAROLE: No. Until a home sale closes and the title transfer is recorded, the real estate agents and the other parties handling the transfer cannot legally disclose who is buying the home. That is confidential information.
Nor can they reveal the purchase price without breaching their fiduciary duty to the seller and buyer. The only way to find out the buyer's name now is to ask the seller. But that individual doesn't have to disclose the buyer's name.
DEAR BOB: I feel the sellers from whom I bought my home did not disclose a material and expensive problem with the house. The neighbors tell me the previous owners tried extensive repairs over the years to remedy the problem but did not succeed. Is there any way I can learn the disclosures the sellers of my house were given when they bought? -- Diane S.
DEAR DIANE: No. You have no legal right to obtain the written disclosures made to your seller unless they are public information, such as local building permits, pest control inspection report, etc.
Of course, if there are any warranties, such as a 10-year roof warranty, you are entitled to the balance of the covered period. Consult a lawyer for details.
DEAR BOB: I gave my tenant notice to move, confirmed with a receipt of notice. She agreed to move out, but the unit is now locked and no one is there, though her car is parked in the driveway. I phoned several times, but no reply. What options do I have? I have already hired a contractor to update the unit, based on the tenant's promise to move out on schedule. -- Paras R.
DEAR PARAS: Consult a lawyer whose specialty is evictions. I'm sure you have thought of the possibilities: The tenant moved out but left the car, abandoned the apartment and the car, died either in the apartment or elsewhere, is in a hospital, is in jail, is avoiding you because she refuses to move out, or wants to drag out the eviction procedure to obtain as much free rent from you as possible.
All these situations have happened to me with my rentals. Ask the neighbors if they have seen your tenant or any activity at the rental. Then contact the local police to learn if they have any record of activity at the property or if they can trace your missing tenant. After that, follow your attorney's advice to regain possession of your rental unit.
DEAR BOB: Several years ago, my mother gifted her house to me because she was moving into her new husband's home in Florida. Now I want to sell that house, but my tax adviser says I am stuck with my mother's cost basis of only $23,000, while the house is worth about $375,000 today. At the time of the gift, the house was worth about $225,000. Will I have to pay tax on all that capital gain? -- Alan P.
DEAR ALAN: Your tax adviser is correct. The general rule for gifts is that the donee takes over the donor's basis for a property.
Unless the property is your principal residence and you have owned and occupied it at least 24 of the 60 months before its sale so that you can qualify for the $250,000 tax exemption of Internal Revenue Code 121 (up to $500,000 for a qualified married couple filing jointly), your capital gain will be taxable. The good news is the federal capital gain tax rate is only 15 percent.
DEAR BOB: Last year, my husband bought a house with his name on the title and mortgage. I help him pay the mortgage and property taxes. What is the best way for him to transfer 5 percent of the property to my name? How much will it cost? -- Patricia S.
DEAR PATRICIA: If you will be receiving only a 5 percent interest in the property, that means you probably want to hold title as a tenant in common with your husband, who will retain a 95 percent interest. Each of you needs valid written wills to pass your interests upon the death of either of you to whomever you each designate.
Your husband can convey a 5 percent interest in the house to you by a recorded quitclaim deed. The deed should include a legal description of the property, the percent interest transferred to you, the official parcel number, the method of holding title and his notarized signature so the deed can be recorded.
DEAR BOB: My parents divorced in 1995. The judge gave the house to my mom, but she had to either sell it or refinance the mortgage. She wanted to keep the house, but she couldn't refinance because her debt-to-income ratio was too high. My mother gave me a quitclaim deed, signing the house over to me, and I helped her refinance with a new mortgage. Now I want to get my name off the title and put my mother back as sole owner, as she desires. If I do that and my mother dies, am I responsible for the mortgage payments even though I don't hold title? What do I need to do to quitclaim the house title back to my mom? Do I need to go through a title company? -- David P.
DEAR DAVID: If you are now on the title alone, you can sign a quitclaim deed to your mother. However, you will still remain liable to make sure the mortgage payments are made even when you don't hold title to the property.
After your mother dies, the title to the house goes to whomever she names in her will or revocable living trust.
You don't need to go through a title company to quitclaim your title to your mother. The deed must include a legal description of the property, usually with its parcel number, and your signature must be notarized so the deed can then be recorded to transfer title to your mother.
