Homeowners’ silver lining Featured

7:00pm EDT February 23, 2009

Today’s low mortgage rates and home prices have provided a silver lining to first-time homebuyers or those looking to refinance their current mortgage. While it may not be a good time for all (such as those who want to sell their home or those who do not have enough equity to qualify for a loan), these low rates are still providing substantial opportunities to homeowners.

“If you need a house and it’s your house for the next three, five, seven years, it’s a great time to be looking and getting yourself into home ownership,” says Carmen Inclan, residential lending division area sales manager, Fifth Third Bank, Tampa Bay.

Smart Business spoke with Inclan about how getting a mortgage loan has changed, why now is a good time to refinance your mortgage and what to do if you might already be in trouble with your mortgage.

How can new homeowners get a loan today, and has anything changed with the process?

All the complex, sophisticated types of mortgage financing that were around a few years ago during the real estate boom are not available today. The banks and agencies have placed restrictions to keep from falling back into some of the questionable lending practices that were rampant throughout the United States. Though the process has not changed, the criteria have been adjusted, and it is now more difficult to qualify for a mortgage loan. A few years ago, if you had good credit, you could get a loan with minimal paperwork. Today, we are back to the requirements that were in place in the early 1990s. A down payment, consistent income for a two-year period, and a good or excellent credit rating are required. Welcome back to traditional financing, where debt-to-income ratios have been lowered to 1990s levels.

Is this a good time for homeowners to refinance their mortgages?

This is a fantastic time to refinance a mortgage. Rates are at 40-year lows. I’ve seen rates hit these levels, but they didn’t last that long. If anyone can save at least 1 percent or more on his or her mortgage, this is definitely a time to discuss refinancing opportunities. Have your banker complete an analysis, discuss how long you plan to own your home and determine your housing objectives for the next several years.

What should people who are already in trouble with their mortgage do?

Troubled mortgage borrowers should call the bank where they send their mortgage payment, ask for the loss mitigation department and speak with a loss mitigation specialist to see if there are any hardship programs available to restructure their existing mortgage. It sounds easy to do, but it depends on what company owns the mortgage note, as not all mortgage servicers own the mortgage notes that they service. When making the call, know that the company may not necessarily have the decision-making ability to renegotiate your loan. The servicer must contact the mortgage note holder to determine if modification is an option. This is where a lot of people are slipping through the cracks. They are having a hard time reaching someone at a lending company who has the authority to discuss loan modifications. If homeowners are sending their payment to the same company that owns the note, they are going to have much more success finding someone to help them restructure their loan.

How long should we expect these low rates to last?

We will know in the next six months how much longer this cycle of price depreciation in housing is going to last. When Congress performs activities to stimulate the economy, it doesn’t happen from one day to the next; it takes time for those activities to take hold in the marketplace. Once the stimulus packages are executed by Washington, we should have a better idea of how far ahead the light at the end of the tunnel will be.

CARMEN INCLAN is residential lending division area sales manager, Fifth Third Bank, Tampa Bay. Reach her at (813) 306-2585 or carmen.inclan@53.com.