There has been lots of talk over the last few years about significant disruptions in the commercial real estate market. Large balloon payments on mortgages are coming due and the ability to refinance is not always available due to declining property values and reduced rent rolls. Fortunately, the commercial real estate market has not suffered as badly here in Massachusetts as it has in other parts of the country. Also, the U.S. Small Business Administration (SBA) has set up a new program to help small commercial real estate property owners refinance their existing mortgages. The following excerpts a realease on the SBA’s new program guidelines.

Small business owners with eligible commercial real estate mortgages maturing after Dec. 31, 2012, will be able to secure more stable, long-term financing through the SBA’s temporary 504 refinancing program. This new program will be available around April 6.

In February, SBA implemented a temporary refinancing program enacted under the Small Business Jobs Act of 2010, which allowed small businesses facing maturing commercial real estate mortgages or balloon payments before Dec. 31, 2012, to refinance with an SBA 504 loan. The SBA change will lift the date limitation and will allow more small businesses to secure stable, long-term financing and avoid potential foreclosure on mortgages approved before and during the recession that were based on inflated real estate values.

To be eligible for the temporary 504 refinancing program, a business must have been in operation for at least two years, the debt to be refinanced must be for owner-occupied real estate and have been incurred no less than two years prior to the date of application and the proceeds used for 504-eligible business expenses, and payments on that debt must be current for the last 12 months.

The refinancing loan is structured like SBA’s traditional 504 loan. Typically, a 504 project includes three elements: a loan (or first mortgage) secured with a senior lien from a private-sector lender covering 50 percent of the project cost, a second mortgage secured with a junior lien from an SBA Certified Development Company (backed by a 100 percent SBA-guaranteed debenture) covering up to 40 percent of the cost, and a contribution of at least 10 percent equity from the small business borrower.

Borrowers are able to refinance up to 90 percent of the current appraised property value or 100 percent of the outstanding mortgage, whichever is lower, plus eligible refinancing costs. Loan proceeds may not be used for other business expenses. Existing 504 projects and government-guaranteed loans are not eligible to be refinanced.

Under the Jobs Act, Congress authorized SBA to approve up to $15 billion in loans under this program ($7.5 billion in both fiscal years 2011 and 2012). Together with the first mortgage, this temporary program will provide up to $33.8 billion of total project financing. SBA’s traditional 504 loan program is a long-term financing tool, designed to encourage economic development within a community. A 504 loan provides small businesses with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization.

I have done some work with the folks at the Bank of Canton, and they are currently supporting the SBA’s new program.

When people buy a new home they often include a financing contingency and a home inspection contingency. These contingencies allow the buyer to back out of the deal if they cannot obtain a mortgage on the property or if the inspection turns up some deficiencies. However, you might also want to include a contingency that requires the seller to produce a copy of the home's CLUE report.

The Comprehensive Loss Underwriting Exchange (CLUE) report will tell you what kinds of insurance claims have been filed by previous owners. And why is this important to you as a buyer? First, the current owners may have neglected to tell you about past damage to the house. The CLUE report will tell you the exact date of loss, type of loss (water damage, mold, fire, etc) and amount of loss for all claims. And, perhaps more importantly, if the home does has a long history of substantive claims, you might be denied home owners insurance and without a certificate of insurance, you won't be able to take out a mortgage and close on the purchase. That's a pretty big deal. While outright denial of coverage is usually quite rare, you could find yourself only being able to get coverage in a high risk pool (or paying much more than you would for a policy on a house with a "clean" claims history.)

If you are a potential seller of a home, it pays to get a copy of your CLUE report before putting the house on the market. That way, you can fix any inaccuracies that might be contained in the report. To get a copy, which should cost about $20, visit choicetrust.com

Interest rates on mortgages are now at incredible lows (at or below 4.5 percent for 30 year fixed rate loans with no points and no closing costs) so new mortgage originations and refinancings are keeping mortgage brokers swamped with work.

That's the good news. The bad news is that mortgages are getting harder to obtain for just about everybody. Even applicants with stellar credit histories and a long tenure with their employers are facing scrutiny in the mortgage approval process.