DEAR BOB: Our next-door neighbor, Charlie, is about 65 and retired. He is divorced and lives alone. In 1995, he and his then-wife bought the house for $220,000. Today, it is worth about $650,000. His ex-wife is asking that he sell the house so she can receive her half of the profit. Charlie doesn't want to sell the house and move. My wife and I trust him completely and are willing to use our liquid assets to help him stay in his house. We are thinking of buying the house from him for cash and then selling the house back to him. Or perhaps we can lend him the money to pay off the mortgage and buy out his wife's share, with him getting a home-equity line of credit to pay us back. What should we do? -- Ashley S.
DEAR ASHLEY: If Charlie can qualify to get a home-equity line of credit for the amount needed to buy out his ex-wife and pay off the existing mortgage, let him do it on his own. No sense in you getting involved in a potentially messy situation.
If he can't qualify for a new mortgage, perhaps you can buy the house and rent it back to him. That would give you the rental-property tax benefits, and Charlie and his ex-wife could each claim their principal-residence-sale tax exemption, up to $500,000 total. Consult a tax adviser for details.
DEAR BOB: I have heard that some people can have a custom home constructed by a builder and after construction is complete wind up with 50 to 60 percent equity in their new homes. Is this true, and how can I go about doing this? -- Greg H.
DEAR GREG: Hire a quality custom home builder who charges low construction prices. If you already own a building lot, that gives you a head start. There is no guaranteed way to turn a fast profit on new custom homes unless you can lock in a low construction price and market values rise during construction. (washingtonpost.com)
A: DEAR STEPHEN: Some mortgage lenders are constantly working to create new names for unnecessary fees to impose on naive borrowers. Start shopping among at least a half-dozen mortgage lenders for a "no-cost, no-fee" home loan. In today's market, I recommend obtaining a fixed-rate mortgage.
However, if you are certain you won't keep your home more than five years, then an adjustable-rate mortgage fixed for five years can save you a few interest dollars. Be certain that it does not contain a prepayment penalty or negative amortization, whereby the interest rate adjusts monthly or semiannually and unpaid interest is added to your loan balance.
If you are dealing with a direct lender, such as Wells Fargo, Bank of America or Countrywide, the lender's good-faith estimate must reveal all loan charges. But you might be asked to pay legitimate fees to third parties, such as for the appraisal, credit report and lender's title insurance. That's fine. Those are not junk fees.
However, if you are dealing with a mortgage broker, his or her written good-faith estimate might be less reliable.
Watch out for previously undisclosed fees with such creative names as underwriting fee, document preparation fee, loan review fee, warehousing fee and loan origination fee.
If the lender asks you to pay a loan fee of 1 or 2 percent of the amount borrowed, usually called points, ask how much reduction you will receive in the interest rate. For each point paid, you should receive at least a one-eighth percentage-point reduction in your loan's interest rate for the life of the mortgage. Pay a loan fee only if you expect to stay in the house at least 10 years. Otherwise, take the no-cost, no-fee loan with all lender charges included in the interest rate.
DEAR BOB: Our condo homeowners association was assessed $6,000 each for replacement of roofs, which we have to pay even if we sell the condo. My roof was replaced last year, but they still want me to pay $6,000. What can I do? -- Rita S.
DEAR RITA: Your homeowners association was not assessed. Instead, the association has assessed condominium owners $6,000 each to replace the roofs. That's the way a homeowners association works. Even when your individual condo unit won't directly benefit, you are subject to special assessments, approved by the board of directors, that benefit the entire condo complex.
DEAR BOB: My widowed mother died recently, and the lawyer who prepared her trust wants to charge an outlandish fee to fill out the court papers for her small estate. Is it possible that I could file the papers myself with the court? Where do I obtain them? -- Eugene B.
DEAR EUGENE: If your mother left her major assets in a revocable living trust, no probate court proceedings are required. However, if she left a will with a testamentary or irrevocable trust, probate court proceedings are probably required. This is not a do-it-yourself project.
Shop around among probate lawyers. Although state law sets a maximum for probate legal fees based on the gross value of the estate, most probate lawyers will adjust their fees downward if you ask unless there are complications or a will contest involving the heirs.
DEAR BOB: Several days after we phoned our neighbor to ask him to quiet his barking dog, and to stop running his tractor and spewing carbon monoxide near my disabled daughter's room, he built a "spite fence." I live on a lake and had a nice view from my kitchen window for 28 years. What chance do I have to either remove part of the fence that blocks my lake view or cut it down by two feet? What recourse do I have? -- Elly W.
Use Local Explorer to learn about Washington, D.C., Maryland and Virginia communities.
