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SUNSET MORTGAGE NEWS: INSIGHT AND SUGGESTIONS
Note : Periodically we will place out of ordinary news to you for some perspective on your personal finances that may not have been considered.
Sunset Mortgage Br 32-036 is now Know As Eagle Nationwide Mortgage Branch 32-019, a subsidiary of Eagle National Bank, FDIC Charted as of 7/7/07. We are a FDIC Bank. Look for more exciting news about our portfolio lending programs in the coming weeks.
Topic: Home Equity For Disaster Relief
Recent hurricanes, flooding, earth-quakes, tornadoes and mudslides have increased the need for residential home owners and buyers to be more conscious about having a Home Equity Line of Credit. When disaster strikes, homeowners lose more than their physical structures, and are faced with financial burdens that insurance may not be able to cover. Debt has a tendency to rise when people least expect it with unexpected expenses and personal loss. Bills still need to be paid, tuition fees will not stop, medical bills and emergency, and new/replacement items do not come free.
If home equity is leveraged, homeowners have access to cash that they can use for any purpose. The Home equity can be a straight loan or line of credit.
Securing a Home Equity in advance enables homeowners to benefit from having an alternate financing option available and at their disposal. On the Line of Credit, requires a payment only on the used portion of the line. The Line of credit has lower rates than the fixed rate counterpart.
The important message here is that once you have received the Home Equity loan before the disaster strikes, the Home Equity Line stays with you even if the home is damaged or demolished. The only admonition is to ensure you do not miss a payment on the used portion; otherwise the lender will freeze or cap the loan.
If you decide to get the Home Equity after a disaster, you are subject to getting an appraisal which will determine your value on what you can access as a Home Equity Loan. What this will do is lower you capacity to acquire the amount of money you may need because the house is devalued. Also, after a disaster, an appraisal certificate that defines the property damage may be needed. This can slow the process of getting a home equity loan and stop the process as an assessment may be needed for the structure. The appraisal report may also suggest to the lender that necessary repairs must be fulfilling before the release of such funds.
Although Insurance may cover damages and losses caused by a disaster, insurance claims can take time to process and be complicated and time consuming. Most insurance polices request a deductible, for which a Home Equity Loan or line is invaluable. Insurance checks can take weeks to get or months. A HELOC should not be a replacement for your home insurance; however, it is an excellent compliment to any insurance policy since it provides immediate cash for purchases, deductibles, and costs not covered by insurance. A Home Equity Loan/Line is a security and provides flexibility to help victims get back on their feet.
The Home equity loan/line can assist in rebuilding parts of the home that have been affected until the insurance check is received. Also, the Home equity loan/line adds value to your home since any improvements adds value to the house.
The best way to hedge yourself is to acquire a Home Equity Loan/Line when you either refiance or purchase which can be a second mortgage. If you are in an area that encounters natural disasters, it is important to procure a Home Equity Line before the disater occurs.
For those that aren't in high disater areas, securing a line of credit during high periods of appreciated home values is a way to secure this line of credit before residential values decrease, thus limiting your maximum potential in securing the largest line of credit since the home equity line is based on your value in terms of equity, that is to say, the higher the value during high peaks in the real estate market , the more your home is worth and creates a higher equity position that you can tap into.
Topic:CELOC ( Commercial Equity Lines Of Credit )
Branch 32-036 has introduced the first ever commercial equity line of credit for commercial property owners. Loan amounts are not based on your business income statement as traditionally is required but on your commercial appraisal value. The concept is similar to residential home equity lines of credit except the concept now applies to commercial properties.
This alleviates the time and strain business owners need in order to deal with traditional banks which can take an inordinate amount of time for a bank to review and approve. Approval in of itself places hard scrutiny on the business owner, which many business lines of credit lines are denied for one reason or another: The business may not have enough assets or income to satisfy the harsh requirements business bank require or the commercial credit report held by Dunn & Bradstreet may be less then impeccable resulting in the underwriter denying this. A blemish on a commercial credit report can damage the chances of a business line of credit yet with our CELOC (Commercial Equity Line of Credit) we have the flexibility to use your personal credit scoring as with residential credit scoring. A blemish, such as a late reporting, or other credit issues resulting in a personal score of 650 will not lower your chances to secure our CELOC.
Our Commercial Lines of Credit can offer a LTV of 80% on the equity and 10% attached to a term loan to increase your lending capacity with a CLTV of 90% and up to an amount of your appraisal.
