Tuesday, December 18, 2012

Example of a Hardship Letter for a Mortgage Loan Modification

A basic loan modification requirement is to demonstrate to your lending institution that you are faced with a financial hardship situation. You need to present enough evidence to convince your lender that, due to your current circumstances, you need to negotiate a lower monthly payment with them.

Some mortgage holders find the process of composing this letter somewhat intimidating. However, bear in mind that lenders are highly motivated right now to approve borrowers under the new Obama guidelines. A hardship letter is your opportunity to let your bank know what has happened since they originated your mortgage, and why you must get a modification on your current terms. Below is a letter that will give you a starting point for composing one of your own.

Date.

Lending institution name and address.

Your name, your address, and your loan number.

Dear [blank]:

This letter is to explain to you, my current financial circumstances, and to request a loan modification from your institution, so that I may stay in my home. My family and I do not want to lose our home, and we are willing to work with you to do whatever it takes to stay here.

We became delinquent on our mortgage payment, due to my husband's job layoff. He was employed for five years, but then he was out of work for four months. During those four months, we needed to spend our savings to buy groceries and pay our basic bills, to make ends meet, we cut back on our expenses by any means possible. Now however, we have depleted our savings and must use credit cards simply to pay for living expenses, and to keep up with other bills.

The good news is that recently my husband started a new job. While his pay is less than what he earned before, we have adjusted our budget, as necessary. With a modified monthly mortgage payment, we will be able to afford to stay in our home. As you may know, due to declining property values all around, our houses value has declined so much that selling or refinancing is not a possibility. Renegotiating our loan with you is our only option.

In light of our family's circumstances, please consider as for President Obama's home affordable plan, or whatever other program we might qualify for through your bank. We are hard-working, responsible homeowners, simply trying to keep our family's home. Please review our enclosed application, and consider us for a rate reduction to 2%, with 40 year terms. Thank you very much for your consideration, and we are most eagerly awaiting your response.

Respectfully,

[Your name].

Of course, you will need to use this letter as a template. Personalize it as necessary, describing your own particular circumstances. The main points are to be descriptive, yet three, providing a few details to try to gain your lender's sympathy. Also, you will be required to demonstrate your ability to meet the new modified payment terms of the loan. This means that you'll need to submit to your lender a budget detailing your expenses and income. Show your lender in black and white terms that you we'll be able to afford the renegotiated terms of your current agreement with them. A budget that includes a small provision for emergencies each month will lend credibility to your application.

Once you understand how to write an effective loan modification hardship letter, you stand a good chance of qualifying for a home loan modification that allows you to stay in your home. You'll need to complete a financial statement, so begin by assembling any necessary documentation for this. Wait to contact your lender until you have all your paperwork together. By being thoroughly prepared, you stand the best possible chance of saving your home, under this once-in-a-lifetime plan.

Sunday, December 16, 2012

Secured Loans, What Are The Legal Implications

Secured loans are all around us. Chances are that you may have even taken out a secured loan in the past and may not have even realized it. A secured loan is a loan in which you place up collateral to secure the loan. These loans are seen every day such as the purchase of a new car or even a house. Just because you have not physically put up collateral for a secured loan does not mean it isn't one.

When you purchase a car, if you do not pay the loan repayments then the loan company can send someone out to reposes it. Just because you never handed them the car does not mean that the car itself cannot secure a loan. Granted you may not be able to use a car as collateral on the purchase of something else that still does not make much of a difference.

What about when you purchase a home? When you purchase a home if you miss too many payments the lender can foreclose on the home and take it away from you. This home loan is known as a mortgage and a mortgage is a secured loan. Remember when you signed all of the paperwork for the home and the lender's representative was there with a check? Well when you think back, you may have realized that you did not actually sign the deed alone, but rather signed it with the lender in which case you were securing the loan for the home even before you actually had the loan. This is still a secured loan and they are in fact the most common loan out there.

From cars to homes secured loans are everywhere and they come in many different styles, sizes and shapes to choose from. It is important to remember though that before you choose a secured loan that you take the time to research all the choices so that you can make sure that you are choosing the right one that will work for you and not simply because it is the cheapest for you right now. The last thing you want to do is to sign a variable secured loan and end up with higher payments down the road that you may not even be able to afford. Take your time and make sure that you make well-informed decision regarding your secured loans purchase what every they may be.

Saturday, December 15, 2012

Prohibition of Interest Rate in Islamic Finance

Islamic economics is referred to as the application of Islamic Shari'a law in economic activity. This form of economics has attracted banks and financial institutions in more than 56 countries including Europe and the United States; they cater to customers who want to invest in a halal instrument, or according to Islamic teachings.

Muslim authors state that Islam offers solutions to solve problems of human civilization. They view the financial problems facing developed countries in Africa and Asia are caused by interest-based financial instruments which create "unrepayable debt" says Muhammad Ayub, author of Understanding Islamic Finance. Mr. Ayub goes on to say that interest-based system makes "a class of people richer and leaving others poorer and oppressed."