DEAR ELLY: Unless your city or county has a view-protection ordinance, you have no legal right to a view. However, if the neighbor's tall fence is defined by local ordinance as a spite fence, usually 6 feet or taller and built without a required building permit, you may have a legal right to have the fence removed. Consult a lawyer for details.
DEAR BOB: In 1988, my husband and I bought a house together. In 1994, we got divorced, and I removed his name from the title. We remarried in May 2006. I added his name back to the title. If we sell our home within a year and file our income tax returns jointly for 2006, can we claim the $500,000 home-sale tax deduction? -- Rita R.
DEAR RITA: Not yet. For your husband to qualify for an additional $250,000 principal-residence-sale tax exemption, Internal Revenue Code 121 says he must occupy the principal residence at least 24 of the 60 months before its sale.
However, he does not have to be on the title if he meets the 24-month principal-residence-occupancy test and you file a joint income tax return in the year of principal residence sale. Consult a tax adviser for details.
DEAR BOB: I am interested in finding out who is buying the house next door to mine. The sale is pending. Is there any way to learn other than asking the buyers or realty agents directly? -- Carole B.
DEAR CAROLE: No. Until a home sale closes and the title transfer is recorded, the real estate agents and the other parties handling the transfer cannot legally disclose who is buying the home. That is confidential information.
Nor can they reveal the purchase price without breaching their fiduciary duty to the seller and buyer. The only way to find out the buyer's name now is to ask the seller. But that individual doesn't have to disclose the buyer's name.
DEAR BOB: I feel the sellers from whom I bought my home did not disclose a material and expensive problem with the house. The neighbors tell me the previous owners tried extensive repairs over the years to remedy the problem but did not succeed. Is there any way I can learn the disclosures the sellers of my house were given when they bought? -- Diane S.
DEAR DIANE: No. You have no legal right to obtain the written disclosures made to your seller unless they are public information, such as local building permits, pest control inspection report, etc.
Of course, if there are any warranties, such as a 10-year roof warranty, you are entitled to the balance of the covered period. Consult a lawyer for details.
DEAR BOB: I gave my tenant notice to move, confirmed with a receipt of notice. She agreed to move out, but the unit is now locked and no one is there, though her car is parked in the driveway. I phoned several times, but no reply. What options do I have? I have already hired a contractor to update the unit, based on the tenant's promise to move out on schedule. -- Paras R.
DEAR PARAS: Consult a lawyer whose specialty is evictions. I'm sure you have thought of the possibilities: The tenant moved out but left the car, abandoned the apartment and the car, died either in the apartment or elsewhere, is in a hospital, is in jail, is avoiding you because she refuses to move out, or wants to drag out the eviction procedure to obtain as much free rent from you as possible.
All these situations have happened to me with my rentals. Ask the neighbors if they have seen your tenant or any activity at the rental. Then contact the local police to learn if they have any record of activity at the property or if they can trace your missing tenant. After that, follow your attorney's advice to regain possession of your rental unit.
DEAR BOB: Several years ago, my mother gifted her house to me because she was moving into her new husband's home in Florida. Now I want to sell that house, but my tax adviser says I am stuck with my mother's cost basis of only $23,000, while the house is worth about $375,000 today. At the time of the gift, the house was worth about $225,000. Will I have to pay tax on all that capital gain? -- Alan P.
DEAR ALAN: Your tax adviser is correct. The general rule for gifts is that the donee takes over the donor's basis for a property.
Unless the property is your principal residence and you have owned and occupied it at least 24 of the 60 months before its sale so that you can qualify for the $250,000 tax exemption of Internal Revenue Code 121 (up to $500,000 for a qualified married couple filing jointly), your capital gain will be taxable. The good news is the federal capital gain tax rate is only 15 percent.
DEAR BOB: Last year, my husband bought a house with his name on the title and mortgage. I help him pay the mortgage and property taxes. What is the best way for him to transfer 5 percent of the property to my name? How much will it cost? -- Patricia S.
DEAR PATRICIA: If you will be receiving only a 5 percent interest in the property, that means you probably want to hold title as a tenant in common with your husband, who will retain a 95 percent interest. Each of you needs valid written wills to pass your interests upon the death of either of you to whomever you each designate.
Your husband can convey a 5 percent interest in the house to you by a recorded quitclaim deed. The deed should include a legal description of the property, the percent interest transferred to you, the official parcel number, the method of holding title and his notarized signature so the deed can be recorded.
