There was a story not very long ago that reported that members of the military were losing their homes to unfair foreclosures. If you were one of the service members affected by this or if you know a military member who had their home foreclosed on unfairly, there is some great news.

As a result of the lawsuits filed over this matter, four of the main lenders in this debacle have vowed to make amends with the military service members who were unduly foreclosed upon and those who were denied a reduction in their interest rates despite the law that is designed to protect active duty military personnel from mortgage and credit abuses while they are deployed. The four major banks that were involved in this were Wells Fargo, Citigroup, Ally Financial and JPMorgan Chase. In order to make amends for these abuses, the four lenders have agreed on a comprehensive settlement which includes the following terms:

• Ally Financial, Wells Fargo and Citigroup will have to pay any service member that had a wrongful foreclosure at least $116,785 in addition to any interest and lost equity that occurred on their home. In some cases, the banking regulators may require them to pay out more depending on each individual case.
• JPMorgan Chase has already compensated some of the military service members who were affected by wrongful foreclosures and those who were denied lower interest rates due to a previous settlement. Chase will also provide these service members either the full cash equivalent of their home at the time when they were wrongfully foreclosed or give them their home free and clear if they are still living in it. In addition to that, many of the service members affected by Chase’s violations will receive additional compensation for additional harm that they may have suffered.

According to Tom Perez, the assistant attorney general for the Justice Department’s civil rights division, the Servicemembers Civil Relief Act is designed to reduce the burden of consumer debt obligations for our active duty military personnel so they can devote their full attention to their military responsibilities instead of worrying about the adverse financial consequences to their families. It is supposed to prevent foreclosure and other consequences so these wrongful foreclosures and resistance to reducing their mortgage interest rates are violating the law. The settlement in the recent class action lawsuit expands the protection by covering troops who are deployed regardless of when they took out their mortgage (before or after enlisting in the military) and it also provides relief for military members’ families who have underwater mortgages and are also relocating due to new military assignments.

If you are unsure if you qualify for mortgage relief help and you are a service member, you can find more information at www.servicemembers.gov. You can also find information by contacting your Armed Forces Legal Assistance office or call the United States Justice Department at 800-896-7743.

Over the last six months, mortgage rates have dropped to record lows while credit remains tight. To understand where rates might go from here and how credit conditions might change, I spoke with Paul Gershkowitz, the Co-owner and President of Greenpark Mortgage. He’s been in the mortgage business for twenty eight years and co-founded the largest privately–held mortgage company in New England before its sale to a Fortune 500 company in 1999.

Paul told me that in his opinion we are in uncharted territory with rates. There is a likelihood rates might drop lower in the near-term but buyers shouldn’t count on that and would be smart to refinance or buy now, if they haven’t already.

He believes there are three keys to the direction of the economy, real estate, and by extension, rates:

• Employment: If we see two consecutive months of non-farm payrolls more than 300,000 than rates will go up.
• Easy Money: In his opinion, the Fed’s actions have created a lot of pent up inflation pressure, and like a spring being wound, this pressure will be released quickly once the employment picture improves. Sovereign governments have also put trillions of dollars into the system and all of this money is sloshing around, waiting for a spark.
• Housing: There is currently a glut of housing. The glut is actually worse than the numbers might show because of shadow inventory. Banks have millions of properties they should have foreclosed on but haven’t because they don’t want to pay to manage and upkeep the properties.

Bottom line: He believes that in the near term rates will remain low or even drop a bit but longer-term, as the economy continues to improve, rates will go up, potentially dramatically.

Getting a Loan

Paul described the mortgage qualification environment as a pendulum, with 10 being easy money and -10 being tight lending conditions. Seven years ago the pendulum was pointing towards 15. Banks were handing out money. Today, the number is at -4. He thinks the conditions are a bit too tight, but not far off. Unlike the boom days, lenders are now carefully examining employment history, income, credit score, past mortgage payments, and savings. They are also relying on credible appraisals.

To get a loan today, you have to show banks you can afford to pay for it. Be prepared to have the proper documentation.

