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CNBC announced today that Citibank has reached a tentative agreement with members of the Financial Committees of Congress, that they will work with any borrowers facing foreclosure in a refinance transaction to lower your current interest rate on your mortgage loan.  While this is good news, it is not great news.

Here are the terms of what Citibank is proposing:

1.  You must be in trouble on your mortgage, at least one month behind on your payments

2.  You must have failed at an attempt with your current lender to renegotiate your rate

3.  No appraisal will be required, so if you are underwater, Citibank will refinance your loan anyway, if you otherwise qualify.

4.  Other features of this proposal are yet to be defined - most significantly charges for this refinance.

How Citibank differs from the renegotiation process we are offering:

1.  You do not have to be delinquent on your current mortgage - in fact, we encourage you to keep making your payments on time to prevent credit score destruction

2.  You do not have to have attempted to renegotiate with your current lender - our attorneys will do that for you

3.  We will make every effort to get your principal balance reduced if your value is less than you owe

4.  This could be very big - if you have a pre-payment penalty on your current mortgage, this will not be affected by our renegotiation process since your loan will remain with your currrent lender - BUT, if you are refinancing with Citibank, there is no way to prevent your current lender from charging you pre-payment penalties.

5.  If you are refinancing with Citibank, you will have Title Insurance charges, reconveyance charges, etc.  These charges will not be part of your renegotiation with our attorneys, again because you are not changing lenders

6.  Refinance charges CAN be added to your loan balance with Citibank, because this is a refinance transaction - but with our attorneys, you will have to pay these charges.  This is a plus and a negative.  Your loan balance will not go any higher, but you do have to come up with at least the minimum charges for our attorneys to start this process.  Most of the attorney fees can be paid on a payment plan with payments as low as $150/month.  (You should be saving at least $150/month with your rate reduction, especially if the attorneys are able to get you a balance reduction as well.)

Other news today

• the price of oil dropped again today, close to $40/barrel.
• Mortgage rates rose slightly today (remember the volatility remains unless and until Congress passes some policy change to keep mortgage rates low for a while to help the housing market), but still remain right around the 5% level for 30 year fixed rate mortgages.
• President-elect Obama announced an outline of his proposed stimulus package this morning.  Total cost will be approximately $1 - $2 trillion!!!  The focus will be to put 3 million people back to work.  (Currently, more than 4 million people are collecting unemployment insurance)  A huge part of the focus of the plan is the "greening of America."  Huge sums of money will be spent on alternative forms of energy and updating our energy grids to handle the alternative energy that will be generated.  ( Just a note here, for your information - in response to Obama's speech today, green energy stocks rose dramatically and are expected to continue to climb.  These include solar stocks, wind generator stocks, natural gas stocks, and any stocks that are related to building out these energy sources.  If interested you should consult with a financial advisor for more information - since that is not the scope of this email, and I am no longer a licensed Securities advisor.)
• There was a huge 10 year Treasury bond auction today which was gobbled up internationally, as well as with our own investors.  This caused the price of the 10 year bond to rise, while the yield dropped.  Apparently, our government is moving much more quickly than other countries to get our economy back on track.  Many European and Asian countries are watching the US now to see how effective our stimulus package is, and are copying some of the Obama proposals.
• We are hearing that the USDA rural loan program has already run out of funds this year.  However, lenders are telling us to keep the applications coming, if you are interested.  The expectation is that this program will be re-funded shortly. 

As always, please feel free to call at any time if you have questions or concerns about your mortgage, or other news reported and how this might affect you.  I will do my best to assist you, or point you in the direction required to find your answers.

A reverse mortgage is a great loan product for the right person, but it definitely is NOT for everyone.

Who qualifies:

1.  62 years old or older

2.  Owner occupied home only

3.  The home does not need to be owned outright, but there has to be a lot of equity for this type of mortgage to make sense for you.

Frequently asked questions:

1.  Do I still own my house if I take out a reverse mortgage?   YES - the title remains in your name, as you draw out the equity as needed

2.  Do I have to take out a set amount every month?  or can I withdraw a lump sum if needed?  You can set up withdrawals any way you like.  Most people take out a set amount monthly, and utilize the option to draw more if the need arises, at any time. 

3.  Is there a maximum loan amount? Yes, since this is an FHA loan product, the maximum loan amount is $417,000 regardless of the value of your house. 

4.  What if I am 59, but my husband is 62?  Can we still qualify?  You do still qualify, but only the husband can be in title on this loan since you must be 62 to be on title.  There are ways to make this loan product work for you if this is your situation, but this is something we should discuss. 

5.  What if our credit is very poor?  Credit is NOT an issue to qualify for this type of mortgage.

A reverse mortgage is ideal for someone at least 62 years of age with a fixed and limited income, and a lot of equity in their home.  To qualify for this type of financing, there are only 2 criteria:  age and equity.  Even if you are facing foreclosure, if there is a lot of equity, a reverse mortgage can bail out the foreclosure, pay off the existing mortgage, and start paying you to live in your house.

6.  What if I run out of equity?  This can happen, especially if you use this mortgage as a Line of credit, rather than set it up with programmed payments in advance.  When you are set up with programmed payments, the payment schedule is designed to pay you to age 100!! 

7.  I've heard this type of mortgage is very expensive.  Is that true?  The initial cost to set up this type of mortgage is a bit higher than a typical refinance transaction, AND there is a monthly servicing fee (currently at $30/month).  Also, you should understand that the rate on this mortgage is variable, and can change every month.  This does not affect the amount you receive monthly, but does affect the payoff amount.

8.  Do I have to pay taxes on this money?  This income is tax free!  You have already paid taxes on this money, and this is considered a loan, not an income.  Also, this income will not affect Social Security or Medicare benefits.

9.  When do I have to start paying it back?  You don't ever have to pay it back until the home is no longer your principal residence

10.  How much can I borrow?  This amount is computed based on your age, the value of the property and the amount of equity.  The more equity, higher value, and older the applicant, the more you can borrow. 

With all the drawbacks to reverse mortgages, why would anyone even consider this?

There are currently 21.2 million seniors in this country who own their homes outright.  Of those people, the median income is less than $10,500 per year.  These are the people who would benefit most from a reverse mortgage.  Imagine living on less than $1000 a month, and what a difference an extra $1000 - $2000 a month could make in their standard of living.  These people will not qualify for a Home Equity Line of Credit or any other type of financing for almost any other needs. 

The FHA and our government did something right when the Reverse Mortgage program was established to help these households. 

Please call if you, or anyone you know would benefit from this program.  I'll be happy to talk to you and help any way that I can.

Warm regards

Shelby

503-819-6545