I recently interviewed Kim Clugston, Vice President and Senior Mortgage Officer at the Bank of Ann Arbor. We discussed the local real estate market, current interest rates, how to shop for a mortgage or refinancing, and the expansion of the Home Affordable Refinance Program, among other topics.
Please note that this blog post and video are for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.
I received this question recently from a reader who is wondering what her options are for refinancing her underwater mortgage:
A recent announcement by the Obama administration indicated that banks were now looking to help home owners whose mortgages are underwater by offering either a principal reduction or an interest reduction. I called our mortgage company’s modification department — CitiMortgage — and they didn’t know anything about it. What do you recommend that I do next? And, what do you think of companies like the Guardian Group (http://www.guardiangroupna.com/) that offer to buy your mortgage and sell it back to you? Is this a legitimate way to get a principal reduction?
For help answering this question, I turned to Kim Clugston, Vice President and Senior Mortgage Loan Officer at Bank of Ann Arbor. She explained that few banks are actually offering loan reductions and that they are not required to do so. Each lender can offer “work out” programs to its customers, but the lender makes up the rules.
Ms. Clugston further explained that the Obama Administration created standard refinancing programs through the Making Home Affordable plan as part of its Financial Stability Plan. Making Home Affordable refinancing at current market rates is available to all lenders if the mortgage is held by Fannie Mae or Freddie Mac. Check here to find out if your mortgage is eligible.
The rub for most homeowners is that the new loan cannot be for more than 105% (Freddie Mac) or 125% (Fannie Mae) of their home’s current appraised value. Moreover, principal is not forgiven under these programs and second mortgages cannot be rolled in.
Regarding companies offering to buy your mortgage and sell it back to you, Ms. Clugston pointed out that the Making Home Affordable website’s homepage currently has a warning against foreclosure rescue scams. The site warns: “Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.”
If you have an underwater mortgage, I recommend that you research Making Home Affordable and check your eligibility for its programs. You can also get free help from housing counseling agencies approved by the U.S. Department of Housing and Urban Development. Ultimately, you will likely need to work directly with your loan servicing company if you are an eligible and good candidate for refinancing.
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Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.
I attended the national conference for the National Association of Personal Financial Advisors (NAPFA) in Chicago this week. NAPFA is a professional organization for financial advisors who are committed to Fee-Only and comprehensive financial planning. Below are some of the new ideas and time-tested reminders that I took away from the conference.
Estate Planning
If you are the parent of a minor and you do not have a Will, a court will determine his or her guardian. Please prioritize putting a Will in place if you are in this boat.
You may need to appoint a short-term guardian in your Will if the primary guardian for your minor child does not live nearby. This will prevent your child from ending up in the care of an agency until your primary guardian arrives.
Use an attorney who specializes in estate planning to draft your estate planning documents. You wouldn’t let your general practitioner perform brain surgery on you, so don’t let your real estate attorney draft your estate planning documents.
Use this checklist provided by the American Bar Association to think through decisions you will need to make in your medical directives.
Property Division in Divorce
Each party must be careful when agreeing to take an asset that is difficult to value such as real estate. You may be better offer selling the asset and splitting the proceeds so that you will know its true worth.
Visit www.whatsthecost.com to calculate how long it will take you to pay off your debt.
It’s difficult to separate the legitimate counselors from the snake oil salesmen in the credit and debt counseling business. A presenter recommended The National Foundation for Credit Counseling as a reliable source for credit counselors.
Check out www.creditcard.com to compare credit card offers and for information on credit cards.
A presenter recommended www.consumerworld.org as her preferred resource for consumer education.
Healthcare Reform
Visit www.statehealthfacts.org for state-specific health plan information and a summary of healthcare reform.
College Education Savings
A speaker, Jean Chatzky, recommended paying for college education in thirds: 1/3 from savings, 1/3 from cash flow while your child is in college, and 1/3 from student loans taken by the student. She feels that this approach allows the student to have some skin in the game. Research has shown that students who pay for part of their tuition take college more seriously.
In 2011, all colleges that participate in Title IV student financial aid programs will required to have net price calculators on their websites.
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Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.