MBS Market Improving

Getting more technical, Paul said that all of this means the Mortgage Backed Securities market is improving, and that may be the hidden story of 2012. The industry must create quality loans and securities that will bring buyers and sovereign governments back to invest in mortgage backed securities. Tighter control on underwriting means better mortgages with more predictable and lower rates of delinquencies and defaults. This is backed up by statistics, which show that the vintage of 2008 – 2012 loans have the highest quality seen in years. That means investors will eventually come in as buyers, replacing the US government and allowing for more growth. Will the pendulum ever get back to a 15 level where credit is too easy and abundant? We hope Never Again, because all that did was to create a huge bubble in real estate that nearly brought the world to its knees. It’s possible that underwriting might loosen a bit more as this process accelerates and the government exits the market.

Overall, he is cautiously optimistic about real estate as an asset class. He believes that an improving economy led by lower unemployment, low to moderately increasing mortgage rates, and the work-down of the real estate inventory glut will largely cancel each others’ effects, resulting in stable, if not slightly increasing real estate values.

Finding a second home that you can use for an investment property or as a vacation property is great, but being able to finance it may be a different story. In many cases, getting a mortgage for a second home is similar to getting a mortgage for your primary home, but there are some differences. Here are some tips you can use for financing a second property which you plan to use to rent out or keep as a vacation getaway.

1. Try smaller banks and lending institutions. For people looking to buy a second home, a down payment will be required before you will be considered as “loan worthy.” In many cases, that down payment will have to be significant, which is usually between 10 and 20 percent. However, if you shop around, you can often find banks and lenders that will be a little more lenient if you meet other qualifications, such as a good credit score, you may find a lender that will look at your specific situation and make a decision on how much of a down payment you will need to get the process rolling. Smaller banks are great for this because they typically know the local market better than the big banks and they often have more flexibility.

2. Ask if the owner is willing to finance the property. There was a time when sellers would be suspicious of buyers if the buyer asked for owner financing. Those were the days, however, when almost anybody could qualify for a mortgage. But these days, with fewer and fewer people able to qualify for a home loan, many sellers are willing to finance their property just so they can be out from under it. You may have to do a little bit of selling on your part to convince the owner that you are trustworthy and that you will pay the loan off according to the agreed upon terms, but this method could work out great for all parties involved.

3. Make sure you have enough money in reserve. Buying a second property, whether as an investment or vacation property, can still have the same problems as buying your primary residence. You may need to make repairs right away and there may be other costs that you don’t think about until it comes up. That’s why it is essential to have some funds reserved in your bank account. As a general rule, have about six months worth of payments for each investment property that you own to make sure you are not stretching yourself too thin financially.

4. Maintain your credit rating. Just because you qualified for a home for your primary residence several years ago doesn’t mean you will qualify now. The credit restrictions have gotten tougher and fewer and fewer people are qualifying. Even if you have your primary residence as collateral, it is important to maintain your credit rating if you want to invest and finance a second property. Pay off some bills and reduce your debt-to-income ratio before applying for a mortgage on a second home to help ensure that you will qualify at a decent interest rate.

These are just a few of the things to keep in mind if you plan to invest in a rental home, an investment property or a vacation home where you can spend several months out of the year. By following these tips, you can increase your chances of getting approved for another mortgage and make sure you are in a financial position to own a second home.

Compare local mortgage rates on second homes and investment properties here.

President Obama today announced a $25 billion "landmark agreement" between the Federal Government, the State Attorney Generals, and five of the biggest mortgage lenders (Bank of America, Ally Bank, JP Morgan Chase, Citicorp, and Wells Fargo. Under the terms of the agreement, the banks will provide foreclosure reliefe and also clean up their mortgage foreclosure and servicing practices in return for being able to restart the foreclosure process.

How this Benefits Homeowners

If you are underwater on your mortgage or having difficulty making payments, this plan may provide you with some assistance. Unfortunately, it's not entirely clear yet who will benefit. The webpage for the settlement says the following:

"Because of the complexity of the mortgage market and this agreement, which will be performed over a three-year period, borrowers will not immediately know if they are eligible for relief."

Three classes of homeowners stand to benefit in the future. They are:

• Homeowners needing loan modifications now, including first and second lien principal reduction. The servicers are required to work off up to $17 billion in principal reduction and other forms of loan modification relief nationwide.State attorneys general anticipate the settlement’s requirement for principal reduction will show other lenders that principal reduction is one effective tool in combating foreclosure and that it will not lead to widespread defaults by borrowers who really can afford to pay.
• Borrowers who are current, but underwater. Borrowers will be able to refinance at today’s historically low interest rates. Servicers will have to provide up to $3 billion in refinancing relief nationwide.
• Borrowers who lost their homes to foreclosure with no requirement to prove financial harm and without having to release private claims against the servicers or the right to participate in the OCC review process. $1.5 billion will be distributed nationwide to some 750,000 borrowers.

