Talking Mortgages with Kim Clugston

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I recently interviewed Kim Clugston, Vice President and Senior Mortgage Officer at the Bank of Ann Arbor. We discussed the local real estate market, current interest rates, how to shop for a mortgage or refinancing, and the expansion of the Home Affordable Refinance Program, among other topics.

 

 

Links to resources mentioned during the video:

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Please note that this blog post and video are for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

Personal Finance Links

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  1. Visit Dinkytown for free personal finance calculators.
  2. If you invest in TIAA Traditional through your employer’s retirement plan with TIAA-CREF, I suggest you read this
  3. Phased out of making Roth IRA contributions? Try the backdoor.
  4. Check out Susan Beacham’s blog if you are interested in kids and money.
  5. Vanguard recently rolled out new exchanged traded funds and a new index fund.
  6. I see eye to eye with Rick Ferri who encourages Forbes readers to buy, hold, and rebalance.
  7. Educate yourself on personal finance through NAPFA’s consumer series. It’s free but you have to register.
  8. Do bonds confuse you? You’re not alone. Learn about bonds courtesy of Vanguard.
  9. Morningstar’s Natalie Choate provides tips and traps about IRA conversions. Scroll down the page to May 4, 2010.
  10. Get credit report tips from Gerri Detweiler via the Garrett Planning Network.
  11. Rick Ferri writes about a new trend in index funds to keep an eye on.

Underwater Mortgage Refinancing

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I received this question recently from a reader who is wondering what her options are for refinancing her underwater mortgage:

A recent announcement by underwater by offering either a principal reduction or an interest reduction. I called our mortgage company’s modification department — CitiMortgage — and they didn’t know anything about it. What do you recommend that I do next? And, what do you think of companies like the Guardian Group (https://www.guardiangroupna.com/) that offer to buy your mortgage and sell it back to you? Is this a legitimate way to get a principal reduction?

For help answering this question, I turned to Kim Clugston, Vice President and Senior Mortgage Loan Officer at Bank of Ann Arbor. She explained that few banks are actually offering loan reductions and that they are not required to do so. Each lender can offer “work out” programs to its customers, but the lender makes up the rules.

Ms. Clugston further explained that the Obama Administration created standard refinancing programs through the Making Home Affordable plan as part of its Financial Stability Plan. Making Home Affordable refinancing at current market rates is available to all lenders if the mortgage is held by Fannie Mae or Freddie Mac. Check here to find out if your mortgage is eligible.

The rub for most homeowners is that the new loan cannot be for more than 105% (Freddie Mac) or 125% (Fannie Mae) of their home’s current appraised value. Moreover, principal is not forgiven under these programs and second mortgages cannot be rolled in.

Regarding companies offering to buy your mortgage and sell it back to you, Ms. Clugston pointed out that the Making Home Affordable website’s homepage currently has a warning against foreclosure rescue scams. The site warns: “Do not sign over the deed to your property to any organization or individual unless you are working directly with your mortgage company to forgive your debt.”

If you have an underwater mortgage, I recommend that you research Making Home Affordable and check your eligibility for its programs. You can also get free help from housing counseling agencies approved by the U.S. Department of Housing and Urban Development. Ultimately, you will likely need to work directly with your loan servicing company if you are an eligible and good candidate for refinancing.

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Please note that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.

Low-Cost Credit Monitoring

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I’ve had a number of clients ask about identity theft and credit monitoring. I think it’s a good idea to keep tabs on your credit reports and score, but I don’t think that most of us have to pay for an expensive monitoring service.

Unless you have a specific reason to believe that you are at more risk than the average person, I think that quarterly monitoring of your credit reports is sufficient. It’s also a good idea to check your FICO credit score once a year. Here’s how you can accomplish all of this for $16 per year by putting quarterly reminders on your calendar.

This process will allow you to check your FICO credit score once per year and to monitor your credit reports from the three major credit reporting agencies: Equifax, TransUnion, and Experian. Each agency can receive and record different information about you, so it’s a good idea to review each report for anything fishy.

If this sounds too labor intensive for you, you can automate the process by anteing up $50 per year for myfico.com’s .

You want to make sure that you are checking your FICO credit score from the Fair Isaac Corporation. You can find many other credit score rating products and get many of them for free. However, the vast majority of lenders review your FICO score when they consider lending you money, so it’s the one you’ll want to know.

If you’d like to learn more about how credit ratings work and how to maintain a good score, I recommend that you read You’re Nothing But a Number by John R. Ulzheimer.

Please keep in mind that this blog post is for educational purposes only and should not be construed as advice specific to your situation. You should get advice from a legal, accounting, or investment professional before deciding what course of action is appropriate for you.