DEAR BOB: My parents divorced in 1995. The judge gave the house to my mom, but she had to either sell it or refinance the mortgage. She wanted to keep the house, but she couldn't refinance because her debt-to-income ratio was too high. My mother gave me a quitclaim deed, signing the house over to me, and I helped her refinance with a new mortgage. Now I want to get my name off the title and put my mother back as sole owner, as she desires. If I do that and my mother dies, am I responsible for the mortgage payments even though I don't hold title? What do I need to do to quitclaim the house title back to my mom? Do I need to go through a title company? -- David P.
DEAR DAVID: If you are now on the title alone, you can sign a quitclaim deed to your mother. However, you will still remain liable to make sure the mortgage payments are made even when you don't hold title to the property.
After your mother dies, the title to the house goes to whomever she names in her will or revocable living trust.
You don't need to go through a title company to quitclaim your title to your mother. The deed must include a legal description of the property, usually with its parcel number, and your signature must be notarized so the deed can then be recorded to transfer title to your mother.
DEAR BOB: Our next-door neighbor, Charlie, is about 65 and retired. He is divorced and lives alone. In 1995, he and his then-wife bought the house for $220,000. Today, it is worth about $650,000. His ex-wife is asking that he sell the house so she can receive her half of the profit. Charlie doesn't want to sell the house and move. My wife and I trust him completely and are willing to use our liquid assets to help him stay in his house. We are thinking of buying the house from him for cash and then selling the house back to him. Or perhaps we can lend him the money to pay off the mortgage and buy out his wife's share, with him getting a home-equity line of credit to pay us back. What should we do? -- Ashley S.
DEAR ASHLEY: If Charlie can qualify to get a home-equity line of credit for the amount needed to buy out his ex-wife and pay off the existing mortgage, let him do it on his own. No sense in you getting involved in a potentially messy situation.
If he can't qualify for a new mortgage, perhaps you can buy the house and rent it back to him. That would give you the rental-property tax benefits, and Charlie and his ex-wife could each claim their principal-residence-sale tax exemption, up to $500,000 total. Consult a tax adviser for details.
DEAR BOB: I have heard that some people can have a custom home constructed by a builder and after construction is complete wind up with 50 to 60 percent equity in their new homes. Is this true, and how can I go about doing this? -- Greg H.
DEAR GREG: Hire a quality custom home builder who charges low construction prices. If you already own a building lot, that gives you a head start. There is no guaranteed way to turn a fast profit on new custom homes unless you can lock in a low construction price and market values rise during construction. (washingtonpost.com)
Monday, May 21, 2007
Foreclosure Fiasco
For years, you’ve been told owning your own home was the “American Dream.” But ABC2 News Investigator Tisha Thompson discovered, some one can literally “steal” your home. Meet Dana Pryor, a mother in North Baltimore who thought she had done everything right. The right education, the right job, she even got what she thought was the right loan. Only to find out how very wrong it can all become.
"How do you not know where your uniform is or your books?” Like single mothers everywhere --
"Could you just find...where is your...ugh." Dana Pryor’s morning ritual can be a bit of a struggle. "Come on and get in the car."
Yet, despite the seeming chaos --
"Everybody in!"
Pryor has managed to do everything right for years. "Come on, come one, come on. Where's your brother?" She went to college.
"I'm about to leave this kid and let him walk to school." Got a master’s degree.
"Ok, we're ready to go."
And a very good job.
"I am a six-figure, degree-having mom who feels very much like I have failed miserably."
Because Pryor’s dream house --
"It was $180,000, six bedrooms, three bathrooms."
Became the money pit --
"Probably $35,000."
That swallowed her 401-K.
"I'm either going to feed my kids or I'm going to pay the person I owe,” Pryor says. “Oftentimes you're robbing Peter to pay Paul and Peter has to wait until later."
Peter being her $1,300 mortgage payment, which escalated to more than $28,000 even after she paid back a few missing installments. Now her home will be sold on the courthouse steps because, despite making more than $100,000 a year, Pryor’s gone into foreclosure.
"The tsunami is coming,” says Allen Fishbein of the Center for Responsible Lending. “It has already engulfed some but unfortunately it appears its going to engulf many more."
The Center for Responsible Lending predicts as many as 22% of Maryland’s subprime loans will go into foreclosure next year.
Maryland has the fastest foreclosure process in the nation. If you miss a payment, your lender can sell your home in just 15 days.
