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Thursday, October 29, 2009
What happens if you don’t pay the mortgage?
FORT LAUDERDALE, Fla. – Oct. 29, 2009 – We all talk about what if's. One big “what if” that many homeowners have today has to do with mortgages.
About one-third of South Florida mortgages are underwater, meaning the homeowners owe more than the home is worth at today’s depressed prices, according to First American CoreLogic. Some homeowners are certainly wondering why they’re sending in the payment on, say, a $300,000 mortgage, when the house today would sell for only $210,000.
Your options: Keep paying or try to change your loan’s terms.
But some people wonder, what if I just stop paying the mortgage? It may be a tempting idea, but it quickly leads to trouble.
Here’s what could happen if you don’t pay the mortgage.
Report to the credit bureau
If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.
The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.
Cards are closed, rates rise
In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.
Tightening of credit lowers your score
Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.
The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.
Lender response
The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.
But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.
What happens next
After four months of not paying your mortgage, you will likely be served with a foreclosure notice.
If you don’t respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.
A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.
(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)
Sources used for this column included: John Ulzheimer, president of consumer education for Credit.com; Barry Paperno, consumer operations manager at FICO; Attorney Roy Oppenheim of Weston, whose practice centers on foreclosure defense; and Jessica Cecere, president of the Consumer Credit Counseling Service of Palm Beach.
© 2009 Sun Sentinel Distributed by McClatchy-Tribune News Service, Harriet Johnson Brackey.
About one-third of South Florida mortgages are underwater, meaning the homeowners owe more than the home is worth at today’s depressed prices, according to First American CoreLogic. Some homeowners are certainly wondering why they’re sending in the payment on, say, a $300,000 mortgage, when the house today would sell for only $210,000.
Your options: Keep paying or try to change your loan’s terms.
But some people wonder, what if I just stop paying the mortgage? It may be a tempting idea, but it quickly leads to trouble.
Here’s what could happen if you don’t pay the mortgage.
Report to the credit bureau
If your payment does not arrive, your lender or servicer will report this late payment to the credit bureau by the first day of the next month. This can happen in as little as two weeks from due date and put a negative mark on your credit report. Your credit score drops.
The late payment report whacks your credit rating. Your credit score starts to drop, by up to 200 points, if this is your only late or missed payment.
Cards are closed, rates rise
In the next 30 days, you can expect your other creditors to take note of the late payment and to take action. They can raise your interest rates, shut off your credit card entirely, or lower your credit limit. You also could face other changes in your financial life, because auto insurance, student loans and other forms of credit are pegged to your credit score.
Tightening of credit lowers your score
Credit scores feed on themselves. If your credit card limits are lowered and you are carrying a balance, you are then using more of your available credit, something known as your utilization rate. When that goes up, it lowers your score some more.
The negative mark stays on your credit report for seven years. But the impact on your credit score lessens over time. The biggest impact is for the first two years.
Lender response
The phone will start ringing. Your lender will try to contact you, try to persuade you to go into a loan modification of some kind.
But after 90 days, you cannot just start making payments again. The lender may actually send your payment back, if you send it this late and have not been in contact.
What happens next
After four months of not paying your mortgage, you will likely be served with a foreclosure notice.
If you don’t respond within 20 days, then the lender, in the following 60 days, will ask a court to issue a judgment against you.
A county sale will be arranged 50 to 120 days after the judgment. Next, 120 days after the sale, the sheriff will be at the door. Ten days after that, you’ll be thrown out of your home.
(Tip: This schedule is a general one. Courts are facing a backlog of foreclosure cases and could take longer to go through these steps. If you hire a lawyer and fight the foreclosure, you may be able to delay the sale for many months or avoid it altogether.)
Sources used for this column included: John Ulzheimer, president of consumer education for Credit.com; Barry Paperno, consumer operations manager at FICO; Attorney Roy Oppenheim of Weston, whose practice centers on foreclosure defense; and Jessica Cecere, president of the Consumer Credit Counseling Service of Palm Beach.
© 2009 Sun Sentinel Distributed by McClatchy-Tribune News Service, Harriet Johnson Brackey.
Economy grows in 3Q, signals end of recession
WASHINGTON (AP) – Oct. 29, 2009 – The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.
The Commerce Department’s report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.
The much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that’s happened on records dating to 1947.
It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.
