Posts Tagged investing
Real estate fraud has been running rampant over the past 10 years, especially during the time of Stated Income and No Doc loans where swindlers could arrange for straw-buyers to buy homes for the swindler with the promise of “investment groups” making the payments for them from dividends generated by the stripped equity from the home. These returns were said to be in the 5% to 12% PER MONTH range, not per year.
You saw this all the time, billboards on I-15 proclaiming “Use your good credit score to make $20,000 today.” These were either one-time payments by “investment groups” to the straw-buyer or promises of dividends far above what people would earn with traditional investments such as IRA’s and CD’s.
These are all Ponzi schemes. And although the No Doc and Low Doc loans have disappeared, the scam artists have not.
In most or all cases the “Investment Firm” disappeared with the money stripped from the equity of properties purchased by straw-buyers, leaving the straw-buyer holding the bag to make the payments on loans they can not afford.
How do you identify these fraudulent schemes? Here are some clues:
- If it seem too good to be true, it probably is.
- Are the presenters telling you the investment will pay far more than a bank or other common institutional investment would pay? Well, it probably won’t.
- Does the person pitching it say there’s only limited participation for a short period of time? Don’t be rushed into anything, take time to do some due diligence.
- Does the math make sense? A $10,000 investment at 10 percent a month for five years would grow to about $1.5MM. But who really could make that type of money legitimately?
- They tell you the investment is it “completely safe.” No investment is.
Check out the person offering the investment by calling the Division of Securities at 801-530-6600 or toll free 800-721-7233 or visiting www.securities.utah.gov
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- 2 Calif. men to stand trial in $200M Ponzi scheme (seattletimes.nwsource.com)
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- Kemptville investment advisor guilty of fraud (cbc.ca)
A question that comes-up quite often is: “How long would I have to wait to by a new home after a foreclosure?”
The answer to that just got better.
Fannie Mae announced last week that they are modifying the waiting period requirements for purchasing a new home after a pre-foreclosure event on a previous home.
Previously a borrower had to wait four (4) years after a deed-in-lieu of foreclosure or a pre-foreclosure sale before they could qualify for a new Fannie Mae conventional loan. Now, after two (2) years a borrower will qualify for a loan of 80% LTV (loan-to-value) and after four (4) years they will qualify for a loan of 90% LTV and after seven (7) years they’ll be eligible for maximum LTV offered by Fannie Mae at that time.
Current waiting period requirements after foreclosure are unchanged from five (5) years.
A deed-in-lieu of foreclosure is differs from a foreclosure. With a deed-in-lieu of foreclosure the borrower conveys all interest in the property over to the lender to avoid foreclosure proceedings.
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- New rules cut wait for those hit by short sale, foreclosure (seattletimes.nwsource.com)
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- Getting A Mortgage After Foreclosure Just Got Easier (zillow.com)
Stocks down. Rates down. What’s going on here?
After a bad day on Wall Street yesterday rates fell dramatically this morning only to have three upward adjustments as the day went on? Why, a few reasons today:
3. Fed Funds Rate
Mortgage rates are based on bonds. When stocks are not attractive, investors move their money to bonds which pay less, but are more secure. This drives mortgage bond yields up and thus rates down. So when Wall Street had it’s worst stocks day since September of 2001 yesterday, bonds got a big boost and rates dropped almost a full point this morning to around 5.5% for a 30-year fixed or an FHA 30-year fixed. The day began with stocks falling 1.5% and as the day went on and the Fed decided not to cut the Funds Rate again it gave investors confidence in the course of the Fed and the markets and stocks rallied to a 2.5% increase. Hence, stocks got better, bonds got worse and so did mortgage rates.
How much worse? Well still better than they were last week. A 30-year fixed loan is still pricing around 6.00%, which is better than 6.375% to 6.50% it was last week. If I had to guess I’d say that rates are going to continue to bounce between 5.75% and 6.375% for the foreseeable future. The last two days could have just been a momentary blip, an anomaly like we had last February when rates fell dramatically for about half a day.
Why didn’t the Fed cut the Funds Rate? Because they have injected $120 billion into the banking system in the past two days. It would seem the Fed wants to make borrowing more accessible rather than simply cheaper. This is probably a good long term move to stave-off inflation increases because more money will be available to more people which will help fuel the economy rather than simply make a limited amount cheaper to less people.
The upshot though is that it’s still a good time to buy because rates are still low. Sure, maybe not the 4.50% low of a few years back, but those days are not sure to return for quite awhile, if ever. Rates are still at historical lows, though, and home prices are stabilizing in Salt Lake City and throughout Utah, which will make homes available to more potential buyers. I have a payment calculator available on my website as well as an affordability calculator. Fool around on them to figure-out how much home can be afforded as well as what the payments would be.
Also, with rates where they are at now, it might be a good time to look into refinancing an 80/15 or 80/20 loan into a single loan. A better rate might be in place on a first, but the second is higher and the blended rate of the two is the one you want to beat to save money. There is also a blended rate calculator on my website to figure-out what the true rate is on a combo 80/10, 80/15 or 80/20 loan.
Call me if you have any questions. Also, I appreciate and referrals you may provide since my business is almost fully referral-based.