Topic: Business Line Of Credit
NEW>>>>> Business Line of Credit: First ever flexible business line of credit for those business owners that have non traditional sources of qualifying the debt service. Program is good for those businesses that have cashflow problems, limited operation exposure, or poor business credit report. Also available for those businesses able to use their business income to qualify but have other adverse factors denying them lines of equity bank financing through their local bank. The program uses the security of other assets such as your primary; second home or Investment properties can be titled in your company name Loan amount available to $ 750,000 with credit score of 750. No Income verification with credit score of $ 680+ with reduced lines of credit. Personal income can be used to qualify the debt service for those with credit score of less than 680. No need of using your Dunn & Bradstreet credit report. Business line can be tied into a term loan to increase the amount of loan capacity. Requires title insurance with loan size over $ 500,000. Minimum loan cost.
TOPIC: Defeasant Loans:
Many borrowers and or clients believe that if they want to refinance an existing loan or sell atheirproperty with a hugh prepayment affiliated with the loan, becomes an obstacle. Can defeasing the loan be a possible solution?? At Sunset , our commercial department will do an analysis to determine whether this penalty can be reduced to a more accceptable amount inorder that you the client, can proceed.
So there is assitance, commercial clients should not dispair, we have done many types of defeasing loans. There is no cost but a solution to your capital needs.
March 2007
Topic: Market changes for residential loan programs
Many of you may know that the economic markets are changing rapidly within the residential home lending programs in that they are becoming more restrictive in allowance such as with terms, Loan to Values, rate changes and more. We at Sunset Br 32036 are hedging ourselves to these deep changes that are occurring in the Mortgage Market by ensuring that we are aligning ourselves with new portfolio programs so to provide the same type of loan programs offered during the times of economic growth as well as during economi volitility. All bank programs are rapidly changing and thus the introduction of these new Sunset programs will counteract the change in the marketplace, so to offer you, the borrower, the rates, terms and Loan to values you seek.
Weekly reports are forged out to the banks indicating a rapid negative change in the sub prime market due largely to high default rates from existing borrowers, thus as this occurs, banks must take a counter measure position thus resulting a change in the bank's position as to its program offerings due to profit margin limitations or borrowing capacity from the Federal Reserve. Sunset will ensure we keep abreast of our programs so that the harsh changes that will be seen throughout the market place in 2007 will be less evident through the many programs Sunset branch 32036 offers
March 2007
Homeowners Stuck as Lenders Cinch Standards
 By Noelle Knox, USA TODAY Edward Booker is one of nearly 3 million homeowners with adjustable-rate mortgages who've had trouble paying their bills. And, like Booker, many of them won't be able to refinance their loans once the interest rates start rising. At that point, they'll have to tighten their belts, sell their homes or lose them through foreclosure. This month, the mortgage payment on Booker's Chicago home rose $200, to about $1,300. It'll go up again in September. He wants to refinance, but he fell behind on payments after his wife died of cancer in 2005, so no lender wants to take the risk.
| Metro area | Home-price decline | Rate Reset risk |
| Akron, Ohio |
-7% |
60% |
| Barnstable/Yarmouth, Mass. |
-8% |
58% |
| Bloomington/Normal, Ill. |
-6% |
58% |
| Bridgeport, Conn. |
-5% |
58% |
| Cape Coral/Fort Myers, Fla. |
-12% |
63% |
| Columbus, Ohio |
-6% |
50% |
| Daytona Beach, Fla. |
-5% |
56% |
| Gary, Ind. |
-4% |
63% |
| Grand Rapids/Muskegon/Holland, Mich. |
-4% |
56% |
| Indianapolis |
-4% |
51% |
| Kennewick/Richland/ Pasco, Wash. |
-4% |
63% |
| Miami/Fort Lauderdale |
-6% |
60% |
| New Orleans |
-9% |
49% |
| Edison, N.J.* |
-4% |
60% |
| Palm Bay/Melbourne/ Titusville, Fla. |
-17% |
61% |
| Pensacola |
-4% |
64% |
| Reno |
-9% |
59% |
| Sacramento |
-4% |
51% |
| San Diego |
-5% |
59% |
| Sarasota/Bradenton, Fla. |
-18% |
63% |
| Springfield, Ill. |
-10% |
62% |
| Toledo, Ohio |
-7% |
67% |
| Worcester, Mass. |
-5% |
59% |
| Youngstown/Warren, Ohio |
-8% |
66% |
* = includes Newark, N.J., Nassau/Suffolk, N.Y., and 23 counties in New York, New Jersey and Pennsylvania. Sources First American LoanPerformance, National Association of Realtors
"I'm just trying to hold onto my house until I can figure out something else to do," says Booker, 58, a former rail-car inspector who's on disability.
