Don't reduce your property insurance coverage to reflect lower home values
Experts say it costs more to rebuild than it does to start from scratch, so the market value of a house doesn't indicate the amount of insurance you need.
Reporting from Washington -- There are a number of steps every homeowner should take to lower the cost of property insurance. But reducing the amount of coverage to match today's lower values is probably not one of them.Because it costs more to rebuild than it does to start from scratch, the market value of a house is not a reliable indicator of the amount of insurance you need. Too little coverage and your policy may not assume the cost to return your place to its original condition if needed.
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"There has been a lot of noise lately around market values, but market value and the cost to rebuild are two totally different things," said Elaine Baisden, vice president of national property for Travelers Cos., the Hartford, Conn.-based property casualty insurer. "So lowering policy limits could leave you underinsured."Despite the downward spiral in housing prices, home repair costs increased nearly 4% nationally, according to Xactware, whose software products estimate building and repair costs. Marshall & Swift, an authority on building-cost data, says it can cost as much as 30% more to rebuild a house as opposed to building a new one.Reconstruction costs are greater because the process usually involves the demolition and removal of damaged property. On-site mobility often is limited by the need to work around existing landscaping, power lines and other buildings. There are no economies of scale like there are when building row upon row of houses. Then there's the issue of newer, often more rigid building codes that might have to be met.
Market value, on the other hand, is often influenced by factors that have absolutely nothing to do with the cost to rebuild -- the quality of nearby schools, for example, the local tax base or the proximity to rapid transit.Value also is affected by the cost of the land on which the house sits, and that is something you should factor in when considering how much coverage to carry.Typically, the building lot accounts for 25% of a home's value. But you can get a better reading from your tax bill, which usually separates the value of the land from the value of the house. You shouldn't use the property's assessed value to determine how much coverage you need, but you can use the percentage ratio of the lot to the total to at least get an idea of what's needed.Still, it's probably not a good idea to arbitrarily make these kinds of decisions without first sitting down with your agent and discussing your needs. The wrong choice could prove to be an expensive one, Travelers' Baisden said."Home insurance limits are in place to financially protect your family should something go wrong," she said. "If there's a fire or a significant weather event, you want to make sure you have enough coverage to rebuild your home in its entirety."How to saveHere are some other steps you can take to save money while still protecting what may be your most valuable asset.* Check your credit records. For years, insurers based their rates mainly on the location and age of the property and its distance from the nearest firehouse. Now, like mortgage lenders and other credit issuers, they "score" policyholders based on information in their credit histories.It's a controversial practice, but insurers maintain that insurance scores are highly predictive of risk. Some use scoring only when other factors suggest that you are likely to file more claims, but others use it more extensively as both an underwriting tool and a mechanism for setting rates.Whether you agree with the practice or not, it is important to pay your bills on time and make sure that there are no errors in your credit records.* Avoid nuisance claims. The more claims you file, the more you are going to be charged, even if the claims are legitimate. So use your coverage for its intended purpose -- to protect against losses from which you cannot recover on your own -- and take care of the minor incidents yourself.* Shop around. Prices vary from company to company. You won't be able to negotiate rates, but you may be able to lower your costs by comparison shopping. Premiums can vary substantially from one insurer to the next.Although price is important, there are other factors to consider when choosing an insurer. You want a company that's financially stable, and an agent who takes the time to answer all your questions. And make sure that the company isn't prone to cutting loose anyone and everyone who files a claim.You can check the financial health of the various carriers with rating companies such as A.M. Best and Standard & Poor's. To get an idea about service, talk with friends and relatives about their experiences, or consult consumer guides (such as Consumer Reports) that rate insurers every few years on readers' overall satisfaction with their companies.* Raise your deductible. A deductible is the amount you pay toward a loss before your coverage kicks in. The higher the deductible, the lower the premium.According to the Insurance Information Institute, an industry-supported nonprofit communications organization, bumping the deductible from $250 to $500 could cut your costs 12%. You could save as much as 25% by jumping to a $1,000 deductible, and up to 30% by going to $2,500.But since you will be self-insuring, be careful. Don't go so high that you don't have the cash reserves to cover your share of the loss.* Look for discounts. It may be possible to lower your costs by buying all your insurance from the same company. Some insurers will cut their premiums up to 15% if you buy two or more policies from them. But be sure that the combined price is lower than buying the same coverage from competing companies.Other discounts abound. You may get a break of up to 10% if you're a longtime policyholder, say, for six years or more. And if you are over 55 and retired, you may qualify for a senior discount under the theory that since you're now home more, there's less chance of a major loss because you will be there to catch the fire or leak before it gets out of hand.You usually can obtain a premium reduction ranging from 5% to 25% if you have protective devices such as burglar alarms or even deadbolt locks. Article By Lew Sichelman June 7, 2009 lsichelman@aol.com http://www.latimes.com/classified/realestate/news/la-fi-lew7-2009jun07,0,3514957.story
Showing posts with label Elk Grove. Show all posts
Showing posts with label Elk Grove. Show all posts
Friday, July 3, 2009
Is Mediation the Answer?
Is Mediation the Answer?
By Jennifer Harmon
Foreclosures are costly to the borrower, servicers and the investors who take losses on the sale of those properties. It’s also expensive to the taxpayers in the communities where these foreclosures are taking place. Foreclosures drive down property value. They often result in an increased level of blight and crime, and property tax revenue decreases because of the decline in value.
The Obama administration is doing everything in its power to reduce foreclosures through the Home Affordable Modification Program. While many are focusing on the refi and modification components of the plan, the Center for American Progress says that mandatory mediation should be incorporated into that process to make sure that the people who are eligible for these programs will in fact get the assistance that they need.
The report, “It’s Time We Talked: Mandatory Mediation in the Foreclosure Process,” outlines how foreclosures can be reduced by as much as 75% if the federal government takes a more direct role in providing opportunities for mediation.
Philadelphia and Connecticut are two places that have had mediation programs in place for about a year now. About three-quarters of all cases that go through mediation are able to avoid foreclosure, according to Andrew Jakabovics, the organization’s associate director for housing and economics. “That really shows that there is an alternative to foreclosure that is beneficial to everybody,” he said. “I think it can be wrapped up nicely into the ongoing administration’s efforts.”
Mediation is simply a voluntary negotiation between two parties in the presence of a neutral third party. The important thing about it is that it’s voluntary negotiation. It’s not bankruptcy and it’s not a cramdown.
Mandatory mediation begins when a foreclosure notice goes out to both parties at the beginning of the process. The servicer and homeowner are required to appear at a particular time on a particular date for a mediation session.If a servicer is participating in a mediation session and feels like it is not beneficial and doesn’t think he will make more from settling than in foreclosure, the servicer never has to settle.
One of the potential pitfalls in the program is that borrowers who are eligible for HAMP are not necessarily getting the modifications under the program either because the servicers are applying the wrong numbers or they are actively steering borrowers to non-HAMP-compliant loans, said Mr. Jakabovics.