The third-quarter’s performance – the strongest since right before the country fell into recession in December 2007 – was slightly better than the 3.3 percent growth rate economists expected.
Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.
Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government’s Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.
The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.
The government’s $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.
The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector’s return to good health is a crucial ingredient to a sustained economic recovery.
Brisk spending by the federal government, led by efforts to stimulate the economy and on defense, also played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.
Copyright 2009 The Associated Press, Jeannine Aversa, AP Economics Writer.
The Commerce Department’s report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.
The much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that’s happened on records dating to 1947.
It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.
The third-quarter’s performance – the strongest since right before the country fell into recession in December 2007 – was slightly better than the 3.3 percent growth rate economists expected.
Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.
Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government’s Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.
The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.
The government’s $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.
The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector’s return to good health is a crucial ingredient to a sustained economic recovery.
Brisk spending by the federal government, led by efforts to stimulate the economy and on defense, also played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.
Copyright 2009 The Associated Press, Jeannine Aversa, AP Economics Writer.
Senate panel OKs extension for home buyers’ credit
WASHINGTON – Oct. 29, 2009 – Senators reached a compromise to extend the $8,000 tax credit for first-time home buyers, a boost the housing industry expects will help it pull out of its two-year-old downturn.
Lawmakers in Washington also added a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, housing-industry sources said.
Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, the sources said. The measure still faces votes in the full Senate and the House.
The current tax credit did little for the new-home market in September, the Commerce Department reported – news that took many industry analysts by surprise. Sales fell 3.6 percent from August and 7.8 percent from September 2008.
Industry observers had expected a fifth consecutive monthly increase in new-home sales, believing that the tax incentive for qualified first-time buyers – credited with 357,000 sales of previously owned homes so far this year – would do the trick.
Instead, sales of typically more expensive newly built houses slipped.
“The decline in new-home sales seems to us to be more a function of the attractive pricing available on resales in the current environment than a reflection of weakening demand,” said Michael Feder, president of Radar Logic Inc., of New York, which tracks the market.
“Big deal,” said Joel L. Naroff, of Naroff Economic Advisors, of Holland, Bucks County. “Since hitting rock bottom in March, demand is up 20 percent.”
For Naroff, the robust rise in existing-home purchases – 9.2 percent year over year in September – indicated that the housing market was not faltering.
“Maybe the issue is supply, which fell to its lowest level in 27 years,” he said. “Builders, at least those left standing, have been making sure they don’t have any houses sitting around, and they have been very successful in controlling inventories.”
IHS Global Insight Inc. economist Patrick Newport echoed that, noting new-home inventories “sank for the 29th straight month to their lowest level since November 1982.”
Naroff maintained housing had recovered enough to stand without the tax credit. But Newport said he believed that if the credit were not extended and expanded, housing demand would take a hit, and home sales would drop.
Until the Senate compromise today, the extension of the credit seemed mired in what National Association of Home Builders vice president Jerry Howard called “a game of partisan chicken.”
Howard’s take on the lower September numbers: It was too late to sign a contract on a house that would be completed by the current Nov. 30 deadline, and many buyers were concerned the credit would not be extended.
The credit has helped, acknowledged Marshal Granor, a principal in Granor Price Homes, of Horsham. But he added, “I’d love for it to go away, for a month.”
“People who believe there is no rush aren’t buying, they are waiting for more bargains from more squeezed sellers,” Granor said.
Still, said Feder of Radar Logic, lower home prices have carried “buyers further into the autumn than we would expect, based on historic patterns.”
Declining inventory means builders will have to ramp up production, Newport said.
As the Senate worked on the compromise, third-quarter data were released showing that the burden of foreclosure filings in the post-bubble market continued to shift from the subprime-ridden “sand” states (California, Nevada, Florida and Arizona) to areas with rising levels of unemployment and adjusting rates on the “exotic” mortgages prevalent in high-cost metropolitan markets.
Yet Las Vegas remained the toxic-loan capital, according to the third-quarter survey by RealtyTrac Inc., of Irvine, Calif. – its rate of foreclosure filings was seven times higher than the national average.
Copyright © 2009 The Philadelphia Inquirer, Alan J. Heavens. Distributed by McClatchy-Tribune Information Services.
Lawmakers in Washington also added a $6,500 tax credit for other primary-home purchasers and raised the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, housing-industry sources said.
Under the Senate compromise, buyers must have sales agreements in hand by April 30, but they will have until June 30 to go to settlement, the sources said. The measure still faces votes in the full Senate and the House.
