Several banks have recently announced a moratorium on foreclosures because they admitted to “robo-signing” paperwork to foreclose on homes without even reading the paperwork. Bank of America was the biggest offender which announced moratoriums on about 20 states at first and then decided to impose the moratorium to foreclosures that it had on its books nationwide. Chase and Ally Financial have also imposed moratoriums while Citigroup and Wells Fargo have admitted no wrongdoing and are going along with their foreclosures. Here are some things you should know about the moratorium if you are affected by it.

The Beginning
The foreclosure moratorium didn’t just spring up because Bank of America and other banks wanted to do a good thing for its mortgage borrowers. The problem actually began in June when Thomas Cox, an attorney and homeowner in Maine, questioned the affidavit practices of a GMAC employee. The lawyer eventually determined that the employee signed the foreclosure affidavit without any knowledge about what was contained in the paperwork. As a result, the foreclosure proceedings on Cox’s home were dismissed. The matter was over until September when another GMAC employee leaked information about the company halting foreclosures in 23 states until corrective action can be taken with the paperwork for many of them.

September’s Figures
The foreclosure numbers across the country were staggering in September. There were more than 102,000 properties seized by lenders in that month alone. This made consumers and officials even more aware of the foreclosure problem and caused many people to begin asking more questions about the practices of the banks and lenders.

Some States Have Fought Back
As a result of the admission by many bank officials who say they did not read the paperwork of literally thousands of homes which were in the foreclosure process, some states have demanded investigations into these cases and until those investigations can be completed, homeowners should be able to stay in their homes even if they are being foreclosed upon. This could create a huge mess involving people who have already been forced to leave their home due to foreclosure. Many of these actions may be deemed illegal which could result in hundreds or even thousands of lawsuits against the title insurers.

The Moratorium is Causing Confusion
What seems like something that could be a great help to some people who just need a few weeks to straighten out their finances and get back on track with their mortgage payments is causing confusion nationwide. Some homeowners have been informed of the moratorium and they think they may get a few extra months in their home only to find out a couple days later that their case has been approved to continue with the foreclosure proceedings.

While the foreclosure moratorium looks good on the surface, there are many factors that can cause confusion, frustration and other negative feelings for homeowners and even lenders. Hopefully the other side of this moratorium looks better than this side of it.

Mortgage fraud is something that costs between $4 and $6 billion each year in the United States. With the vulnerability of the mortgage market and the potential homebuyers looking for ways to circumvent the lengthy and cumbersome home loan process, mortgage fraud cases are on the rise. Here are some tips to help you stay safe during this time and avoid getting taken advantage of by some unscrupulous companies and individuals.

Know What You are Signing
Many cases of mortgage fraud are the result of the victim not reading the documents that they are signing. Reputable lenders and mortgage companies will typically not put stipulations in documents and contracts that are fraudulent or against the general rules of mortgage borrowing, but less reputable individuals and companies may do that. Never sign anything without first reading it and understanding it.

Never Lend Your Identity to Someone
Some mortgage fraudsters will try to convince you to loan your identity, including your Social Security number, to them for a short time so they can sign papers on your behalf or agree to deals for you. This is never a good idea and it can only end in some type of fraud. Depending on the person or company, it could also rob you of your life savings.

Get Independent Evaluations
Many home buyers make the mistake of trusting the seller. This is a big mistake. Regardless of how trustworthy or honest the seller seems, it is always best to hire your own company or private individual to do an evaluation of the home and the terms of the mortgage loan. If the seller is honest, they should have no problem with your getting an outside evaluation.

Hire Your Own Appraiser
In addition to getting an evaluation of the mortgage terms and the home inspection, hiring your own appraiser is also ideal. The seller’s appraiser could inflate the price of the home because they will be working on the seller’s behalf. You need someone looking out for your best interests and hiring your own appraiser to evaluate the value of the home is one way to make that happen.