Since the start of the year, more lenders have been shutting their doors to people such as Booker, just as those homeowners' interest rates are rising. They're slashing the "Bad credit? No problem" types of loan programs, known as subprime, that helped fuel the housing boom. And they're raising the bar for homeowners and first-time buyers to qualify for new loans.
The trend accelerated last week after federal regulators proposed stricter guidelines for banks that make subprime ARMs (adjustable-rate mortgages). The move followed Freddie Mac's decision to drastically raise the criteria for the subprime ARMs it would buy and to require better proof of a borrower's finances.
The industry is reacting to the waves of subprime borrowers who've defaulted on their ARMs in recent months. The tighter controls should help prevent future borrowers from getting in over their heads and protect them from predatory lenders. But the sudden shift in lending rules could also threaten the homeownership gains made by families since 2000, weaken the recovery of the housing market and potentially slow the economy.
"It will be a very severe correction (in the subprime market), and I think it will last anywhere from six to 12 months, during which many of the lenders who have operated in this market will gradually get pushed out of business," says Chris Flanagan, a managing director for JPMorgan
Nearly two dozen subprime lenders have already closed their doors or been purchased, and a dozen more are in trouble, according to a report by Credit Suisse.
To stem their losses, lenders nationwide are notifying mortgage brokers to cancel loan programs. Many of them are:
Reducing loans for 100 percent of the purchase price.
Reducing the number of "piggyback" loans, whereby a lender makes one loan for 80 percent of the purchase price and a second loan for the remaining 20 percent of the price at a higher interest rate
Raising the required credit score.
Requiring more documentation of a borrower's income and scrutinizing the appraisal and comparable-home sales data.
"Some of these companies are yanking away six, eight (loan) products at a time, and the reps are just hanging on the phone with their mouths open, saying, 'What are we going to sell?' " says Dave Tucker, owner of MileHighMortgage.com in Castle Rock, Colo.
That's partly why he can't help Anita Furakh and Bobby Pervez this time.
Tucker helped them buy their first home near Denver two years ago with an ARM that covered 100 percent of the $195,000 purchase price. The young couple, with two children, made their payments on time until December, when Pervez traded in his car for a new one. That month, they were late on their mortgage. The timing couldn't have been worse. They needed to refinance their mortgage before the rate started rising this month. But their home's value hasn't gone up, and their credit score has gone down.
"I don't know what I'm going to do," says Furakh, 24, who was bathing and feeding her two daughters after work. "I'm trying to work on my credit, but sometimes you can't be that good. I've got two jobs. I've got two kids. Sometimes, I am just late."
The industry was caught off guard by the surge in delinquencies last year. ARMs made to people with shaky credit in 2005 and 2006 are defaulting at two to three times the rate of loans from 2003 and 2004, according to First American LoanPerformance. Because the interest rates on these loans are usually fixed for the first two or three years, and then start rising, "The worst is still to come," says Brenda White, a managing director at Deloitte & Touche.
So far, the deepening crisis seems confined to lenders who made riskier loans and hasn't spread to the broader financial markets, which hold up to $1.5 trillion in subprime loans. Still, as many as 7 percent of those loans will go into foreclosure, resulting in losses as high as $70 billion, Flanagan estimates. The Center for Responsible Lending projects that 2.2 million homeowners with subprime loans will lose their homes.
Sharing the blame
Thousands of homeowners are already feeling the pain. In January, the Homeownership Preservation Foundation, a non-profit financial counseling group, received 4,500 calls to its toll-free hotline (888-995-HOPE or 888-995-4673), 150% more than last summer. The callers are in financial difficulty and often trying to stave off foreclosure. Equally alarming was that 16 percent of the callers from October to December didn't know what kind of mortgage they had, according to the foundation.
Experts say there's plenty of blame to go around. During the real estate boom, lenders began offering an array of loans to borrowers with poor credit histories. They let many borrowers finance 100 percent of the purchase price, often asking for little or no proof of income or assets. Last year, 43 percent of loans required little or no documentation of the borrower's finances, according to First American LoanPerformance. These "stated-income" loans have earned the nickname "liar loans."
