Mortgage Refinance Bad Credit

							                         Presentation for
             Pennsylvania Association of REALTORS®
                               Kate Newton
                Director of Homeownership Programs, PHFA

                                   September 25, 2007




Edward G. Rendell, Governor • Steven Kaplan, Chairman • Brian A. Hudson, Sr., Executive Director


                                      www.phfa.org
                                                                                          8/13/07
                          PHFA Overview
   State instrumentality created by legislation in 1972 to help enhance
    the quality and supply of affordable homes and apartments for older
    adults, persons of modest means, and persons with disabilities
   Provider of capital for affordable homes and apartments
   Three Main Operational Divisions
        Homeownership
             Previously, for home purchases only
             Repair program rolled out last summer
             Now doing refi’s
        Multi-Family
        HEMAP
   Homeownership preservation sometimes involves blending of
    homeownership and HEMAP resources

                                                                           2
                            Subprime vs Predatory
   Affects all types of lending, but we’ll focus on mortgage market
   Subprime loans charge higher rates (for interest and mortgage insurance) commensurate
    with increased levels of risk
        Not necessarily bad and not necessarily predatory
        Have helped people with less than perfect credit, little credit, hard to document income and assets,
         etc. become homeowners
        Jargon: A minus, Alt A, B and C paper; stated income/assets

   Predatory loans have unfair terms that harm a borrower and may strip their equity
        Are bad, even illegal
        Common in refi and home equity lending
        Not necessarily subprime terms, but usually (maybe the only predatory component is an inflated
         appraisal, for example)
        Also, when a subprime loan is given to someone who qualifies for prime

   “Exotic” loans
        ARMS with short-term fixed rate periods; Option ARMS; Interest only
        Stated income/Stated Assets
        80/20 piggybacks
        Prepayment penalties
        Don’t worry . . . You can refi!


                                                                                                                3
            Warning Signs of Predatory Loans

   A loan amount higher than what’s needed
   An appraisal that seems too high
   Pressure to sign blank docs, sign quickly or sign modified ones at
    closing
   The lender/broker doesn’t request any income or asset information
   High interest rate and/or fees
   Prepayment penalties and/or balloon payments
   Mandatory binding arbitration
   Frequent refinancing with high fees and even higher rates hidden in
    the new loan (loan flipping)
   Requiring credit insurance
   Reluctance to answer or dismissal of questions
   Loans provided by contractors
   The money comes looking for you


                                                                          4
                      Tips to avoid bad loans.

Don’t . . .
   Let anyone rush you.
   Be afraid to say no, even at the last minute.
   Sign forms you don’t understand or overstate your income or assets.
   Be intimidated.
   Work with professionals who make you feel uncomfortable.

Do . . .
   Educate yourself!
   Shop around and only borrow what you need.
   Ask questions and get clear answers in plain English (or another
    language if applicable).
   Negotiate for better terms and get them in writing.
   Get copies of everything you sign.
   Remember you’re the customer and you’re in charge.
   Contact authorities immediately if you’re suspicious.

                                                                          5
                                 Resources
Trustworthy Web sites
     www.parealtor.org/content/consumer.htm (PAR Consumer Resources)

     www.moneysbestfriend.com (PA Office of Financial Education)

     www.dontborrowtroublesepa.org

     www.nw.org (NeighborWorks® America)


Organizations
  Office of Attorney General, Bureau of Consumer Protection
  717-787-9707
  www.attorneygeneral.gov/consumers.aspx?id=397 (list of regional offices)

   Department of Banking
   Hotline, 1-800-PA-BANKS (800-722-2657)

   The Pennsylvania Legal Aid Network, Inc.
   717.236.9486 or 800.322.7572
   www.palegalservices.org/

                                                                             6
                       PHFA Homeownership Programs
                                 www.phfa.org or 1-800-822-1174

Home Purchase Loans (Keystone Home Loan and Keystone Home Loan PLUS)
   Lower rates and fees, prime terms, reputable lending network, PHFA services, free homebuyer education,
    downpayment and closing cost assistance, access modification assistance

Mortgage Refinance (REfinance to an Affordable Loan, or REAL)
   100% refi’s with flexible credit underwriting for homeowners trapped in an unaffordable mortgage
   Possible workout program on horizon with more flexible credit terms if funding obtained; geared more
    towards victims of predatory loans

Home Repair (Renovate & Repair Program, or R&R)
   Attractive loan with good terms, fewer fees and help with the repair process

Foreclosure Prevention (Homeowners Emergency Mortgage Assistance Program, or HEMAP)
   Pennsylvania Foreclosure Prevention Act 91 of 1983
   Loan to bring mortgage current and make partial payments for up to 24 months or $60k max.
   For PA homeowners facing foreclosure due to no fault of their own; must have a reasonable prospect of
    resuming mortgage payments
   1-800-342-2397



                                                                                                            7
                       Thank you!

Getting your customers the best deal doesn’t just
  feel good, it helps you get more business!

   Increased purchasing power for your buyer
   Repeat sales
   Referrals
   Marketing tool - set yourself apart as the expert




                                                        8