“One of the things mediation would do is simply say if a borrower in the process of getting foreclosed on goes to a mediation session, the servicer is there and says, ‘Look, you didn’t qualify.’ This gives the borrower basically an appeals process that is currently missing from HAMP so the borrower can say, ‘Here are my numbers. What numbers were you looking at?’ The servicer might go back and look at them and see if they can actually reach a deal.”
Given that the compliance checks on HAMP are several months out, the detailed checks are not likely to start until October. There are problems these compliance checks might not catch. “Certainly, come October if something gets flagged and is eligible for HAMP, but the borrower was not offered the modification, it does the borrower very little good if they are already out of their home,” said Mr. Jakabovics.
Getting borrowers and servicers together in the same room appears to have tremendous value. Mediation might be an ideal way to make sure the servicer is getting it right. They are not going to be making any more deals that are less valuable to them than what they would have gotten in foreclosure.
By Jennifer Harmon
Foreclosures are costly to the borrower, servicers and the investors who take losses on the sale of those properties. It’s also expensive to the taxpayers in the communities where these foreclosures are taking place. Foreclosures drive down property value. They often result in an increased level of blight and crime, and property tax revenue decreases because of the decline in value.
The Obama administration is doing everything in its power to reduce foreclosures through the Home Affordable Modification Program. While many are focusing on the refi and modification components of the plan, the Center for American Progress says that mandatory mediation should be incorporated into that process to make sure that the people who are eligible for these programs will in fact get the assistance that they need.
The report, “It’s Time We Talked: Mandatory Mediation in the Foreclosure Process,” outlines how foreclosures can be reduced by as much as 75% if the federal government takes a more direct role in providing opportunities for mediation.
Philadelphia and Connecticut are two places that have had mediation programs in place for about a year now. About three-quarters of all cases that go through mediation are able to avoid foreclosure, according to Andrew Jakabovics, the organization’s associate director for housing and economics. “That really shows that there is an alternative to foreclosure that is beneficial to everybody,” he said. “I think it can be wrapped up nicely into the ongoing administration’s efforts.”
Mediation is simply a voluntary negotiation between two parties in the presence of a neutral third party. The important thing about it is that it’s voluntary negotiation. It’s not bankruptcy and it’s not a cramdown.
Mandatory mediation begins when a foreclosure notice goes out to both parties at the beginning of the process. The servicer and homeowner are required to appear at a particular time on a particular date for a mediation session.If a servicer is participating in a mediation session and feels like it is not beneficial and doesn’t think he will make more from settling than in foreclosure, the servicer never has to settle.
One of the potential pitfalls in the program is that borrowers who are eligible for HAMP are not necessarily getting the modifications under the program either because the servicers are applying the wrong numbers or they are actively steering borrowers to non-HAMP-compliant loans, said Mr. Jakabovics.
“One of the things mediation would do is simply say if a borrower in the process of getting foreclosed on goes to a mediation session, the servicer is there and says, ‘Look, you didn’t qualify.’ This gives the borrower basically an appeals process that is currently missing from HAMP so the borrower can say, ‘Here are my numbers. What numbers were you looking at?’ The servicer might go back and look at them and see if they can actually reach a deal.”
Given that the compliance checks on HAMP are several months out, the detailed checks are not likely to start until October. There are problems these compliance checks might not catch. “Certainly, come October if something gets flagged and is eligible for HAMP, but the borrower was not offered the modification, it does the borrower very little good if they are already out of their home,” said Mr. Jakabovics.
Getting borrowers and servicers together in the same room appears to have tremendous value. Mediation might be an ideal way to make sure the servicer is getting it right. They are not going to be making any more deals that are less valuable to them than what they would have gotten in foreclosure.
Tuesday, June 23, 2009
Managing an REO
From walls to floors and cabinets to countertops, asset managers have to cover a lot of ground in order to make sure an REO property is clean and ready to sell.
It is a wise move for asset managers to give their real estate agents, brokers and service providers a guide to use when getting real estate-owned assets spic-and-span, according to CJ Gehlke, president and founder of REO Nationwide in Newport Beach, Calif.
Let's get down to specifics. Inside the home, Ms. Gehlke recommends to take a close look at the kitchen. Remove the refrigerator if it is inoperable and not repairable. If it is in working condition, remove the kick plate at the bottom front of the refrigerator and remove and clean the defrost pan. Defrost the fridge, remove and clean all shelves, racks and drawers. After cleaning, reassemble the refrigerator, and turn it on, setting the control at the warmest setting.
For drawers in the kitchen, empty and clean all stains and food particles by washing them with mild soap and warm water. Remove any worn paper lining. Wipe out drawers. It is important to clean the interior of the dishwasher and remove any food particles. Clean the soap holder, racks and trays. Clean the exterior by wiping with mild soap and warm water.
Next, move down the hallway of home to the washer and dryer. REO Nationwide says it's important to clean the interior thoroughly and include any filters. Remove all mineral and dried soap deposits from the top of the washer.
"For the furnace, remove and thoroughly clean or replace filter in the bottom of furnace. Clean all windows inside and out. Don't forget the screens. Vacuum Venetian blinds to remove dust and spots," says Ms. Gehlke. "Wipe the window sills to remove dust, spots or stains. The walls and ceilings take up a great deal of time. Brush out all corners to remove any dust. Clean the ceiling surrounding all vents."
There's more work to be done. Inside the bathroom, make sure to sanitize all tile and shower doors to remove lime deposits and mildew. Scrub the tub as well as the shower and sinks. "It is important to clean thoroughly any woodwork, including doors, door frames and baseboards."
Also, sweep and mop hardwood floors, title and linoleum. Don't forget to take care of the carpet. Remove stains and shampoo when this is requested. Empty and tidy up shelves, drawers and closets thoroughly. Remove, dust and replace the light fixtures. All fixtures should have an operable 60-watt bulb in each socket, says Ms. Gehlke. "If the house has a fireplace, go over it thoroughly to include the ash compartment. Sweep, clean and remove all trash and debris from the back porch."
Don't forget the garages and carports. Get rid of all trash and debris, and sweep clean these areas of the property. Remove the oil and grease from floor of carport/garage and driveways. Vacuum any vents in the property and haul off items from the storage sheds and make sure to sweep this area clean. And of course, remove all items of personal property.
If the amount of personal property exceeds a certain threshold (industry standards are $500), the personal property goes through an eviction process in accordance to state and local requirements. When it comes with dealing with the outside of the home, Cheryl Lang, president of the Houston-based Integrated Mortgage Solutions, says in the summer, contractors mow the lawn every two weeks and trim the bushes during April to October.
She says part of property preservation means ensuring that all hazardous materials have been removed from the property. This may include removing swing sets, tires, paint, boarding up in-ground pools or removing aboveground pools and draining ponds.
"The process of preserving property has been greatly improved by the use of digital imaging," describes Ms. Lang. "Because contractors may miss something or deem a property vacant when it is occupied, most vendors today require pictures to verify contractor's work. It is estimated that roughly 20% of contractor mistakes are caught using digital photos."
