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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: nextrade! who wrote (3499)	7/20/2002 11:44:04 AM
From: nextrade!	Read Replies (4) \| Respond to of 306849

Innovation!?! <G> Skip-Payment Loans. New generation of mortgages in works: Some innovative concepts to hit marketplace within few months businesstoday.com Housing Update/by Kenneth R. Harney Friday, July 19, 2002 WASHINGTON - Your next home mortgage could come with bells, whistles and services you've never imagined. How about a mortgage that has built-in warranty coverage to fix the roof or replace the heating system, pipes and other big-ticket home system breakdowns? How about a home loan that allows you to skip payments - up to six months' worth without penalty - when you run into unexpected cash flow problems? What do think about a mortgage that would tap you into a much lower-cost health and disability insurance coverage plan for you and the family than you've got now? Or a loan that wraps nearly all your household credit needs into a single, expanding package - a tax-deductible pot of spendable cash whenever you want or need it? Or special features aimed at first-time and immigrant buyers that allow them to qualify for a mortgage despite lack of credit histories, lack of cash and unconventional income sources? All these innovative concepts not only are on the drawing boards of mortgage designers, they are heading for the marketplace within as little as a few months. Here are some of the most noteworthy new loan plans coming your way. Skip-Payment Loans. If you're like many Americans, your household finances are stretched. You make a solid income, but you've got expenses that gobble up that income month by month. You've got little or no protection against an unanticipated interruption of income, or a sudden, major emergency repair needed for the house. If your spouse should lose his or her job, or you got hit with a large, uninsured medical expense, you could be plunged into a financial crisis - possibly serious enough for you to fall behind on your debt obligations. Where could you turn for help? Fannie Mae, the giant home loan investor, is working on a two-word answer: your mortgage. Though still at the developmental stages, Fannie Mae executives envision a new generation of loans that come with built-in, automatic protections against household financial meltdowns. One concept, tentatively named ``Home Stay,'' would provide up to half a year's worth of mortgage payments when borrowers suffered a loss of income because of disability, death of a spouse or unemployment. Say you were laid off as part of one of the many corporate downsizings now under way. The company gave you a modest severance payment, but it was hardly enough to cover your family's expenses for the extended period you need to find a new job. Meanwhile, your biggest monthly debt - your home mortgage - has to be paid. Under the concept Fannie Mae is developing, your home loan would pay for itself for as much as half a year while you're unemployed and strapped for cash. Fannie Mae executives emphasized that key details - such as the cost to borrowers and the type of insurance add-on - are still being worked out. But they are convinced that such a financial backstop feature would address one of the deep-seated fears of many mortgage customers. The timetable target for the new loan's introduction: possibly late in 2002 or early in 2003. Fannie Mae's rival, Freddie Mac, also reportedly is exploring unemployment add-ons and other insurance concepts as part of its own future mortgage offerings. Home Warranty Loan. A second plan under way at Fannie Mae would provide still another form of built-in financial protection for home buyers. Dubbed ``Home Manager'' internally, the idea is to graft a home warranty plan onto your basic home mortgage. The warranty coverage would extend at least to all major mechanical systems, and would be available through a ``preferred provider'' program, allowing you the choice of contractors. If your roof needed replacement or your heating system died, you'd be able to pick from a list of local service companies participating in the Fannie Mae program to make the repairs. Pricing, timing and other details are still being worked out, say Fannie Mae executives, but the concept is likely to be on the street within the year. Both Home Manager and Home Stay are concepts that emerged from intensive consumer research and focus groups conducted by the corporation over the past two years. They are expected to give extra oomph to Fannie's efforts to increase homeownership rates among lower and moderate-income, minority and immigrant groups. Fannie Mae Chairman Franklin D. Raines has hinted at other innovative loan changes on the horizon, including the possibility of customizing mortgages to borrowers' individual needs. One example is the ``teacher loan'' - a mortgage with principal and interest payment schedules tailored to incomes that tend to be concentrated in nine-month time periods. And the two-word answer to your mortgage is? <VBG>