"Maryland's 'Rocket Docket' of going into foreclosure sale in 15 days doesn't have to be,” says Phillip Robinson for the legal-aid group Civil Justice Network. “Most states have a much slower process."
To make matters worse, Robinson says the banks don’t even have to tell you they’re selling your house. "It’s the only legal proceeding in Maryland that doesn't require notice, which to me is mind-boggling,” he says. “If you want to sue me for $20 in District Court, the judge can't sign the order until you can prove through an affidavit that I got served. But if you want to sue me and take away my home and foreclose on my home, you don't have to prove to the judge that I got notice of the lawsuit."
"This is everyone's problem and we need to get them to get outraged," says Congressman Elijah Cummings (D-MD). He says he’s going to fix the problem, but needs you to write him a letter complaining about Maryland mortgage meltdown first. "I need people to be fiery about it.”
But foreclosure is embarrassing for many people.
"Pride is the biggest stumbling block," says Pryor. "The biggest mistake I made, the one everyone makes, is putting your head in the sand. It’s very hard to admit you need help with your mortgage."
Pryor says she hasn’t told anyone she’s about to move out and only agreed to go on camera because she doesn’t want what happened to her to ever happen to you.
"You can't buy a home in 15 days, but you amazingly enough you can lose one in 15 days.” (abc2news.com)
"How do you not know where your uniform is or your books?” Like single mothers everywhere --
"Could you just find...where is your...ugh." Dana Pryor’s morning ritual can be a bit of a struggle. "Come on and get in the car."
Yet, despite the seeming chaos --
"Everybody in!"
Pryor has managed to do everything right for years. "Come on, come one, come on. Where's your brother?" She went to college.
"I'm about to leave this kid and let him walk to school." Got a master’s degree.
"Ok, we're ready to go."
And a very good job.
"I am a six-figure, degree-having mom who feels very much like I have failed miserably."
Because Pryor’s dream house --
"It was $180,000, six bedrooms, three bathrooms."
Became the money pit --
"Probably $35,000."
That swallowed her 401-K.
"I'm either going to feed my kids or I'm going to pay the person I owe,” Pryor says. “Oftentimes you're robbing Peter to pay Paul and Peter has to wait until later."
Peter being her $1,300 mortgage payment, which escalated to more than $28,000 even after she paid back a few missing installments. Now her home will be sold on the courthouse steps because, despite making more than $100,000 a year, Pryor’s gone into foreclosure.
"The tsunami is coming,” says Allen Fishbein of the Center for Responsible Lending. “It has already engulfed some but unfortunately it appears its going to engulf many more."
The Center for Responsible Lending predicts as many as 22% of Maryland’s subprime loans will go into foreclosure next year.
Maryland has the fastest foreclosure process in the nation. If you miss a payment, your lender can sell your home in just 15 days.
"Maryland's 'Rocket Docket' of going into foreclosure sale in 15 days doesn't have to be,” says Phillip Robinson for the legal-aid group Civil Justice Network. “Most states have a much slower process."
To make matters worse, Robinson says the banks don’t even have to tell you they’re selling your house. "It’s the only legal proceeding in Maryland that doesn't require notice, which to me is mind-boggling,” he says. “If you want to sue me for $20 in District Court, the judge can't sign the order until you can prove through an affidavit that I got served. But if you want to sue me and take away my home and foreclose on my home, you don't have to prove to the judge that I got notice of the lawsuit."
"This is everyone's problem and we need to get them to get outraged," says Congressman Elijah Cummings (D-MD). He says he’s going to fix the problem, but needs you to write him a letter complaining about Maryland mortgage meltdown first. "I need people to be fiery about it.”
But foreclosure is embarrassing for many people.
"Pride is the biggest stumbling block," says Pryor. "The biggest mistake I made, the one everyone makes, is putting your head in the sand. It’s very hard to admit you need help with your mortgage."
Pryor says she hasn’t told anyone she’s about to move out and only agreed to go on camera because she doesn’t want what happened to her to ever happen to you.
"You can't buy a home in 15 days, but you amazingly enough you can lose one in 15 days.” (abc2news.com)
Thursday, May 17, 2007
HUD to seek ban on mortgage 'aid'
WASHINGTON // The Department of Housing and Urban Development plans to seek a ban on a certain type of down payment assistance that has grown sevenfold this decade and contributed to a surge in foreclosures of government-backed mortgages.
Nonprofit groups, such as Nehemiah Corp. of America and AmeriDream Inc. of Gaithersburg, Md., provide the down payment help and are then reimbursed by the seller. The programs are "a contributing factor of increased risk in our portfolio" of loans, HUD spokesman Lemar Wooley said in an e-mail.
