Bill Duffey REMAX |Mortgage Information|Remax Excalibur in Scottsdale AZ

I am not affiliated with Bankrate, in any way! I encourage you to contact your Mortgage Banker or Broker, for up-to-date information in this market! The above, is for your convenient information, only.

See more information about mortgages, title insurance and your credit rating, below.

NOTE: You can request a free credit report on the Web at www.annualcreditreport.com . This is the official site, set up by the three credit reporting companies, pursuant to federal law. There's also a toll-free phone number (1-877-322-8228), as well as a mailing address. You can access your credit report one time, each 12 months. Accessing your credit report via this website will not affect your credit score. Other sites (as seen on TV) may. USE THIS ONE.

Also, Arizona Passed a Bill Permitting Electronic Recording of Mortgages AR SB 1354 which follows the Uniform Real Property Electronic Recording Act. Among other provisions, it says that if a law requires a document to be "signed", that such a requirement may be satisfied by an electronic signature.
Click here>>> http://mortgages.interest.com/index.asp for today's mortgage rates.

If you really want to know what is going on with the mortgage market. Watch this!

With U.S. mortgages entering foreclosure at a record pace, the crisis has far reaching implications, from the financial markets to the financial health of ordinary Americans. For the latest, Bill Moyers interviews assistant business and financial editor at THE NEW YORK TIMES Gretchen Morgenson, who has been covering the story.

Gretchen Morgenson is assistant business and financial editor and a columnist at the NEW YORK TIMES. She has covered the world financial markets for the Times since May 1998 and won the Pulitzer Prize in 2002 for her "trenchant and incisive" coverage of Wall Street.

Clearly, one of the best explanations of our current market. Air date: June 29, 2007 PBS

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Home Mortgage Consultant
Wells Fargo Home Mortgage
MAC S4033-011
1530 N. Scottsdale Rd
Scottsdale, AZ 85257
480-945-7244 Office
480-221-3483 Cell
866-359-1792 e-Fax
Doug.Henriksen@WellsFargo.com

Jan L Havill, Vice President and Account Executive
14648 N. Scottsdale Rd, Ste 250
Scottsdale, AZ 85254
Tel 480-624-0392
Fax 480-624-0411
IO #AZ3-588-02-02
janet.l.havill@bankofamerica.com

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Types of Loans
There are many different types of mortgage loans. Most borrowers choose a 30-year term, but loans are also available in 15-, 20- and 25-year terms. 40 loans are now available from some lenders.

Fixed-Rate Mortgage
A fixed-rate mortgage is stable because the interest rate is set for the term of the loan and you make the same monthly payment of principal and interest for the life of the loan. This stability makes it easy to plan a budget and manage your finances.

Adjustable-Rate Mortgage (ARM)
An ARM usually starts with a lower interest rate than a fixed-rate loan. After the initial period, which ranges from 6 months to 10 years, the rate will adjust up or down annually (or semiannually) for the life of the loan based on a specified index. Your monthly payment changes as the index changes. The ARM features a lifetime cap, which is determined at the time you lock in your interest rate. You know from the start the maximum rate on your loan.

Combination Mortgage
You receive a first mortgage combined with a second, smaller mortgage (home equity loan or home equity line of credit) at the same time for a total combined mortgage of up to 95% of the house price. With this option, you avoid the cost of private mortgage insurance while still being able to make a small down payment. And you can get a larger mortgage without paying the higher interest rate of a jumbo loan. The most popular combinations are 80-10-10 (80% first, 10% second, 10% down payment) and 80-15-5 (80% first, 15% second, 5% down payment). For borrowers looking to make lower monthly payments up front, most Banks offer initial, interest-only ARMS. These let you make fixed, interest-only payments during the first three, five, seven or ten years of the loan. And for borrowers looking for maximum payment flexibility, most Banks offer an adjustable rate mortgage with a very low initial rate and three payment options each month.

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Closing costs are expenses that cover fees associated with the transfer of property ownership, fees paid to state and local governments, and the costs of obtaining a mortgage loan. Some of these fees are negotiable, and could be paid by either the buyer or the seller. Some costs are one-time fees (non-recurring closing costs, such as title search, termite inspection, appraisal, etc.); while other fees such as homeowner's insurance or property taxes are things you will expect to continue to pay on a regular basis as a homeowner.

As part of the loan selection process, your mortgage consultant should be giving you some idea of how much money you should have in reserve to cover your end of these costs. The Real Estate Settlement Procedures Act (RESPA) requires the lender to provide you with a Good Faith Estimate within three days of the submission of your loan application.

RESPA also states that as a home buyer, you have the legal right to request a copy of the HUD-1 Settlement Statement 24 hours before your closing is scheduled. The HUD-1 clearly defines all closing costs, including those that are to be paid by the buyer and the seller. It's a good idea to have both of these forms before your closing so you can compare the estimated costs to the actual costs before you finalize your transaction.

