Draw Me Self

Lenders and mortgage businesses pushing low rate mortgages. Ads on the radio, print ads in the Business section of newspapers tell customers: 1 percent mortgages, $500K mortgage loans only $1,500/month, get into your dream house, etc.

Above sounds very attractive to get a mortgage loans, but now with the adjustable rate much higher & value of houses declining, these people are defaulting! The default rates are rising, the financial institutions who made these loans are in trouble, but realtors are to blame. The radio ads don't mention that the real rate gets added to the back of the
loan every month, for example a $500k mortgage loan can end up being a $700k mortgage loan after a certain time because the interest is added to the end of the term instead of the beginning, that's the reason why rate loans are low in the first place!

Mortgage loan is the generic term for a loan secured by a mortgage on real property; the "mortgage" refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. Mortgage loans generally refer to a loan secured by residential property, often for the purpose of acquiring the residence. Mortgage loans may be lower priced than other forms of borrowing because the value of the property reduces risk for the lender. There are many benefits of Mortgage Loans.

Home owners get into their house they always dreamed of today, but what happens in five years from now, when the adjustable rates starts? Maybe they have to sell their home lower than what they paid for it and owe more than they think! There are lenders who explain this to customers at time of closing, but those things are often not explained in their radio ads, print ads, etc. Lenders try to close the deal from there!

LendAdvisors.com - Blog that helps you with Real Estate, Mortgages & Refinance.

Florida mortgage refinance can be beneficial for property owners within the Sunshine State. This state has witnessed a high level of foreclosure rates which resulted in plummeting property values and left many borrowers owing more than their home is worth.

Entering into Florida mortgage refinance can help homeowners reduce monthly loan installments through the reduction of assessed interest. This can be particularly helpful to investors offering rental properties.

Many investors can no longer charge the high rental rates often associated with vacation rentals and beachfront property because of economic conditions. A large percentage of investors are now charging less than their mortgage payment in attempt to generate cash flow through investment properties.

A recent report published by industry expert, Zillow, states of the 13,000 plus homes for sale in Florida nearly one-quarter are bank owned properties. Once banks regain ownership of foreclosure real estate they often list houses for sale below market value to recover losses incurred by the repossession process.

Due to the abundance of discounted properties many Florida homeowners and investors are holding onto properties because they cannot obtain fair market value. Combined with fewer buyers and tightened lending criteria those who are buying houses often turn to bank foreclosures as a way to save money.

Refinancing real estate loans lets mortgagors obtain reduced payments so they can keep their property until market conditions improve. Reduced payments also let investors' lower rental rates without incurring a financial loss.

Multiple factors should be considered before applying for Florida refi. The first consideration is to determine current rate of interest vs. reduced rate of interest. Borrowers should be able to reduce interest by at least 1.5- to 2-percent for this to be a viable option.

Another critical element is determining if the current loan includes a prepayment penalty. This information is provided in the Truth in Lending (TIL) statement attached to loan documents. Mortgage lenders often assess penalties when borrowers' payoff loans early. This can amount to several thousand dollars.

Prepayment clauses vary by lender. Some are in place during the first 5 years. Others reduce the rate of penalty over the course of the loan. Florida property owners who obtained financing through chartered credit unions or hold VA or FHA loans are exempt from prepayment penalties.

A third consideration is the amount of refinance rates. In Florida, the average cost of mortgage refinance ranges between $2500 and $6000. This includes the cost of loan application, loan origination, real estate appraisals and inspections, legal fees, and various closing costs.

Lastly, Florida property owners must determine if they hold sufficient home equity to qualify for refinancing. Within the Sunshine State, lenders require a minimum of 5-percent accrued equity before even considering review of loan applications.

One program that can be helpful to borrowers owing more than their property is worth, but need refinancing help to reduce loan installments, is Making Home Affordable. This program is sponsored by the U.S. government and offered to mortgagors with Fannie Mae or Freddie Mac loans. Program details are provided at MakingHomeAffordable.gov.

It is always best to consult with a tax accountant or mortgage consultant to determine if Florida mortgage refinance is a financially-sound decision. Take time to calculate the true cost of refinancing to prevent placing personal finances and property at risk.

Borrowers looking for Mortgage Refinance has created somewhat of a phenomenon during uncertain economic times. Mortgage rates have dropped after the Federal Reserve announced its plan to buy mortgage-backed securities to loosen the tight hold on consumer lending.

With the U.S. Government initiating the purchase of mortgage-backed securities this has reduced rates even further. All of this activity has contributed quite a bit to the mortgage finance business and has added to the struggle lenders were experiencing not long after the financial downturn forced lenders through a layoff period.

It has been reported that consumers contacting lenders for mortgage refinance have been unable to speak to a live person and are only left with the option of leaving a message for a return phone call. Some frustrated consumers are unable to simply leave a message as lender mailboxes and voicemail are unable to handle the call volume, not to mention the mortgage refinance agents. As things are starting to cool down in the mortgage industry we see the lenders starting to even out as far as their work load goes.

The mortgage finance surge has found lenders under-prepared during a time when they could really maximize on the opportunity to make up for the lull in previous months. So I wonder if it is possible to be prepared for such an event in the future. With unexpected delays in applications following up with prospective customers, understaffed lenders scurry to service consumer requests for mortgage refinance. We see this could not have been a pleasant time for lenders.

Lenders had to pull staff from other departments to handle the demand for mortgage refinance. Consumers are worried about the possibility of rates going back up before they can lock in. The history of fluctuating rates proves there is great chance this could happen again as rates did change from one hour to the next.

I believe the best advice to give in this situation would be to contact as many lenders as it takes. Be in touch with someone that can get to the point of locking in the rate quicker than the rest, without compromising everything that encompasses processing the loan.

