Marc's Mortgage Matter's

We have a few days until Thanksgiving, first celebrated in the fall of 1621 when the Pilgrims held a three-day feast to celebrate a bountiful harvest. But it did not become a national holiday until 1863 when President Abraham Lincoln proclaimed the last Thursday of November as a national day of thanksgiving. Later, President Franklin Roosevelt clarified that Thanksgiving should always be celebrated on the fourth Thursday of the month to encourage earlier holiday shopping - very crafty. The USDA estimates that 248 million turkeys will be raised in the U.S. this year, weighing in at about 7.1 billion pounds. Minnesota is numero uno in turkey production with almost 1/5 of the national tonnage. North Carolina and Arkansas tie for 2nd at around 30 million turkeys each, and adding in production from Missouri, Virginia, and Indiana accounts for two-thirds of U.S turkeys!

Looking at the other side of the plate, U.S. cranberry production is 750 million pounds per the USDA. Wisconsin leads the way with 430 million pounds, followed by Massachusetts, New Jersey, Oregon, and Washington. And let's not forget sweet potatoes: 2.4 billion pounds for the year is the USDA's estimate, 40% coming from North Carolina.

A husband read an article to his wife about how many words women use a day...
30,000 to a man's 15,000.
The wife replied, "The reason has to be because we have to repeat everything to men."
The husband then turned to his wife and asked, "What?" 

Underwater Mortgages and Divorce
What can you do if you're getting divorced and need to decide who gets the house - which has an underwater mortgage? There are a number of options here, but unfortunately, none of them are particularly easy or attractive.

When a divorce occurs and the couple shares a home with a mortgage, one of two things typically occurs. The first is that one person gets the home in exchange for financial considerations in the divorce agreement, and the mortgage is refinanced into that person's name alone. The other is that the house is sold, and the proceeds are divided among the two according to the divorce agreement.

That's how it works when there's equity in the house. If the mortgage is underwater, though, the house is a liability, not an asset, and things get much stickier. At the same time, the basic options are the same 1) get rid of the house or 2) one person gets it. Here are some of the ways to do that.

Refinance

If you can do it, this is probably the best-case scenario. There are programs that allow you to refinance an underwater mortgage, most specifically, the Home Affordable Refinance Program (HARP), which is due to announce new, more relaxed guidelines Nov. 15. If you can, refinance the mortgage under the name of the party keeping the house, and make some other arrangements in the divorce decree to reflect the financial liability he or she is assuming.

For this to work, the person getting the house needs to have enough financial resources to continue the mortgage on their own. In addition, some lenders may decline to do a HARP refinance if one person is coming off the mortgage, although it is permitted under the program's basic guidelines.

Another option is a cash-in refinance, where one or both of the divorcing parties contribute money toward paying down the mortgage balance far enough that it can be refinanced. Again, these contributions need to be factored into the overall divorce settlement.

Short sale

This is where you try to get the lender to agree to let the home be sold for less than balance owed on the mortgage. Usually, lenders are reluctant to do this unless it's apparent the mortgage holder will be unable to continue making mortgage payments. A divorce may qualify if both parties' incomes were contributing toward the mortgage payments.

One of the downsides of a short sale is that it does a lot of damage to your credit, since it goes on both of your records as a settled debt not paid in full. In addition, some lenders may still refuse to grant a short sale even though you're divorcing, preferring to still hold both parties liable even though they are no longer married.

Foreclosure

If you're well underwater, this may make the most economic sense, even though it will savage your credit rating for seven years. Many divorcing couples simply choose to mail the keys back to the bank and abandon the property, a process known in the industry as "jingle mail."

In some cases, one of the ex-spouses will continue to live in the property after both have ceased making mortgage payments, simply waiting for the bank to eventually reclaim it. Since some foreclosures are taking in excess of two years these days, this can be a financial benefit to the party staying in the property. The downside, particularly for the non-occupying ex-spouse, is that it's going to take that much longer for the blot to come off their credit, since it extends the foreclosure process.

On the upside, if you remarry soon after, you may be able to buy another home fairly quickly using your new spouse's unblemished credit, though you may not be able to count your income toward qualifying for the loan.

On the downside, foreclosure may not get you off the hook if you have a second mortgage on the property. Typically, a lender's only recourse in a foreclosure is whatever it can recover from the sale of the property. But if the second mortgage holder gets no payment from the property sale (since it all went to the primary mortgage holder), in some states that means its claim is still valid and it can still seek reimbursement, perhaps years.

Deed in lieu of foreclosure

This is a somewhat better option than "jingle mail," if your lender will accept it. You tell your lender you're getting divorced, won't be able to afford the home anymore and ask to simply sign the deed to the property back over to them.