HUD plans to propose the ban this month for public comment, possibly as early as this week, Wooley said. More than 100,000 low- and moderate-income consumers bought homes using such programs last year.
The percentage of foreclosures on these homes is more than double that on other loans sponsored by the Federal Housing Administration, according to agency audits.
Once HUD issues its rule proposal, industry and consumer groups will have 60 days to submit comments.
In 1999, HUD proposed a similar ban and withdrew it in 2001 after industry opposition.
Foreclosures rose last year in the Baltimore metropolitan area - particularly the suburbs - as problematic loans and a housing market slowdown buffeted new owners with little equity.
But FHA loans weren't part of the problem. HUD records show a significant drop in FHA foreclosures, the result of aggressive efforts to stem the fallout from illegal flipping in the late 1990s.
Vincent P. Quayle, executive director of the St. Ambrose Housing Aid Center, a Baltimore nonprofit that does not offer seller-financed assistance, believes fewer local homebuyers have turned to such programs in the past few years because they can obtain assistance through the city and the state.
But he's still pleased to hear HUD is trying for a ban on seller-financed help. He said buyers paid for that help, literally: "The seller would just raise the price."
Under the program, groups including Sacramento, Calif., Nehemiah and AmeriDream give buyers an average of about $3,400 for a down payment.
They are then reimbursed by sellers of the house, who also pay a service fee. The arrangement was designed to circumvent U.S. rules that bar sellers from giving direct assistance.
Sellers have tried to recover the cost of the fee they pay nonprofits by raising the price of the house an average of 3 percent, a 2005 study by Congress' nonpartisan Government Accountability Office found.
The number of FHA-backed homes purchased with nonprofit assistance has risen to 102,921 in 2006 from 14,603 in 2000, HUD data show. While these payments accounted for just 2 percent of all FHA loans in 2000, they soared to 33 percent of the loans last year.
The Internal Revenue Service held last year that groups providing down payment assistance did not quality for tax exemptions and said it was examining the practices of 185 nonprofits. AmeriDream and Nehemiah said they are in talks with the IRS.
(Bloomberg News, baltimoresun.com)
Nonprofit groups, such as Nehemiah Corp. of America and AmeriDream Inc. of Gaithersburg, Md., provide the down payment help and are then reimbursed by the seller. The programs are "a contributing factor of increased risk in our portfolio" of loans, HUD spokesman Lemar Wooley said in an e-mail.
HUD plans to propose the ban this month for public comment, possibly as early as this week, Wooley said. More than 100,000 low- and moderate-income consumers bought homes using such programs last year.
The percentage of foreclosures on these homes is more than double that on other loans sponsored by the Federal Housing Administration, according to agency audits.
Once HUD issues its rule proposal, industry and consumer groups will have 60 days to submit comments.
In 1999, HUD proposed a similar ban and withdrew it in 2001 after industry opposition.
Foreclosures rose last year in the Baltimore metropolitan area - particularly the suburbs - as problematic loans and a housing market slowdown buffeted new owners with little equity.
But FHA loans weren't part of the problem. HUD records show a significant drop in FHA foreclosures, the result of aggressive efforts to stem the fallout from illegal flipping in the late 1990s.
Vincent P. Quayle, executive director of the St. Ambrose Housing Aid Center, a Baltimore nonprofit that does not offer seller-financed assistance, believes fewer local homebuyers have turned to such programs in the past few years because they can obtain assistance through the city and the state.
But he's still pleased to hear HUD is trying for a ban on seller-financed help. He said buyers paid for that help, literally: "The seller would just raise the price."
Under the program, groups including Sacramento, Calif., Nehemiah and AmeriDream give buyers an average of about $3,400 for a down payment.
They are then reimbursed by sellers of the house, who also pay a service fee. The arrangement was designed to circumvent U.S. rules that bar sellers from giving direct assistance.
Sellers have tried to recover the cost of the fee they pay nonprofits by raising the price of the house an average of 3 percent, a 2005 study by Congress' nonpartisan Government Accountability Office found.
The number of FHA-backed homes purchased with nonprofit assistance has risen to 102,921 in 2006 from 14,603 in 2000, HUD data show. While these payments accounted for just 2 percent of all FHA loans in 2000, they soared to 33 percent of the loans last year.