"When these loans were introduced, they made sense, given the relatively strict requirements borrowers had to meet before qualifying," according to an April 2006 report by the Mortgage Asset Research Institute. "However, competitive pressures have caused many lenders to loosen these requirements to a point that makes many risk managers squirm."
The lenders typically use a network of independent brokers who sell loans from a variety of lenders for a commission. The brokers, some of them new to the industry, some of them unlicensed, were responsible for explaining the complex terms of the loan to the borrower. This led to allegations of predatory lending -- pushing high-cost loans that are plainly unsuitable for a person's financial resources and prospects.
Take Betty Jean James, 70, a retired glass inspector living on Social Security. Two years ago, she refinanced the Chicago home where she's lived for 25 years. The rate on the loan started rising after the second payment. The payments started at $1,032 but have since climbed to $1,761. "I fell behind two months ago," said James, who is facing foreclosure. "It just got too high." Though James signed the loan document, which clearly states that the interest rate is adjustable, she recalls that the mortgage broker "explained to me he could refinance the house, and he did. He didn't explain the interest rate could go up."
Some borrowers, meantime, contracted real estate fever and took out loans they didn't fully understand or stretched their budgets too thin. Some lied about their income on their loan applications, sometimes with a wink or a little help from their broker on a stated-income loan.
Casey Serin is a classic case. Serin, a Sacramento website designer who was profiled in USA TODAY in October, has admitted that he lied on his loan applications to buy eight houses in four states as investments. He hoped to flip them for a quick profit, but he made too many newbie mistakes. He sold three of the homes, the lenders foreclosed on two, and he's still trying to sell the remaining three.
When the real estate market was on fire, such excesses and abuses were often overlooked. If a borrower ran into trouble and fell behind on a payment, it was easy to refinance or sell the property.
Everything changed after the market peaked in August 2005. "For sale" signs swung in front yards for months, and home prices started falling. Borrowers who fell behind on their loans sometimes owed more than their homes were worth. Or they couldn't sell their property before the lender foreclosed and drove neighborhood prices down further.
In 23 metro areas where home prices fell 4 percent or more at the end of last year, at least half the subprime ARMs will reset to higher rates this year or next, according to an analysis by First American LoanPerformance for USA TODAY. (See chart.)
In Grand Rapids, Mich., for example, home prices fell 4 percent at the end of last year, and 56% of homeowners with subprime ARMs will see their rates reset by the end of next year. "I've got a handful of clients right now I want to help, but I can't," says Pava Leyrer, president of Heritage National Mortgage in Grandville, Mich. "They are better off selling their homes." But that's hard in Michigan, which has one of the highest foreclosure rates in the country.
'One of the real tragedies'
First-time home buyers are also vulnerable. On average, first-time buyers made only a 2% down payment last year, the National Association of Realtors says.
"One of the real tragedies of this is that the folks who became first-time buyers because of this expansion of credit, many times they were first-time buyers not just themselves, but for generations of their families," says Jim Wheaton, deputy director of Neighborhood Housing Services of Chicago, a non-profit counseling and lending service. "But if they lose that home to foreclosure, given the impact on their credit, the appreciation of home prices, and the fact that their incomes generally are not rising that quickly, they are losing their only opportunity at homeownership."
Yet the lack of affordable housing is one of the reasons subprime ARMs became so popular. With a starting "teaser" rate, these loans let people with little money for a down payment still buy a home. Last year, 7 percent of buyers used a subprime ARM, according to the Mortgage Bankers Association.
It's too soon to know how many buyers won't qualify under the tighter criteria and how the trend will hamper this year's expected housing recovery. "It's a tough situation," says Dick Syron, CEO of Freddie Mac.
Under Freddie's new rules: If a subprime borrower wanted to buy the U.S. median-price home at $210,600 with a two-year ARM, the buyer would have to qualify not only at the starting monthly payment of $1,619, at 8.5 percent, but also at the maximum payment of $2,412 a month, at 13.5 percent.
"There's a very delicate and difficult balance between getting as many people into houses as you can," Syron says, "and at the same time putting people into houses they can't keep unless home prices are appreciating or interest rates are very low." Hanging in that balance: nearly 400,000 homeowners with subprime ARMs who, like Booker in Chicago, have already missed at least one loan payment and have a lot fewer options now.
FIRST TIME HOMEBUYER: SEACRH HOME LISITINGS AND NEIGHBORHOOD FACTS
First Time Home Buyer Search, Home Listings, & Neighborhood Information - AOL Real Estate
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