Some vendors today even provide phones with camera capabilities to contractors, so they may collect and share real-time photos in order to expedite the property preservation process. As more and more REO homes need to be monitored and preserved, technology ultimately allows more details to be presented on every property.
Photoinspection.com, a Buffalo, New York based company, provides property inspection services for the insurance and mortgage industries. The company, which was established in 1999, has focused on developing a robust and functional technology platform from the very beginning. The company has built a national network of inspectors, which was not an easy thing to do for a small company that was surviving on a bootstrap financing, says Ted Onyeji, president.
A network that includes several thousand appraisers located across the country has become the backbone of the company, he describes. Inspectors are monitored on their first 10 jobs to make sure they comply with industry standards. "We've noticed a lot of inspection companies are beginning to add inspectors across the country, especially in the areas of Florida and Michigan because of the glut of houses out there."
The biggest goal is to make sure the vacant property is not an eyesore.
Safeguard Properties, a privately held field services company located in Valley View, Ohio, makes sure the grass is cut, that there are no broken windows and if there is a gas or water leak inside the home, the company addresses those types of problems immediately.
Safeguard also offers maid services. Contractors are to follow the maid services checklist included in the work order and leave it at the property signed by the person who completed the services. This is a requirement when completing the initial services order. "You have no idea what we find in some of these properties. We will wash the counters down, clean the fridge, put in air fresheners so it doesn't smell like an REO," says Mr. Klein.
Bleach and household cleaners are used to rid a property of a smell, along with a powder scent put down on the carpet before vacuuming. Contractors bring a hot water supply with them to perform the cleaning. If carpet is in deplorable condition, the contractor will notify Safeguard to have it removed. "The lender wants to sell the REO as soon as possible to a homeowner who will live in the property. You want to make it as attractive as possible. You have to make it look and smell good. We try to do the best we can. We do as much as we can so the neighbors don't have a rundown home with 50 tires in the front yard," he adds.
Properties are becoming more seriously damaged as well. Some homeowners in foreclosure are so frustrated they will do serious damage to the property. They take out appliances, put holes in the walls and holes in the floor, he says. "There is no rhyme or reason. They are taking their frustration out on the system or the process. We are seeing that more and more."
By the time the mortgage company gets a hold of one of these properties, it is sometimes problematic. Safeguard hire various contractors they have built relationships with to do repairs such as re-roof a home. In today's market the industry is seeing an increase in the amount of repairs being done to vacant REOs.
"The goal of the mortgage company is to sell this property as quickly as possible. Every day they hold on to it is costing them money, in addition to the foreclosure process. It's a bigger financial loss. We want to make the house inviting and attractive to the possible homeowner."
Full Article: http://www.managingreo.com/feature/?story_id=89
It is a wise move for asset managers to give their real estate agents, brokers and service providers a guide to use when getting real estate-owned assets spic-and-span, according to CJ Gehlke, president and founder of REO Nationwide in Newport Beach, Calif.
Let's get down to specifics. Inside the home, Ms. Gehlke recommends to take a close look at the kitchen. Remove the refrigerator if it is inoperable and not repairable. If it is in working condition, remove the kick plate at the bottom front of the refrigerator and remove and clean the defrost pan. Defrost the fridge, remove and clean all shelves, racks and drawers. After cleaning, reassemble the refrigerator, and turn it on, setting the control at the warmest setting.
For drawers in the kitchen, empty and clean all stains and food particles by washing them with mild soap and warm water. Remove any worn paper lining. Wipe out drawers. It is important to clean the interior of the dishwasher and remove any food particles. Clean the soap holder, racks and trays. Clean the exterior by wiping with mild soap and warm water.
Next, move down the hallway of home to the washer and dryer. REO Nationwide says it's important to clean the interior thoroughly and include any filters. Remove all mineral and dried soap deposits from the top of the washer.
"For the furnace, remove and thoroughly clean or replace filter in the bottom of furnace. Clean all windows inside and out. Don't forget the screens. Vacuum Venetian blinds to remove dust and spots," says Ms. Gehlke. "Wipe the window sills to remove dust, spots or stains. The walls and ceilings take up a great deal of time. Brush out all corners to remove any dust. Clean the ceiling surrounding all vents."
There's more work to be done. Inside the bathroom, make sure to sanitize all tile and shower doors to remove lime deposits and mildew. Scrub the tub as well as the shower and sinks. "It is important to clean thoroughly any woodwork, including doors, door frames and baseboards."
Also, sweep and mop hardwood floors, title and linoleum. Don't forget to take care of the carpet. Remove stains and shampoo when this is requested. Empty and tidy up shelves, drawers and closets thoroughly. Remove, dust and replace the light fixtures. All fixtures should have an operable 60-watt bulb in each socket, says Ms. Gehlke. "If the house has a fireplace, go over it thoroughly to include the ash compartment. Sweep, clean and remove all trash and debris from the back porch."
Don't forget the garages and carports. Get rid of all trash and debris, and sweep clean these areas of the property. Remove the oil and grease from floor of carport/garage and driveways. Vacuum any vents in the property and haul off items from the storage sheds and make sure to sweep this area clean. And of course, remove all items of personal property.
If the amount of personal property exceeds a certain threshold (industry standards are $500), the personal property goes through an eviction process in accordance to state and local requirements. When it comes with dealing with the outside of the home, Cheryl Lang, president of the Houston-based Integrated Mortgage Solutions, says in the summer, contractors mow the lawn every two weeks and trim the bushes during April to October.
She says part of property preservation means ensuring that all hazardous materials have been removed from the property. This may include removing swing sets, tires, paint, boarding up in-ground pools or removing aboveground pools and draining ponds.
"The process of preserving property has been greatly improved by the use of digital imaging," describes Ms. Lang. "Because contractors may miss something or deem a property vacant when it is occupied, most vendors today require pictures to verify contractor's work. It is estimated that roughly 20% of contractor mistakes are caught using digital photos."
Some vendors today even provide phones with camera capabilities to contractors, so they may collect and share real-time photos in order to expedite the property preservation process. As more and more REO homes need to be monitored and preserved, technology ultimately allows more details to be presented on every property.
Photoinspection.com, a Buffalo, New York based company, provides property inspection services for the insurance and mortgage industries. The company, which was established in 1999, has focused on developing a robust and functional technology platform from the very beginning. The company has built a national network of inspectors, which was not an easy thing to do for a small company that was surviving on a bootstrap financing, says Ted Onyeji, president.
A network that includes several thousand appraisers located across the country has become the backbone of the company, he describes. Inspectors are monitored on their first 10 jobs to make sure they comply with industry standards. "We've noticed a lot of inspection companies are beginning to add inspectors across the country, especially in the areas of Florida and Michigan because of the glut of houses out there."
The biggest goal is to make sure the vacant property is not an eyesore.
Safeguard Properties, a privately held field services company located in Valley View, Ohio, makes sure the grass is cut, that there are no broken windows and if there is a gas or water leak inside the home, the company addresses those types of problems immediately.