The Internal Revenue Service held last year that groups providing down payment assistance did not quality for tax exemptions and said it was examining the practices of 185 nonprofits. AmeriDream and Nehemiah said they are in talks with the IRS.
(Bloomberg News, baltimoresun.com)
Wednesday, May 16, 2007
NovaStar accused of redlining Baltimore row houses
Subprime lender NovaStar Financial Inc. has been hit with a Fair Housing Act lawsuit charging that it refused to make mortgage loans for purchases of row houses in Baltimore.
The lawsuit, filed Wednesday by the National Community Reinvestment Coalition (NCRC), also alleges that NovaStar had a written policy instructing loan officers to reject mortgage applications involving property on American Indian reservations or homes used for adult foster care.
A NovaStar spokesman did not immediately return a call from Inman News, but reportedly called the claims without merit and said NovaStar will fight them.
In its complaint, NCRC said that on two occasions in 2006 it used a "tester" to call NovaStar about obtaining a loan on a row house in Baltimore.
In the first call in January 2006, "After the tester stated that the house was a row house, the agent stated that the company had stopped financing row houses a few months before the tester's call," the complaint alleged. "The agent asked where the house was located, and ... after looking up the address, the agent informed the tester that 'we don't do row houses in Baltimore.' "
A call the following month produced similar results, and the complaint alleges that "NovaStar has continued to enforce this policy up to the present time."
The policy is discriminatory because of the high concentration of African Americans and Latinos in Baltimore, the suit alleges.
"A loan applicant in Baltimore with a row house, despite having substantial assets, a strong FICO score, a low LTV (loan-to-value) and or/DTI (debt-to-income) ratio, and steady income, would not qualify for a loan of any size," NCRC alleged.
The suit said NCRC filed a complaint with the U.S. Department of Housing and Urban Development on March 16, 2006, alleging that NovaStar's no-row-house policy violated the Fair Housing Act, which HUD has not acted on.
NCRC -- a coalition of 640 nonprofit organizations that promotes the investment of private capital in underserved communities -- was awarded $500,000 in September after filing a similar complaint with HUD about the lending practices of SouthStar Funding LLC. HUD negotiated a settlement in which SouthStar agreed to fund NCRC programs over a four-year period, including training seminars for housing counselors.
As part of its lawsuit against NovaStar, NCRC cited as evidence a manual issued to company employees that listed "unacceptable property types" for loans, including "properties located on Indian reservations" and "properties used for adult foster care."
NCRC said the alleged "no Indian reservation policy" has "the purpose and effect of limiting access to capital for Native Americans," noting that Native Americans make up more than half the population of reservations nationwide. The alleged policy against financing properties used for adult foster care "excludes homes typically licensed for people with disabilities" resulting in an "adverse impact on loan applicants associated with, or living with, persons with disabilities."
The lawsuit seeks an injunction against NovaStar forcing it to halt its alleged discriminatory practices, and also seeks compensatory and punitive damages
The lawsuit, filed Wednesday by the National Community Reinvestment Coalition (NCRC), also alleges that NovaStar had a written policy instructing loan officers to reject mortgage applications involving property on American Indian reservations or homes used for adult foster care.
A NovaStar spokesman did not immediately return a call from Inman News, but reportedly called the claims without merit and said NovaStar will fight them.
In its complaint, NCRC said that on two occasions in 2006 it used a "tester" to call NovaStar about obtaining a loan on a row house in Baltimore.
In the first call in January 2006, "After the tester stated that the house was a row house, the agent stated that the company had stopped financing row houses a few months before the tester's call," the complaint alleged. "The agent asked where the house was located, and ... after looking up the address, the agent informed the tester that 'we don't do row houses in Baltimore.' "
A call the following month produced similar results, and the complaint alleges that "NovaStar has continued to enforce this policy up to the present time."
The policy is discriminatory because of the high concentration of African Americans and Latinos in Baltimore, the suit alleges.
"A loan applicant in Baltimore with a row house, despite having substantial assets, a strong FICO score, a low LTV (loan-to-value) and or/DTI (debt-to-income) ratio, and steady income, would not qualify for a loan of any size," NCRC alleged.
The suit said NCRC filed a complaint with the U.S. Department of Housing and Urban Development on March 16, 2006, alleging that NovaStar's no-row-house policy violated the Fair Housing Act, which HUD has not acted on.
NCRC -- a coalition of 640 nonprofit organizations that promotes the investment of private capital in underserved communities -- was awarded $500,000 in September after filing a similar complaint with HUD about the lending practices of SouthStar Funding LLC. HUD negotiated a settlement in which SouthStar agreed to fund NCRC programs over a four-year period, including training seminars for housing counselors.
