Tag Archives: real estate loans

Real Estate

Tax Credit Can Be Used on Closing Costs

tax-credit

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.
Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can’t be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.

In addition, some state housing finance agencies

have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.
The first-time homebuyer tax credit was enacted last year–and improved upon earlier this year–to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven’t owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

Source: Robert Freedman, REALTOR® Magazine Online

 

 

Real Estate

New Financial Incentives and Uniform Process for Short Sales

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short-sale-house

The following is a press release which announces that the Obama Adminstration has setforth guidelines to make short sales a little easier and should help us in Nevada County in speeding up short sales.  For anyone with economic problems regarding their home, this is welcome news. Banks tend to prolong a short sale because of their bureaucracy . This proposal will give banks financial incentives to speed up the process. 

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.

The NATIONAL ASSOCIATION OF REALTORS® (NAR) today announced that the Obama Administration has added new incentives and uniform procedures for short sales under its new Foreclosure Alternatives Program (FAP), part of the administration’s Making Home Affordable plan.

Loan servicers may consider short sales or deeds-in-lieu of foreclosure for borrowers who do not qualify to have their loans modified on a permanent basis under the Making Home Affordable Loan Modification Program.

• Borrowers/homeowners qualify under the FAP if they meet minimum eligibility requirements for the Home Affordable Modification program, but don’t qualify for a modification or do not successfully complete the three-month trial period. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate.

• Incentives include: $1,000 for servicers for successful completion of a short sale or deed-in-lieu of foreclosure; $1,500 for borrowers/homeowners to help with relocation expenses; and up to $1,000 toward the cost of paying junior lien holders to release their liens (one dollar from the government for every $2 paid by the investors to the second lien holders).

• The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

• Servicers will independently establish both property value and minimum acceptable net return, in accordance with investor requirements. The price may be determined based on an appraisal or one or more broker price opinions (BPOs), issued no more than 120 days before the date of the short sale agreement.

• In the Short Sale Agreement, servicers must give borrowers/homeowners at least 90 days to market and sell the property, or up to one year, depending on market conditions. Property must be listed with a licensed real estate professional with experience in the neighborhood. No foreclosure may take place during the marketing period (at least 90 days) specified in the Short Sale Agreement.

• The Short Sale Agreement must specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

• Servicers may not charge fees to borrowers/homeowners for participating in the FAP.

• The program is in effect through 2012.

• Servicers have the option to require the borrower/homeowner to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).

Printed by Permisson of:
Copyright © 2009 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)

Real Estate

Putting Mortgages into ‘Plain Language’

house-on-hands

Bank of America has created a new website called Bank of America Home Loans for borrowers that includes a calculator that determines not just what size loan people can qualify for, but how much they can spend without being stretched too thin. “We wanted to change the conversation to ‘How much house can I comfortably afford?’ rather than ‘What’s the maximum I can buy?’ ” said Aditya Bhasin, the product, pricing and strategy executive for Bank of America Home Loans.

The site is designed to be easy to read, spelling out a variety of contingencies, including the maximum payment that an adjustable rate mortgage could potentially cost.

The new site also offers what BofA calls Flat Fee Mortgage Plus, which has no application fee and a single closing fee that includes processing costs and fees for third-party services like appraisals.

Not included are other standard costs like property taxes, homeowners’ insurance and prepaid interest.

Craig Focardi, a senior research director at the Tower Group, a financial consulting firm, said the idea for the plan is nothing new – it’s been tried by others. But the prominence of the programs could persuade competitors to adopt the features.”

If you recall, Bank of America took over Countrywide Lending and renamed it Bank of America Home Loans. I’m not sure that their new website is not a rehash of Countrywide’s old website. But with B of A’s great customer service (tongue in cheek) they need some kind of P.R. to make them look helpful. Some related information on Countrywide Financial Corporation:

According to the LA Times 04/27/2009

“Linked more recently with high-risk loans, co-founder Angelo R. Mozilo’s huge paydays and FBI investigations, the Countrywide name became “too toxic to resuscitate,” as another expert puts it — and a liability for Bank of America Corp., which snatched it up last year as it neared collapse.