Safeguard also offers maid services. Contractors are to follow the maid services checklist included in the work order and leave it at the property signed by the person who completed the services. This is a requirement when completing the initial services order. "You have no idea what we find in some of these properties. We will wash the counters down, clean the fridge, put in air fresheners so it doesn't smell like an REO," says Mr. Klein.
Bleach and household cleaners are used to rid a property of a smell, along with a powder scent put down on the carpet before vacuuming. Contractors bring a hot water supply with them to perform the cleaning. If carpet is in deplorable condition, the contractor will notify Safeguard to have it removed. "The lender wants to sell the REO as soon as possible to a homeowner who will live in the property. You want to make it as attractive as possible. You have to make it look and smell good. We try to do the best we can. We do as much as we can so the neighbors don't have a rundown home with 50 tires in the front yard," he adds.
Properties are becoming more seriously damaged as well. Some homeowners in foreclosure are so frustrated they will do serious damage to the property. They take out appliances, put holes in the walls and holes in the floor, he says. "There is no rhyme or reason. They are taking their frustration out on the system or the process. We are seeing that more and more."
By the time the mortgage company gets a hold of one of these properties, it is sometimes problematic. Safeguard hire various contractors they have built relationships with to do repairs such as re-roof a home. In today's market the industry is seeing an increase in the amount of repairs being done to vacant REOs.
"The goal of the mortgage company is to sell this property as quickly as possible. Every day they hold on to it is costing them money, in addition to the foreclosure process. It's a bigger financial loss. We want to make the house inviting and attractive to the possible homeowner."
Full Article: http://www.managingreo.com/feature/?story_id=89
California running out of $10,000 tax credits
First-time home buyers wanting to take advantage of the state's $10,000 tax credit may have less time than originally expected. California set aside $100 million to help home buyers purchase newly built homes, hoping to jump start the residential-construction market. According to state officials, the tactic has worked well and is helping to entice home buyers into the market. However, there only is approximately 20 percent of the program's funding remaining.The program launched in March, and as of June 3 nearly $24 million in tax credit certificates already had been issued, according to the state's Franchise Tax Board, leaving nearly $76 million in credit available. Many applications still are in the pipeline awaiting approval. If all of the submitted applications are approved, only $17.5 million would remain in the fund. The California state legislature is considering adding another $200 million to the program. However, securing approval may be difficult due to the state's estimated $24 billion budget deficit. A bill to extend the program already has won Assembly approval and now is awaiting activity in the state Senate.
Wednesday, June 3, 2009
Market Update and How a 15 Year Mortage saves you $$P
Signs of more trouble ahead for housing marketSeveral recent market barometers, including declining housing inventory, increasing buyer competition, slowing price depreciation, and rising builder confidence all point to a real estate market rebound. However, other signs such as rising unemployment, lack of “move-up” buyers, stricter loan underwriting standards, and foreclosures also may impact the market’s recovery.Rising unemployment means that those who own a home, but are not currently employed, could lose their homes to foreclosure. While the first round of foreclosures mainly encompassed people who had difficulty affording their homes even when employed, a second wave may be brought on by those who lose their jobs and are not able to continue paying their mortgages. Numerous programs are in the works to help remedy this situation, including C.A.R.’s Mortgage Protection Program. Eligible first-time buyers who lose their job may be able to receive $1,500 for six months to help pay their mortgages. For more information on this program, please visit:
http://www.car.org/aboutus/hafmainpage/carhafmortgageprotection/While some housing analysts believe overall the state’s housing prices remain unaffordable; 69 percent of the state’s households could afford to purchase an entry-level home in California in the first quarter of this year, compared with 46 percent during the first quarter last year, according to C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI).A study conducted by the Comptroller of the Currency found that more than half of modified mortgages again were delinquent within months of the modification, often because the homeowners still were unable to make regular mortgage payments despite the modified terms. However, the study was conducted prior to the Obama administration’s mortgage modification plan. For more information about the Obama administration’s foreclosure-prevention efforts, please visit:
http://www.car.org/newsstand/newsreleases/fapsummary
Mortgage News: This week’s Mortgage Update contains information about refinancing and 15-year mortgages.A battle plan for refinancing your mortgageHomeowners seeking to refinance their mortgages may be surprised by the amount of paperwork required. During the “easy credit” years, some lenders did not require proof of income or documentation. Nowadays, most lenders require borrowers to provide pay stubs, banks statements, brokerage statements, and possibly tax returns. Self-employed individuals may be asked for a profit-and-loss statement. Those relying on bonus income should expect that most lenders will assume this year’s bonus will be a lot less than last year’s, which could make securing approval more difficult. Determining the amount of equity in the home is key to being approved for a new loan. Homeowners whose mortgage obligations are less than 80 percent of the home’s value are more likely to have refinancing options available to them. Other homeowners who are current on their mortgages, owe 80 percent to 105 percent of the home’s value, and have a loan owned by Fannie Mae or Freddie Mac may be able to refinance under the government’s “Making Home Affordable” program. Other factors to take into consideration when refinancing are the property’s appraised value, the homeowners’ credit score(s), whether or not the property has a second mortgage, and the length of the original loan.
MortgagesMore Takers for 15-Year Loans
THE 30-year fixed-rate mortgage has traditionally been the go-to loan for borrowers who want stability and lower payments. Adjustable-rate mortgages, by contrast, are often seen as more suitable for risk takers and those who expect to sell their homes in a short time.More recently, there has been increased activity in another loan alternative: a fixed-rate mortgage with a 15-year term. Debt shedding comes at a price. Those borrowing $400,000 on a 15-year loan, with a 4.375 percent interest rate, the average rate earlier this month, can expect to pay about $3,034 a month, compared with about $2,056 a month for a 30-year fixed-rate loan with a 4.625 percent average rate. (The payment excludes costs like property taxes and insurance.) Because a 15-year loan also has 180 fewer interest payments than a 30-year loan, the borrower with that 15-year loan would pay $194,000 less in interest over the life of the mortgage.
http://www.car.org/aboutus/hafmainpage/carhafmortgageprotection/While some housing analysts believe overall the state’s housing prices remain unaffordable; 69 percent of the state’s households could afford to purchase an entry-level home in California in the first quarter of this year, compared with 46 percent during the first quarter last year, according to C.A.R.’s First-time Buyer Housing Affordability Index (FTB-HAI).A study conducted by the Comptroller of the Currency found that more than half of modified mortgages again were delinquent within months of the modification, often because the homeowners still were unable to make regular mortgage payments despite the modified terms. However, the study was conducted prior to the Obama administration’s mortgage modification plan. For more information about the Obama administration’s foreclosure-prevention efforts, please visit:
http://www.car.org/newsstand/newsreleases/fapsummary
Mortgage News: This week’s Mortgage Update contains information about refinancing and 15-year mortgages.A battle plan for refinancing your mortgageHomeowners seeking to refinance their mortgages may be surprised by the amount of paperwork required. During the “easy credit” years, some lenders did not require proof of income or documentation. Nowadays, most lenders require borrowers to provide pay stubs, banks statements, brokerage statements, and possibly tax returns. Self-employed individuals may be asked for a profit-and-loss statement. Those relying on bonus income should expect that most lenders will assume this year’s bonus will be a lot less than last year’s, which could make securing approval more difficult. Determining the amount of equity in the home is key to being approved for a new loan. Homeowners whose mortgage obligations are less than 80 percent of the home’s value are more likely to have refinancing options available to them. Other homeowners who are current on their mortgages, owe 80 percent to 105 percent of the home’s value, and have a loan owned by Fannie Mae or Freddie Mac may be able to refinance under the government’s “Making Home Affordable” program. Other factors to take into consideration when refinancing are the property’s appraised value, the homeowners’ credit score(s), whether or not the property has a second mortgage, and the length of the original loan.