Suppose you deposit in a conventional bank 00, at 4 percent interest for a period of one year. At the end of the year, your return is predetermined at 00+40. The bank will invest your money. If it fell short of 40, the bank will incur a loss. So an interest-based loan places the risk entirely on the borrower, in this case, the bank. Under Islamic economics, this type of investment is prohibited and is considered "un-Islamic" and "unfair."

The source of prohibition of interest is based on the Qur'an. Verse 2:275 reads: ". . .Allah permits commerce and prohibits riba. . ." The etymology of the term riba comes from Aramaic raba meaning increase'. Muslim interpreters define this term as interest'. In pre-Islamic Arabia, a borrower saw his debt double following a default and redouble if he defaulted again. If the borrower was unable to pay off his debt, he would be pushed into enslavement until the debt is paid. Such a situation was creating a social disharmony in Arabia, to which the Qur'an was responding. The ban on riba was therefore an instrument used to avoid mistreatment of fellow citizens, when their financial situation was in distress.

Among the Muslim community in the Middle East and elsewhere, financial transactions involving interest on borrowed money are accomplished, but without mentioning the word interest'. For example, Y wants to borrow from X 0 at 5 percent interest without violating the prohibition. X buys a TV system from Y for 0 but then promptly returns it for 5, payable in one year installments. The additional represents interest but was not mentioned; it was circumvented instead by the purchase of the TV and selling it, immediately, to the borrower at a higher price, which is equivalent to the amount of interest.

The most popular instrument in Islamic banking is Murabaha, a contract of sale in which a commodity is sold for a profit. The contract involves the purchase of real property by the financial institution which then sells them to the client at an agreed mark-up. A repayment is usually in installments. Accordingly, X wants to buy a car from the dealer and finance the transaction through a bank. Under Islamic economics, the bank does not charge interest. So the bank will buy the car on behalf of the buyer, and immediately sells it to X at the dealer's price plus an extra amount of money for the time spent and the paperwork involved to finalize the deal, the extra amount represents interest on the borrowed money, but the contract does not use the word interest'.

All Muslim authors and practitioners of Islamic finance agree that charging interest is a violation to Islamic Shari'a, but there is no agreement on the definition of interest-free' loan. There is no account for the rate of inflation in this Islamic instrument. In order to protect the purchasing power of money, loans are indexed to the rate of inflation, which is absent from Islamic banking and was proclaimed un-Islamic in two international conferences on indexation, one held in Islamabad in 1986 and the other in Jeddah in 1987.

Critics of interest-free banking claim that those who call for prohibition on interest are guilty of misinterpreting the Qur'an and misreading Islamic history. The Qur'an bans, not interest rate, but usury, or exorbitant interest.

Suleyman Uldag, a prominent Turkish author suggests that "even if interest were unlawful, it would be a lesser sin to deal in interest openly than to cloak it in practices aimed at deception." He writes that "Islamic banking is its own worst enemy."

Another attack on the prohibition of interest came in 1989 through a fatwa (Islamic legal opinion) from Muhammad Sayyid Tantawi, the grand mufti of Egypt and head of the top Islamic university, al-Azhar, who said that simple bank interest is permissible in Islam, while excessive interest rates constitute riba (usury) and thus forbidden. Tantawi added that legitimate instruments, including high-yield government bonds and interest-bearing saving accounts are compatible with Islamic Shari'a. Tantawi's fatwa represented the minority view, and provoked considerable discussion among the Muslim community in Egypt and around the world.

Tuesday, December 11, 2012

Chelan County Short Subdivision

According to Chelan County/WA a short subdivision aka Short Plat is the division of land into four or fewer lots, plots, sites, parcels, or tracts. note: examples are based on Chelan County Code but, the same principles are used in all counties. Check with your jurisdiction on the different type of subdivision they offer.

This means that if a parcel of land's zoning allows for division of land, then a person can go through the short plat process and achieve this division. Example: A 10 acre parcel, zoned RR2.5 or 2.5 acre min. lot size, can be short subdivided into four separate lots each with separate parcel numbers. As you can see this can create a tremendous amount of value. Note: Zoning designations can be different in different counties, cities and states, check with a professional or local agencies to find out the current zoning for a specific property.

This process is commonly thought of as dividing a large plat of land but, this same process can be used in Urban areas. Example No. 2 - A 20,000 sq. ft. lot, zoned UR3 (Urban Residential 3) Chelan County WA, can be divided into four, 5,000 sq. ft lots or 7,000 sq. ft. lot with a duplex.

Example 3 - Through your research your calculation determine that you can subdivide into 6 lots based on the zoning and parcel size. Within Chelan County WA you would then have to go through a formal subdivision process. This process will take at least 6-8 weeks longer to complete, require two hearings with the county and a significant increase in development costs i.e. roads, utilities, engineering etc. As you can see the variable cost of developing 2 additional lots may exceed your return.

The advantages of a short plat are reduced application process time, reduced development costs, reduced project risk and earlier return on investment. Check with your county or cities planning department to determine what process is right for your project. Or Contact a professional land use consulting firm to perform a project analysis.