One category of applicant that is having a particularly hard time getting a mortgage are parents who are home temporarily with babies. This would include mothers on maternity leave and fathers taking family leave time without pay.

A recent New York Times article told the story of a new mother who was home on maternity leave with her new baby. She was being paid for her maternity leave, but was technically receiving "disability" payments and her lender wouldn't consider this as income because it wasn't expected to continue for at least three years. They also wouldn't consider her "old" salary because there was no guarantee that she was going to return to work. She was instructed to re-apply for her loan once she returned to work.

If you are expecting to be out of the workforce to care for a baby, the smart thing to do is apply for and close on your mortgage while you are still receiving your "regular" income. That means that you should close on the new mortgage either before your leave or after. You don't want to find yourself in the position of losing a great mortgage rate because you happen to be out on a few weeks of unpaid leave.

Lots of people have life insurance (and that is certainly a good thing...) but very few people carry disability insurance. A recent study by Northwestern Mutual indicated that just 10 percent of people over age 21 have purchased a disability policy.

That statistic is pretty surprising since the average adult much more likely to suffer a disability than to die. According to the Social Security Administration, three out of every 10 workers entering the workforce will become disabled at some point in their careers.

And this disability can have a huge impact on how well prepared a person is for retirement. Another report from Northwestern Mutual shows that over $1M in retirement assets can be loss if a 50 year old suffers a two year disability and does not have disability insurance. The same person with disability coverage loses much less -- only about $230,000.

So, what is the best way to get disability insurance? Most larger employers offer short and long term disability coverage to their employees and they offer (generally) very affordable rates. If your employer offers this coverage, you should strongly consider it and be sure to ask if you have the option to pay the premium with before tax or after tax dollars. It might seem like paying the premium with before tax dollars is the way to go but it is actually better to pay with after tax dollars. If you pay with after tax dollars, any benefit you may receive in the future will be tax free. If you paid the premiums with before tax dollars, any benefit would be taxable.

If you are self employed or want to get an individual policy, you should expect to pay significantly higher premiums.

If you spent this past rainy weekend visiting open houses looking for a new home, you might want to step up the search.  The reason is that we are fast approaching the deadline for the expiration of the Home Buyers Tax Credit.  In order to qualify for the credit, you must have a signed purchase and sale contract in place by April 30.  That gives you about 6 weeks to find a possible property.  (In addition, the sale must close by June 30th.)  This credit has been extended before but it doesn't appear likely that it will be extended again.

The credit is equal to 10 percent  of the purchase price of the home and first time home buyers (those who have not owned a home in the past three years) can qualify for up to an $8,000 credit.  People who already own homes (and have lived in them for 5 out of the past 8 years) can get a credit of up to $6,500 if they purchase a replacement home.

The full credit is available to single filers with Modified Adjusted Gross Income (MAGI) up to $125,000 and $225,000 for joint filers.  Partial credits are available for single filers earning between $125,000 and $145,000 and married filers earning between $225,000 and $245,000.  Single filers earning more than $145,000 and married filers earning more than $245,000 are not eligible for the credit.

Finally, if you make a qualifying purchase in 2010, you have the option of claiming your credit on either your 2009 or your 2010 return.  You will also need to file Form 5405 with your return and you wont be able to file your return electronically because you need to provide documents that prove you are eligible for the credit.

The housing market is still very unstable.  One month we read that sales are strong and prices are rising.  The next month we see that sales are down.  One piece of discouraging news that came out recently was that in the fourth quarter of 2009 another 600,000 homeowners found themselves "underwater" or owing more on their mortgages than their homes were worth.  In fact, the total number of households in this situation is now over 11 million people or 24 percent of all properties that carry a mortgage.  This information, reported by First American Core Logic, a real estate research firm, tells us that many people are still really struggling.

The first choice for many homeowners in this situation is to try to restructure their existing mortgages.  However, this can be a very long and painstaking process and many people find that they do not qualify.  As a result, more and more people are thinking about walking away from their existing homes and mortgages. 

