June 22, 2018

Minnesotat Shutdown And Your Mortage: Should You Worry?

“As you are likely already aware the government of Minnesota has shut down due to budget issues. Some government services — including basic care for residents in prisons, treatment facilities and nursing homes — continue to operate. Unfortunately many more services have been suspended. Businesses will not be able to get licenses, road work has stopped and there is currently no funding for job training.

If you are someone who is in the process of buying a house with a mortgage during this shutdown you will likely have some concerns. There have been a total of five federal government shutdowns in the past. During these FHA mortgage loans were delayed, so it is natural that home buyers would be concerned about a shutdown on the state level.

Rest assured that Minnesota courts will still be open during this shutdown. Retired Judge Bruce Christopherson said that closing the courts would be a denial of residents’ constitutional rights. Any of your court dealings will proceed normally.

Those who should be most concerned about loan approval are state workers or those people who work in the private sector but could face a layoff due to the difficulties of the shutdown. If this is the case for you, you must call your lender as soon as possible.

Many lenders understand the hardship that the Minnesota shutdown has caused and are still willing to work with Minnesota residents. They understand that the fact that your paycheck isn’t coming is is temporary. This will not be the case for all lenders, which is why you need to keep in touch with the institution that was to issue your mortgage. You can protect yourself by staying abreast of the situation at hand.

Most people will not have to worry about loan approval during this trying time, but it doesn’t hurt to stay informed and contact your lender, anyway.

The most important thing to remember about this Minnesota government shutdown is that it is temporary. As much as residents’ lives are affected now the struggle will not be a permanent one. Governor Mark Dayton is now working diligently with Republicans to put an end to the shutdown, and a resolution should be reached shortly.”

Minnesota’s courts would continue to operate even during government shutdown

Will a Minnesota Government Shutdown Impact Your Loan Approval?

Minnesota Gov. Ready to End Shutdown

Minnesota residents suffer in government shutdown

Mortgage Grace Period For Unemployed Homeowners

“Unemployed homeowners will soon get an extension that will enable them to miss their mortgage payments for up to one full year. The Obama administration will lengthen the grace period from the current time frame of 3 to 4 months, to a full year for those who need additional help to stay in their homes and for those who may be facing foreclosure. This extended grace period only applies to loans obtained from the Federal Housing Administration. This time extension is expected to help tens of thousands of people who are unemployed and are having a difficult time paying their current mortgage and need longer than a few months to get back on their feet.

Officials say that 10,000 unemployed homeowners took advantage of the 3 month grace period within the past year. The reason the FHA is extending the grace period is to try and boost the current foreclosure-prevention program and keep further forclosures from occuring. In 2010, approximately 17,000 troubled homeowners benefitted from the ability to delay their payment that was granted to them by the government. Urban Development Secretary Shaun Donovan hopes this move will compel Fannie Mae and Freddie Mac to follow suit and make the time allowance extension as well. The two government controlled mortgage companies currently back approximately 90 percent of newly obtained mortgages. Freddie Mac and Fannie Mae had no reply as to whether or not they will join the FHA in this endeavor, but come October 1, new rules will apply to the mortgage giants. Rules will be put into effect that will make allowances for long term help for disabled people and people who suffer from long term illness. If a homeowner dies and their property is put into probate, the mortgage payment on the property of the deceased can be delayed for up to one full year.

Trial modifications were allowed for over 1.6 million people who have experienced trouble paying their home mortgage to keep them from facing forclosure and losing their home, but the program has lost approximately 800,000 participants who have permanently dropped out of the governmental run assistance programs permanently. In 2009, the government’s main foreclosure program was created to ensure that at risk people at least had an opportunity to avoid home forclosure. The program’s extension will benefit many who have found themselves unemployed and will give them more time to find work. Hopefully, this will enable them to make their payments, avoid becoming homeless and adding to the already crippling home foreclosure rate.”

San Francisco Chronicle

Jobless homeowners could get mortgage reprieve

Liar Loan Mortgages

“This is the story of Charlie Engle who is now behind bars serving a 18 month jail sentence for mortgage fraud. More specifically, for taking out what is known as a ‘Liar Loan Mortgage’.

Liar Loan Mortage

The way the authorities tracked down his Liar loan mortgage transaction was through his use of a Stated Income mortgage, in which he is said to have inflated his income.

Mr. Engle is said to have received two loans from Countrywide by falsely stating his income, which was what most of the people were doing in the early part of 2006, at the peak of real estate bubble.

Millions of people took out Stated Income mortgages and inflated their incomes, but Mr. Engle gained the increased attention of Internal Revenue Service special agent Robert W. Nordlander, who went to great lengths to pursue him.

It is interesting to note, and quite sad indeed, that the only prosecutions and convictions that have come from the mortgage crisis have been of very low level people. People who were in the wrong, but caught up in the same fervor as the rest of the nation – while the architects of the whole mortgage crisis have so far escaped unscathed.”

For more information, click here: http://www.calculatedriskblog.com/2011/03/liar-loan-prosecution.html

Fannie Mae and Freddie Mac to be Phased Out

The Wall Street Journal is reporting that the Obama administration has released a white-paper that spells out the federal government’s reform plans to phase out the Fannie Mae and Freddie Mac mortgage programs.

This will have wide implications because Fannie Mae and Freddie Mac are responsible for 9 out of 10 mortgages made currently.

Here is a quick list of possible ways that these proposed reforms could affect home-buyers:

  • Home-buyers will be required to make  a 10% down payment, which is up sharply as you can now secure a mortgage with much less money down if you buy mortgage insurance.
  • Interest rates will likely increase.
  • The amount of money that you will be able to borrow will drop, however by how much is still unclear.

There are further possible effects to banks, lenders and other financial institutions, all of which will dramatically change the face of home-buying and getting a mortgage in America.

WSJ Article:  Click Here

Press Release:  Click Here

Read the text of the proposal:  Click Here (PDF)