The Federal Home Loan Mortgage Corp. is offering some terrific bargains on foreclosed homes across the United States.
Q–I recently heard a radio advertisement for foreclosed homes offered by “Freddie Mac.” They sound like good deals. Do you know anything about them?
A–The Federal Home Loan Mortgage Corp., nicknamed “Freddie Mac,” is trying to sell thousands of foreclosures it owns across the nation through a new program it calls “HomeSteps.”
Judging by price alone, the homes Freddie Mac is selling don’t seem like terrific bargains. That’s because Freddie, unlike many traditional lenders, renovates most of its foreclosures before putting them up for sale. Buyers don’t get much of a break on the sales price because the homes are in such great shape.
The big savings come from Freddie’s special financing plans. Buyers who will live in the property themselves need only make a 5 percent down payment, compared to the 10 percent or even 20 percent down required by many lenders. Freddie doesn’t require mortgage insurance on its foreclosures, which saves the typical buyer $700 a year. Appraisal and loan-application fees are also waived, saving another $500 in closing costs.
Rental-property investors can qualify for similar savings on Freddie Mac foreclosures, although they usually must make a down payment of at least 15 percent.
You can get a free list of foreclosures that Freddie Mac is selling in your area by calling the agency at 1-800-972-7555. Computer users can obtain a list from its Web site, http://www.homesteps.com.
Q–My lender wants to charge me a $65 “late fee” because my last mortgage check apparently arrived two days after its due date. I mailed the payment four days before it was due, but I guess the postal service was a little slow. Do I have any grounds to fight the late fee, especially because the postal service is a branch of the federal government?
A–We can blame the post office for a lot of things, but a late fee charged by a lender isn’t one of them. You might still be able to have the penalty removed, though the chances of getting a waiver will depend on the terms of your mortgage contract and your personal payment history.
Nearly all mortgage contracts include a clause that specifies when each monthly loan payment must be received. If the lender doesn’t get your check on time, it has the legal right to charge a late fee even if you can prove that the payment was mailed several days earlier. You, not the lender, must “pay the price” for any postal delays.
Most loan contracts also state that the borrower’s payment must be negotiable the moment that the lender receives it. This allows the bank to charge a late fee if your check bounces..
Call your lender’s customer-service department and explain why your payment was late. Some lenders will automatically waive their penalty if a borrower’s check was received on a weekend or bank holiday and couldn’t be processed immediately.
Your chance of having the penalty removed will be bolstered if all your previous payments were received on time. Many lenders are willing to provide a one-time waiver to borrowers who have never been tardy before, but they’re understandably reluctant to provide a similar break to homeowners who have missed several payment deadlines in the past.
Q–I was watching a TV news report about refinancing and I got confused by a mortgage broker who was talking about credit reports. Is there a difference between a “delinquency” and a “derogatory,” or are they the same thing?
A–Many consumers think the terms “delinquency” and “derogatory” are interchangeable, but lenders and credit-reporting bureaus are quick to point out that there are some important differences between the two.
A delinquency is created when payment on a debt is made between 30 and 180 days past its due date. Many lenders are willing to overlook a delinquency or two when they’re reviewing a loan applicant’s credit record.
A derogatory is more serious. It means that payment on an account has been received more than 180 days past its due date, or that no payment has been received at all. Bankruptcies, collection accounts and debts that creditors “charge off” as being uncollectable are also considered derogatory.
Lenders and mortgage brokers commonly refer to derogatories as “derogs” (pronounced DEE-roggs). Having one or two on your credit record doesn’t necessarily mean that your loan application will be rejected. However, you might be asked to make a bigger down payment, pay a higher interest rate or accept a smaller loan amount if you’ve got a derog on your credit report.
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Write to David Myers, P.O. Box 2960, Culver City, Calif. 90231-2960.
