It has just come to my attention the HUD does not require HECM/ Reverse mortgages to be listed on the MLS. Has anyone else run into this? I have been negotiating short sales in south Florida for over 10 years and I was just made aware of this.
What Kind of Mortgage Fits Your Needs?
No matter the state of the economy, each year the number of new mortgages underwritten reaches millions of homeowners. Some are buying for the first time while others are downsizing or upsizing. When rates drop, like they did over the past 2 years, many people seize the opportunity to refinance their home loan. However, how do people decide on which mortgage to use for their specific need? An online survey conducted by HSH.com points to some of the factors that influence consumer decisions.
Most Important Factor
It should come as no shock that the most important factor is the interest rate. Regardless of the type of loan, the size of the loan or the customers home state, everybody is trying to get the best rate for their home loan. In the survey mentioned above over 45% stated that the rate was the top factor for choosing a loan.
Other items, such as the length of the term and the fees also ranked high in the survey, but none was as vital as the rate.
Deciding How Much to Use for Down Payment
The ability to make a down payment equal to 10%-20% of the home’s price will give the borrower a range of products to choose from. A large down payment and a solid credit score will usually allow a borrower to qualify for a conventional loan which has the best interest rates.
For borrowers that have a smaller down payment, their options will be limited to FHA, USDA or VA for qualifying veterans.
Choosing the Right Term
With rates at an all-time low many borrowers are actually paying more attention to the term of the mortgage loan as part of the decision process. While the traditional fixed rate of a 30 year loan remains quite dominant more and more people are looking at different adjustable rate products. Those borrowers that have refinanced in the past 2 years have often chosen to go down to a 15 or 10 year term in order to drastically cut down on their total interest pay back while also paying off the home sooner.
Brokers Still the Top Choice
When looking for the right mortgage loan a number of people still prefer to use the services of a mortgage broker over a local bank or credit union. In the survey mentioned earlier over 30% of respondents claimed that they sought the services of a broker rather than another type of lender. Since brokers typically have access to multiple lenders they can offer any type of mortgage loan and get the best rate too.
Obviously, none of these factors discussed the two biggest items facing a borrower; are they happy with the home and can they afford the mortgage payment? Beyond those two items, the guidelines mentioned above should help any new borrower pick a loan that is right for their situation.
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Homeowners with second mortgages have a higher risk of a delayed short sale or foreclosure. Why? The 2nd lienholders have trouble (rightly so) allowing tens of thousands of dollars to be forgiven and often times, their denial of the short sale offer results in more loss on their interest(s) than if they cooperated. Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, says, “Subordinate liens have become the biggest hurdle to resolving the foreclosure crisis more quickly.” How do our agents resolve the 2nd mortgage issue? By Persistence and Communication.
First, what are some local governments doing to eradicate the subordinate lienholders issue? A recent bill proposed by Rep. Jerry McNerney (Cali’s 11th congressional District) called the “Fast Help For Homeowners Act” aims to expedite short sales by requiring second mortgage lenders to review and make a decision on a short sale agreement within 45 days. If the lender does not respond within the time frame, the short sale is deemed “approved” by the second mortgage lender on the 46th day. McNerney ultimately wants this bill to provide relief to homeowners throughout the country.
I commend rep Mcnerney for putting effort in publicizing the issue and proposing ways to get 2nd lienholders to comply. Do I believe more laws and regulations will improve the situation? Not necessarily. Will it actually produce positive results for the short sellers? From a historical perspective, one can easily be skeptical but we all can hope for the best.
To set the scene (reiteration of my last post) of a typical short sale with primary and subordinate lienholders, picture a room of five famished people waiting for food and suddenly throwing one pie right in the middle. Most likely, a fight will break out for the pie and it will probably end up getting ruined resulting in a loss for everyone (AKA foreclosure). This is what typically happens in a short sale transaction and 2nd lienholders are usually the biggest contributors to this demise.
What uncooperative 2nd lienholders do not understand is IF they allow the property to fall into foreclosure, they will get nothing from the transaction. Yes, they are able to pursue the borrower for the remaining balance post auction but they would have to pursue via lawsuit which will add on more costs, time, and a headache. The homeowner will probably end up filing for bankruptcy anyway.
Now, one indispensable element to a successful short sale transaction is COMMUNICATION. Our previous post The Secrets Of A Pro Negotiator, emphasizes the importance of communicating with all parties of the transactions well, one of which is the 2nd lienholder. The job of a professional short sale agent or 3rd party negotiator is to communicate the simple notion, “Here is the whole pie. You can either have a piece of the pie or nothing at all. We think you should take the piece we offer you.” Although many no’s will be spoken from the 2nd lienholder, through months of persistence and explaining the present circumstances, they will eventually understand that accepting the offer will be the better financial choice than the alternative.
What do you think is the solution for subordinate lienholders?
Peter
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