Last evening, we instructed our continuing education course, Deal Killers: Don't let your deal die, at Briarcliffe College in Patchogue. 




During the course we received many questions from students about what alternatives there were to FHA funding to help SAVE a deal for a highly leveraged transaction. Our friends at Citi suggested the HomeRun program.

Here are the details: 

HomeRun is Citi’s exclusive portfolio Program that has no mortgage insurance and no price ups. It is designed as a responsible financing solution to meet the needs of the low-and moderate-income (LMI) borrower. It provides the stability of a fixed rate, the flexibility of lower down payment options, and the added borrower protection of a relationship with a nonprofit housing organization committed to helping the borrower stay on track with payments. Fannie Mae Community Lending guidelines apply except as modified by the Mortgage Policy Manual (MPM) Fact Sheet.

On May 9, 2012 we blogged about the importance in extending the Mortgage Forgiveness Debt Relief Act of 2007. To read that blog, click here.

On November 20, 2012, the National Association of Attorneys General joined the cause by writing this letter to the Congressional Leadership of our Federal Government.

Additionally, the Real Property Committee of the Suffolk County Bar Association also drafted a similar letter to our local leadership in the region.

Its imperative that this act is extended to protect those vulnerable community members who have underwater homes. Additionally, there are many secondary and tertiary effects on our local economy that will be realized if this act is not extended.

Please contact your representative and stress why this Act should be extended.

During this Thanksgiving I was spending time with some good friends who recently purchased a house. They are great people, but not particularly knowledgeable about the real estate industry.

My friend said to me that his wife and him were discussing setting up automatic payments for their mortgage, which I thought was a good idea so they would never miss a payment.

Then, my friend said that once they got situated in their new house that they would switch to paying every other week to cut down their interest and make the mortgage term shorter. My response was simple, "So you are going to make an additional payment a year on your mortgage?". He responded with "No, I am just going to pay every other week and we will save money, everyone does that", as if I was some sort of fool who had no idea how mortgages worked - thanks for the lesson. I thought that I may share with him why he doesn't understand what he is talking about, but on second thought I thought it is Thanksgiving and he didn't ask me for my professional advice, so I should keep my mouth shut.

To be clear, paying every other week as opposed to monthly is not a magic trick. The bank is not happy to merely receive payments in partial amounts more frequently than in full amounts monthly. Instead, paying bi-weekly results in 26 half payments throughout the course of a year. 26 half payments equals 13 full payments. Math not magic is what matters. So, the result is that a bi-weekly payor is making 1 extra payment a year and that is the SOLE reason that a loan's term is accelerated by expeditiously reducing the loan's principal balance. Moreover, as you reduce the principal, the amount of interest paid is reduced. This is actually what my friend was saying; albeit confusedly. In fact, it works the same if you simply make 13 payments a year as opposed to 12.

However, mortgagors (borrowers) should not EVER unilaterally decide to make bi-weekly payments. Instead, they must discuss their desire with their lender first. Many lenders want a one-time setup fee for this service and require online payments as opposed to checks.

Or, instead, mortgagors (borrowers) can simply send an extra payment annually and they are set.

Enjoy the holidays. I've learned that when I keep my mouth shut I enjoy the holidays too.