Make Sure Your Deposit is Secure
Never just give your deposit to a seller or seller’s agent and hope it will be safe. There can be misunderstandings and other problems when you do this. Instead, put your deposit in an escrow account or some other safe account so it will be there and available as soon as the deal is ready to close.

Buy Title Insurance
Title insurance protects you in case there is a lien on the title that does not show up during the purchasing process. If there is a lien on the title after you move in, there is a chance you could be removed from the home or you could be responsible for paying off the lien. Title insurance is a great way to protect your investment so always factor in the price of this commodity when buying a new home.

The foreclosure moratorium by Bank of America, Ally Financial and Chase has sparked much discussion about if the idea is a good one which will help troubled homeowners or if it is bad for the mortgage industry and the economy as a whole. Barbara Novick with the Wall Street Journal recently wrote a piece about the foreclosure moratorium. Here are some highlights and thoughts from that article.

Fore one thing, addressing the fraudulent activity concerning foreclosures is definitely something that is vital to keeping the banks honest. However, the moratorium on all foreclosures that these banks own in all 50 states is not necessarily the best way to address the issue. Even when the fraudulent activity is dealt with and solved, we are still left with the problem that hundreds of thousands of homeowners are still having a great deal of trouble making their mortgage payments each month. By imposing the moratorium, it prevents homeowners from moving on from a home loan they can no longer afford. It only deters the inevitable for a short time and keeps the troubled homeowner in limbo financially.

Another problem that will be attached to the comprehensive moratorium is that investors will likely back out of future investments. The moratorium equivocally ends the contract between the lender and the borrower and the investor is the one stuck with a major loss. This moratorium could make investors think twice about investing the capital that the mortgage industry needs in order to help bring down the price of home ownership to a level that more people can afford.

As far as home prices are concerned, the foreclosure moratorium prevents the housing market from clearing its available homes for sale. As a result, this is going to bring home prices down even further which is going to hurt the average homeowner. Their homes are going to drop in value even more and if they try to sell it, they are going to find that they will get much less for it than what their original loan amount was for.

Programs in the past have promised to help people stay in their homes. Unfortunately, they have been dismal failures. Novick brings up the problem with HAMP, the Home Affordable Modification Program, which was introduced earlier to help troubled homeowners stay in their homes. This didn’t happen. The goal was to help about three million homeowners permanently modify their home loans so they could afford the payments rather than go through foreclosure. The program has actually helped less than 20 percent of its intended goal.

So what is Novick’s solution? She actually proposes one unlike many others who simply talk about the problem in their publication without offering a solution. Novick proposes introducing bankruptcy reform with a “special chapter of bankruptcy” which would be used specifically for the mortgage crisis and the people who need help with their home loan payments. This special provision would protect homeowners and investors. It would take the homeowner’s entire list of debts into account and then the court would make a decision about repayment based on a number of circumstances and factors. There would also be a “sunset clause” which would cause the bankruptcy to expire once the mortgage crisis was solved.

What do you think of Novick’s ideas? She goes further than just explaining what the problem is with the housing crisis and is trying to offer solutions. Do you have any solutions for the mortgage crisis?

With the mortgage industry in the trouble that it’s in right now, reverse mortgages are becoming more attractive to some older homeowners who are over the age of 62. And now that the federal government has offset the rising costs of insurance premiums for reverse mortgages, these mortgage products are getting even more attention as a way for older homeowners with huge amounts of equity built up in their home to get a break from the pressures of paying a monthly mortgage payment.

The Department of Housing and Urban Development, or HUD, created another type of reverse mortgage which takes into consideration the high costs of the insurance premiums. It is called the Home Equity Conversion Mortgage Saver and it greatly reduces the upfront costs associated with a reverse mortgage. These upfront costs and fees are similar to those of buying or refinancing a home and they include paying for an appraisal, origination fees and more. Homeowners are also responsible for mortgage insurance premiums during the term of their reverse mortgage as well.