MortgagesMore Takers for 15-Year Loans
THE 30-year fixed-rate mortgage has traditionally been the go-to loan for borrowers who want stability and lower payments. Adjustable-rate mortgages, by contrast, are often seen as more suitable for risk takers and those who expect to sell their homes in a short time.More recently, there has been increased activity in another loan alternative: a fixed-rate mortgage with a 15-year term. Debt shedding comes at a price. Those borrowing $400,000 on a 15-year loan, with a 4.375 percent interest rate, the average rate earlier this month, can expect to pay about $3,034 a month, compared with about $2,056 a month for a 30-year fixed-rate loan with a 4.625 percent average rate. (The payment excludes costs like property taxes and insurance.) Because a 15-year loan also has 180 fewer interest payments than a 30-year loan, the borrower with that 15-year loan would pay $194,000 less in interest over the life of the mortgage.
Thursday, May 28, 2009
Imported Chinese Drywall may have harmful materials EPA discusses
http://www.chinesedrywall.com/uploads/EPA_Analysis.pdf
The U.S. Environmental Protection Agency (EPA) confirmed Chinese drywall testing found that samples of wallboard imported from China between 2004 and 2008, contains certain potentially harmful chemicals that are not found in drywall manufactured in the United States.
To view the full EPA Analysis, please click on the following link:EPA Analysis As discussed below, the Senate Committee on Commerce, Science, and Transportation convened a subcommittee hearing on Health and Product Safety Issues Associated with Imported Drywall on Thursday, May 21, 2009.
To view a webcast of the Hearing, please click on the following link:Health and Product Safety Issues Associated with Imported Drywall
A request for $2 million in emergency funding failed to move forward in the U.S. Senate, however the Consumer Product Safety Commission and other federal agencies will continue investigating the potential effects of imported drywall.
The U.S. Environmental Protection Agency (EPA) confirmed Chinese drywall testing found that samples of wallboard imported from China between 2004 and 2008, contains certain potentially harmful chemicals that are not found in drywall manufactured in the United States.
To view the full EPA Analysis, please click on the following link:EPA Analysis As discussed below, the Senate Committee on Commerce, Science, and Transportation convened a subcommittee hearing on Health and Product Safety Issues Associated with Imported Drywall on Thursday, May 21, 2009.
To view a webcast of the Hearing, please click on the following link:Health and Product Safety Issues Associated with Imported Drywall
A request for $2 million in emergency funding failed to move forward in the U.S. Senate, however the Consumer Product Safety Commission and other federal agencies will continue investigating the potential effects of imported drywall.
Fannie Mae Upate on HAMP program and misc info
FHLMC Bulletin 2009-13
Wednesday, 27 May 2009
Freddie Mac has issued the following Single Family Seller/Servicer Guide Update regarding Bulletin 2009-13. With this Single-Family Advisory e-mail and today’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2009-13, we are announcing multiple servicing updates, including:
Updates to Requirements for the Home Affordable Modification Program (HAMP)
Enhancements to Electronic Default Reporting (EDR) for all Mortgages that Have an Alternative to Foreclosure Being Pursued
Revisions to Servicer Performance Profile Default Management Weighting
Changes to Tier One Premium Awards
Revisions to Servicing Requirements
Information on Recent Treasury Announcements
Updates to Requirements for the Home Affordable Modification ProgramWith today’s Guide Bulletin, we are:
Requiring Servicers to solicit borrowers who are 31 days or more delinquent on or after July 1, 2009, by no later than the 50th day of delinquency; also providing additional guidance on borrower solicitation by phone or electronic means.
Permitting the collection of certain borrower loss mitigation information and documents electronically.
Providing additional guidance on the collection of Government Monitoring Data using the revised HAMP Hardship Affidavit that was posted on April 21, 2009.
Revising the requirements for reporting and remitting a payoff of a mortgage with a partial principal forbearance and revising the required monthly Spreadsheet for Reporting Mortgages with a Partial Principal Forbearance template.
Beginning June 1, 2009, Servicers may report a number of new EDR default action codes and a new default reason code that will become mandatory reporting as of October 1, 2009. Enhancements to Electronic Default Reporting for All Mortgages that Have an Alternative to Foreclosure Being PursuedWe are introducing new EDR default action codes in order for Servicers to provide us with information on mortgages they are pursuing an alternative to foreclosure. Some of the new EDR default action codes are specific to HAMP, while others apply to all mortgages, including current mortgages, for which the Servicer is pursuing an alternative to foreclosure. We are also adding the new default reason code “HMP” so Servicers can identify which loans that are in a Home Affordable Modification Trial Period. This new default reason code must be reported in conjunction with the “09-Forbearance” default action code. Servicers are required to use these new EDR codes beginning October 1, 2009. Guide Exhibit 82, Electronic Default Reporting Transmission Code List, has been updated to reflect these new codes and an updated version of the EDR Quick Reference Guide will be posted on the Learning Center by May 31, 2009.Revisions to Servicer Performance Profile Default Management WeightingUnprecedented market conditions and a crucial new role for Servicers in helping at-risk and delinquent borrowers through the Making Home Affordable program require changes to the Servicer Performance Profile. To maintain the Profile as a meaningful, accurate measurement and guide to continual improvement of servicing performance, we are adjusting the weighting of the Default Management metrics with your July 1, 2009, performance. The revised Default Management metrics will focus more on your loss mitigation, inventory management, and data integrity performance and less on collections management performance. Servicers will continue to be rated on the same Servicer Performance Profile weighting under Investor Reporting and Remitting.As the market continues to adjust this year, we will continue to evaluate the Servicer Performance Profile. If we find that the program warrants additional revisions, we’ll communicate those changes to you.Changes to Tier One Premium AwardsIn light of the current market conditions, with this Single-Family Advisory e-mail, we are discontinuing some of the incentives that correspond to the Tier One Premium Awards for all Servicers’ 2009 performance.
Effective immediately, we are no longer offering monetary performance incentives for Tier One Platinum, Tier One Gold, and Hall of Fame Servicers. In addition, both Tier One Platinum and Tier One Gold’s technology compensation will not be offered in 2009.