12/1/2005 - Freddie/Fannie Conforming loans have been increased to $417,000.

VA Loan Guaranty Increase Signed Into Law

January 1, 2005 the VA guaranty also will increase to $89,913 and the maximum loan amount will go up to $359,650(December 14, 2004) -- President Bush on Friday signed the Veterans Benefits Improvement Act of 2004 (S. 2486), a measure that increases the loan limit under the U.S. Department of Veterans Affairs Home Loan Guaranty Program to 25 percent of the Freddie Mac/Fannie Mae conforming loan limits.

The NATIONAL ASSOCIATION OF REALTORSŽ backed the increase, saying it ensures the veteran's continued ability to purchase a home in high-cost housing markets.

Effective immediately, the maximum VA guaranty will increase to $83,425 from the current $60,000, allowing borrowers to purchase homes valued up to $333,700. The previous limit was $240,000.

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SANDY TINKHAM, Manager
GRAND CANYON TITLE AGENCY
711 E. CAREFREE HIGHWAY #105
PHOENIX, AZ. 85085
PH 623-580-0004 FAX 623-580-0979
or
3701 W. ANTHEM WAY, STE 107
ANTHEM, AZ. 85086
PH: 623-551-6651
FAX: 623-551-6640
EMAIL: TINKHAMS@GCTA.COM

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Ways to hold Title in Arizona

Joint Tenancy With The Right of Survivorship
Two or more persons may hold title to real property as joint tenants with the right of survivorship. In the past it was required that all joint tenants share the four unities of time, title, interest and possession. As of July 20, 1996, the Arizona legislature effectively abolished the requirement of the "straw deed" and the necessity of joint tenants to all take their interest at the same time. The advantage of joint tenancy is that upon death of one of the joint tenants, their interest is transferred outside probate to the surviving joint tenant(s). Evidence of the intent of a married couple to hold title to real property as joint tenants with right of survivorship must be in writing so as to avoid the presumption of community property.

Tenancy In Common
Two or more persons may hold title to real property as tenants in common. In Arizona, married couples must reject community property and specifically take title as tenants in common. Each owner has a distinct and proportionate interest without the right of survivorship. The only unity involve is possession. Their undivided interest need not be equal but in the aggregate cannot exceed 100% of the ownership interest. A tenant in common may transfer his undivided interest without destroying the co-tenancy estate.

Community Property
Only persons married to each other may own real property as community property. Each spouse owns an undivided one-half interest in their community property. Each spouse may provide by will for the disposition of his or her community interest in the community real property. However, Arizona community property law requires both spouses to join in a conveyance or encumbrance of community real property. Property acquired by a spouse during marriage is presumed to be community property except that property acquired by gift, device or descent. A married couple seeking to hold title to real property located in Arizona in a form other than community property may do so by renouncing the community property form and specifically accepting another form of co-tenancy.

Community Property With The Right Of Survivorship
Only persons married to each other may take title as community property with the right of survivorship. One spouse is entitled to the whole of the property upon the death of the other and both halves of the community property receive a new tax basis equal to the fair market value as of the date of death. Evidence of the intent of a married couple to hold title to real property as community property with the right of survivorship must be in writing in order to avoid the presumption of community property. When parties that hold property as community property with the right of survivorship dissolve or annul their marriage, the property converts to tenancy in common.
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Sole And Separate
Real property owned by a spouse before marriage or any acquired after marriage by gift, descent or specific intent. If a married person acquires title as sole and separate property, his/her spouse must execute a disclaimer deed.

General Partnership
Title may be taken in the name of a general partnership duty formed under the laws of the state of Arizona or the state of the formation of the partnership. A partnership is defined as a voluntary association of two or more persons as co-owners in a business for profit.

Limited Partnership
A partnership formed by two or more persons under the laws of Arizona or another state and having one or more general partners and one or more limited partners. A certificate of limited partnership must be filed in the Office of the Secretary of State, a certified copy of which must be recorded.

Corporation
Title may be taken in the name of a corporation provided that the corporation is duly formed and in good standing in the state of its incorporation.

Beneficiary Deed - The new way of holding title in Arizona
The Beneficiary Deed, touted as the best innovation in conveying property in quite some time, is the latest kid on the block when it comes to how to deal with real estate in Arizona. It is more than just a way to hold title to real estate. It is promoted as an estate-planning tool for estates large and small. The owner of real estate may record a deed in the county in which the property is located in order to transfer title to another upon the owner's death. The theory behind Section 33-405 of the Arizona Revised Statutes is to create a transfer-at-death type of grant to a third party without the need for special administration at the time of death. It is very flexible about who can grant and who can receive. There can be more than one owner and more than one beneficiary and the grant to the beneficiary can be held in any form permitted by law (i.e., joint tenancy with the right of survivorship, tenants in common, etc.).

