Having trouble paying your mortgage?  You aren’t alone.  According to RealtyTrac, 1 out of every 134 homes filed for foreclosure in the first half of 2007.

More and more, though, mortgage companies are doing their best to work things out with delinquent homeowners.

Loss of a job or a sudden medical emergency are just some of multitude of reasons that forces an otherwise responsible borrower to find themselves in difficulty. 

What’s important to remember is that you are not alone, and there are people you can talk to.  Remember: foreclosure is a difficult and expensive proposition for a mortgage company and it wants to avoid the foreclosure process as much as you do.

If you are having trouble making payments — before you fall behind! – call your mortgage lender and explain to them your situation.  The lender will likely put you in touch with credit counselors and will usually attempt to work out a payment plan with you.

Never miss a payment (or make a partial payment) without first speaking to your lender because no news is bad news in the case.  The lender will assume the worst — that you plan to never make a payment again.

People with excellent credit are burdened with bad luck all the time so don’t let a temporary problem destroy your credit or threaten your home. 

No one benefits from drastic action taken against you, so give the lender a call and work things out to everyone’s satisfaction.

The stock markets faced large losses last week and the bond market was a beneficiary.  That was good news for mortgage rates, but the news could have been better.

Unnerved by losses in the sub-prime market, investors are beginning to question the safety of mortgage bonds overall.  Once considered a “safe” investment, mortgage bonds may be losing their luster and that could drive mortgage rates higher. 

Less demand for mortgage bonds forces mortgage rates up.

This week, markets should stop taking their cue from “sentiment” and instead focus on actual data.  There’s a lot of inflation-related news coming up.

Tuesday is the first big data day of the week, featuring Personal Consumption and Expenditures (PCE) and the Employment Cost Index.  The former answers “What is the cost of living for ordinary people?” and the latter answers “What is the cost of keeping a workforce?”.

Increases in either will be viewed as inflationary which should contribute to a rise in mortgage rates.

Then, on Friday, the Bureau of Labor Statistics will release the jobs report from July.  Markets are expecting 135,000 new jobs created, a 3,000 increase over June 2007. 

As always, though, the real story in the Non-Farm Payrolls report is not the headline, but the upward or downward revisions to May’s data and June’s data.

It’s been a wild ride for mortgage rate shoppers lately.  This week does not figure to get any smoother.

(Image courtesy: Seeking Alpha)

The Dow Jones Industrial Average lost 311.50 points yesterday.  On the rankings of Top 10 Daily Losses of All-Time, 311.50 doesn’t even come close, according to djindexes.com (and the charts above)

So, as we always do, let’s put yesterday’s action in perspective for the average person.

#7 on the “total points” list happened five months ago today — February 27, 2007.  On that day, the Dow lost 416.02. 

Was it a crisis?  Probably not.  We know that because if you pulled your money out of the market February 27, you would have missed the 10.3% in market gains since that day.

Yesterday’s loss doesn’t register in the Top 10 on a points basis, and on a percentage basis, it’s even farther off the chart.  At 2.3%, the loss is just a blip.

The point is this: If you are invested in stocks, don’t react too swiftly to the headlines.  Many passive investors lose money when trying to time the market’s ups-and-downs.  If you’re nervous about your exposure to stock market fluctuations, speak with your wealth planning professional for advice.

The Dow’s worst day ever remains Black Monday on which the market lost 22.61%.  Since that date, however, the Dow Jones Industrial Average has added more than 12,000 points.  Investors that stayed the course endured temporary pain, but emerged as winners.

Don’t let yesterday’s losses get you down.

(Image courtesy: Dow Jones Indexes)

This video from CNBC via YouTube does a terrific job of illustrating how sub-prime mortgage defaults are impacting mortgage rates overall.

There’s some jargon in there, but overall, it’s very easy to follow.

June’s Existing Home Sales reported weaker than expected and dropped from prior levels, according to the National Association of REALTORS. 

Because our country (A) loves to discuss real estate, and (B) loves statistical headlines, expect tomorrow’s newspapers to emblazon one (or both) of these data points on the front page:

• Home sales are down 3.8% from May 2007
• Home sales plummet 11.4% from one year ago

Those are two of the negative points from the NAR report. 

There were positives in the report as well, but they’ll likely get buried deep in the newspaper coverage.

For example, homes are more affordable today than they were a year ago.  Mortgage rates for “A” paper home buyers (i.e. strong income, assets and/or credit rating) are slightly lower today in June 2006. 

Additionally, the number of homes on the market dropped in June which led to, in part, an increase in the median home sale price.

We bring the up today because it’s important to remember that real estate is not a national news story — it’s hyper-local.  That’s why newspaper headlines need to be taken with a grain of salt.

Your home is a part of your neighborhood and that has its own “real estate market”.  Just like on any street in America, your street has good buys and outright lemons listed for sale.  What’s happening on the national scene has absolutely nothing to do with what’s happening in your backyard.

Unfortunately, this is a truth that remains largely untold. 

Prospective pool of buyers can be frightened by negative headlines like the ones we’ll likely see tomorrow morning.  Fewer buyers means less demand for homes, placing additional downward pressure on the housing market.

Mixed news from the sub-prime sector, depending on how you look at it. Many lenders discontinuing their short-term ARM products.

Washington Mutual, Countrywide and Wells Fargo are among the sub-prime lenders no longer offering the 2/28 mortgage product. 

The “2/28″ is a adjustable rate mortgage in which the interest rate remains fixed for two years, and then adjusts for the loan’s remaining 28 years.

