Category Archives: Real Estate

Real Estate

Handling High Mortgage Costs

New York Times
Closing costs can increase the price of a home by as much as $10,000, sometimes more.  Borrowers who are “cash-poor” can ask for assistance, or talk to their lender about a lender credit toward closing costs.

  • Some lenders advertise that if borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.
  • These mortgages are sometimes called no-closing-cost loans, though the term is misleading.  The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal.  That generally leaves title insurance, mortgage-recording taxes, insurance, and escrowed taxes to cover.The amount of credit depends on total closing costs and other loan details.  Generally, for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount.
  • While these mortgages can be helpful to some, borrowers should carefully review all the details.  There are pluses and minuses to these loan types.  A downside is the higher rate and monthly payment remain in place through the life of the loan.
  • Doing a side-by-side comparison of loans with and without the credit can be helpful.

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Real Estate

How Long Are Loans Delinquent in Foreclosure?


Loans in foreclosure have been delinquent an average of 624 days — a record high, according to Lender Processing Services’ September report.

The time loans spend in foreclosure continues to increase. For example, 40 percent of home owners with loans in foreclosure have failed to make a payment within two years, and 72 percent of home owners have failed to make a payment in a year or more.

The time from the last payment to foreclosure sale has been found to be even longer in judicial states, in which foreclosures must be approved by the courts. The time span in judicial states is averaging 761 days, six months longer than non-judicial states, LPS reports.

While loans are spending longer in foreclosure, the number of foreclosure starts is decreasing. Foreclosure starts decreased 11.2 percent in September compared to August, and foreclosure starts are 15 percent below a year earlier, LPS notes in its recent report.

The states with the highest percentage of loans in delinquency or foreclosure are:

  • Florida
  • Mississippi
  • Nevada
  • New Jersey
  • Illinois

The states with the lowest: North Dakota, South Dakota, Wyoming, Alaska, and Montana.

Source: “LPS: Foreclosures Delinquent an Average of 624 Days,” HousingWire (Nov. 1, 2011) and Lender Processing Services

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Real Estate

Troubled Homeowners Get A Lifeline

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The government is changing its Home Affordable Refinance Program (HARP), making it easier for homeowners to refinance their underwater, high-interest mortgages.

Making sense of the story

  • Although HARP has helped more than 890,000 homeowners nationwide by reducing their monthly mortgage payments, there are still millions of homeowners who are too far underwater to participate.
  • Under the new rules, homeowners who owe more than 125 percent of the market value of their homes will be allowed to refinance into new loans.
  • The program also streamlines the refinancing process for homeowners who are current on their mortgage payments and reduces or removes fees that previously hindered them from refinancing.
  • Fannie Mae and Freddie Mac also will reduce the fees they charged in the past to enable borrowers to better afford the new loans.  Among the fees that will be reduced or eliminated are those for appraisals, title insurance, and closing costs.
  • Fees also will be waived for some underwater borrowers who are refinancing into 20-year or shorter-term loans.
  • HARP is only open to borrowers who are current on their payments for the past six months with no more than one missed payment in the past 12 months.  The loans must have been originally issued before May 31, 2009, and purchased by Fannie Mae or Freddie Mac.

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Real Estate

Obama’s New Mortgage Plan To Help Homeowners


 

President Obama announced Monday a plan to ease eligibility rules for home owners who want to refinance to take advantage of ultra-low mortgage rates and lower their mortgage payments. The administration hopes that by broadening its requirements for the Home Affordable Program that about 1 million home owners will now be able to qualify.

Here are more details about the newly announced changes to the program:

What is HARP?

It’s a program started in 2009 that allows home owners to refinance their mortgages at lower rates without having to meet the typical requirement of having at least 20 percent of equity in their home to do so. Under current guidelines, many underwater borrowers have been ineligible for the program because their home values had to be no more than 25 percent below what they owed their lender. Also, some home owners were unable to afford the closing costs and appraisal fees to participate.

What’s changing?

Many of the extra fees to participate in the program have been waived, and home owners’ eligibility won’t be contingent on how far their home’s value has fallen.

Who’s eligible?

  • Home owners with loans backed by Fannie Mae or Freddie Mac can participate. (Home owners can visit: freddiemac.com/mymortgage or fanniemae.com/loanlookup to determine if their mortgage is owned by either).
  • Home owners must be current on their mortgage.

When will it take effect?

The changes could take effect by Dec. 1. HARP also is being extended through 2013 to allow more home owners the opportunity to qualify.

How successful will this be?

The administration hopes that by home owners being able to lower their monthly mortgage payments (with an average annual savings of $2,500 expected), they’ll be more likely to stay current on their mortgage and avoid foreclosure. Also, the administration hopes that it will then free up household money to start spending more on other things, which could provide an overall boost to the economy. However, the administration says it realizes that aiding the housing market requires much more than a refinancing plan.

“This is only one piece of a broader strategy to help the housing market,” says Housing Secretary Shaun Donovan. Donovan also notes federal efforts to help home owners who are delinquent on their mortgages and the unemployed.

Source: “A Guide to Administration’s New Mortgage-Refi Plan,” The Associated Press (Oct. 24, 2011)

 

 
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Real Estate

Looking To Buy A Home? Triggers For Rejection Of Your Loan


Last year, more than two million people were turned down for homes, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic.  With lenders’ underwriting criteria becoming more rigorous in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.

  • Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments.  Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
  • Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income.  Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
  • Poor credit: Lenders typically reject applicants with FICO scores below 620.
  • Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low.  A buyer may think he or she is purchasing a house worth $800,000, but if the appraisal comes in less than that, the lender will not loan the borrower the money.
  • Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
  • Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

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Real Estate

Muhammad Ali Isn’t Happy With Home, Sues Former Owners

Picture courtesy of BBC
Picture courtesy of BBC

 

Former heavyweight boxing champion Muhammad Ali isn’t happy with his retirement home in Louisville, Ky., and he’s blaming the former owners.

Ali and his wife, Lonnie Ali, have filed a lawsuit against the former owners of the property, claiming the owners failed to disclose severe problems with the property when they had purchased it. The Alis say the home has had a range of problems since they moved in, everything from roof and chimney leaks to water intrusion and poor insulation, improper ventilation, and mold.

In the lawsuit, the Alis allege the former home owners committed fraud by signing disclosure statements that they knew were false. The former home owners said in a statement that the legal filing is a “complete surprise” and that “there are no serious defects or conditions in the home that cannot be resolved.”

The Alis purchased the home in 2006 for $1.9 million. Ken Jones, the real estate agent who represented the former home owners on the sale, told WHAS-11 News that the home was not listed for sale when the Alis inquired about buying it.

“We insisted on an inspector. They had an inspection done,” Jones said. “There were several items noted.” But Jones says all of the items on the list were corrected before the sale went through.

Source: “Realtor Is Shocked by Ali Lawsuit,” WHAS11.com (Oct. 13, 2011)
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Real Estate

U.S. Lowers The Size Of Mortgage It Will Guarantee

September 30, 2011
The current conforming loan limit, which determines the maximum size of a mortgage that the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac can buy or guarantee – is set to expire Friday, Sept. 30.

 

  • Beginning Oct. 1, the conforming loan limit will decline to $625,500, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.
  • Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
  • Under the new GSE loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by San Diego ($151,250), Sonoma ($141,550), Solano ($140,500), and Napa ($137,500) counties.
  • Under the new FHA loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by Merced ($201,450), Riverside ($164,650), San Bernardino ($164,650), Solano ($157,300), and San Diego ($151,250) counties.
  • The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) estimates that more than 30,000 California home buyers statewide will be impacted by the change to the conforming loan limits.
  • In anticipation of the conforming loan limit decline, some banks already have stopped accepting conventional and government applications for loan amounts that exceed the new permanent loan amounts.

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Real Estate

Home Owners Beware A New Twist on Foreclosure Rescue Fraud

Forensic Mortgage Loan Audit Scams:

Fraudulent foreclosure “rescue” professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.

In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

Nothing could be further from the truth. According to the FTC and its law enforcement partners:

  • there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.
  • some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.
  • if you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

If you are in default on your mortgage or facing foreclosure, you may be targeted by a foreclosure rescue scam. The FTC wants you to know how to recognize the telltale signs and report them. If you are faced with foreclosure, the FTC says legitimate options are available to help you save your home.

Spotting a Scam

If you’re looking for foreclosure prevention help, avoid any business that:

  • guarantees to stop the foreclosure process – no matter what your circumstances are
  • instructs you not to contact your lender, lawyer or credit or housing counselor
  • collects a fee before providing any services accepts payment only by cashier’s check or wire transfer
  • encourages you to lease your home so you can buy it back over time
  • recommends that you make your mortgage payments directly to it, rather than your lender
  • urges you to transfer your property deed or title to it
  • offers to buy your house for cash at a fixed price that is inappropriate for the housing market
  • pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.

Source: Federal Trade Commission

 

 

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Real Estate

REALTORS® Expect 1 Percent Rise in Calif. Home Sales

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The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) released its 2012 Housing Market Forecast this week during CALIFORNIA REALTOR® EXPO 2011 in San Jose.  The forecast calls for California home sales and median price to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction.

  • The forecast for California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.
  • “Discretionary sellers will play a larger role in next year’s housing market,” said C.A.R. President Beth L. Peerce.  “Those who held off selling in 2011 may list their homes in 2012, thereby improving the mix of homes for sale compared with the last few years.  Additionally, distressed sales will remain an important segment of the overall market as lenders continue to work through the foreclosure process.”
  • The California median home price is expected to increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast.  Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.
  • View a video of C.A.R. Vice President and Chief Economist Leslie Appleton-Young discussing the 2012 Housing Market Forecast.
  • “2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market.

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Real Estate

Mistakes Housing Investors Make


With traditional investments delivering low returns, some are considering buying rental housing.  However, potential investors should do their homework and avoid the following common mistakes.

Making sense of the story

  • Investing in real estate right now can be profitable, if everything goes as planned.  Rents are increasing in many areas, and more properties may be coming on the market.
  • Last month, the Obama administration asked for proposals on how to convert at least some of Fannie Mae’s and Freddie Mac’s inventories of foreclosed homes into affordable rentals.
  • Traditionally, investors rented out properties for 1 percent of the purchase price per month.  However, according to one property management firm, today, some investors are receiving as much as 2 percent of the purchase price.
  • While it may be true that in some areas home prices are relatively low, that doesn’t mean the property can be rented out.  Homes in deserted subdivisions aren’t any more appealing to renters than they are to buyers.  The same is true for less-attractive properties or those in less-desirable school districts.
  • Prior to purchasing a property, investors should also factor in closing costs of 3 percent to 6 percent, the costs to fix up the place and maintain it, and the holding costs.
  • Investors become landlords, and as such, need to keep in mind that, just like homeowners, tenants may not always be able to pay rent.  Evicting tenants can take several weeks.
  • It’s also important to remember that owning a rental is not the same as owning a home.  An owner may put up with flaws in a home that a renter wouldn’t tolerate.  Additionally, many states and communities have strict laws for landlords, even for those who own only one property.

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John J. O’Dell Realtor® GRI
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