The current tax credit did little for the new-home market in September, the Commerce Department reported – news that took many industry analysts by surprise. Sales fell 3.6 percent from August and 7.8 percent from September 2008.
Industry observers had expected a fifth consecutive monthly increase in new-home sales, believing that the tax incentive for qualified first-time buyers – credited with 357,000 sales of previously owned homes so far this year – would do the trick.
Instead, sales of typically more expensive newly built houses slipped.
“The decline in new-home sales seems to us to be more a function of the attractive pricing available on resales in the current environment than a reflection of weakening demand,” said Michael Feder, president of Radar Logic Inc., of New York, which tracks the market.
“Big deal,” said Joel L. Naroff, of Naroff Economic Advisors, of Holland, Bucks County. “Since hitting rock bottom in March, demand is up 20 percent.”
For Naroff, the robust rise in existing-home purchases – 9.2 percent year over year in September – indicated that the housing market was not faltering.
“Maybe the issue is supply, which fell to its lowest level in 27 years,” he said. “Builders, at least those left standing, have been making sure they don’t have any houses sitting around, and they have been very successful in controlling inventories.”
IHS Global Insight Inc. economist Patrick Newport echoed that, noting new-home inventories “sank for the 29th straight month to their lowest level since November 1982.”
Naroff maintained housing had recovered enough to stand without the tax credit. But Newport said he believed that if the credit were not extended and expanded, housing demand would take a hit, and home sales would drop.
Until the Senate compromise today, the extension of the credit seemed mired in what National Association of Home Builders vice president Jerry Howard called “a game of partisan chicken.”
Howard’s take on the lower September numbers: It was too late to sign a contract on a house that would be completed by the current Nov. 30 deadline, and many buyers were concerned the credit would not be extended.
The credit has helped, acknowledged Marshal Granor, a principal in Granor Price Homes, of Horsham. But he added, “I’d love for it to go away, for a month.”
“People who believe there is no rush aren’t buying, they are waiting for more bargains from more squeezed sellers,” Granor said.
Still, said Feder of Radar Logic, lower home prices have carried “buyers further into the autumn than we would expect, based on historic patterns.”
Declining inventory means builders will have to ramp up production, Newport said.
As the Senate worked on the compromise, third-quarter data were released showing that the burden of foreclosure filings in the post-bubble market continued to shift from the subprime-ridden “sand” states (California, Nevada, Florida and Arizona) to areas with rising levels of unemployment and adjusting rates on the “exotic” mortgages prevalent in high-cost metropolitan markets.
Yet Las Vegas remained the toxic-loan capital, according to the third-quarter survey by RealtyTrac Inc., of Irvine, Calif. – its rate of foreclosure filings was seven times higher than the national average.
Copyright © 2009 The Philadelphia Inquirer, Alan J. Heavens. Distributed by McClatchy-Tribune Information Services.
Tuesday, October 20, 2009
U.S. housing starts up slightly
Housing starts inched up 0.5 percent in September to 590,000 units, pushed up by single-home construction, which rose by 3.9 percent.
However, initial construction of multifamily homes fell 15.2 percent, to 89,000 units, the second-lowest reading since 1959, according to the U.S. Department of Commerce.
Housing starts were down 28.2 percent, year-over-year.
Housing permits, a gauge of future construction, fell 1.2 percent to an annual pace of 573,000 units in September. Single-family permits dropped 3 percent.
Builders appear to be holding off on new construction, as uncertainty looms over the possible extension of the $8,000 tax credit for first-time homebuyers.
This tug-of-war between the effects of the tax credit and low inventories may continue for a few months, but eventually, low inventories will win out,” noted Patrick Newport, an economist with IHS Global Insight.
“Low inventories will require that builders ramp up production, which means that the job losses in the residential construction sector will soon turn into job gains,” he said.
Source: South Florida Business Journal
However, initial construction of multifamily homes fell 15.2 percent, to 89,000 units, the second-lowest reading since 1959, according to the U.S. Department of Commerce.
Housing starts were down 28.2 percent, year-over-year.
Housing permits, a gauge of future construction, fell 1.2 percent to an annual pace of 573,000 units in September. Single-family permits dropped 3 percent.
Builders appear to be holding off on new construction, as uncertainty looms over the possible extension of the $8,000 tax credit for first-time homebuyers.
