Mortgage Reset May Boost Foreclosures: Study

By Ilaina Jonas

NEW YORK (Reuters) - About 1.1 million additional home foreclosures are expected over the next six years as adjustable-rate mortgages -- which made home buying more affordable to U.S. buyers in recent years -- reset to higher payments, according to a study by research firm First American CoreLogic.

The expected $112 billion in losses won't break the mortgage industry but will inflict pain on lenders and borrowers affected by the defaults, said the study, released on Monday.

more at: http://today.reuters.com/news/articlenews.aspx?storyID=2007-03-19T051716Z_01_N19243239_RTRUKOC_0_US-USASUBRIME-RESET.xml&rpc=81

Adjustable Mortgages:

Why do people take out ARM loans anyway? An ARM is an Adjustable Rate Mortgage and these can suit many people perfectly. The idea is that you have a term where your interest rate is fixed. This term can be as short as one month and as high as ten years. ARM loans are ideal for starter homes or condos, where you plan only to stay for 3-10 years and then you plan to sell. They can also be great for getting into the home of your dreams with a slightly lower payment. The risk is that when you refinance your mortgage, the interest rates may be higher, so although you are getting a great deal in the short term, your long term interests are not as clear. If you are in the financial industry and you follow interest rates, an adjustable mortgage is probably a great plan. The key is knowing when to refinance into a fixed rate mortgage to protect your long term property interests.

Choosing a Mortgage Term:

The term of your mortgage is an important factor to consider when choosing your mortgage program. Obviously, the longer the term, the lower the payments - but low payments aren't on every person's mind. In fact, some people prefer to make larger payments towards their home loan because it will be paid off more quickly and because they are putting their money into an appreciating asset. Additionally, if you plan to rent or lease your property or a unit in your property, you'll make more money the faster you pay down your mortgage. The moral of the story is that larger payments are better as long as you can afford them. This doesn't mean you can't get a 30 year fixed mortgage and just be disciplined enough to make an extra payment or two throughout the year, but it does mean that the more money you put into your home, the better off you'll be.

Quick Explanation About Interest Rates:

To be qualifies for a certain interest rate many factors are included and analyzed (income, credit score, amount of equity in your home, DTI {debt to income}, the current market, etc, etc.) However, one factor that has a total relation to interest rates is the 10Yr Bond. When ever the 10Yr bond goes up the interest rates go down, when the 10yr bond goes down interest rates go up.

Countrywide Cuts 108 Wholesale B&C Jobs

Countrywide Financial Corp., the nation's eighth largest subprime table-funder, has cut 108 jobs in its wholesale subprime division, citing a need to align the lender's "workforce with the recent changes in the mortgage market." The company declined to comment further and would not disclose how many of the jobs eliminated belong to account executives. Last week the Calabasas-based Countrywide disclosed that 19% of its $119 billion subprime servicing portfolio was in some stage of delinquency. According to the Quarterly Data Report, CFC ranks first among all subprime servicers, and third among lenders.

New Trend In The Mortgage Industry:

More and more, the mortgage industry is becoming more and more technologically advance. More and more mortgage companies are introducing e-sign technologies. This feature will mostly appeal to busy professionals who don't have much time to meet with their mortgage consultant when obtaining a mortgage.

E-sign is a unique concept where all the mortgage documents can be signed on the internet and be sent back to the mortgage company. This way everyone benefits as the loan can be closed faster and the consumer never has to leave their home until closing.

Google e-sign for more information...

Mortgage Tips For Consumers:

As a mortgage professional I feel it's my duty to educate consumers about residential mortgages. When obtaining a mortgage it's essential as a consumer to check at more than one place. Even though mortgage companies don't really like to be shopped, you as a consumer really won't know the figures if you don't check with a few brokers or lenders. Both, brokers and lenders have their pros and cons but in todays market to me it seems more convenient to check with brokers.

Brokers, usually are sigend up with 50+ lenders and typically in today's market brokers can give you somewhat of a better deal than a direct lender. It's almost a fact that a broker will always find you a lower rate, but broker's closing costs in most cases are $1000.00+ more than lender's closing costs. In this case, you as a consumer you must think through which is really better for you.

In my perspective, if you are refinancing or purchasing a home where you won't stay in for more than 3 years my suggestion is to go with the lender. But, if you are going to stay in that home for more than 3 years, in that case getting a mortgage through a broker is more recommended.

When you deal with a broker, try to negotiate your way of not paying an appraisal and or credit report fee. In many cases a broker will accept these terms. (Trust me) Also, never accept closing costs to be over $3000.00 as nowdays closing costs are less than $2000.00. Finally, don't buy down the rate. What you are qualified for is what you should accept or not accept but never pay points to buy down the rate. It's money out of your pocket (thousands) to save $15-50 a month. (Not worth it)