We will, however, continue to provide Tier One Platinum Servicers with a $10,000 non-monetary wavier to use toward EarlyIndicator® renewal fees or to acquire the tool and a $1,000 non-monetary waiver to use toward Freddie Mac training and events. Tier One Gold Servicers will also continue to receive a $500 non-monetary waiver to use toward Freddie Mac training classes and events. All Tier One waivers for transfer of servicing and database change fees will remain in effect.
We will not provide public promotion of the Tier One Premium Awards for 2008 and 2009 performance. We will, however, continue to notify you of your Tier One and Hall of Fame status through your servicing representative.
Our robust Workout Incentive Program, which is available to Servicers regardless of their Tier rating, remains available to help offset the costs of pursuing alternatives to foreclosure. Servicers will continue to receive monetary incentives, depending on the type of successful workout, in accordance to the Guide.
As we are with the Servicer Performance Profile, we will continue to evaluate the Tier One Premium Awards throughout the year. If the program requires updates, we’ll communicate those changes to you. Revisions to Servicing RequirementsWith today’s Guide Bulletin, we are also:
Updating the Loss Mitigation Transmittal Worksheet to include data elements specific to HAMP and incorporating it into the Guide as new Form 1128, which is now an interactive Microsoft® Excel spreadsheet.
Updating Guide Chapter B65 to reflect that a HAMP-eligible borrower must first be considered under Guide Chapter C65. Servicers must implement the requirements for HAMP and also directs them to consider borrowers who are in a 0 to 30 day delinquency status to first be considered for a Freddie Mac Relief Refinance MortgageSM under Guide Chapter 24. If the borrower is not eligible for a modification under HAMP, the Servicer must then consider the borrower for other alternative to foreclosure options outlined in Guide Chapter B65.
Announcing new, standardized form subordination agreements, which were developed by Freddie Mac and Fannie Mae in coordination with the American Land Title Association. These standard form agreements are designed for lenders and Servicers to use to resubordinate subordinate liens when working with borrowers on modifications or refinances, including loan modifications under HAMP and Freddie Mac Relief Refinance Mortgages. The new agreements will be available on our Uniform Instruments Web page by June 1. Information on Recent Treasury AnnouncementsThe U.S. Department of the Treasury recently announced that they are expanding HAMP to include requirements on the use of short sales and deeds-in-lieu of foreclosure in the event a borrower cannot complete the modification process. They also announced a second lien program to help struggling borrowers lower their monthly payments on their second mortgage. We are currently working through the policy and operational guidelines, and we will communicate any necessary changes to our requirements in a future Guide Bulletin.
Wednesday, 27 May 2009
Freddie Mac has issued the following Single Family Seller/Servicer Guide Update regarding Bulletin 2009-13. With this Single-Family Advisory e-mail and today’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2009-13, we are announcing multiple servicing updates, including:
Updates to Requirements for the Home Affordable Modification Program (HAMP)
Enhancements to Electronic Default Reporting (EDR) for all Mortgages that Have an Alternative to Foreclosure Being Pursued
Revisions to Servicer Performance Profile Default Management Weighting
Changes to Tier One Premium Awards
Revisions to Servicing Requirements
Information on Recent Treasury Announcements
Updates to Requirements for the Home Affordable Modification ProgramWith today’s Guide Bulletin, we are:
Requiring Servicers to solicit borrowers who are 31 days or more delinquent on or after July 1, 2009, by no later than the 50th day of delinquency; also providing additional guidance on borrower solicitation by phone or electronic means.
Permitting the collection of certain borrower loss mitigation information and documents electronically.
Providing additional guidance on the collection of Government Monitoring Data using the revised HAMP Hardship Affidavit that was posted on April 21, 2009.
Revising the requirements for reporting and remitting a payoff of a mortgage with a partial principal forbearance and revising the required monthly Spreadsheet for Reporting Mortgages with a Partial Principal Forbearance template.
Beginning June 1, 2009, Servicers may report a number of new EDR default action codes and a new default reason code that will become mandatory reporting as of October 1, 2009. Enhancements to Electronic Default Reporting for All Mortgages that Have an Alternative to Foreclosure Being PursuedWe are introducing new EDR default action codes in order for Servicers to provide us with information on mortgages they are pursuing an alternative to foreclosure. Some of the new EDR default action codes are specific to HAMP, while others apply to all mortgages, including current mortgages, for which the Servicer is pursuing an alternative to foreclosure. We are also adding the new default reason code “HMP” so Servicers can identify which loans that are in a Home Affordable Modification Trial Period. This new default reason code must be reported in conjunction with the “09-Forbearance” default action code. Servicers are required to use these new EDR codes beginning October 1, 2009. Guide Exhibit 82, Electronic Default Reporting Transmission Code List, has been updated to reflect these new codes and an updated version of the EDR Quick Reference Guide will be posted on the Learning Center by May 31, 2009.Revisions to Servicer Performance Profile Default Management WeightingUnprecedented market conditions and a crucial new role for Servicers in helping at-risk and delinquent borrowers through the Making Home Affordable program require changes to the Servicer Performance Profile. To maintain the Profile as a meaningful, accurate measurement and guide to continual improvement of servicing performance, we are adjusting the weighting of the Default Management metrics with your July 1, 2009, performance. The revised Default Management metrics will focus more on your loss mitigation, inventory management, and data integrity performance and less on collections management performance. Servicers will continue to be rated on the same Servicer Performance Profile weighting under Investor Reporting and Remitting.As the market continues to adjust this year, we will continue to evaluate the Servicer Performance Profile. If we find that the program warrants additional revisions, we’ll communicate those changes to you.Changes to Tier One Premium AwardsIn light of the current market conditions, with this Single-Family Advisory e-mail, we are discontinuing some of the incentives that correspond to the Tier One Premium Awards for all Servicers’ 2009 performance.
Effective immediately, we are no longer offering monetary performance incentives for Tier One Platinum, Tier One Gold, and Hall of Fame Servicers. In addition, both Tier One Platinum and Tier One Gold’s technology compensation will not be offered in 2009.
We will, however, continue to provide Tier One Platinum Servicers with a $10,000 non-monetary wavier to use toward EarlyIndicator® renewal fees or to acquire the tool and a $1,000 non-monetary waiver to use toward Freddie Mac training and events. Tier One Gold Servicers will also continue to receive a $500 non-monetary waiver to use toward Freddie Mac training classes and events. All Tier One waivers for transfer of servicing and database change fees will remain in effect.
We will not provide public promotion of the Tier One Premium Awards for 2008 and 2009 performance. We will, however, continue to notify you of your Tier One and Hall of Fame status through your servicing representative.
Our robust Workout Incentive Program, which is available to Servicers regardless of their Tier rating, remains available to help offset the costs of pursuing alternatives to foreclosure. Servicers will continue to receive monetary incentives, depending on the type of successful workout, in accordance to the Guide.
