‘Liar Loans’ Earn Their Nickname, Michael Corkery, Wall Street Journal


The failure of Hope for Homeowners to prevent foreclosures is sparking a blame game in Washington. The Department of Housing and Urban Development, which runs the voluntary program, says Congress made it too restrictive and expensive for homeowners.

Congressional leaders say the program’s failure — only 357 people have signed up since Oct. 1 — shows that lenders aren’t willing to modify loans voluntarily and they need to be forced to do so.

But HUD officials say other problems are hampering the program’s success. In order to refinance through Hope for Homeowners, applicants must certify they did not supply false or misleading information on a previous loan application. The HUD program also requires homeowners to supply two years of financial records.

HUD officials believe that people who used “stated income” mortgages which required no documentation of income, are having a hard time qualifying for Hope for Homeowners because of incorrect information on their previous loans. It might not all be the borrowers fault. In many cases, mortgage brokers and lenders fudged loan applications.

Either way, it appears that stated income mortgages, which are known as “liar loans,” are earning their nickname.

Here’s a list of the government sponsored and voluntary lender foreclosure prevention programs and how they are faring so far.

http://blogs.wsj.com/developments/2009/01/02/liar-loans-earn-their-nickname/

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Land Sales Contract Solution: Down Payment Installment


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What is most attractive about Land Sales Contracts or seller financing in general is the buyer and the seller can develop agreements that will fit each others needs. Recently a buyer and seller came to an agreement on the selling price of a home. The buyer had very little for a down payment. The seller proposed that the buyer make down payment installments during the term of the agreement. In this case the buyer and seller had to agree on a couple things. First they had to agree how much the down payment would be. Second they had to agree on how many installment payments the buyer could make. In this case, the contract for for 60 months and the seller and buyer agreed on a 48 month down payment installment plan.

The Deal:

Sales Price………$250,000
Down Payment…….10% ($25,000)
Buyer will pay 50% ($12,500) at closing and will pay the rest of down payment over 48 months at $260.42 per month.
Interest Rate…….7%
Payment………….$1496.93
Payments Amortised over 30 years
Buyer to pay Property Taxes ($1953 per year) and Insurance ($258) during term of contract.
Contract Term…….60 Months (Balloon payment of balance due month 61)

Monthly Payment Break Down

Contract……….$1468
Down Payment..$260.42
Taxes…………..$162.75
Insurance………$21.50
Total……………$1912.92

If the seller and buyer had agreed that the buyer was to make interest only payments instead of a 30 year amortization then the payment would be a little smaller.