Let the games begin! Today, March 5 is the official first day that home owners can call their mortgage companies to apply for mortgage relief under the new Homeowner Affordability and Stability plan by the Obama administration. Administration Officials said that homeowners could actually start making calls yesterday and banks like JPM Chase and SunTrust reported call volume increases of 150 and 50 percent respectively. Homeowners will need to be patient as lenders scramble to get their systems in place to handle the huge increases in call volume. Some callers have reported waiting for several hours before getting through to speak with a real person. Banks such as Bank of America and Wells Fargo have given high marks to the plan along with many economists who think that the new guidelines will help with the current crisis. Under the plan homeowners with loans as large as $729,750 may see their interest rates cut to as low as 2 percent. The refinancing part of the program is expected to reduce payments for up to 5 million homeowners but is limited to loans owned or backed by Fannie Mae and Freddie Mac. Homeowners must also apply by June 2010.
As some of you know I like to show my readers a project from start to finish. I put a contract on another one today and should close within 45 days or so. Hopefully if everything goes well, I will start the pictures and posts within a month or two. As you know the Hopkins Project is on hold for now. I was told I would have a letter within 2 months and there are only two weeks or so left. At that point I am going to restart that project and just let the chips fall where they may. Here are the details on the Old E. Baltimore project category.
Purchase Price 37k
Approx Rehab Costs 20k (Conservative)
3 Bedroom 1 Bath Rowhouse
Current Condition: New Drywall, New Plumbing, New Paint, New Carpet, New fixtures (some missing). I found out that the previous investor took the furnace, refrigerator and stove out before the foreclosure auction.
This property was owned by another investor in the area. We have crossed paths several times but I didn’t realize that it was hers until after the sale. She owns hundreds of properties in the city but she was basically in over her head and her balloon payment was due on several of her properties. They were all auctioned off today but I believe she managed to stop one of them. This kind of thing happens to many investors and we must all fight through the failures in order to reap the rewards. She actually didn’t do too badly because one of them sold for more than 60k over what she paid.
Rent comps are between 800-1200 for a 3 bedroom 1 bath in the area. The math looks good and the price was cheap so I’m pretty happy so far. Now lets hope there aren’t any encumbrances in the way as I go through the due diligence process. As always, stay tuned by clicking the Old E Baltimore Project category.
Gone are the days where lenders could get Fannie Mae to back mortgages that come with low credit scores. Although its not official reports are that the minimum score will be 580 for most loans with some possible exceptions. This is just another step in fixing this broken system and moving into the next phase. According to the Wall Street Journal Fannie Mae said it will increase the period needed for borrowers to re-establish their credit history after a foreclosure to five years from four years. They will also allow shorter recovery periods for those who have “legitimate circumstances” for being foreclosed.
I’ve been attempting to get my head around this thing for a while. How could banks have been so reckless, all the while knowing what the future held? As we all may know by now the Feds have done it. Last week they decided they would help poor little Bear Sterns from a messy collapse. It may not stop with them either. There must be a line at the Feds doorstep by now. After all its not the banks fault for their poor practices and questionable ethics. It must be the taxpayers fault, since we are the ones who will pay for this in the end. What this says is that banks are basically allowed to use poor standards and practices , jeopardize the economy and be bailed out in the end. When it comes to large banking institutions, it seems they are.
Don’t get me wrong, I am not against what the Feds and JP Morgan did to help Bear Sterns. I believe that the ramifications, of allowing them to fail, would have been huge. Poor performing Securities would have been dropped and written down by every institution on Wall street. But maybe in the end that is what needs to happen before the economy will begin to fight its way back. Can the government bail out every institution facing trouble?
The other day someone asked me what I thought was the biggest contributor to today’s mortgage mess. I thought about low interest rates, inflated home prices, Mortgage Company lenience, and subprime lending. It’s difficult to say that there was one root more responsible than another since they all played together in one big mortgage mess. However, if I must choose, subprime lenders get the most blame in my opinion. The main reason they get the blame is because of the ugly gremlins that spawned out of subprime lenders. These offenders are commonly referred to as predatory lenders. The situation has gotten so bad that there is legislation being discussed by congress. The intention is to curtail the many practices commonly described as predatory lending. Read the rest of this entry »