Aside from the moral considerations, which are great, what are the points you need to consider before you think about walking away from a mortgage?  First, you need to understand that that is a huge decision.  It might seem like this option would solve a lot of your problems, but in reality, it generally just adds more. Probably the biggest impact is that you will not be able to get a new mortgage for quite some time -- five years is typical.  That means you need to prepare to be a renter for at least that amount of time.

Plus, your credit score and record will be adversely impacted for about seven years.  During that time, your ability to get any other kind of loan will be negatively impacted.  Car loans, assuming you can get them, will be at a very high interest rate.  Same for any other type of consumer loan.  Finally, there may be adverse tax implications as well.

So, walking away is certainly not without its costs.  If your financial life is going to be impacted for five to seven years anyway, it just might make more sense to hang in there and keep making the mortgage payments.  No one can accurately predict what the real estate market might look in 2015 -- perhaps by then your situation could be dramatically different.

The number of reverse mortgages backed by the government jumped nearly 20 percent in March and April alone from the same period in 2008. At a time when seniors have seen their retirement assets depleted by market losses, tapping their home equity has become an attractive but potentially risky option. A reverse mortgage can turn your home equity into tax-free cash without forcing you to move or make a monthly payment. This can be a worthwhile financial tool if used in the right situations. If not, you can end up with serious complications to your financial future.

A reverse mortgage gets its name because of the way it works. Instead of the borrower making payments to the lender, the lender releases equity to the borrower in a number of forms, including:
- A lump sum cash payment;
- A monthly cash payment;
- A line of credit;
- Some combination of the above.

Santa Claus arrived a little late in the Downey household this year. However, his gift of low home mortgage rates is extremely generous and may continue to benefit our family for some 30 years. My wife and I are in the process of refinancing our mortgage and have just locked in to 30 year fixed loan at 4.875 percent. The rate on our original mortgage from two years ago is 6.25 percent.

My wife and I have a monthly mortgage payment of $3,200 per month and our combined income is $180,000. We each made the maximum contribution to our 401(k) accounts of $15,500. I calculated that for the past 3 years, if we had redirected our 401(k) contributions to pay down our mortgage we would have done much better. Do you think it is wise to pay off our mortgage as opposed to contribute to our 401(k) account?

Wealth management, like life, has many risk and reward opportunities. Over the Thanksgiving holiday, my wife, daughter and I piled into our car and drove to New Jersey to visit relatives. We were fortunate to hit little traffic and for much of the way I set the cruise control at 72 miles per hour. I wanted to get to New Jersey as quickly as possible, but did not want the risk of getting a speeding ticket. I felt that at 72 miles an hour, I was unlikely to get a ticket in a 65 mile per hour zone. This was the maximum speed I could drive without significant risk of being pulled over. Unlike Burt Reynolds in “Smokey and the Bandit”, my appetite for risk of receiving a ticket was pretty low and I did not want to encounter Sheriff Buford T. Justice (Jackie Gleason).

I am planning on selling my townhouse (fingers crossed) and buying a single family for $350,000. I don't quite have the 20 percent down and wanted to take a "loan" of $15,000 from my 401K to make up the difference so that I don't have to pay private mortgage insurance (PMI). Do you think that it would be cheaper to pay the PMI than to take a loan?

Lenders usually require private mortgage insurance (PMI) on home loans in which the down payment is less than 20 percent of the value of the home. The cost of PMI depends on your down payment, but ranges from approximately 0.35 percent of the value of the home (with approximately a 15 percent down payment) to approximately 0.75 percent of the value of the home (with approximately a 5 percent down payment.) PMI is tax deductible to the home owner if your household income is less than $100,000. Let’s determine your total annual cost of home ownership under each scenario and determine which one is the better option.

Nationwide, 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010. Knowing this, JPMorgan Chase and Bank of America have announced broad sweeping plans to help homeowners who are on the verge of foreclosure.

JPMorgan Chase plans to change the terms of $70 billion in mortgages for homeowners who are behind in their payments. The program is expected to impact approximately 400,000 homeowners or just under 5 percent of all the mortgages held by the bank.

Bank of America, under a settlement offer with 11 states, has agreed to permanently write down the amounts owed on approximately 400,000 mortgages.