This tug-of-war between the effects of the tax credit and low inventories may continue for a few months, but eventually, low inventories will win out,” noted Patrick Newport, an economist with IHS Global Insight.
“Low inventories will require that builders ramp up production, which means that the job losses in the residential construction sector will soon turn into job gains,” he said.
Source: South Florida Business Journal
Housing starts expected to rebound slowly
Housing starts may rebound slowly, although they have begun to increase lately, according to a forecast from housing market research firm Metrostudy.
“We believe that some of the recent gains in housing starts could be given back during the third and fourth quarters of this year if the current tax credits are not extended,” said Brad Hunter, Metrostudy’s chief economist and national director of consulting. “That said, the forecast for 2010 is for steady increases in starts.”
The U.S. Department of Commerce is set to release national housing starts figures tomorrow.
Hunter said starts have increased in recent months partly because of the $8,000 tax credit for home buyers, but also because speculative inventories are down sharply among many builders.
He said home builders need to start a home every time they sell one to keep speculative inventory “at a normal level,” but that starts are nevertheless likely to rebound only slowly from this point for several reasons:
• Some builders in the bubble markets still are working off inventory.
• Some builders’ banks are cutting their credit even if they are current on their loans.
• Some builders are finding prices too low to sell homes profitably.
Nationwide, Metrostudy forecasts 562,000 housing starts for 2009, a 38 percent drop compared with the same period in 2008.
Single-family starts are forecast at 438,000, a 30 percent drop from 622,000 in 2008.
“Most markets have been improving since last spring, but some of the hardest-hit bubble markets have only recently started to see increases in starts. Those lagging markets will probably start to experience increased homebuilding activity in 2010,” Hunter said. “Homebuilders are still challenged by economic conditions, and also by the lack of credit from banks, but there are some positive trends.”
According to Hunter, those include:
• Homebuilders’ sales and traffic are up, as well as the number of prospective buyers who will actually buy a home, especially in California, Hunter said. Even weak markets like Las Vegas, Phoenix, Florida and Southern California have shown significant improvement in sales per subdivision during the last several months, he said.
• Builders’ new home inventory is under control in most markets, although there is still a large “shadow inventory.”
• Foreclosures are being bought enthusiastically, but the flow of additional real estate-owned properties is still daunting.
In the release from the government expected Tuesday, September starts are likely to be up for single-family homes, but down for multifamily housing, Hunter said.
Source: Austin Business Journal
“We believe that some of the recent gains in housing starts could be given back during the third and fourth quarters of this year if the current tax credits are not extended,” said Brad Hunter, Metrostudy’s chief economist and national director of consulting. “That said, the forecast for 2010 is for steady increases in starts.”
The U.S. Department of Commerce is set to release national housing starts figures tomorrow.
Hunter said starts have increased in recent months partly because of the $8,000 tax credit for home buyers, but also because speculative inventories are down sharply among many builders.
He said home builders need to start a home every time they sell one to keep speculative inventory “at a normal level,” but that starts are nevertheless likely to rebound only slowly from this point for several reasons:
• Some builders in the bubble markets still are working off inventory.
• Some builders’ banks are cutting their credit even if they are current on their loans.
• Some builders are finding prices too low to sell homes profitably.
Nationwide, Metrostudy forecasts 562,000 housing starts for 2009, a 38 percent drop compared with the same period in 2008.
Single-family starts are forecast at 438,000, a 30 percent drop from 622,000 in 2008.
“Most markets have been improving since last spring, but some of the hardest-hit bubble markets have only recently started to see increases in starts. Those lagging markets will probably start to experience increased homebuilding activity in 2010,” Hunter said. “Homebuilders are still challenged by economic conditions, and also by the lack of credit from banks, but there are some positive trends.”
According to Hunter, those include:
• Homebuilders’ sales and traffic are up, as well as the number of prospective buyers who will actually buy a home, especially in California, Hunter said. Even weak markets like Las Vegas, Phoenix, Florida and Southern California have shown significant improvement in sales per subdivision during the last several months, he said.
• Builders’ new home inventory is under control in most markets, although there is still a large “shadow inventory.”
• Foreclosures are being bought enthusiastically, but the flow of additional real estate-owned properties is still daunting.
In the release from the government expected Tuesday, September starts are likely to be up for single-family homes, but down for multifamily housing, Hunter said.
Source: Austin Business Journal
Tuesday, October 6, 2009
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