Oklahoma did not join the settlement and residents of the state are not eligible to receive compensation.

Other Provisions

In addition to the provisions for homeowners, the agreement stipulates increased regulation. The banks have agreed to implement servicing standards to improve communication with homeowners, mortgage documents, foreclosure documents, fees, and dual track foreclosures.

State Attorney Generals will also gain oversight over national banks. The banks will be required to submit reports to an outside monitor who reports to the AGs in order to monitor compliance with the agreement. If a bank is not found compliant, it will have to pay heavy fees.

For the Banks

At first, this seems like a loss for the banks. But in reality, it is good news. The banks have already written down many of their loans and this allows the foreclosure process to start again and removed uncertainty, which has depressed bank stock prices. It does mean more compliance but my guess is that bank monitoring will not be vigorous over time. As we've seen in the past, compliance issues have a way of weakening and fading as priorities shift.

For the Housing Market

As the logjam over foreclosures is cleared, expect to see more houses on the market. This will temporarily lower home prices in many cities but in the long-run may help to clear the market and help it heal.

Mortgage rates hit new lows this week according to the Freddie Mac Weekly Mortgage survey.

• 30-year fixed-rate mortgage (FRM) averaged 3.87 percent with an average 0.8 point for the week ending February 2, 2012, down from last week when it averaged 3.98 percent. Last year at this time, the 30-year FRM averaged 4.81 percent.
• 15-year FRM this week averaged 3.14 percent with an average 0.8 point, down from last week when it averaged 3.24 percent. A year ago at this time, the 15-year FRM averaged 4.08 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week, with an average 0.7 point, down from last week when it averaged 2.85 percent. A year ago, the 5-year ARM averaged 3.69 percent.

Frank Nothaft, the Vice President and Chief Economist at Freddie Mac said the following:

"Most mortgage rates eased to all-time record lows this week as fourth quarter growth in the economy fell short of market projections. The Gross Domestic Product rose 2.8 percent in the final three months of 2011, below the market consensus forecast of 3.0 percent, while consumer spending in December was flat."

President Obama Sends New Refinance Plan to Congress

Low rates are great news for first-time homebuyers but they don't mean much if homeowners are stuck with an underwater mortgage and unable to refinance. President Obama on Wednesday forwarded a new plan to Congress that provides "responsible homeowners" with FHA backed mortgages even if the original mortgage is not guaranteed by Fannie Mae or Freddie Mac. In the past, mortgages needed to be guaranteed by one of these agencies to receive FHA refinancing assistance.

According to the White House, a borrower whose loan is NOT guaranteed by a GSE could receive FHA backing if the following criteria are met:

1) Current on your mortgage
2) Meet a minimum credit score (580)
3) Have a loan that is no larger than the current FHA conforming loan limits in your area (median home price $271,050 to the high of $729,750)
4) The home being refinanced is the owner-occupied principal residence

The Administration predicts that the average borrower would save $3,000 under the plan.

Don't Get Your Hopes Up

Let's set aside the question of whether it is wise for the government to take on even more exposure in the housing market via these FHA loans. The first question is whether the plan stands a chance of passing Congress, and the answer is - No. With the election year cycle in full swing and partisanship on the rise, there is almost no change Congress can come together to make this happen, even if they wanted to.

The good news.

This week, the Interest Rate Review from Informa Research Services reported that rates on 30-year fixed mortgages dropped to 4.21%, down from 77 basis points from last year, when it stood at 4.98%. The result is a great opportunity for current homeowners to refinance their homes at lower APRs. If you want to keep track of the rise and fall of current mortgage interest rates, pay a weekly visit to BestCashCow.com for all the latest information.

The advice.

If you’re interested in doing everything in your power to turn an upside down situation into a right-side-up advantage, now may be the best time ever to strike. Informa suggests that you take the following steps:

-Take a look at the various mortgage loan products available to you and determine which would work best for you. The three most common are 30-year fixed rate mortgages, 15-year fixed rate mortgages, and adjustable rate mortgages (ARM).

