Friday, May 28, 2010

Thinking of walking away from your mortgage???

In the past, if you defaulted on a mortgage thru bankruptcy or foreclosure, you could count on a major hit on you FICO score and a wait of about 4 years before you could think about buying another home.

For some people today, the thought of paying a mortgage that is worth more than their home value has them thinking about a strategic foreclosure, just to get out from the debt. After all, it's pretty appealing to think that if you owe $300,000 on a home and it's only worth about $200,000, you could walk away, take a hit to your FICO score, save $100,000 in debt payments, and than buy another home in about 4 years.

But, the picture may be changing. The industry is considering changes that may double the time people would have to wait for a "strategic" foreclosure of this type. New rules could soon be in place that would make these people wait 8 years, pay higher rates, and be required to pay higher down payments.

For the folks that lost their homes due to layoffs, or some other unforseen economic hardship, such as a huge medical bill, they old rule would still apply. What is unclear, is how they would handle the situations, where the borrower got in over their head with too much borrowed on a adjustable rate mortgage and then lost it all when rates went higher. Time will tell.... I'll keep you posted.

If you have questions, let me know. John Graham at Neighborly Financial.

Wednesday, May 26, 2010

So what's going on with rates ?????

Right now, rates are incredibily low. We thought at this time last year, we were seeing the bottom. Everyone was in a mad scramble to refi to historically low rates. Now, a year later we are seeing rates at even lower levels. And this, at a time when we thought rates would begin to rise, following the government subsidies of the last year.

Well, it all goes back to the recession that we are supposedly coming out of. We seem to go from euphoria to fear and panic, then back again, from week to week. The stock market is going thru a funk now and the same in happening with interest rates on mortgages.

So the real question is what is triggering the fear? Well, it's pretty simple. As some of the smaller European countries like Greece, Spain, Portugal, and Italy have racked up huge government debts, there is growing fear about their ability to repay. In Greece, the government workers are having to make huge concessions to the government in order to keep the government out of bankruptcy. Even with these concessions, other European countries are having to bail out these smaller countries. This extra tax load on the citizens of Europe could trigger a second wave of recession. It's too early to tell, but some folks are nervous. But, in any case, big debts, racked up by governments are not good. (Oh and did I mention that the US debt has more than doubled in the last year........)

But, in any case, if you need a refi, now is a great time to get one. Give us a call at Neighborly Financial (