As we are with the Servicer Performance Profile, we will continue to evaluate the Tier One Premium Awards throughout the year. If the program requires updates, we’ll communicate those changes to you. Revisions to Servicing RequirementsWith today’s Guide Bulletin, we are also:
Updating the Loss Mitigation Transmittal Worksheet to include data elements specific to HAMP and incorporating it into the Guide as new Form 1128, which is now an interactive Microsoft® Excel spreadsheet.
Updating Guide Chapter B65 to reflect that a HAMP-eligible borrower must first be considered under Guide Chapter C65. Servicers must implement the requirements for HAMP and also directs them to consider borrowers who are in a 0 to 30 day delinquency status to first be considered for a Freddie Mac Relief Refinance MortgageSM under Guide Chapter 24. If the borrower is not eligible for a modification under HAMP, the Servicer must then consider the borrower for other alternative to foreclosure options outlined in Guide Chapter B65.
Announcing new, standardized form subordination agreements, which were developed by Freddie Mac and Fannie Mae in coordination with the American Land Title Association. These standard form agreements are designed for lenders and Servicers to use to resubordinate subordinate liens when working with borrowers on modifications or refinances, including loan modifications under HAMP and Freddie Mac Relief Refinance Mortgages. The new agreements will be available on our Uniform Instruments Web page by June 1. Information on Recent Treasury AnnouncementsThe U.S. Department of the Treasury recently announced that they are expanding HAMP to include requirements on the use of short sales and deeds-in-lieu of foreclosure in the event a borrower cannot complete the modification process. They also announced a second lien program to help struggling borrowers lower their monthly payments on their second mortgage. We are currently working through the policy and operational guidelines, and we will communicate any necessary changes to our requirements in a future Guide Bulletin.
Wednesday, May 6, 2009
Final Score: $8,000 for Homebuyers
Les Christie, CNNMoney.com staff writer
There's a nice windfall for some homebuyers in the economic stimulus bill. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
“I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?”
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll withholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll withholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm receptionThe housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
“[The Senate version] would have done a lot more to turn around the housing market,” said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). “We have a lot of reports of people who would be coming off the fence because of it.”
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. “I think there are many homeowners who would be trading-up but they have had no buyers for their own homes,” Yun said.
Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.
One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the down payment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.
Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.
And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.
Reprint courtesy of CNNMoney.com
There's a nice windfall for some homebuyers in the economic stimulus bill. First-time buyers can claim a credit worth $8,000 - or 10% of the home's value, whichever is less - on their 2008 or 2009 taxes.
A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill - the amount of withholding they paid during the year plus anything extra they had to pony up when they filed their returns - was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:
“I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?”
The short answer? Yes, Billings would get back the $8,000 plus what he'd overpaid. The long answer? It depends. Here are three scenarios:
Scenario 1: Your final tax liability is normally $6,000. You've had taxes withheld from every paycheck and at the end of the year you've paid Uncle Sam $6,000. Since you've already paid him all you owe, you get the entire $8,000 tax credit as a refund check.
Scenario 2: Your final tax liability is $6,000, but you've overpaid by $1,000 through your payroll withholding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.
Scenario 3: Your final tax liability is $6,000, but you've underpaid through your payroll withholding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.
To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.
Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)
Applying for the credit will be easy - or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.
Lukewarm receptionThe housing industry is somewhat pleased with the result because the stimulus plan improves on the current $7,500 tax credit, which was passed in July and was more of a low-interest loan than an actual credit. But the industry was also disappointed that Congress did not go even further and adopt the Senate's proposal of a $15,000 non-refundable credit for all homebuyers.
“[The Senate version] would have done a lot more to turn around the housing market,” said Bernard Markstein, an economist and director of forecasting for the National Association of Homebuilders (NAHB). “We have a lot of reports of people who would be coming off the fence because of it.”
Even so, the $8,000 credit will bring an additional 300,000 new homebuyers into the market, according to estimates by Lawrence Yun, chief economist for the National Association of Realtors.
The credit could also create a domino effect, he said, because each first-time homebuyer sale will lead to two more trade-up transactions down the line. “I think there are many homeowners who would be trading-up but they have had no buyers for their own homes,” Yun said.
Who won't benefit, according to Mark Goldman, a real estate lecturer at San Diego State University, are those first-time homebuyers struggling to come up with down payments. The credit does not help get them over that hurdle - they still have to close the sale before claiming the bonus.
One state, Missouri, is trying to get around that problem by creating a short-term loan on the tax credit of up to $6,750. The state would loan borrowers the money so they could use it at closing as part of the down payment. Then, when the buyers receive their tax credit from the IRS, they pay back the state. Other states may follow with similar programs, according to NAHB's Dietz.
Many may look at the tax credit as a discount on the home price, according to Yun. A $100,000 purchase effectively becomes a $92,000 one. That can reassure buyers apprehensive about purchasing and then watching prices continue falling, he added.
And it provides a nice nest egg for the often-difficult early years of homeownership, when unexpected repairs and expenses often crop up. Recipients could also use the money to buy new stuff for their home - a lawnmower, a rug, a sofa - and, in that way, help stimulate the economy.
Reprint courtesy of CNNMoney.com
Monday, May 4, 2009
Wachovia asks REALTORS to help with Short Sales
Distressed homeowners with Wachovia, formerly World Savings, as a lender are seeing a glimmer of home when it comes to saving their homes from foreclosure.
Unlike other banks, Wachovia has short sale managers in the field to talk to distressed homeowners and help them explore options before going to foreclosure. The process is simple and straight forward for the homeowner.
The Wachovia Short Sale manager meets with the homeowner to determine that there is truly a hardship. The seller may be asked to provide a financial statement as well as other information such as tax returns. The Short Sale Manager assess the situation, orders a Brokers Professional Opinion, and then is able to approve the hardship in just a matter of days. Of course if there is a chance that the seller may qualify for a loan modification, that is also an option.
This does several things for the distressed homeowner:
It gives them piece of mind knowing that they are dealing with their lender directly and not some third party collection team;
It gives them faith in their Realtor, and the industry, by seeing the two entities work together to provide help and assistance;
It stops the foreclosure process and takes away the burden and the embarrassment of a foreclosure;
It expedites the short sale process into a period of weeks, as opposed to months, allowing the homeowner to move on with their lives;
It allows the homeowner to reestablish credit faster than if they had to go to through the foreclosure process.
This also helps Wachovia:
Wachovia's short sale managers are a great public relations team for Wachovia to the industry, and to distressed homeowners;
It ultimately saves Wachovia time and money by properly pricing the home and determining the hardship from the start - as opposed to the extended process, which results in a greater loss, especially in a declining market.
Wachovia should be applauded for their efforts and held up as an example for other financial institutions. Working together only helps the distressed homeowner and our industry.
Currently have a World Savings, Wachovia, Golden West, Home Loan and your property is upside down. You would like to List your property than please contact me today.
Unlike other banks, Wachovia has short sale managers in the field to talk to distressed homeowners and help them explore options before going to foreclosure. The process is simple and straight forward for the homeowner.