Aug. 22, 2002 -- What do you do if you lock in a rate for a mortgage and rates keep dropping?

That's exactly what has happened to thousands of borrowers in recent weeks as mortgages dropped to their lowest level in decades.

Whenever borrowers get a new loan, lenders allow them to "lock in" an interest rate some 30 or 60 days before the actual closing of the loan. This protects a borrower if rates suddenly go higher, but it can also prevent a borrower from enjoying the upside if rates unexpectedly fall. Suddenly the great rate a borrower locked in a few weeks ago may not look so great.

If that applies to you, don't give up hope. You may have more options than you think.

First, talk to your lender. If you locked in a 6.75% rate earlier this summer, and rates have now dropped to 6.25%, the lender might agree to lower your rate to, say, 6.5%. But the lender isn't likely to do it unless you ask.

Lenders aren't being altruistic when they negotiate a lower rate on a lock. They know if they refuse to budge, the borrower can always go to another lender.

Some mortgage brokers, in fact, say it has become easier to renegotiate in the wake of last year's mammoth refinance boom, when some lenders lost scores of customers to banks that were more willing to talk turkey.

"As little as a year ago and going back 20 years ago, a call from a mortgage broker asking for a negotiation was a deeply hostile phone call -- on both sides," says Lou Barnes, a partner at Boulder West Financial, a Boulder, Colo., mortgage banker. Now, it's much easier to do.

If your current lender isn't willing to negotiate, then you should seriously consider walking. You will probably lose some of the fees you paid to the first lender, but you could still come out ahead if rates have dropped sharply.

Do the math: At 6.75%, you would expect to pay about $1,620 a month for a $250,000 30-year home loan. But if you could get the same loan at 6.25%, you would pay only $1,540 a month, or $80 less. That adds up to savings of nearly $1,000 a year, and almost $30,000 in interest over the life of the loan. If you had to surrender only a few hundred dollars in fees to get the new rate, you would be able to break even in less than a year.

Consumers who haven't locked their rates can prevent future squabbles by requesting a "float-down" option when they apply, which allows borrowers to lock in a rate, then adjust it later if the market changes. Under that scenario, if you lock in and rates go up, your rate stays the same. But if it goes down, the lender will lower the rate to reflect the drop. Not all lenders offer this option, and most will charge you a few hundred dollars for it.

A float-down helped Patrick Szymanski, a 35-year-old accountant in Manalapan, N.J. In July, he locked in a rate of 5.75% for a 15-year, $205,000 mortgage through Priceline.com. This week, he exercised his float-down and lowered his rate to 5.5%. "I've been watching rates, and it's a big mortgage, and to me a quarter point is a lot of money," he says.

Even if you closed on a loan, you can sometimes get a lower rate by playing hardball. Under federal law, many refinancing borrowers can back out of a mortgage for up to three days after the loan closes. Some people have done exactly that and taken out another mortgage with a lower rate. But it can be a messy process, and many mortgage experts advise against canceling your mortgage simply because rates have tumbled.

"If you're fooling around with eighths of a [percentage] point, I think you're just going to drive yourself crazy," says Larry Goldstone of Thornburg Mortgage in Santa Fe, N.M. "All we would need is three pieces of economic data that indicate the economy is doing better than expected, and rates are going to be up a quarter of a point in a blink of an eye."

Conforming mortgage loan limits raised

The two largest buyers of existing mortgages and suppliers of funds for new mortgages, Fannie Mae and Freddie Mac, announced that the conforming mortgage loan limit for a single-family mortgage has been increased from $333,700 to $369,650. Conforming mortgages are those that are most salable to those secondary market organizations. Mortgages greater than the conforming limit are called jumbo loans. These usually carry a higher interest rate. In some areas, the rate difference can be as much as a half percent.

The change will make it possible for many additional buyers to purchase and finance a home of their own. But real estate leaders in some high-priced areas say the increase is far short of what is needed.

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REVERSE MORTGAGES

The reverse mortgage is being billed as a helping hand for some seniors, sitting on a home rich with equity, but who also may be on a fixed income and facing rising health and medical costs, low returns from bank deposits and dismal stock portfolios.

"The biggest benefit to seniors is that, one, they don't have to have any debt service payments. Everything is deferred until they no longer reside in the house and then they have a period after that in which to repay the loan," says Victor Dhooge a loan officer with CalPacific Mortgage Consultants. He's been in real estate financing for 25 years and specializing in reverse mortgages for the past two years.

Dhooge says there are three different types of reverse mortgages that are available to seniors 62 years and older. If one spouse is under 62 years old, Dhooge says that the younger spouse would have to be taken off of the deed and covered in a trust instead. He says the Federal Housing Administration (FHA), Federal National Mortgage Association (Fannie Mae) and private lenders offer programs ranging from $290,000 to unlimited loan amounts depending on your home equity. All programs require homeowners to meet with a Department of Housing and Urban Development (HUD) approved counselor before initiating the loan to make certain this type of loan is appropriate for the homeowner.