Wednesday, December 5, 2012

FHA Loans Below 580 Credit Score

If you have a credit score below a 580 it might be extremely hard to get a FHA loan in this current lending market. But there are other options when it comes to getting government loan. Even though FHA will insure loans below a 580 credit score the secondary market that buys and sells mortgage paper has set the stage as to what will be bought and sold in this market.

When loans are bought and sold in the secondary market, investors watch a particular borrower's performance. If they notice a particular borrower is not performing well on the secondary market they pull the plug on financing that type of risky borrower. So it's essentially like watching your own stock portfolios performance. If that particular portfolio of yours is not dong well you stop investing your money in that stock. Mortgage loans work the same way.

Over the last 6 to 7 years FHA loans were being written for all types of borrowers including borrowers below a 580 credit score. Until now there was never a credit score requirement for FHA loans. Most banks are requiring a middle credit score of 580. There are exceptions to this rule. Some banks will allow a FHA loan to go through with a credit score below a 580 if the bank or mortgage company gets an automated approval. An automated approval is a piece of software that banks use that either says "yes" or "no". Let's assume you have a credit score of 578 and your loan file is ran through this software and it says 'yes", as long as that particular lender will allow a credit score below a 578 with a automated approval you are good to go.

Some banks have internal rules for loans they will approve as well. So just because you have a credit score below a 580 does not mean all hope is lost for an approval.

If you have a credit score below a 580 here are some factors that could possibly help to get an automated approval.
- Savings in the bank
- 401k, usually ,000 or more really helps
- Money for down payment
- Low income to debt ratios

These are some key factors that could possibly get you an automated approval with low credit scores.

If you have recently been denied for a mortgage loan, get a recent copy of your free credit report and start working on your credit. The higher your credit scores the better terms you will get anyways. Bad credit does not go away; it just lingers over your head like a dark cloud. What ever your situation is there is always a solution.

Sunday, December 2, 2012

Obama's Wireless Stimulus Package

On the whole, the Obama administration's new wireless plan is one of the cleanest and most uncontroversial budget proposals in recent memory and it is supported by the fact that the GOP, which is currently balking at most of President Obama's budget proposals, has not elected to attack this one. The reason is simple; on the face of it, Obama's wireless plan intends to dramatically expand the reach of wireless access providers, and thus, the potential market as well.

Overall, bottom lines will increase, as well the wireless network, allowing access providers to begin to phase out the infamous last mile problem. DSL and Cable Internet are costly to build out and maintain, while wireless is not. With the recent FCC Net Neutrality legislation, it is clear there is a heated focus on expanding wireless infrastructure to shift the bulk of communication to the wireless model. Already, most new phone numbers are mobile. The Plain Old Telephone network is being phased out, and a home phone makes little sense in light of the convenience of cell phones.

Plan Details: The Money

Broadcast Spectrum Auction: One of the key parts of the proposal was the 500 MHz broadcast spectrum auction, currently held by television and radio broadcasters, and would be sold off specifically for licensed mobile access providers. The total cost of the program is currently estimated at billion, and total revenue is .8 billion over 10 years, hence the Obama wireless plan will realize a .6 billion net gain. Some will go to the current holders of the spectrum to be sold off in exchange for voluntary surrender of the spectrum.

Infrastructure: The next major part of the plan is the investment of .7 billion to build a public safety wireless infrastructure. This will provide police, fire, and other public services high-speed wireless access, allowing them to share video and exchange email. While a little vague, the scope of the plan is extensive and would involve dedicating the D Block of broadcast spectrum for public safety. Much of the cash would be spent on towers and infrastructure to support the use of the spectrum. The recent buyback of the Wireless Philadelphia, a multimillion-dollar effort to provide free wireless and its re-tasking to fire and police use is an example of the goal of this phase of the plan.

Other Funding: billion would go to fund an expansion of the Universal Service Fund, ensuring low-income families access to wireless services, and to support companies that invest money in building private infrastructure in areas traditionally too costly to develop profitably. Safelink wireless is an example of this initiative, providing cell phones and monthly airtime to low-income American.

An additional billion would be invested in research and development of wireless technologies in the education, health care, and energy sectors, which would dovetail with existing health care technology initiatives. Additional funds are already allocated in the Commerce and Agriculture Departments through the Recovery Act and will be used to fund wireless development in rural areas.

Effects of the Plan

With the deployment of DTV and the end of analog broadcast television, a starting gun was sounded and the race was on. Much of the news, beginning with Google's attempt to enter the most recent spectrum auction and the recent FCC Net Neutrality Act has been the pole positions of the race. For many years, the federal government has supported efforts to bring telephone service to outlying areas of the country. Now the government will assist in the expansion of wireless access to replace the existing infrastructure and create a wireless broadband future.

The plan intends to be a win-win effort with commercial entities benefiting from the creation of a much larger market base, and lower cost of wireless access and America benefiting from a major step forward in technological development. Consumers will benefit by having mobile access nearly everywhere. Finally, the taxpayers will realize 9 billion dollars in revenue over the next ten years. It is rare that any federal program is this balanced and universally accepted.