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Debbie Siegel's Mortgage Minute
Governmental Response to Changing Market Conditions
With the recent housing boom came numerous creative financing options, with one of the most popular programs being the adjustable rate mortgage or ARM. An ARM is a type of mortgage loan where the interest rate on the note is periodically adjusted based on an index.
With a low starting rate, ARMs were very attractive to purchasers who thought they would either sell the property or refinance it before the higher, adjustable rate payments began. However, given the recent changes in market conditions, many purchasers have found themselves unable to meet their adjusted mortgage obligations – hence the rise in loan defaults and foreclosure proceedings.
The problem has become so widespread that the federal government is now stepping in. Although most of the proposals focus on borrowers who financed a primary residence, it behooves real estate investors to be aware of them.
FHASecure is a refinancing option offered and insured by the Federal Housing Administration. To qualify, the homeowner must:
* Next 37 17 investors only!
- Have a non-FHA insured ARM that has reset;
- Have sufficient income to make the mortgage payment; and
- Have a history of on-time mortgage payments before the loan reset.
In addition, a proposed amendment to Internal Revenue Code § 108 would provide relief from discharge of indebtedness income for taxpayers who lose their primary residences to foreclosure.
Aside from generalized caution about choosing one’s financing program carefully, what this means for real estate investors is that it will become even more difficult to purchase investment properties with creative financing.
Stricter controls on lending and increased governmental oversight of the lending industry will certainly impact the availability of funds to investors, and as the government assists more home buyers, purchasing properties from foreclosure may become subject to even more scrutiny as well.
Got questions about real estate financing? Contact
Debbie@westchester-mortgage.com
or 617-965-1236. She'll consider them for
inclusion in a future column. Debbie Siegel is president of Westchester
Mortgage in Newton, Mass. She is licensed in several Northeastern states.
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