Lenders look at the homeowner's age, amount of equity and interest rates to determine how much money can be borrowed. Yet another benefit for seniors is that, unlike a forward (regular) loan, there is no minimum credit score needed to get into the reverse mortgage.

"The only thing we look at is the equity in the home. They can have horrible credit, they could have come out of bankruptcy weeks ago, they could have virtually no assets and no income, it matters not," says Dhooge.

The reverse mortgage, however, must be the first lien on the property. If the home is not paid off, a portion of the reverse mortgage would be first used to pay off the current debt. Reverse mortgages cost about 3 percent of the loan, not counting the mandatory mortgage insurance, specific to the FHA programs.

Oceanside, Calif. resident, Peggy, who only wanted to be identified by her first name, capitalized on the reverse mortgage, "It's an excellent idea."

The extra income has made her life easier and more comfortable. She says the reverse mortgage makes sense, "I was in real estate so I realize property nowadays is three or five times worth what it was worth in the 70's, so you have a lot of equity."

Rather than having that equity locked up in her home, Peggy says she decided to put it to use, "It's really terrific for seniors. If you're alone -- a lot of people don't have relatives -- this way you can spend it on yourself."

But reverse mortgages, at one time, were considered backwards. Dhooge explains, "In years past you had some unscrupulous lenders out there where they would take a portion of the appreciation in the house -- future appreciation. I understand others, within the loan proceeds, would require that you bought an annuity from them."

Today, Dhooge says the industry is highly regulated and that kind of activity is absent from the programs.

Reverse mortgages could be a helpful tool for seniors, but it's important to realize the equity can be quickly drained. Careful consideration and expert advice help ensure a sound financial decision.

By Nicholas Yulico - STAFF WRITER 2005

OAKLAND - MARY WAGNER, 79, relies on a 1985 Toyota Camry to travel around the Bay Area, showing off her paintings. But for some time, the elderly artist feared major expenses if her car broke down. Her teacher's pension and Social Security payments provide a modest income but don't leave much room for error.

"What would happen if the Toyota gave up, and I wanted to move pieces to an exhibit? I'd be very upset," Wagner said. So a few weeks ago, Wagner joined the growing ranks of senior citizens signing up for reverse mortgages, which allow people to turn their homes into cash machines by pulling out the equity while still living in the dwellings.

Rather than a traditional mortgage, where you pay a lender each month, a reverse mortgage results in a lender sending you checks.

People over 62 are eligible to borrow against the equity in their home to get tax-free income. No loan payments are due until the loan ends -- typically when an elder sells the house or dies.

Money can come in lump-sum cash payments, regular monthly payments, a line of credit or a combination of these options. The loan amount is determined by a formula based on the borrower's age, the house's value and whether the person is single or married.

In Wagner's case, it allowed her to cash in on the appreciated value of her Oakland hills home while still living in it. She purchased the property in 1975 for $57,000, she said, and it is now appraised at $700,000.

Wagner was able to obtain a $239,000 reverse mortgage. She took a small lump-sum payment to pay off the remainder of her existing mortgage. She also opted to receive $250 in monthly income and set up a $156,000 line of credit, which she can draw from when she needs cash.

"This now gives me the feeling that anything serious, I can handle," Wagner said.

Types of reverse mortgages

There are three main types of reverse mortgages, which carry different origination fees, rates and borrowing limits. However, they share several common features:

- Your age must be 62 years or older. The older you are, the more cash you can get. The more your home is worth, the more cash you can get.

- The interest is compounded.

- The loans are asset-based and don't require personal credit ratings or monthly payoffs, like home equity credit lines.

- You must pay off your existing home mortgage before getting a reverse mortgage; or you can use a lump-sum payment from the reverse mortgage to pay off the original loan.

- The mortgages are non-recourse loans, which means lenders can only look to a home's value for repayment. In other words, you never owe more than your home is worth when your loan is repaid.

- The income from the loan is non-taxable and doesn't affect Social Security benefits but could affect other public assistance benefits, such as Medicare, Medicaid/MediCal and Supplemental Security Income.

While some have criticized reverse mortgages for their high upfront fees, the products are increasing in popularity and can be good sources of income for the right candidates.

The Home Equity Conversion Mortgage (HECM), a reverse mortgage that is insured by the federal government, is the most popular product and accounts for about 95 percent of all reverse mortgages. From fiscal 2001 to 2004, HECMs increased 470 percent, said Jeff Taylor, a vice president with Wells Fargo Home Mortgage. The amount of HECMs issued in the Bay Area so far this year is double that of this time last year, he said.

"Business has been picking up fairly dramatically and has for the overall industry for the last two years," said Marty Appel, a loan consultant with Bay Area Reverse Mortgage.

Appel attributes the increase to dwindling stock portfolios of many seniors on fixed incomes.