Some prospective customers were told to apply on the internet after getting through to a live person. For consumers that do manage to reach a lender it would be wise to know the most recent rates available. Some online lending sites do not post the best rates for fear of being bound even as rates increase.

Now is a good time to be in touch with connections directly related to the lending industry or connections with a real estate agent that can act as a liaison between the lender and customer looking for a mortgage refinance. Keep in mind there is a good possibility the lender may not reply at all to the message or when the online application was submitted. With business booming for lenders, it would be smart to pursue and secure that magic number before it is lost whether they are as busy as they were at the beginning of the year or not.

While many economists are focused on the unemployment numbers, residential foreclosures and the growth of the US economy, there still remains a possible near replay of the housing bust. I'm talking about the commercial real estate and commercial real estate mortgage markets.

While the factors that led to the housing bust have and continue to be front and center in the news, news coverage of the commercial real estate market is receiving little press. What many don't know is that while to a lesser degree, the commercial real estate and commercial mortgage markets (an over $6 trillion market) have gone through a very similar phase, as did the residential housing market.

The similarities were
1) The commercial mortgage market was sliced and diced by Wall Street to the tune of $700 Billion,
2) Commercial property values jumped dramatically due to easy financing and the resulting demand and
3) Commercial mortgage loan qualifications were eased significantly (but less than residential loan requirements) during the boom.

The differences are
1) A lot less speculation was done in commercial real estate and
2) Nearly all commercial mortgages are short term loans. While less speculation, often in the form of flipping or attempted flipping is a good thing, short term loans is a bad thing so commercial real estate owners don't have the luxury of time to wait out the market or economical swings. On top of that, many of the banks are not making commercial real estate loans except for the really big companies and those with perfect transactions.

Fortunately, there are a few private lenders who are filling some of the void left after the big banks deserted this market but even so, there are a lot of stressed out business owners needing a commercial mortgage refinance loan. Many, however have neither the value and equity or sufficient income for debt coverage to allow them to get a loan. Many others are getting hard money commercial loans to bridge the financing gap. If as many gurus project, the commercial market busts anywhere near to what happened in the residential market (and early indicators, such as delinquencies are for this), it could be a huge hit to an already fragile economy. Time will tell.

July 3, 2009 - As I gaze out my window at the vast expanse of Northern Colorado real estate, I ponder what lies ahead for this great region. How will the effects of this global economic meltdown translate into commercial real estate for an area that, while not isolated from past slowdowns, certainly has been insulated from them? Where do the problems exist and what will it take to get us back on track?

Too much debt

Let's start with a broader perspective. By some estimates commercial real estate debt totals $1.4 trillion nationally, backed by everything from strip malls to apartment complexes - and it is set to mature over the next several years. Much like residential mortgages, these commercial loans were packaged and sold as complex financial derivatives known as Commercial Mortgage-Backed Securities. In recent years, the CMBS market has satisfied a whopping 40 percent of credit demand in the commercial mortgage sector.

Our friends on Wall Street have effectively turned off the spigot, leaving a massive gap in the refinancing needs of borrowers. This could lead to a flood of foreclosures and a considerable amount of supply for years to come.

Already in the first quarter of 2009, payoffs for maturing loans are at a meager 55 percent. This means that 45 percent of loans maturing are either being transferred to special servicing or are unresolved.

Recently the Fed announced plans to include legacy CMBS as collateral under the TALF (a credit facility to stimulate lending), but the stringent requirements to qualify may leave many borrowers standing around like the child who has just realized that the music has stopped and there are no more chairs. Trying to solve the problem of too much debt by creating more debt is akin to telling the guy who exceeded his three-margarita limit at the Rio the night before to just keep drinking. Eventually one has to face the hangover, as painful as it may be.

I have often said the only difference between pricing real estate and stocks is that you can see where your stock prices are every day by simply opening up the newspaper. If property owners could see where their real estate prices were by such a transparent measure, reality would likely replace denial. A valuation gap still exists between what buyers are willing to pay and the price sellers think their properties are worth.

Such a gap has led to a significant decline in activity. In Northern Colorado the numbers are staggering. For Larimer and Weld counties this year, through May 31 according to CoStar, there have been 74 commercial real estate transactions totaling $54,714,791, compared to the 203 transactions totaling $263,016, 509 for the same time period in 2008 (which was down roughly 50 percent from 2007). This translates to a nearly 80 percent decline in year-over-year dollar volume.

The denial promises to set in when the refinance wave hits. Let's take for example a property purchased for $1,000,000 with 25 percent down and a five-year term. If the value of that property erodes by 25 percent (highly probable in the current market), the owner's equity has been wiped out. When that owner goes to refinance the property the lender will require not only the 25 percent equity but possibly as much as an additional 15 percent, as lending standards are becoming more rigorous.

The owner is faced with the choice of bringing $300,000 to the deal to keep the property or walking away. This is the sobering reality.

Going forward

As we look forward, the picture remains cloudy. Northern Colorado is a hub for creativity and innovation. The area generates patents at the rate of 11.45 per 10,000 people a year, nearly four times the average U.S. city. We will continue to see the collaboration of cutting-edge research in renewable energy and businesses as new technologies in wind, solar and biofuels transfer to the marketplace.

While the region will likely remain insulated from the broader market, the macro environment will continue to weigh us down. Not only are we in a recession, but it is one caused by de-leveraging - a phenomenon most of us are still trying to figure out.

We recently learned the region shed some 3,700 jobs over the past year, the most on record. No real estate will recover without stabilization in the job market. Transaction volume will continue to be light as participants continue to probe into price discovery and get more realistic. Remember, there are no bad markets, just bad prices.

Both wealth building and wealth erosion for many will hinge on accurate and timely analysis of the commercial real estate market.