Tuesday, March 23, 2010

US Plan to Streamline & Simplify Short Sales

The U.S. Treasury plan to help homeowners avoid foreclosure potentially applies to 75 percent of the mortgages in the U.S., including those backed by Freddie Mac or Fannie Mae (those two organizations are currently devising guidelines). The plan, which provides incentives for lenders and homeowners for completing Short Sales, is many-faceted:
  • It provides incentives to lenders and borrowers for completing Short Sales
  • It streamlines and standardizes the documentation necessary for Short Sales
  • It limits the ability of subordinate lien-holders to obstruct the Short Sales process
  • It sets limits on the time it takes lenders to approve or reject Short Sales requests
  • It steps up pressure on lenders to make permanent the 650,000 trial loan modifications they started earlier in 2009

Incentives to Borrowers

Under the plan, borrowers who complete a Short Sale are released from all mortgage debt. Additionally, they receive $1,500 for moving expenses.

Incentives for Lenders

The plan provides for payments of $1,000 to mortgage servicers and investors for completing a Short Sale - or a deed-in-lieu transaction, in which the deed is simply turned over to the lender.

Standardized Documentation

The program will publish streamlined and standardized documentation for Short Sales, including a Short Sale Agreement and Offer Acceptance Letter. Creating one standard set of documents will minimize the complexity of Short Sales, which should significantly increase use of the optionn.

Payments Capped to Subordinate Lien-Holders

Some holders of second mortgages have blocked Short Sales by requiring payment in exchange for releasing their claim. Under the plan, subordinate lien-holders as a group can receive no more than $3,000 from proceeds of the sale.

Time Limits for Short Sales

Lenders will have only 10 days to approve or reject a Short Sale - a significant step, since the process often takes so long to complete that the transaction falls through. Borrowers will be allowed at least 90 days to market and sell their home, with the possibility of additional time based on local market conditions. Marketing can run at the same time as the foreclosure process, but no foreclosure can take place during the marketing period as long as the borrower is acting in good faith to sell the property.

Many real estate agents have undergone extensive training to help homeowners avoid foreclosure. If you've fallen behind in your mortgage payments or received a pre-foreclosure letter from your lender, a real estate professional can help. Try to select a real estate agent with a Certified Distressed Property Expert (CDPE) or Short Sales and Foreclosures Resource (SFR) designation to ensure their level of expertise.

Friday, March 19, 2010

U.S. Plan to Help Homeowners Avoid Foreclosure

Homeowners across the United States who are undergoing financial hardship could avoid foreclosure under a plan announced on Nov. 30 by the U.S. Treasury Department. Under the plan, millions of at-risk homeowners could be free of mortgage debt without going through foreclosure, and given $1,500 for relocation.

The Treasury plan, which potentially applies to 75 percent of the mortgages in the U.S., including those backed by Freddie Mac or Fannie Mae (those two organizations are currently devising guidelines), provides incentives for lenders and homeowners for completing Short Sales – transactions in which the lender agrees to a sale price that's less than the borrower owes on the mortgage. Short Sales are preferred to foreclosure because homeowners take less of a hit on their credit and lenders realize a smaller loss.

However, Short Sales often get bogged down because of the complicated nature of the transaction. Deals can fall through because they take too long. Buyers are discouraged with the extended short sale process, which frequently results in foreclosures that could have been prevented.

On April 5, 2010, the U.S. government will implement the Home Affordable Foreclosure Alternatives Program (HAFA). Part of the Home Affordable Modification Program, HAFA helps home owners who are unable to retain their home under HAMP by simplifying and streamlining the use of short sales and deeds-in-lieu of foreclosures. The official effective date of the plan is April 5, 2010, but participating mortgage servicers can begin operating under the terms of the program before then if they are ready to meet all reporting requirements.

Under the plan, which speeds up and simplifies the Short Sale process, mortgage servicers have 10 days to approve or reject a request for a Short Sale. And when the sale is done, the borrower must be fully released from the debt.

Many real estate agents have been through extensive training to help homeowners avoid foreclosure. If you've fallen behind in your mortgage payments or received a pre-foreclosure letter from your lender, contact a real estate agent with a Certified Distressed Properties Expert designation today.

Friday, March 12, 2010

Buy Now ~ Before the Cost Goes Up!

Don’t forget the cost of FHA mortgage insurance is going up. But there is a window of opportunity to get an FHA loan before the this happens. As long as the the laon in obtained before April 5, you can get an FHA loan with 1.75% upfront mortgage insurance (versus 2.25% AFTER April 5).

Why This Is Happening:
· FHA’s capital reserve requirement mandated by Congress has fallen below the minimum requirement.
· FHA makes up 1/3 of all financing in today’s market

What Will Change:
· Increase in the up front MIP Fee to 2.25% from 1.75%
· FHA is also asking Congress to increase its monthly premium which is one of the major advantages compared to a Conventional Loan’s PMI rate. (This has not been finalized yet).
· Seller concessions will be lowered to 3% from 6% - currently viewed as a reason to inflate appraisals.
· Minimum Credit Score of 580 – lower scores require 10% down
· Most likely will not increase the amount the buyer needs to bring to the table, but by increasing the PMI it will increase payments (which is one way to add to the reserve without hurting buyers)

So, Save $$$ ~ Buy NOW!!! Don't hesitate on this one, time is running out!

Visit my website for more up-to-date real estate news.

Saturday, March 6, 2010

The Truth About Appraisals

Knowing the Guidelines Solves the Mystery

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them.

It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed.

Visit my website for more helpful Home Seller Tips.

Wednesday, March 3, 2010

Make Sure You Are Getting the Best Tax Advice

Recently I had a client call me to complain about how upset she was regarding the fact that she was only getting half of the $8000 tax credit. She had purchased a duplex a couple of months ago and was expecting to receive 10% of half of the sales price (since she was renting out the other half of the duplex and receiving rental income). She was, therefore, expecting to get $7500 (10% of $75K instead of 10% of the full purchase price of $150K)

She was very upset because she had recently been to H&R Block to have her taxes done and they insisted on the fact that she was only entitled to half of the tax credit ($4000) rather than 10% of half of the purchase price ($7500).

Now, I am not a tax accountant and don’t even pretend to be. But, I called the IRS and they confirmed that this is indeed wrong. She was indeed entitled to 10% of half of the purchase price ($7500), NOT half of the tax credit ($4000).

So, don’t assume that H&R Block knows what they are talking about. If you (or your clients) have questions regarding the tax credit or any other tax related issues, contact the IRS!

You can get answers to questions about general tax rules by calling (800) 829-1040 (Option 2, Option 1, Option 4).