Taylor, of Wells Fargo, said the No. 1 use of reverse mortgages is paying off an existing home mortgage. This, in turn, "creates new cash flow that is non-taxable," he said. Home remodeling is also often a big use of proceeds.

But while reverse mortgages have clear benefits, the product is not for everyone, experts say.

"This is not a product that you want to get into for three or four years. You want to make a long-term commitment to this because you're paying these very substantial loan fees upfront," said Dave Carey, reverse mortgage program manager with Fannie Mae.

Fees vary on the different products. For the federally insured HECM, there is an upfront lender fee (generally 2 percent), a settlement charge of about $1,800, and a 2 percent mortgage insurance charge. The mortgage rate on the monthly adjustable HECM is currently 5.5 percent.

Besides the extra income they provide, reverse mortgages also can be a great way to minimize certain people's tax burdens, said Charles Sterck, managing director of Sterck Kulik O'Neill, a San Francisco-based CPA firm that specializes in estate planning.

He provided a hypothetical example of a homeowner who bought a house many years ago for $50,000. Say the house has appreciated in value to $1 million. Selling the house would trigger capital gains taxes. If the homeowner is single, he or she gets an exclusion of $250,000 on the appreciated value, and would pay about a 10 percent capital gains tax on the leftover $700,000 increase in value. If married, the couple gets a $500,000 exclusion and pays a 10 percent tax on the remaining $450,000 increase.

But by staying in the home until death with a reverse mortgage, the house would end up being sold and the leftover equity would likely pass on to heirs without any capital gains tax or estate tax being due.

"I like the reverse mortgage because it allows old people to stay in their home, and that gives them the most comfort. ... This is a great tool for the right party," Sterck said.

Oakland Tribune - 2005-08-07

Reverse Mortgages Popular, But There Are Risks

(November 22, 2005) -- A rising number of older homeowners who've seen their property values soar in recent years are embracing reverse mortgages as a means for financial independence.

Reverse-mortgage borrowers "range from people who are faced with trying to decide whether to spend money at the pharmacy or grocery store, on up to people who want to buy a build-it-yourself airplane kit," says Peter Bell, president of the National Reverse Mortgage Lenders Association.

However, the product does have some disadvantages, including steep closing costs, loan limits, and delays in securing the financing while the borrower waitssometimes for weeksto undergo mandatory loan counseling.

The National Foundation for Credit Counseling and Money Management International plan to add approximately 250 counselors to their organizations over the next several months, as they prepare to provide reverse mortgage counseling. The two groups recently received approval from the U.S. Department of Housing and Urban Development to offer the counseling service.

Source: USA Today (11/22/05); Block, Sandra

Bankers' Group Issues a Caution on Home Loans

(August 24, 2005) -- The Mortgage Bankers Association has joined the NATIONAL ASSOCIATION OF REALTORSŽ, Federal Reserve Chairman Alan Greenspan, and bank regulators in sounding the alarm about interest-only loans.

In a new report, MBA confirmed that home loans with low initial repayments are helping to put more consumers in homes but warned that such borrowers become vulnerable to "potentially substantial payment shocks."

In particular, members of MBA are concerned that borrowers may be unprepared for the hefty increase in monthly payments when it comes time to pay off the principal, in addition to the possibility of a double payment shock if interest rates rise as the principal payments kicks in.

The report also warns consumers about "payment-option" loans, which provide borrowers with several payment options each month, because the option leads to an increase in loan balances, or negative amortization.

Source: Wall Street Journal (08/24/05); Hagerty, James R.

Shopping for a Mortgage? DO YOUR HOMEWORK FIRST
Specialty Mortgages: What are the Risks and Advantages?

UNDERSTANDING SPECIALTY MORTGAGES

In many housing markets, home prices have risen to very high levels, making it harder to afford a
homeespecially for first-time homebuyers. The traditional fixed-rate mortgage and standard
adjustable-rate mortgage may not be the best options for everyone. A growing number of
homebuyers are deciding to use one of several new types of specialty mortgages that let them
stretch their income so they can qualify for a larger loan. But before you choose one of these
mortgages, make sure you understand their risks and how they work.

Specialty mortgages often begin with a low introductory interest rate or payment plana
teaserbut the monthly mortgage payments are likely to increase a lot in the future. Some are
low documentation mortgages that come with easier standards for qualifying, but also higher
interest rates or higher fees. Some lenders will lend you 100% or more of the homes value, but
these mortgages also present a big financial risk if the value of the house goes down.

Its in your best interest to learn the ins and outs of these packages before deciding if the loan
youre considering is right for you.

Specialty Mortgages Can

Pose a greater risk that you wont be able to afford the mortgage payment in the future,
compared to fixed rate mortgages and traditional adjustable rate mortgages.
Have monthly payments that can increase by as much as 50% or more when the introductory
period ends.
Cause your loan balance (the amount you still owe) to get larger each month instead of smaller.