Last week, however, those monthly premiums nearly tripled when they went from 0.5 percent to 1.25 percent. The huge increase was the result of wanting to protect taxpayers and the federal government from massive payouts because of the declining home prices across the country.

The new reverse mortgage product greatly reduces some of these fees and premiums. For instance, those who take out a standard reverse mortgage would be responsible for paying an upfront insurance premium that is equal to 2 percent of the value of their property. For every $100,000, this would be about $2,000. With the new Home Equity Conversion Mortgage Saver, however, this fee could drop as low as $20 for the same property. There is a catch, though. Homeowners who choose the new reverse mortgage product are not allowed to borrow as much money as they can with the traditional reverse mortgage. For example, if your home is worth $200,000, you may only be allowed to borrow about $90,000 rather than the $116,000 you would be able to borrow under the old reverse mortgage product.

The best thing to do is to consult with a trusted mortgage broker and some family members or friends who know about the mortgage industry. In some cases, a traditional reverse mortgage may be the best financial option for you despite the fact that you have to pay higher upfront fees. And as always, shop around for the best mortgage lender when choosing a reverse mortgage. Companies are competing for your business these days and shopping around for the best deal is the only way you are going to come out ahead in any mortgage deal.

If you have applied for a mortgage loan in recent months, you may have noticed some trends occurring in the industry these days. Some trends are good while others may be holding some people back from enjoying the home-buying process. Here are five things that analysts are predicting will happen in the mortgage industry for the next few months.

Rates Continue to Drop
One of the best things about the current mortgage industry is that mortgage rates continue to drop. As a result, these rates are consistently setting new record lows for mortgage interest rates. This was a shock to many mortgage insiders who thought rates would begin rising again once the autumn season hit. Now, these insiders are saying mortgage rates may continue to drop during the last few months of 2010 and possibly into the first part of 2011. It will be interesting to see just how low these rates will go before they begin to climb or even stabilize.

Fewer Foreclosures Will Occur
If you have been keeping up with the mortgage industry at all, you know that several banks in the country have now put a freeze on thousands of foreclosure proceedings as a result of many bank officials admitting to signing foreclosure paperwork without reading it. This means that they could have signed off on thousands of foreclosures that should have never been approved. When all is said and done, there may be thousands of homeowners who will not be foreclosed upon which leaves fewer foreclosed homes on the market.

The Mortgage Process is Lengthy
The time it takes to process a mortgage and a refinance is very long these days because of underwriting and other factors. Some mortgage lenders are suggesting that home buyers lock in their rates for 60 days when applying for a mortgage because it could take that long just to get the paperwork pushed through. Home appraisers are in high demand which means their schedules are full and they cannot make it to homes as quickly as before to appraise them which only adds to the amount of time it takes to process a mortgage loan. Remember to be patient and diligent during the process and you will be able to see it through.

Jumbo Rates are Falling
A jumbo mortgage is a mortgage loan for an amount larger than $729,750. The mortgage rates for these huge loans are falling faster than those for non-jumbo loans. A couple years ago, these rates were much higher and they didn’t continue to drop until just recently. Currently, rates for jumbo loans are only about 0.75 of a percentage point more than the rate for a regular mortgage loan. Unfortunately, there are not many people who are refinancing their jumbo loans because the underwriting process is very strict and they either do not qualify for the low rates or they simply don’t want to go through the lengthy process.

No-Cost Refinancing is Attracting Homeowners
With mortgage rates at historic lows, many homeowners are refinancing their loans with zero-cost refinances. This term is misleading, however, because homeowners still have to pay closing costs and other fees when they refinance their home. With this type of refinance, though, the homeowner accepts a higher mortgage interest rate in return for paying zero fees and costs to refinance.

In a deal that could mean about $86 million in mortgage relief for Arizona homeowners, Wells Fargo has decided to lower the mortgage balances of about 1,700 people who signed up for a particular ARM.