And so over the weekend, nearly 10 months after the Bank of America deal closed, Countrywide Home Loans signs came down and Bank of America Home Loans signs appeared at the lender’s 215 storefront offices in California. It was the start of a rebranding of nearly 1,300 Countrywide mortgage offices nationwide.”

Yep, Countrywide and Bank of America, great combination.

Real Estate

Lenders Chase Short Sale Sellers

This is a reverse view, your neighbors are there to watch out for you.
This is a reverse view, your neighbors are there to watch out for you.

This is Listing… with panoramic views in Seattle, Washington. But, on with the story.

An increasing number of lenders are going after borrowers who sell their homes for less than they owe – known as a short sale – in order to recover more of the difference between the amount owed and the sale price.Lenders say the factors that they consider when they decide to seek more money are: 

  • How large was the unpaid debt?
  • Was the property an investment or a personal residence?
  • How much money does the borrower make and what other assets does he have?
  • What is the policy of the mortgage insurer or the holder of the second lien? 

A PMI Group Inc. spokesman says the mortgage insurer “primarily target[s] borrowers who are not experiencing hardship – but those who simply elected to walk away from the property due to its decline in value

Source: The Wall Street Journal, Ruth Simon (04/30/2009)

In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, usually in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. 

In some cases as mentioned above, the banks are not willing to just let go of the mortgage without further compensation.  In many cases, this has led to foreclosure in lieu of a short sale. 

Nevada County Home & Land Statistics, Nevada County Information, Real Estate

Nevada County Residential & Land Sales, April 2009

"Alternative Housing" Location, Oregon
"Alternative Housing" Location, Oregon

 

What the figures show for April of this year is that residential sales are about the same number as it was for April of last year.  However, we’ve had a further decline in medium residential home prices of minus 23 percent. Here are the stats for sales in Nevada County.

There were 67 residential properties sold in April 2009 compared to 62 residential sales in April 2008.  Total residential sales from January to the end of April 2009 were 191 sales compared to the same period last year of 203 sales.

The medium price for April 2009 was $299,000 compared to April 2008 of $387,500 a decline in market price of 23 percent.  There were 1,165 residential properties listed for sale at the end of April, which based on the number of sales from January to April 2009 equals about 1.6 years supply of residential property for sale, assuming sales continue at the same rate.

There were 20 land sales from January to April in 2009 with a 45 month supply of land at the end of April. Last year there were 45 land sales with a 49 month supply of land.

I’ve noticed a pickup in pending sales, which I post on this website daily for those that are interested, and it seems that the pending sales are up. They have been hovering in the 200 pending sales starting within the last month. However, this is for all sales, not just residential sales.

Where are we with future sales? It’s anyone’s guess, Fannie Mae and Freddie Mac asked lenders to forestall any more foreclosures until March 6, 2009.  What they are doing now that the agreement date has expired? Some circles say we are in for a tsunami of foreclosures. The following banks had agreed to the government’s request and their expiration dates of the agreement. 

JP Morgan Chase – New Owner-Occupied residential loans that are owned and serviced by JPMorgan Chase.  As with Fannie Mae, the moratorium of foreclosures end date, March 6th.

Citigroup – All Citi-owned first mortgage loans that are principal residence and on loans for which understandings with investors have been reached.  Moratorium end date – March 12th.

Bank of America (also Countrywide now renamed Bank of America Home Loans) – Delay foreclosures sales on owner occupied properties whose mortgage loans are owned and serviced by B of A or Countrywide  – Through March 6th.

Wells Fargo (also Wachovia) – For Loans it holds.  The moratorium is expected to remain in place until the government’s foreclosure prevention plan is announced.  The majority of Wells Fargo’s mortgage loans are serviced by it and owned by other investors. 