COMMON TYPES OF SPECIALTY MORTGAGES

Today, when you apply for a loan, you have more choices than ever before. Here are a few
examples:

Interest-Only Mortgages: Your monthly mortgage payment only covers the interest you owe on
the loan for the first 5 to 10 years of the loan, and you pay nothing to reduce the total amount you
borrowed (this is called the principal). After the interest-only period, you start paying higher
monthly payments that cover both the interest and principal that must be repaid over the
remaining term of the loan.

Negative Amortization Mortgages: Your monthly payment is less than the amount of interest
you owe on the loan. The unpaid interest gets added to the loans principal amount, causing the
total amount you owe to increase each month instead of getting smaller.

Option Payment ARM Mortgages: You have the option to make different types of monthly
payments with this mortgage. For example, you may make

A minimum payment that is less than the amount needed to cover the interest and increases the
total amount of your loan,
An interest-only payment, or
Payments calculated to pay off the loan over either 30 years or 15 years.

40-Year Mortgages: You pay off your loan over 40 years, instead of the usual 30 years. While
this reduces your monthly payment and helps you qualify to buy a home, you pay off the balance
of your loan much more slowly and pay much more interest.

This is only a short list of specialty mortgages. Todays marketplace includes many variations on
these types.

WHAT ARE THE MAJOR RISKS OF SPECIALTY MORTGAGES?

1. Payment Shock. One major risk is that your monthly payment may increase by a large
amount, resulting in payment shock. Even a change of 1% or 2% in interest rates can result in
a very big jump in your monthly mortgage payment. For example, if the interest rate on your
mortgage changes from 4% to 6%, your monthly payment could rise by as much as 50% (from
$1,000 to $1,500). If your income has not increased enough, you may not be able to afford the
new larger monthly mortgage payment. And if that happens, you could lose your home.
Example: How Payment Shock Can Occur

Assume you buy a home for $300,000, put 10% down, and choose a 5.75% interest-only
adjustable rate mortgage. The mortgage requires interest-only payments for 5 years. After that,
the interest adjusts every year based on rates in effect at that point.

Initial monthly payment: $1,294.
Monthly payment after 5 years with no increase in mortgage interest rates (amount increases
because payments begin to include principal in addition to interest): $1,699.
Monthly payment after 5 years with a 3% increase in interest rate to 8.75%: $2,220.
2. Higher Debt Over Time. Another risk that comes with specialty mortgages involves your
equitythe amount your house is worth after you subtract the amount you still owe to the
lender. Consumers who choose some types of specialty mortgages will build equity in their home
much more slowly than with traditional loans. In fact, with some specialty mortgages, the
amount you owe on your home could increase rather than decrease over time.

WHO IS BEST SUITED FOR A SPECIALTY MORTGAGE?

Specialty mortgages are designed for homebuyers in special circumstances. The lower initial
monthly payments may make sense for buyers who intend to own a home for a short time or who
can handle high payments in the future. If you are a homebuyer who plans to be in your home for
years, or who does not expect a significant increase in income by the time the monthly payments
go up, you should very carefully consider the risks and advantages of a specialty mortgage.

QUESTIONS TO CONSIDER BEFORE CHOOSING A SPECIALTY MORTGAGE

How much can my monthly payments increase and how soon can these increases happen?
Do I expect my income to increase or do I expect to move before my payments go up?
Will I be able to afford the mortgage when the payments increase?
Am I paying down my loan balance each month, or is it staying the same or even increasing?
Will I have to pay a penalty if I refinance my mortgage or sell my house?
What is my goal in buying this property? Am I considering a riskier mortgage to buy a more
expensive house than I can realistically afford?
Be sure you work with a REALTORŽ and lender who are willing to discuss different
options and address your questions and concerns!

HELPFUL STEPS TO TAKE BEFORE FINANCING A HOME

Check your credit status. As of September 2005 (or earlier, depending on where you live), you
have the right to receive a free credit report once a year from each of the 3 major credit bureaus
Equifax, Experian and TransUnion. For completeness, it is best to review reports from each one
of them. Contact information is included under Additional Resources.
Work with your REALTORŽ
and lender to determine how much you can afford to pay for
a home.
Ask your lender for your credit score. This score, which is calculated based on your credit
history and other factors, determines how lenders view your creditworthiness and determine the
loan terms to offer. Scoring rules vary widely, but generally a score of 650 or higher means that
you qualify for the most favorable loan terms.
Shop around. Different lenders charge different rates and fees and have different options. Be
sure to compare to get the best deal. Your REALTORŽ
can recommend reliable lenders.
Be sure you understand the risks of your mortgage and know whether you can handle
possible payment increases.

Why 40-Year Plans Are Becoming Popular

(November 21, 2005) -- Forty-year mortgages are emerging as an increasingly popular alternative to interest-only loans.