As part of its lawsuit against NovaStar, NCRC cited as evidence a manual issued to company employees that listed "unacceptable property types" for loans, including "properties located on Indian reservations" and "properties used for adult foster care."
NCRC said the alleged "no Indian reservation policy" has "the purpose and effect of limiting access to capital for Native Americans," noting that Native Americans make up more than half the population of reservations nationwide. The alleged policy against financing properties used for adult foster care "excludes homes typically licensed for people with disabilities" resulting in an "adverse impact on loan applicants associated with, or living with, persons with disabilities."
The lawsuit seeks an injunction against NovaStar forcing it to halt its alleged discriminatory practices, and also seeks compensatory and punitive damages
Thursday, May 3, 2007
Low appraisals hurt subprime borrowers
BALTIMORE - You face foreclosure. You quickly move to refinance but qualify only for a double-digit subprime rate. You take it, pay for an appraisal and learn your house is worth $425,000. Then the lender reduces your appraisal by $100,000.
That’s the situation Mark Allen, of Gwynn Oak, faced after being downsized at work.
“I took a part-time job to feed my family, keep gas in my car and continue my job search,” said Allen, a single parent of three. “When I finally got a full-time job, I was so far behind I couldn’t catch up. I had to refinance to save my home, but when they dropped my appraisal by $100,000, I was floored.”
Allen accepted that his monthly mortgage payments would go up by $1,000 and that he would only receive 70 percent loan to value, but he questions whether dropping his appraisal was legal.
A loan officer from Quality Home Loans, a lender that downgrades appraisals, said, “Appraisals can be downgraded for a lot of reasons, like market saturation, houses that stay on the market too long, or if when doing a public records search we see that though additions were made to a residence, the proper permits were not obtained. So then we disallow those additions.”
Real estate lawyer Stephen Greenwood said he thought lenders are “being oversensitive” to avoid financial problems such as those that affected New Century Financial, which went bankrupt.
“I don’t know if it is actually legal to decide to reduce somebody’s appraisal,” he said. “Then again, the lenders are the ones loaning the money, and they want to make sure their risks aren’t worse than what they already are.”
Ashidda Khalil, executive director of the Baltimore branch of the Neighborhood Assistance Corporation of America, was familiar with the practice. “Imagine your neighbor with the identical house in the same condition gets 100 percent LTV, and not only do you get double-digit interest rates and only 60 to 70 percent LTV, but now they drop the value of your home by tens of thousands of dollars,” she said.
Khalil cautions borrowers to steer clear of lenders that drop appraisals. “There is legitimate help out there that doesn’t seek to further victimize the borrower,” she said.
(www.examiner.com)
That’s the situation Mark Allen, of Gwynn Oak, faced after being downsized at work.
“I took a part-time job to feed my family, keep gas in my car and continue my job search,” said Allen, a single parent of three. “When I finally got a full-time job, I was so far behind I couldn’t catch up. I had to refinance to save my home, but when they dropped my appraisal by $100,000, I was floored.”
Allen accepted that his monthly mortgage payments would go up by $1,000 and that he would only receive 70 percent loan to value, but he questions whether dropping his appraisal was legal.
A loan officer from Quality Home Loans, a lender that downgrades appraisals, said, “Appraisals can be downgraded for a lot of reasons, like market saturation, houses that stay on the market too long, or if when doing a public records search we see that though additions were made to a residence, the proper permits were not obtained. So then we disallow those additions.”
Real estate lawyer Stephen Greenwood said he thought lenders are “being oversensitive” to avoid financial problems such as those that affected New Century Financial, which went bankrupt.
“I don’t know if it is actually legal to decide to reduce somebody’s appraisal,” he said. “Then again, the lenders are the ones loaning the money, and they want to make sure their risks aren’t worse than what they already are.”
Ashidda Khalil, executive director of the Baltimore branch of the Neighborhood Assistance Corporation of America, was familiar with the practice. “Imagine your neighbor with the identical house in the same condition gets 100 percent LTV, and not only do you get double-digit interest rates and only 60 to 70 percent LTV, but now they drop the value of your home by tens of thousands of dollars,” she said.
Khalil cautions borrowers to steer clear of lenders that drop appraisals. “There is legitimate help out there that doesn’t seek to further victimize the borrower,” she said.
(www.examiner.com)
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