So why are the banks doing this? Several believe that they can best improve the value of their loans by modifying the terms of existing loans instead of using foreclosures. That's probably not too surprising as both parties tend to lose when a house is foreclosed. The homeowner obviously loses their home, and, generally, the bank doesn't receive as much as it otherwise could for the home. Plus, the bank incurs a lot of legal fees when it follows the foreclosure route.

To learn more about the programs offered by these banks and some others, check out this New York Times article.

We are financially living on the edge. We have no savings, are in debt, and have no hope for real progress. Should we sell our house now? We live in a relatively strong market north of Boston and we are considering a move to something smaller in the ex-urbs. This would gain us a financial safety net that we don't have now. Our concern is that if we wait too much longer, this plan might not even be an option.

It is hard to answer this question without at least a little bit more information, but it seems like you are thinking along the right lines. If you can sell your current home and recognize enough of a gain to eliminate the debt and establish a reserve fund, that could be a very smart move.

At the very least, you should meet with a realtor and confirm a realistic selling price for your current home. You should also do some house shopping in the areas you are considering moving to so you can be sure that you can get a reasonable place for the amount you are hoping to spend.

Finally, you should also meet with a mortgage broker and get pre-approved for a mortgage. If you are as much on the edge as you think you are, there is a strong possibility that your credit score may prevent you from getting a good rate on your next mortgage. So, you need to go through the entire mortgage qualification process and be certain that you know where you stand.

Once you do all these things, you will have all the information you need to make an informed decision and if things go according to plan, you could find yourself with some financial breathing room which could be a huge weight off your mind. Good luck.

A startling article in the Wall Street Journal reports that nearly one out of every six homeowners in the US owe more on their home than the house is worth. One in six!

Now this doesn't mean that one in six homeowners is facing foreclosure because most can probably still afford to make their payments, but it is still shocking to think that values have fallen so quickly that one in six people owe more than their house is worth. Prices in the Boston area are now back to 2003 levels.

The article points out that only 4 percent of homeowners were underwater in 2006 and even though the 2007 number rose to 6 percent, the 2008 figure is staggeringly high at almost 16 percent. And for those people who bought their homes within the past five years, 29 percent now owe more than their homes are worth.

In other disppointing news, 9 percent of the mortgages on 1-4 family homes were a month or more overdue or in foreclosure and that is the highest percentage recorded since the Mortgage Bankers Association began tracking this figure 39 years ago.

Virtually the only piece of good news was that declines in home prices have now made homes more affordable. In the second quarter of this year, the median home price in the US was 1.9 times the average pre-tax household income and that ratio is very close to the 1.87 times income rate that was in effect for 1985 through 2000.

I am a first time home buyer. What is the best way to shop for a home loan? I have been on the job 8 years, make $117,000 per year, have excellent credit and I have 20 percent down on a mortgage of $417,000.

Great, it seems like you have definitely been doing your homework. A great place to scout out local mortagage rates is the real estate section of the Sunday Globe. There is usually a half page listing of 20 to 30 lenders with their contact information and current rates. This information is also available online.

Rates continue to drop and it looks like you might be able to get a 30 year fixed rate of 5.5 percent with no points if you shop around. If you are willing to pay a point, some lenders are offering rates as low as 5.25 percent. Some 15 year fixed rates are around 5.125 percent with no points.

You can also compare rates online using sites like Bankrate.com Unfortunately, you will probably have to do a lot of old-fashioned calling around because rates can change very quickly. You might see a great rate in the paper this morning but by the time you call the next day, another rate may be in effect.

In your case, a 30 year $417,000 mortgage fixed at 5.5 percent would have a $2,367 per month principal and interest payment. At your income level, a principal, interest, taxes and insurance (PITI) payment of $2,730 per month would be considered affordable.

Up until about a week ago, it was pretty much impossible to find a 30 year fixed mortgage rate much lower than 6.375 percent. Mortgage rates declined on Monday and Tuesday of this week and now rates in the 5's are common. Bankrate is reporting an average rate of 5.88 percent and brokers in the area are reporting some rates as low as 5.75 percent.