For a slightly higher interest rate, borrowers receive an initial monthly payment nearly as low as the one on a comparable interest-only loan, with the amortization enabling them to slowly amass equity in the property.

Argent Mortgage President Sam Marzouk reports that 40-year loans are particularly attractive to consumers who consider their home to be a long-term investment. Some consumers should be aware, though, that many loans that amortize on a 40-year schedule have balloon payments that come due after 30 years.

Source: American Banker (11/21/05); Bergquist, Erick

************************************************
ADDITIONAL RESOURCES
The National Association of REALTORSŽ

For information on NARs Housing Opportunity Program, go to
www.REALTORS.org/housingopportunity

The Center for Responsible Lending:

For information about predatory mortgage lending practices, including The Seven Signs of
Predatory Lending, go to www.responsiblelending.org

Fannie Mae:
Look for the section For Home Buyers & Homeowners at www.FannieMae.com

Freddie Mac:
Look for the section on Buying and Owning a Home at www.FreddieMac.com

Ginnie Mae:

For a simple calculator to help homebuyers estimate how much they can afford to spend, read
How Much Home Can You Afford? at www.GinnieMae.gov

HUD Housing Counselors:

For a list of counseling agencies, by state, approved by the Department of Housing and Urban
Development (HUD), go to www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm

Looking for the Best Mortgage is a brochure on how to shop, compare, and negotiate the best
deal on a home loan. The brochure is a joint effort of 11 federal agencies, including the Federal
Trade Commission (FTC), the Federal Reserve Board, HUD, and the Department of Justice.
www.federalreserve.gov/pubs/mortgage/mortb_1.htm

INTEREST-ONLY MORTGAGES
NEGATIVE AMORTIZATION MORTGAGES
PAYMENT OPTION ARM MORTGAGES
40-YEAR MORTGAGES
The National Association of REALTORSŽ
, The Voice for Real Estate, is Americas largest
trade association, representing more than 1 million members involved in all aspects of the
residential and commercial real estate industries. For more information, please visit
www.REALTORS.org

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy
organization dedicated to protecting homeownership and family wealth by working to eliminate
abusive financial practices. CRL is affiliated with Self-Help, one of the nations largest
community development financial institutions. Please visit our website at
www.ResponsibleLending.org

National Association of REALTORSŽ
500 New Jersey Avenue, NW
Washington, DC 20001

Center for Responsible Lending
910 17th Street NW, Suite 500
Washington, DC 20006

Foreclosure hurts long after home's gone

If you're lying awake at night, fretting about whether you'll lose your house to foreclosure, you may not be the only insomniac on your block.

More than 2.1 million Americans with home loans missed at least one payment last year, according to the Mortgage Bankers Association. Even more troubling, the rate of new foreclosures hit a record.

The problem is likely to get worse. As adjustable-rate mortgages adjust to higher rates, many borrowers are finding they can't afford their payments. And the collapse of the subprime market has made it harder for those with tarnished credit to refinance.

But be aware: Even if your mortgage has become an intolerable burden, letting the bank foreclose could lead to a lifetime of hurt. Losing your home is just the beginning. A foreclosure will wreck your credit report for years, making it impossible - or at least extremely expensive - to buy another home, says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies. If the proceeds from the sale of your home don't cover your loan, your lender might sue you to recover the unpaid balance.

Many borrowers who lose their homes to foreclosure haven't tried to negotiate with their lenders. That's unfortunate, because lenders are usually willing to work with borrowers to avoid foreclosure, says John Lamb, co-author of "Solve Your Money Troubles." "With the number of foreclosures on the horizon, lenders are going to be more willing to work with people, because it doesn't do anybody good to have a glut of foreclosed houses on the market."

Ideally, you should call your lender before you miss your first payment, says Bob Walters, chief economist for Quicken Loans. If your payment is due on the first of the month, call before the 15th, which he says is usually when your lender will report the late payment to credit-reporting agencies. The longer you wait, the fewer options you'll have. Once your loan is declared in default, typically after you've missed three or four payments, you're "past the point of no return," Walters says. At that point, most lenders won't accept a partial payment of what you owe. Unless you can come up with the money to cover all your missed payments, plus any late fees, your lender will start foreclosure.

Avoiding default

If you're suffering a temporary financial setback, your lender may offer programs that will help you get back on track. They include:

- Forbearance. This is an agreement that lets borrowers make a reduced payment, or none, for a specific period. You might have to make larger payments once the crisis has passed. To qualify, you might need to show that you're expecting a bonus, a tax refund or other income that will let you catch up.

- Reinstatement. You agree to pay the full amount of your missed payments by a specific date. Reinstatement is sometimes combined with forbearance.

- Modification. Your lender agrees to change the terms of the loan to make payments more affordable. Your lender may agree to add missed payments to your loan balance or extend the term of your loan, reducing the size of your payments.

