October 1st is right around the corner and the impacts of the reform are already making an impact in the mortgage business. Hopefully it will help more people achieve the dream of owning a home. That is, once the media stops focusing on the doom and gloom of the Lehman failure and the bailouts that are going on almost every week. Yesterday was an incredible opportunity for many borrowers to lock into FHA fixed loans for 30 years at 5.375%. FHA loans currently have climbed from less than 5% early last year, 2007, to close to 50% of all loans being writen today. The fact is that October 1st should represent the opening of gates for MANY consumers that otherwise would have fallen into an adjustable rate or subprime loan into a loan that provides numerous benefits both short and long term.
For the consumer in need to refinance to save their home, this also represents a tremendous oportunity on many fronts. With the large number of foreclosures, lenders are eager to work out new terms with the homeowners to keep them in the home. The biggest challenge is that the homeowners psychology, once they have become late on their mortgage, is one that hits them so hard that they lose all hope and diminishes any motivation to get into a long and painful road filled with red tape and anxiety to save their home. The facts are that for those who find the energy and will to reach out for help will keep their homes. There are millions of bank owned properties. The lenders will do one of several things:
- Reduce the current interest rate significantly
- Reduce the principal balance or place that diference in a defered interest free non secured loan
- A combination of both
I have seen some loan reductions of 50% or higher allowing homeowners to preserve their credit without foreclosure and be able to have manageable monthly payments.
Unfortunately, there are still plenty of bad apples that claim to be experts in “Loan Modifications” and FHA lending. Most of these new companies are entering a business to capitalize on the already beaten up consumer charging money upfront and giving empty promises. In some cases the true experts, licensed and/or attorney’s will ask for a refundable fee to be placed in escrow.