Saturday, February 16, 2008

Conventional mortgage loans are rare

Conventional mortgage loans is the most common type of mortgage.

Conventional mortgage loans make up any mortgages that are not guaranteed by the government. In general, conventional loans are more difficult to qualify for and require large down payments; however, the guidelines used to determine whether a property is suitable for purchase under the mortgage terms are more lenient. This is the most common type of mortgage.

Conventional mortgage loans are available with fixed or adjustable interest rates. Some loans may require mortgage insurance. Some manufactured-house customers can get mortgages from local banks, similar to those for site-built houses. These mortgage loans generally carry lower interest rates and have more legal protections than the loans through the dealers. However, the mortgage loans are rare because many manufactured-house customers have bad credit, or lack a credit history, or don't know that they have the option to seek a mortgage.

Practically all conventional conforming loan programs share the same core document requirements:

Pay stubs for the past two pay period.

Bank statements for the previous two months.

Tax returns and W-2s for the past two years.

Some programs are called no income verification, no asset verification and no documentation loans.

Unfortunately, many homebuyers and investors misinterpret the true program requirements. Contrary to what many people mistakenly believe, these programs will still require a good deal of borrower documents. They just don't require as much.

The no income verification program will not require income documentation, but lenders will still require documentation of the borrower's employment. The no asset verification program will not require documentation of the "source" of the asset funds that the borrower must have to qualify for the loan. However, the no asset verfication program will still require documentation of the current funds.

The no documentation loan is a combination of the no income verification and no asset verification programs.

The "no doc" will require income and asset-source documentation, but it will still require employment, current asset and other documentation.

Wednesday, February 13, 2008

Describing The Foreclosure Process

Basic Foreclosure Process Explained

Foreclosure is a process of legal action taken by a lien holder or mortgage holder, as set forth by state and local laws and a contractual obligation. This obligation is spelled out in a mortgage contract or trust deed.

The foreclosure action, pre-arranged in the contract, is taken when the terms of the contract are not met. It almost always means that the payments on the loan have not been made. The loan which was used to buy real estate is not being paid back and is

considered in default. "Default" being the non-performance of a contractual or other obligation such as not making payments on a note.

The contract (mortgage or trust deed) states that if the loan is not paid according to the agreement the one granting the loan is entitled to gain possession of the property in order to retrieve the money they lent for that property.

The ultimate goal of the foreclosing lender is to end the rights of possession of the property owner. Foreclosure then, is a process whereby the lender takes a property back from the borrower who's loan is in default and then sells the property to pay off the loan.

Sounds complicated? Not really.

A simple analogy is that of repossession. Example: When you buy a new car, most likely you will need an auto loan. The loan may come from your bank, credit union or even the bank or lending institution the auto dealership works with. In most states you get to

drive the car off the lot, registered in your name and the name of the lender of the loan. Likewise, the title to the vehicle is in both names and held by the lender. When you payoff the loan, the title is sent to you, with only your name on it. You drive the car clean it repair and maintain it but it isn't your until the loan is paid off.

Try not making your auto payments for three or four months and watch what happens. Most likely you will receive a series of letters from the lender, progressively getting a little more unfriendly. The lender may call to try to resolve the matter of late payments.

Whether or not satisfactory arrangements are made make no mistake about it you are in default of your contractual obligation to make the timely loan payments stipulated in the loan agreement.

If the contract is not adhered to, the lender has the right to protect his interest in the agreement. The lender's exposure is secured by your signature on a promissory note and by the vehicle itself.

According to most contracts or agreements of this nature, the lender will have the right to and may choose to accelerate the loan thereby making the full amount of the principal portion due and payable immediately not just the portions or payments in arrears.

Acceleration, commonly known as "calling in the note or loan", is done so that the lender can avoid having to chase a borrower through cycles of being behind in payments and playing catch-up.