Before asking for forbearance or loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage, says Jim Svinth, chief economist for LendingTree.com, a Web site that helps consumers shop for mortgages. If you can demonstrate that you've reduced other expenses, the lender will be more inclined to negotiate, he says.

Svinth warns, though, that your ability to negotiate will also depend on which institution owns your loan. If your bank still has your loan in its portfolio, it can modify the terms or offer forbearance. But many lenders sell loans into the secondary market, where they're repackaged as mortgage-backed securities. In that case, Svinth says, the company that's servicing your loan might be unable to change the terms.

Moving on

If you're in a home you can't afford, loan forbearance isn't going to solve your problem. But even if you have to move, you can take steps to avoid foreclosure:

- Put your home up for sale. This may be the best choice, Walters says, if you've been in your home for several years and have built up some equity. If your local real estate market is strong, your lender may agree to forgo payments until the house is sold, says John Jones, a financial specialist at ComPsych, an employee-assistance program. The proceeds from the sale might cover your mortgage and selling costs.

- If you have no equity or your local real estate market is depressed, ask your lender to consider a "short sale." In a short sale, the lender agrees to accept the proceeds from the sale of your home, even if they don't cover the amount you owe.

- Ask your lender to accept a deed in lieu of foreclosure. If you can't sell, your lender may agree to take the deed to your home and cancel your debt.

There's one serious drawback to a short sale or a deed in lieu of foreclosure: You could find yourself stuck with a hefty tax bill. In most cases, debt forgiven by a lender is considered taxable income. Unless you have your debt eliminated in bankruptcy or can prove you're insolvent, you'll have to pay taxes on the canceled debt, says John Roth, senior analyst for tax publisher CCH. Many people don't realize that canceled debt is taxable, Roth says, until they receive a Form 1099C from their lender; a copy goes to the IRS.

So why opt for a short sale or a title transfer instead of foreclosure? For one thing, foreclosure won't get you off the hook, either. If the lender sells your foreclosed house for less than you owe, it might sue you for the balance. And if the lender writes off the remaining debt, you could still end up with a tax bill, Roth says.

Though a short sale or a title transfer will hurt your credit report, you might still be able to work with your lender to reduce the damage - which isn't possible with a foreclosure, Lamb says.

"Foreclosure is really a bad thing to have to go through," he says. "You have all this emotional baggage, as well as the financial consequences. It's certainly better to have some control over the process."

************************************NOTICE**************************************

PLEASE NOTE: Everything on this website is subject to change, without notice.

Bill Duffey is not a mortgage professional and will not provide any information regarding mortgages, for any reason. You are advised to consult your attorney, Title company, CPA or qualified mortgage/financial/legal professional concerning anything on this website.

This list of professionals is provided "only for convenience" and does not serve to "qualify" or "endorse" any individual or company contained herein, especially anything relative to financial matters.

Bill Duffey does not receive any compensation from any vendor listed herein, nor is any personal financial information provided to him, by any vendor listed above.

Bill Duffey does not have any shared advertising with any company listed above.

Title companies may, from time to time, provide closing and escrow information and mortgage companies may provide "general" program and rate information. Specifics may vary, depending on a given transaction to which Bill Duffey is an Agent.

Scottsdale AZ Real Estate | Bill Duffey | REMAX | Carefree, Cave Creek, Paradise Valley and North Phoenix - Homes, Land and Commercial Properties

RE/MAX Excalibur REALTORŽBill Duffey, Scottsdale AZ 480-585-2904

Does Your Loan Lock
Limit Your Flexibility?

Foreclosure hurts long after home's gone

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Copyright Š 1998-2008 All Rights Reserved by Bill Duffey - Luxury Real Estate in Scottsdale, Carefree, Paradise Valley and Cave Creek, Arizona

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Scottsdale AZ Real Estate | Bill Duffey | REMAX | Carefree, Cave Creek, Paradise Valley and North Phoenix - Homes, Land and Commercial Properties

RE/MAX Excalibur REALTORŽBill Duffey, Scottsdale AZ 480-585-2904

Does Your Loan LockLimit Your Flexibility?

Foreclosure hurts long after home's gone

Send e- mail to wmduffey @ yahoo.com - questions or comments. >>> <<< Click on this icon to send e-mail) Copyright Š 1998-2008 All Rights Reserved by Bill Duffey - Luxury Real Estate in Scottsdale, Carefree, Paradise Valley and Cave Creek, Arizona

Click here, if you get lost on this site -- click here >>> http://www.billduffey.com <<< Click here

Does Your Loan Lock
Limit Your Flexibility?

Send e- mail to wmduffey @ yahoo.com - questions or comments. >>> <<< Click on this icon to send e-mail)
Copyright Š 1998-2008 All Rights Reserved by Bill Duffey - Luxury Real Estate in Scottsdale, Carefree, Paradise Valley and Cave Creek, Arizona