This gets you clear of the house without any further liability, and will have less impact on your credit than a foreclosure will - and you may be able to negotiate how the lender will report it to the credit bureaus. For the lender, the attraction is that they avoid the cost of foreclosure and get the property in better shape than a typical foreclosure, which is often in neglected condition. You also start rebuilding your credit sooner than if you let the property go straight through the foreclosure process.

Staying together

This doesn't mean not getting a divorce, it means that the two of you continue to occupy the same house and pursue separate lives until such time as you can refinance, sell the home or come to some other resolution. This isn't as strange as it sounds - in the current economy, many divorced couples are doing this when they can't afford any other alternative. It goes without saying that this type of arrangement only works if the split is fairly amicable.

Divorce is usually messy and having to deal with a financial liability like an underwater mortgage makes it even messier. It's a difficult situation and one you'll need a competent professional help to address, so don't proceed without talking things through with your legal and financial advisors.

Yes, profiling can be racist (pulling a car over because the driver is black, or targeting Arabic looking men for special screening at airports). But what if we had positive profiling? Why not have the TSA target certain type of safe-looking people and just wave them through all those X-Ray machines and metal detectors? Even screening out 10-20% would make the lines move a heck of a lot faster. They could start with little old ladies appearing to be over 75. 
 

Mortgage borrowers will soon be given a chance to refinance, courtesy of an expanded Home Affordable Refinance Program. While announced several weeks ago, technical details came only this week, and lenders are expected to begin to take applications under the new guidelines starting December 1st.

That mortgage rates remain low and steady during the early months of the new initiative is key. The expanded program desperately needs some early successes so that borrowers, both new homeowners and especially those who failed to previously get HARP refinances, are encouraged to come try to get the payment relief for which they have been waiting.

The program isn't expected to be fully underway for the borrowers most deeply underwater until later in the first quarter of 2012; with the economy gently improving, there is some risk of rising interest rates between now and then. That said, if rates should move gently upward, the value of refinancing would still be in tact, but any serious push higher would put folks back on the sidelines.

FHA borrowers may again see expanded loan limits. Congress attached a provision doing so to a bill that President Obama is expected to sign into law before long. This comes on the heels of a report questioning the solvency of the FHA insurance program and the possibility that the fund may need a taxpayer bailout in the next two years. The limits were only reduced a few short weeks ago, and there is little evidence that lower limits have caused any trouble in the housing market so far. However, some factions feel that the housing market cannot do without wide-open and near-perpetual support, even if that includes continuing to allow borrowers to obtain up to $729,750 with as little as 3.5% down and lower credit scores.

The European debt mess continues to play a role in interest rates and this week was no exception, as on-going concerns keep investor money flowing into safe-haven buys of US Treasuries. Bank stresses overseas have been showing in international lending markets, and the 12-month LIBOR (US Dollars) has crept back over the 1% level this week for the first time since August of 2010.

The inbound flow of funds plus the Federal Reserve's OpTwist program is helping to keep the lid on mortgage rate movements. The low and stable rate environment is important to potential HARP borrowers, as noted, but may actually matter more to potential homebuyers. Homebuying can take months of planning and executing, and while not necessarily derailed by a flare in interest rate certainly isn't much enhanced by it.

A holiday-shortened week next week has a spate of economic news of note, including existing home sales, the second reading of third quarter GDP, minutes from the last FOMC meeting and more. We don't expect much change in mortgage interest rates, just a wobble one way or the other -- that is, just about the same as this week.

Thanksgiving is upon us next week, with all the traveling and family and such that it entails. Please take a minute from your day and feast to give thanks for those in our armed forces around the world, far from their families, hearth and home, working to keep all the things we hold dear within reach.

Part 1 of Men Teaching Classes for Women at THE ADULT LEARNING CENTER REGISTRATION MUST BE COMPLETED By Sun, April 30, 2012 

NOTE: DUE TO THE COMPLEXITY AND DIFFICULTY LEVEL
OF THEIR CONTENTS, CLASS SIZES WILL BE LIMITED TO 8 PARTICIPANTS MAXIMUM.
Class 1
Up in Winter, Down in Summer - How to Adjust a Thermostat
Step by Step, with Slide Presentation.
Meets 4 weeks, Monday and Wednesday for 2 hrs beginning at 7:00 PM.
Class 2
Which Takes More Energy - Putting the Toilet Seat Down, or Complaining About It for 3 Hours?
Round Table Discussion. Meets 2 weeks, Saturday 12:00 for 2 hours.
Class 3
Is It Possible To Drive Past a Wal-Mart Without Stopping? Group Debate. Meets 4 weeks, Saturday 10:00 PM for 2 hours.
Class 4
Fundamental Differences Between a Purse and a Suitcase - Pictures and Explanatory Graphics.
Meets Saturdays at 2:00 PM for 3 weeks.
Class 5
How to Ask Questions During Commercials and Be Quiet During the Program
Help Line Support and Support Groups. Meets 4 Weeks, Friday and Sunday 7:00 PM