-Determine which of those three would yield the least amount of risk to you. For many, the ARM option is seen as a higher risk because even though it comes attached with far lower interest rates, after a designated period this will automatically adjust to whatever the current going rate is. If rates are high, you’ll end up with a much higher interest rate for your mortgage. 30-year and 15-year fixed rate mortgages are far more secure, with the 15-year loan appealing to those who don’t mind paying a higher monthly amount in exchange for paying off their homes in half the time and 30-year fixed loans drawing the interest of those who want to lower their monthly payment.

-Capitalize on current low interest rates. If you’re upside down in your home or owe more than 80% of what its current value appraises for, it’s likely that you won’t qualify for the lowest rates around. But the good news is, as the bottom line drops, so does the top line. In a classic case of “what’s good for the goose is good for the gander,” even if you aren’t able to qualify for rock-bottom home mortgage rates, you still benefit from historic lows. Stay updated on current interest rates by frequently visiting BestCashCow.com.

-Make the best of a lowered monthly payment. By securing a lower fixed mortgage interest rate, you’ll also be paying much less per month. But this doesn’t mean that you should take this as a cue to start spending that extra money on frivolous purchases. This is a perfect opportunity for you to make an extra payment each month towards the principal balance on your home, and can take you a long way toward getting out from under an upside down financial burden.

As always, Informa Research Services emphasizes making smart financial decisions, coupled with keeping abreast of current mortgage rates, as a means of taking charge of your financial health. By utilizing all of the tools at your disposal, you’ll be well on your way to becoming what everyone aspires to be: a debt free homeowner.

Compare mortgage rates where you live here.

With banks and lenders being stricter on who they loan money to, it’s getting more and more difficult to qualify for a traditional mortgage. There are several reasons why you might get denied if you apply for a traditional mortgage. Do you have a foreclosure in your past? Do you own a business with substantial assets but you cannot prove a decent cash flow? Or are you self employed, which means that you have an irregular income? These and other reasons are why many people look for alternatives to traditional mortgages. Here are a few mortgage alternatives that you may have never even thought of.

1. Seller Financing

With seller financing, the current homeowner offers to sell you the house. You make payments to them but they continue to hold the note until you have paid off the home. This alternative may be a feasible option in a variety of situations. The homeowner may be trying to sell the home but they are not having much luck in finding buyers because of strict bank and lender qualifications. When this happens, the homeowner may take a chance on a buyer. Often, seller financing takes place between two parties that know each other. When the seller becomes the “lender,” an agreement is drawn up between both parties in the form of promissory note which details the interest rate, payment terms, consequences of default and other details.

2. Leasing or Rent to Own

This is a popular alternative to a traditional mortgage because the home buyer can rent the property that they are planning to purchase before they make their final decision to buy it. With a rent to own (which is also called lease to buy, lease to own or a lease option), the homebuyer and the seller come to an agreement for a specified period of rental time. The buyer has the option to purchase the home at the end of that time or they can come to another agreement to continue renting or move out.

This is an ideal mortgage alternative because it is designed for home buyers who may not be able to purchase right now, but who expect to build up a down payment, improve their credit score and be in a better overall financial position in the next few years. It’s also a great mortgage alternative for someone who may be moving in the next few years and does not want to commit to purchasing the home until they have more certainty about their plans and future location.

With a rent to own or lease option, the buyer monthly rent to the owner of the home. The rent cost is typically inflated and the extra money goes toward a down payment on the home at the end of the rental agreement. If the buyer decides that they do not want to purchase the house, the extra rent money is forfeited.

3. Borrowing from a Self-Directed IRA

This option is typically designed for investors who want to buy a home but don’t have the upfront cash to make it happen. A self-directed IRA is somewhat like a Roth IRA or a traditional IRA but it has more flexibility and it is managed by someone else, a custodian, on behalf of the IRA holder. The IRA can invest in real estate, equities, franchises, private equity, etc.

The main catch with using a self-directed IRA to invest in a home is that the IRS does not allow you to use your own account or the account of a relative or business partner. You cannot use your own self-directed IRA to purchase a home. But you can use the money from another person’s self-directed IRA if they are not related to you. There are many investors who will allow buyers to use money from their self-directed IRAs as an investment deal. The investor would own an interest in the property or the investor can simply loan the money llike a regular mortgage.

These are just three of the alternatives to a traditional mortgage that you may be able to utilize if you can’t qualify for a traditional mortgage loan. Try these options to achieve the dream of home ownership in a non-conventional way.

Still looking for a traditional mortgage? Find the best mortgage rates on BestCashCow.