Archive for the ‘Commentary’ Category

Should A Borrower With An Underwater Mortgage Strategically Default?

Thursday, September 20th, 2012


By Evan Nemeroff at mortgageservicingnews.com

Does a borrower whose mortgage is underwater have an obligation to continue paying their monthly loans if they have the ability to do so? The answer to this question is different whether you speak to an economist or a homeowner.

According to a Zillow home price expectations survey in which 114 responses were compiled by Pulsenomics LLC from a group of economists, real estate experts and investment and market strategists, 71% said they would not strategically default on their mortgage that is at least 40% more than the current value of their home.

In a separate national survey conducted by Ipsos on behalf of Zillow where 2,009 adults where asked if they would pursue a strategic default, 59% of homeowners said they would not utilize this strategy if they were underwater on their home by 40%.

Currently, out of the 31% (15.3 million) of U.S. homeowners who have a mortgage underwater—paying a mortgage that is higher than the value of their home—nearly three-quarters have properties that are 40% below their buying cost, Zillow’s second quarter negative equity report said. Regionally, high rates of negative equity have accumulated in states such as California, Florida, Nevada, Arizona, and Georgia, Zillow reported. On average, homeowners across the country owe $75,235, approximately 44%, more than what their house is worth.

When homeowners were asked in the survey why they would not choose to strategically default, 37% cited moral reasons, while 35% indicated it didn’t make sense since they intend to live in that house for an extended period of time.

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The beatings will continue until morale improves!

Monday, November 7th, 2011

“The U.S. Federal Reserve is tilting the playing field in favor of those attempting to get mortgages by keeping interest rates ultra-low. The Senate also has voted to tilt the playing field in their favor, by raising the limit of Freddie Mac and Fannie Mae guarantees back to $729,750 – an absurdly high amount for a program that was meant to help the middle class.

However, the banks themselves are being very cautious, restricting lending to those well within traditional parameters of no more than an 80% loan to value ratio and no more than 25% of income consumed by mortgage payments. That helps the rental market, by preventing well-qualified renters from buying homes, but it does nothing for housing market recovery.

Given the restrictions on mortgage availability and the continued overhang of foreclosures and pre-foreclosures . . . the pace of new home sales remains extremely depressed. Further, even when the housing market recovers it will do so first through the absorption of existing inventory, so the demand for new building will remain low.”

Source : moneymorning.com

Banks get both sides of their bread buttered

Sunday, October 9th, 2011

Mortgage Fraud explained