 

Real Estate

Jumbo Loan Limits Raised by Fannie Mae and Freddie Mac

mansion-picture

Fannie Mae and Freddie Mac will once more begin buying “super-conforming” mortgage loans of up to $729,750, which will bring rates down for borrowers with good credit seeking loans previously classified as jumbo.
Currently, loans greater than the $417,000 conforming limit in “normal” housing markets — or the super-conforming limit of up to $625,500 in high-cost markets — are considered jumbo loans.

Jumbo loans carry higher rates than conforming loans because they aren’t eligible for purchase or guarantee by Fannie Mae and Freddie Mac. Rates on jumbo loans are running at least 1 percent to 1.5 percent higher than conforming loans of less than $417,000.

In between conforming and jumbo loans are so-called super-conforming loans that exceed the $417,000 conforming loan limit, but are still eligible for purchase or guarantee by Fannie and Freddie.

Super-conforming loans carry slightly higher interest rates than conforming loans — about 25 to 30 basis points — but are less costly than jumbo loans that Fannie and Freddie can’t buy or guarantee. A basis point is one hundredth of a percent.

On Jan. 1, the upper limit for super-conforming loans was rolled back from $729,750 to $625,500. But the economic stimulus bill signed into law Feb. 17 restored the higher limit for single-family homes in high-cost markets that was in place for much of 2008.

The following week, the Federal Housing Finance Agency published lookup tables for the new Fannie and Freddie limits in high-cost markets — 250 counties nationwide.

But Fannie Mae did not issue its eligibility requirements for the new limits until March 30. Freddie Mac published its guidelines on April 16. Both companies will begin buying super conforming loans of up to $729,750 from lenders on May 4.

Wells Fargo will begin making super-conforming loans of up to $729,750 in high-cost markets on Monday, and Bank of America will start in mid-May, the San Francisco Chronicle reported.

Real Estate

Shall I Walk Away From My Home? Part 2

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walking  

The post I wrote entitled “Shall I Walk Away from my House” drew some real good comments both pro and con.

Shall I walk away from my home? If you are backed against a wall and have no choice, then of course the answer is yes, if you have no other choice. But If you like your house, you can make the payments, then the answer is no. You should have bought your home because you liked it, it appealed to you; it made you happy to have it as your house. The consequences of walking away are that you are going to have to rent because your credit score is down the tubes. Because of your low credit rating you are going to have to rent from three to five years or more because lenders won’t lend money for you to buy a home.

Owning a home is forced savings. You have to make the payments, your principal is going down, and money is depreciating, making your payments lower in relation to your earnings over a period of time.

The primary purpose of owning a home, unless you are an investor, is to live in the house, not to make a profit off of it. I believe that some people got carried away during the housing boom times and bought a home just to make money, not live in it. So if you have a steady job, and feel secure in it, this is just as good a time to stay in your home as any other. The question that goes along with this is: should you buy a home now, if you don’t have one.

The philosophy that I’ve had all my life in regards to a home has been to buy not to rent. I remember when I worked as an engineering aide and making barely enough money to do anything, I bought my first house through a private party with a small down payment. The seller carried the paper.  From that first purchase, a few years later, I was able to trade the home in Diamond Springs for a lot in Nevada City. Since I had the lot free and clear, I was then able to get a loan to have a contractor build a new home for me. My mortgage payment was $175 a month. I was in charge of the Nevada County Engineering Department at that time, and believe me, that mortgage payment was all I could afford. Do you think money has depreciated?

Is this a good time to buy? Is this a good time to hold on to your house if you can? The answer to both of these questions is yes. It’s always a good time as far as I’m concerned. I would rather buy a home than rent. I don’t like to be under a landlord.  Besides, it always seemed a waste of money to pay off someone else’s property when you could be paying off your own.  Time has shown that money depreciates and real estate increases in value.  My first mortgage on the house I had built was $175 a month. I could barely afford it. What can you buy today for $175 a month? Not much, certainly not a home.

