Possible Mortgage Restrictions Coming Up?

There is a federal proposal in the works that would not only require a 20% down-payment for a home purchase in order to qualify for the best mortgage rates, but also that would further restrict debt loads as part of the same qualification process. The impact of this is so great because it includes student loans as well as credit cards and car loans. It is estimated that a third of borrowers over the last year would not have qualified if these standards were in place already.  

Critics of the proposed regulation include those who otherwise have no debt, but whose mortgage alone would constitute a higher percentage of income. The reasons behind these kinds of regulations include the securities created from mortgage loan debt. Mortgages that meet the requirements will be exempt from exclusion from mortgage-backed securities derivatives. Critics also claim that such regulations will hinder those who are able to buy homes with cash, who have larger down-payments, but carry other debt and those who might otherwise have circumstances that would support favorable borrowing.

Proponents site an inability to predict changes in earnings, medical or health issues and things like a couple deciding to have a child and forego a certain portion of their income so that one spouse might stay at home to care for the child. Since discretionary income expenditures are not easily predictable, as well, there will be less risk to banks if loans are more heavily scrutinized. Overall, the thought is that the buyers and banks will be better off with greater oversight in the long term.

Disclaimer: This blog is for informational purposes only and does not establish a client-attorney relationship. Consult with an attorney before taking action on any information found herein as individual circumstances may affect the applicability of information provided. Call The Law Office of Michael Riley at 508-405-0831 with any questions.

Mortgage Abandonment as Financial Strategy?

CNN recently reported about a trend emerging in real estate, specifically in the mortgage arena. As people find themselves "underwater" with mortgage loans, they are exploring all options, including "walking away" from the mortgage and the home, even if they are capable of paying the debt. Many homeowners who face negative equity as the result of the burst of the housing bubble believe they will fair better with a short term credit hit than by remaining in what has become a poor investment.

While the nature of this blog is to report trends, news and information and not to judge the merits of the information or practices on which we report, in this instance, I must address the ethical nature of this kind of practice. As with almost any purchase, there is a loss of value upon ownership. Goods, whether tools or vehicles, become "used" and are most often worth less (if you go sell them) than they cost you. Now and again, a piece of fine art or other purchase might see a gain in value. However, vehicles are a perfect example of something you purchase that loses value, especially initially. You do not "walk away" from a vehicle loan just because the car is worth less than the purchase price. While paying on a car loan, you have use of the vehicle. While paying on a mortgage, you have use of the property and home. Thus, if you can afford the payment, just because your home lost value, does not mean you should abandon it. There are extenuating circumstances that might necessitate this kind of decision, yet overall, if it is merely about whether you "want" to pay versus whether you can pay, you might want to consider the moral obligation.

Disclaimer: This blog is for informational purposes only and does not establish a client-attorney relationship. Consult with an attorney before taking action on any information found herein as individual circumstances may affect the applicability of information provided. Call The Law Office of Michael Riley at 508-405-0831 with any questions.

Purchasing a Property After Foreclosure

News reports abound about what is happening with foreclosures. Industry newsletters, title insurance companies and regular newspapers are all covering the court decisions that have been made about the "bad" foreclosures of the past two years. These foreclosures have errors in the order in which documents were recorded and the courts essentially require that the procedure be re-performed to perfect it before the title to the property is clear.

Why is this important? Well, if you're buying a home from a bank, you might assume that the title is clear and marketable. You assume the bank did everything right when it foreclosed and that if it didn't, you're protected. However, without title insurance, the problem just becomes yours to fix. When buying a home, especially out of foreclosure, you're wise to hire an attorney to represent your personal interests so that he or she examines a title in detail and makes sure you're not inheriting something that a bank did wrong. Be sure to seriously consider title insurance, as well, so that if there is something on the title, you have insurance against the cost of fixing the problem.

Disclaimer: This blog is for informational purposes only and does not establish a client-attorney relationship. Consult with an attorney before taking action on any information found herein as individual circumstances may affect the applicability of information provided. Call The Law Office of Michael Riley at 508-405-0831 with any questions.