The government's bailout of Fannie Mae and Freddie Mac is believed to be responsible for the decline in rates although experts appear to have been caught off guard by the magnitude of the decreases. Whatever the reason, this is great news for new home buyers and people looking to refinance. The drop in rates from 6.375 percent to 5.875 percent would translate to savings of $100 per month on a $300,000 30 year fixed rate mortgage. Not a gigantic difference, but every little bit helps.

Many experts are predicting that rates could drift still lower over the coming months so it will pay to shop around and compare several lenders. When comparing lenders, don't forget that the fees charged can be just as important as the rate. Be sure to ask what kind of fees will be incurred and don't be afraid to ask for lower fees. Also, if you will be putting down less than 20 percent of the purchase price of the home, you will be required to pay Private Mortgage Insurance (PMI). If you are anywhere close to a 20 percent downpayment, stretch a little to get over the 20 percent.

Finally, remember that lending standards are still very tight so while the rates have improved, it may still be difficult for some people to qualify.

I had my home foreclosed last June.Will I be able to get another mortgage in the future?

Unfortunately, foreclosures are not an uncommon occurrence these days. For the one year period ending in May 2008, statewide foreclosures were up 140 percent. In some Massachusetts counties, the rate was up as much as 175 percent.

According to Rich Shapiro, from the Asset Mortgage Group, you will have to wait five years from the date of foreclosure to qualify for a Fannie Mae mortgage. The prohibition period for Federal Housing Administration (FHA) loans is a little more lenient -- just three years. Also, if the foreclosure was due to "documented extenuating circumstances beyond the control of the borrower" you could be considered by the FHA in less than three years. The extenuating circumstances would generally have to be something like a death or grave illness and you would need to fully document the situation for the underwriter's review.

As is the case with all mortgage loan agencies, good credit needs to be re-established. Consult with a mortgage professional about your particular circumstances -- you might find that you can get another loan sooner than you expected.

My goal is to purchase a home by the age of 50. That gives me four years. Assuming that my salary will grow slightly over the coming years, what do you think about borrowing from my 401(k) to make the down payment? I am single but I have been unable to save much every month. I make $40,000 per year and would like to buy a $200,000 home.

With a salary of $40,000, the monthly payment that you make to cover principal, interest, taxes and insurance (PITI) on your condo should not exceed $1,000. If I assume $200 in property taxes and $50 for homeowners (both pretty conservative estimates), that leaves $750 available for the principal and interest payment. If I further assume a 6 percent mortgage rate and a 30 year fixed term, you can afford a mortgage of approximately $125,000.

That means that you would need to make a down payment close to $75,000. That is a pretty large down payment. If you don't have any savings available elsewhere, and you are looking to borrow that amount from your 401(k), I would advise against doing so for several reasons.

First, there are limits on how much you can borrow from your 401(k). Generally, total outstanding loans cannot exceed the lesser of $50,000 or half of your current account balance. If half your account balance is the lower of the two amounts, a loan of up to $10,000 is possible even if $10,000 is more than half your account balance.

Second, I just hate the idea of having to borrow from a 401(k). Some points to consider:

1. Some plans do not allow you to contribute to a 401(k) while you have a loan outstanding so you would lose any employer provided match, and

2. If you were to leave your employer (voluntarily or involuntarily) the loan would be due immediately. If you failed to repay it within 30 to 60 days, it would count as a premature distribution and be subject to taxes and a penalty.

3. There is also the question of how you would pay the loan back. In my opinion, borrowing from a 401(k) should be an absolute last resort option and if you feel the need to borrow from a 401(k) to afford a house, you probably really can't afford the house.

If you have done a really, really great job of saving in your 401(k), another option might be to decrease or eliminate your contributions to your 401(k) for a very small number of years and accumulate some money that way. If you pursued this option, you would have to be diligent about resuming your contributions as soon as you bought the house. With this option, there is always the danger that you might end up using the money for other needs, and then you would have a smaller retirement account balance and no house, so it has drawbacks as well.

This is a very tough decision because buying a home is certainly an admirable goal. I would just advise you not to extend yourself too far and not to endanger your future retirement. You will certainly find people who will tell you that you can afford a much larger mortgage than $125,000, but don't believe them. Prepare your own budget and determine what seems reasonable for you and your personal circumstances.