Some people have forgotten the value of home ownership during this downturn. All you hear about are the people who are losing their homes. We forget that most of us bought a home to live in, not to make a living buying and selling, or getting into a “get rich” scheme.

So should you stay in your home?  My answer is stay there if you can, or buy one if you can.  History, no matter what people say, shows that real estate goes up and the value of your money goes down. I wish I had that $175 a month mortgage on my present home.  Let me know what you think.

Real Estate

Banks Banking Their Foreclosures?

bomb
Are the banks holding off putting some of their foreclosures on the market? It looks like they might be to keep the prices of the real estate market from plunging further. Another reason could be that it helps them appear more solvent then they really are.

According to the San Francisco Chronicle

“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.”

“There is a real danger that there is much more (foreclosure) inventory than we are measuring,” said Celia Chen, director of housing economics at Moody’s Economy.com in Pennsylvania. “Eventually those homes will have to be dealt with. If they’re all put on the market, that will add more inventory to an already bloated market and drive down home prices even more.”

In November of last year, Fannie Mae and Freddie Mac ordered their loan servicers and attorneys not to evict about 16,000 troubled borrowers or sell their homes until they implement a streamlined loan modification program. This might prevent some foreclosures, but the numbers of homeowners facing foreclosures have increased since then.

Where’s the bottom? As I posted yesterday, there are some signs of increased sales and improvement in the economy, so maybe we’re there and maybe not.

Real Estate

Mortgage Brokers Can Cost You More Money

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Using a reputable mortgage broker can save you time and remove some of the hassle in obtaining a loan.  However according to a study by the Department of Housing and Urban Development published last year, you may wind up paying more for your loan.

According to the study, borrowers paid about $300 to $425 more in fees when they worked with a broker as opposed to working directly with a lender.

If you are a home buyer, you may want to investigate mortgage options as opposed to using a broker by comparison shopping. This can be tricky, but be sure to include at least one credit union, a community bank and multiple national banks. You may have to spend several days doing this before you find just the right loan.

You should compare one type of loan at a time–for instance, a 30-year, fixed rate with no points. Their research should include a request for a guarantee that both the rate and the good-faith estimate will be exactly as initially presented. This standard could be difficult for a buyer to find, but it’s worth trying to find it, experts say.

If you get too confused, you can always go to a mortgage broker, they have access to multiple lenders and can lead you through the lending process rapidly.

 

Real Estate

The Sad Face of a Foreclosure

I was recently asked by an Eastern Bank to do a brokers professional opinion (BPO) as to the listing value of a property. This is not an appraisal, but a value based on six properties that are similar, three recently sold and three that are active that would compete for the property for which the bank wants a listing value.

 We had done an earlier BPO on this property several years ago when the home owners were in the process of building their home.  The bank had given them a loan to build their home and the homeowners wanted additional money to finish their home.

The market at that time was red hot and the value for additional financing was there, based on the value of similar properties in the area.  What a change, going back there now, the owners had left, leaving behind their dreams, broken like the thousands of pieces of garbage they had left behind. Yes, they had left behind a home unfinished, garbage strewn all over the property, vehicles left behind that had been cannibalized. To further complicate matters, it is off the power grid, and the home was provided power by a generator and solar panels, all of that gone, leaving behind only one battery in the living room.

The kitchen was unusable, with the stove inoperable, and in a big mess. I would estimate that before the bank can even put this house on the market, it is going to cost $15,000 to clean up the garbage, haul away the vehicles, (including a trashed RV).  Due to the poor workmanship on the home, the home being off the grid, the cleanup necessary, the bank is going to lose a tremendous amount of money. Of course, this foreclosure will further depress the market in the area, as all foreclosures are doing to all of our property values.