The state’s attorney general, Terry Goddard, announced that Wells Fargo will also be reducing the interest rates on many more mortgages throughout the state. The overall financial benefit for homeowners in Arizona will be more than $150 million when it is all said and done.

But not everybody in Arizona will be able to benefit from these actions. Actually, only the borrowers who signed up for a “payment option adjustable rate mortgage” will be able to get some mortgage relief. And of those people, only the ones who got their mortgage through Golden West Corporation or Wachovia will be able to take advantage of the reductions.

According to Goddard, these types of mortgages are too complicated and sophisticated for the average homebuyer. Yet they were sold to many Arizona residents without their complete knowledge of how they work. One aspect of this type of mortgage loan has a “negative amortization,” which means that the unpaid balance of the mortgage will actually get larger during the term of the loan. The borrowers who chose this type of loan were sold a fraudulent product that was misrepresented. As such, many AZ mortgage borrowers were deceived and that is why Wells Fargo is now trying to make things right even though officials with the bank say they did nothing wrong.

Here’s how these type of mortgage loans worked: The initial interest rate was very low to begin with. After five years, the rate would increase. The minimum monthly payments were also low to start out. But if the homeowner wasn’t paying toward the principle balance, the remainder was added to the loan balance. This increased the overall cost and made it so that borrowers would end up owing more than they originally borrowed once the rates reset. These types of loans are designed for investors who buy houses and quickly resell them before any of the balances add up.

Goddard believes that the homeowners who chose this option “did not understand the consequence of choosing the lowest payment option.” As a result, they signed up for a loan that they did not fully understand. Although the type of mortgage loan in question is a specific type of adjustable-rate mortgage loan, Goddard says that there is nothing wrong with a normal ARM. In fact, he says, he has one himself. With the current mortgage rates where they are right now, he’s probably enjoying his adjustable-rate mortgage, too.

Keeping up with the current mortgage rates is almost like riding a rollercoaster lately. For the longest time, the rates were holding fairly steady a few months ago. Then they started to decline. In fact, they declined for several weeks in a row. A couple weeks ago, they went back up slightly and now the current mortgage rates have dropped again to another historic low.

According to figures by Freddie Mac, the rates for a 30-year fixed-rate mortgage have fallen to a record low for the 12th time in only 16 weeks. Analysts attribute the rate drops to the uncertainty in the market. People aren’t spending like they used to and instead they are putting their money away. That means fewer borrowers on the housing market. Inflation is also playing a major role in the lowest mortgage rates in decades.

Here is a breakdown of the current mortgage rates you can expect if you qualify for the best rates available:

A 30-year fixed rate mortgage has dropped to 4.27 percent with 0.8 percent of the borrowed amount paid directly to the lender at the beginning of the loan. Freddie Mac has been tracking rates for nearly four decades and this is the lowest the rates have been in all those years. It also marks the 12th time the rates have hit a record low since the last couple weeks of June.

Mortgage rates for a 15-year fixed rate mortgage are even lower than that. That rate currently stands at 3.72 percent with 0.7 of a point paid to the lender up front. These numbers for the 15-year fixed rate loan have not been this low in nearly 20 years. It’s about a half of a percentage point lower than it was a year ago at this time when the rate stood at 4.33 percent.

Rates for a five-year ARM are currently at 3.74 percent which represents the lowest it has been in five years. One-year mortgage ARMs are sitting at 3.40 percent. Rates have only been that low one other time since 1984 and that was only three weeks ago.

As low as these rates are, some analysts are expecting mortgage rates to drop even lower than they are now. According to Richard C. Temme of the California Association of Realtors, believes Fannie Mae and Freddie Mac may offer mortgage rates as low as 3.75 percent in the next few months because the Fed is running out of options. Unfortunately, he says, lenders are too scared to take any more chances with borrowers who have bad credit because of what has happened in the last few years. Hopefully something will work out soon to get the housing market jump started once again where people are confident about buying.