Most lenders will work with you when you get behind in your regularly scheduled payments. If you fall behind enough show no ability to get caught-up in a reasonable length of time or are just generally uncooperative with the lender the lender will most likely accelerate the loan.

Banks and other lending institutions are not in the automobile business. Banks only male money on the interest they charge. If the loan is not performing, the lender is not profiting on its investment. Its profits come from the interest you pay on the loan.

All banks are regulated. That means that they have to perform within very specific guidelines and the laws of the land. The banks us our money to loan other's money and to invest. If the return (the interest) on the investment or loan the bank makes is not enough to cover its expenses and make a reasonable profit, then the bank is not running profitably. Who then, in their right mind, would want to deposit their hard earned dollars in a business or bank in this case that was not running profitably?

Banking regulations are supposed to protect the consumer from fraud misuse and misappropriation of the monies the consumer entrusts the bank with.

Following is an example of the acceleration process.

Let's say that you bought $12,000 car. You put $2,000 down and you borrowed $10,000 at 9.50% interest for 36 months. Your monthly payments would be $320.33. If you make no payments what-so-ever, the scenario would look like this:

30 Days You Owe 320.33

60 Days You Owe 640.66 plus late fees for 1 month

90 Days You Owe 960.99 plus late fees for 2 months

91 Days You Owe 10,000 plus late fees, interest and collection expenses

If suitable arrangements can not be made the lender will "call in the loan," thereby making the full amount of the original $10,000 loan due and payable immediately. (plus interest, late fees and other expenses associated with trying to collect on the loan)

While all contracts and loan agreements vary, typically, 90 days is all you get.

If you still can not make satisfactory arrangements remove your personal possessions from the vehicle because the truck with the 'hook' on the back will surely come.

Copyright © The Real Estate Library 1994-2004
Copyright © 2004 Federal Homes

Monday, February 11, 2008

About Mortgages

Much is the same with real estate loan agreements and mortgages.

When Jack secure a home loan from a bank he will sign two of the most important documents he will ever sign. The first is the promissory note. Promissory note outlines the terms and conditions of the loan and obligation to make the specified monthly payments to the bank. Technically speaking the note is the signed document that acknowledges the existence of a debt, and the promise to repay the debt.

The second document is the mortgage contract. Mortgage contract is a pledge of security collateral for the debt. This legal instrument is created to give mortgagee (lender) certain rights to the property in the event the mortgagor (borrower) fails to perform as agreed in the loan agreement by pledging the property being financed as collateral. The mortgage given to a bank is not evidence of a debt.

A mortgage simply pledges the property as security for the payment of the loan.

There are several types of mortgages prepared for all kinds of situations. In some states, the contract actually transfers the property to the lender until the terms of the mortgage contract are met. In other states, the mortgage acts as a lien against the

property. The borrower retains possession and use of the property, as long as the terms of the mortgage contract are met.

Theodore J. Dallow, a recognized foreclosure expert and editor-in-chief of "FORECLOSURES", a professional newsletter, points out the five basic covenants in a mortgage agreement:

1. The borrower agrees to pay the principal mortgage debt.

2. The borrower will keep the property insured against fire, for the benefit of the lender.

3. No building on the property will be removed or destroyed without the consent of the lender.

4. The full amount of the principal portion of the loan will become due and payable, in the event that the borrower defaults on the payment of the principal, interest, taxes or assessments.

5. The borrower will agree to the appointment of a receiver, if foreclosure proceedings occur.

The contract states that the borrower will protect the property and pay the loan back. It also states that if the borrower doesn't abide by the agreements, the lender will accelerate the loan if payments aren't made and that the borrower agrees to the foreclosure process should it become necessary. Therefore, by signed contract, the lender must accelerate the loan and must foreclose on the property, should it become necessary.

The lender is regulated and is loaning out the consumers' moneys. The lender must protect its depositors. By law and by contractual obligation, the lender must accelerate and/or foreclose.

2008 Magic Mortgage Foreclosures All rights reserved.