The 2/28 mortgage was the basis of all sub-prime lending in recent years.

First Franklin has gone a step further, eliminating the 2/28 and the 3/27.  As you’d expect, the 3/27 is a mortgage in which the interest rate remains fixed for three years, and then adjusts for the loan’s remaining 27 years. 

Lenders are continuing to offer 5/25 mortgages and 30-year fixed mortgages.

The mortgage lenders hope that longer “fixed rate periods” on their mortgage products will help keep their loans from defaulting so soon. 

Today, 2/28s originated in 2003 and 2004 are in their adjustment phase and are contributing to rising foreclosure rates across the country.

For homeowners, the downside to loan portfolio paring is that longer fixed-rate periods creates more “time risk” for the lending bank and, therefore, leads to higher interest rates for home loans. 

The potential upside, though, is that better sub-prime loan performance overall will reduce the risk levels in sub-prime, thereby lowering mortgage rates.  Either way, borrowing money classified as “sub-prime” continues to get more difficult. 

If you believe you are a sub-prime borrower, speak with your mortgage lender and/or financial planner and craft a plan to improve your credit rating and lending risk profile.

(Image courtesy: The Wall Street Journal)

With more ups-and-downs than an elevator, the mortgage market has not been for the faint of heart since March. 

Last week provided more good news than bad, though, and mortgages rates closed out the week slightly improved overall.

The good news for mortgage markets came in three distinct parts:

1. Federal Reserve Chairman Ben Bernanke did not cite a fear of inflation in his congressional testimony
2. The Cost of Living (as measured by CPI) and the Cost of Doing Business (as measured by PPI) increases in July were squarely within the markets expectations
3. Oil prices remain at high levels putting strain on the American Consumer

The bad news in mortgage markets is that sub-prime loans continue to lose their luster as default rates rise. 

Last week, Bear Stearns acknowledged that sub-prime losses wiped out $1.5 billion of investor capital.

This major loss could scare investors away from buying any mortgage-backed securities in the future and if the demand for MBS is lower, the price of the urderlying bonds will be lower, too. 

Because mortgage rates move in the opposite direction of mortgage bond prices, this would cause mortgage rates to rise.

There are two housing reports this week — Existing Home Sales (Wednesday) and New Homes Sales (Thursday)– but neither figure to move mortgage rates too much; traders have lately turned a blind eye to news from the beaten-up sector.

Expect rates to continue bouncing this week.

(Images courtesy: Wall Street Journal Online)

If you own a home and somebody else depends on your income, consider that the leading cause of home foreclosures is not “adjustable rate mortgages”.

As cited many times over (including by a Harvard law professor), the answer is medical bills.

Even for the insured, medical expenses can dramatically impact a family’s finances and push it into bankruptcy. 

Over one million families discovered that sad fact in 2004 and medical bills have not gotten any cheaper, says the Bureau of Labor Statistics.

Death is another major cause of foreclosure. 

When a family’s primary wage-earner dies, the secondary wage-earner is now obligated to pay the family’s monthly obligations and that may include a mortgage payment.  Sadly, that income may not be enough to cover the bills.

A strong life insurance policy can offset bills, ease transition periods, and even pay off the home’s remaining mortgage obligation. 

Whether you’re a first-time buyer or a seasoned investor, consider protecting yourself and your family with adequate medical and life insurance coverage, as well as taking preventative health care steps. 

There are resources online to help you determine what coverage is necessary, but the best place to start for this highly personal discussion is with your personal financial planner.

Life is a series of surprises and it’s never too soon to be prepared.

(Image courtesy: NCSALL)

As homeowners insurance premiums rise across the nation, Bankrate.com writes a helpful story on ways to keep your premiums down.  The tips may surprise you.

Some of the highlights include:

1. Don’t think a series of small claims is better than one big claim.  The smaller clains are more expensive to process for an insurer and may result in higher premiums for your home.
2. Don’t lie about your history of claims — similar to CARFAX, homeowners have a “record” that track prior filings and getting busted is only a database search away.
3. Higher credit scores can lead to lower premiums because homeowners will higher scores tend to make fewer claims.
4. Your driving records impact your premium calculation.

The article also provides a fair amount of myth-busting so it’s worth a read.  A few minutes could save you some good money on your home insurance.

(Image courtesy: Spot Lite Magic & Costumes)

Despite lower prices at the gas pump, the Consumer Price Index increased a little bit more than expected in June. 

According to the Bureau of Labor Statistics, CPI rose 0.2% versus the 0.1% expected by economists

CPI tries to answer the question “How expensive is everyday life?”.  Over the last 12 months, says the government, “life” is 2.7% more expensive.

Normally, this would cause mortgage rates to increase for rate shoppers but today the normal increase is being offset by two other factors:

1. If we exclude the typically-volatile prices of food and energy, CPI increased 0.2% and that met economist expectations
2. Federal Reserve Chief Ben Bernanke testified to Congress today that the economy is expanding “at a moderate pace”, making it less likely that the Fed will raise the Fed Funds Rate in 2007.

Big Ben’s words always carry a big stick in the markets and especially today as markets look ahead to tomorrow’s release of the FOMC meeting minutes from June 28.  The minutes will highlight the debate and conversation that eventually led to the Fed’s press release.

If the minutes reveal that the Fed is fearful of inflation, mortgage rates will rise in response.  This is because inflation devalues bond payments and mortgage rates are based on the value of mortgage bonds.