Napa Land & Loan and Prudent Borrowers' Real Estate Loans are licensed dba's of attorney and real estate broker Michael D. Imfeld. Mr. Imfeld is an AV rated attorney with 30 years experience (see http://www.MDI-law.com.) After years spent advising buyers, sellers, borrowers and lenders, he entered the real estate sale and financing business to help home buyers and sellers get what they want, and to help borrowers obtain the right purchase or refinance loans in these difficult days for the mortgage and real estate markets.
Many homeowners and mortgage borrowers face crisis as adjustable rate loans they may not have totally understood adjust up, raising monthly payments beyond their ability to pay. Mr. Imfeld makes sure that his clients understand the payment terms of their loans and how to qualify to purchase the best homes they can afford. Apply now at http://www.PrudentBorrowers.com.
Among the many factors which precipitated the present mortgage crisis was the constant rise in the Federal Reserve interest rate for lending to member banks. These increases led to corresponding increases in the rates used as indices for adjustable rate loans, playing a significant role in creating "payment shock," when initial fixed rates on adjustable rate mortgages expired. For example, a borrower who took out an adjustable rate loan in July of 2003 with a three year fixed rate, adjusting to one percent over Wall Street Journal (WSJ) prime rate at the end of the three years, probably expected that the adjustable rate would be five percent in July of 2006. That would have been one percent above the 4% WSJ prime rate in July of 2003. What a shock to find out increases by the Federal Reserve led the WSJ prime to 8.25% in July of 2006. For a $700,000 interest only loan, the payment in July of 2006 would have been $5,541.67, instead of the $2,916.67 per month the borrower expected.
Another unexpected factor was the collapse of the private mortgage backed securities (MBS) market in the summer of 2007. The mortgage market for the last five years was increasingly financed by companies who turned large portfolios of mortgages into complex billion dollar bonds sold to multiple investor groups. Until this securities market developed, most mortgage loans were either made by banks, allowed to make loans based upon a percentage of their funds on deposit, or were loans purchased by Fannie Mae or Freddie Mac, or guaranteed by the FHA. When high subprime default rates panicked MBS investors, drying up the securities market overnight, little money was available for refinance or purchase loans above the $417,000 maximum for Fannie Mae and Freddie Mac.
As a result, until the financial incentive legislation passed in February of 2008, sellers could not sell because the jumbo (over $417,000) mortgage rates were too high and the low adjustable rates once available had disappeared. Even lenders who foreclosed could not sell the properties (called REO's) once they had taken them back in foreclosure. That is why the new incentive package loans, which will be available soon, present a tremendous opportunity for California homeowners to sell or refinance their homes, and for buyers to pick up bargains. Since so called conforming loans (which can be sold by lenders to Fannie Mae or Freddie Mac or guaranteed by the FHA) will be available in amounts up to $729,750 in most Bay Area counties, buyers will have the best opportunity to purchase a home which may be available for years, possibly ever. Unless extended by Congress, the maximum conforming rate will go back to $417,000 on January 1, 2009.
Credit standards have also tightened up, requiring better credit and verification of income and assets for Fannie Mae and Freddie Mac loans. However, limited time FHA programs give special consideration to borrowers who were current on their loans before their loans adjusted up, but who may have defaulted after the adjustment became effective. In addition, FHA loan standards are traditionally more flexible; and, the cash assets borrowers must show can be around 3% to 5% on FHA loans.
Borrowers should prepare now, since cash down payment amounts and reserves need to be verified by bank records going back several months. Also, borrowers should obtain their own credit reports and if necessary, attempt credit repair on their own or through reputable credit repair companies, before having their credit run for their loans. Each lender credit inquiry can lower a borrower's FICO score. Borrowers can obtain their own reports and scores without lowering their FICO scores. Beware of companies which promise the impossible or counsel borrowers to engage in tricking the lender to present a clean credit report. Many of these schemes constitute fraud and most leave the borrower in worse shape rather than better.
As an attorney with many years experience in the lending industry, Mr. Imfeld can help borrowers through these steps, help buyers to make prudent decisions, and help sellers to obtain buyers qualified to follow through with the sale.
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