The Wachovia Short Sale manager meets with the homeowner to determine that there is truly a hardship. The seller may be asked to provide a financial statement as well as other information such as tax returns. The Short Sale Manager assess the situation, orders a Brokers Professional Opinion, and then is able to approve the hardship in just a matter of days. Of course if there is a chance that the seller may qualify for a loan modification, that is also an option.
This does several things for the distressed homeowner:
It gives them piece of mind knowing that they are dealing with their lender directly and not some third party collection team;
It gives them faith in their Realtor, and the industry, by seeing the two entities work together to provide help and assistance;
It stops the foreclosure process and takes away the burden and the embarrassment of a foreclosure;
It expedites the short sale process into a period of weeks, as opposed to months, allowing the homeowner to move on with their lives;
It allows the homeowner to reestablish credit faster than if they had to go to through the foreclosure process.
This also helps Wachovia:
Wachovia's short sale managers are a great public relations team for Wachovia to the industry, and to distressed homeowners;
It ultimately saves Wachovia time and money by properly pricing the home and determining the hardship from the start - as opposed to the extended process, which results in a greater loss, especially in a declining market.
Wachovia should be applauded for their efforts and held up as an example for other financial institutions. Working together only helps the distressed homeowner and our industry.
Currently have a World Savings, Wachovia, Golden West, Home Loan and your property is upside down. You would like to List your property than please contact me today.
Wednesday, April 29, 2009
Sacramento Define Swine Flu?
Swine Flu
Inquire about the availability of documents in alternate formats.
Swine Flu is a respiratory disease typically found in pigs. However, human Swine Flu cases can and do happen. Swine Flu has been detected in the United States, and locally in Sacramento County.
Use the following information to learn the symptoms, treatment and prevention of Swine Flu, as well as news about it’s occurrence locally and nationally.
Swine Flu and You – Description of the Swine Flu symptoms, treatment, and prevention from the Center for Disease Control
Swine Flu Information – Comprehensive resource from the State of California about Swine Flu.
Swine Flu in Sacramento County – Update from the Public Health Division
Swine Flu Investigation – National and international information from the Center for Disease Control
The County and City of Sacramento recommend you call 2-1-1 for general information about the swine flu. If you believe you have flu symptoms, please call your doctor, or 9-1-1 for a life threatening emergency. By calling 2-1-1 (or 1-800-550-4931) your questions will be answered by a representative who will have the latest public health information.
Click on the following link to gather more information on the highlighted links above:
http://www.sacramentoready.org/SAC_Sacready_DF_SwineFlu
Inquire about the availability of documents in alternate formats.
Swine Flu is a respiratory disease typically found in pigs. However, human Swine Flu cases can and do happen. Swine Flu has been detected in the United States, and locally in Sacramento County.
Use the following information to learn the symptoms, treatment and prevention of Swine Flu, as well as news about it’s occurrence locally and nationally.
Swine Flu and You – Description of the Swine Flu symptoms, treatment, and prevention from the Center for Disease Control
Swine Flu Information – Comprehensive resource from the State of California about Swine Flu.
Swine Flu in Sacramento County – Update from the Public Health Division
Swine Flu Investigation – National and international information from the Center for Disease Control
The County and City of Sacramento recommend you call 2-1-1 for general information about the swine flu. If you believe you have flu symptoms, please call your doctor, or 9-1-1 for a life threatening emergency. By calling 2-1-1 (or 1-800-550-4931) your questions will be answered by a representative who will have the latest public health information.
Click on the following link to gather more information on the highlighted links above:
http://www.sacramentoready.org/SAC_Sacready_DF_SwineFlu
Tuesday, April 28, 2009
Modifying Loans Under the Affordable Home Modification Plan
This will only apply to the first mortgage on your primary residence.
To qualify, you must:
Have originated your mortgage before Jan. 1, 2009.
Be an owner-occupant.
Have an unpaid balance that is equal to or less than $729,750 (for a single-family home).
Have trouble paying your mortgage due to financial hardship. That could be because you have had an increase in your mortgage payments, or because your income was reduced or you suffered a hardship (like medical problems) that increased your bills, or, you can show that you soon will be unable to make your payments. You will be required to enter an affidavit of financial hardship.
Your monthly mortgage payment must also be more than 31% of your gross (pre-tax) monthly income.To seal the deal, you must successfully complete a three-month trial period at the modified rate. If you make all payments on time, you will keep this lower rate that will be fixed for five years.
What if I am About to be Foreclosed On?
The foreclosure process will stop while you’re being considered for the program (or for any alternative foreclosure prevention option).
What Will it Cost?
Under the program, the borrower does not have to pay any charges or fees. Any fees are supposed to be paid by the company that holds the loan, and the servicer of the loan will pay for your credit report.
Is There a Deadline?
New borrowers will be accepted until Dec. 31, 2012.
How Do I Start?
Gather these required loan modification documents and call your mortgage servicer (the company you make payments to). Your servicer is not required to join the program, but the government hopes that the incentives, along with the fact that this could help millions avoid defaulting on their mortgage, will motivate them to participate.
Home Affordable Modification Program Guidelines
FULL DETAILS CLICK THE FOLLOWING LINK PRINT & REVIEW:
http://www.ustreas.gov/press/releases/reports/modification_program_guidelines.pdf
To qualify, you must:
Have originated your mortgage before Jan. 1, 2009.
Be an owner-occupant.
Have an unpaid balance that is equal to or less than $729,750 (for a single-family home).
Have trouble paying your mortgage due to financial hardship. That could be because you have had an increase in your mortgage payments, or because your income was reduced or you suffered a hardship (like medical problems) that increased your bills, or, you can show that you soon will be unable to make your payments. You will be required to enter an affidavit of financial hardship.
Your monthly mortgage payment must also be more than 31% of your gross (pre-tax) monthly income.To seal the deal, you must successfully complete a three-month trial period at the modified rate. If you make all payments on time, you will keep this lower rate that will be fixed for five years.
What if I am About to be Foreclosed On?
The foreclosure process will stop while you’re being considered for the program (or for any alternative foreclosure prevention option).
What Will it Cost?
Under the program, the borrower does not have to pay any charges or fees. Any fees are supposed to be paid by the company that holds the loan, and the servicer of the loan will pay for your credit report.
Is There a Deadline?
New borrowers will be accepted until Dec. 31, 2012.
How Do I Start?
Gather these required loan modification documents and call your mortgage servicer (the company you make payments to). Your servicer is not required to join the program, but the government hopes that the incentives, along with the fact that this could help millions avoid defaulting on their mortgage, will motivate them to participate.
Home Affordable Modification Program Guidelines
FULL DETAILS CLICK THE FOLLOWING LINK PRINT & REVIEW:
http://www.ustreas.gov/press/releases/reports/modification_program_guidelines.pdf
Wisconsin State Tenant Protection Act help foreclosed owners stay in Home 90 days
The Wisconsin Economic Recovery Act, Act 2 was recently enacted, with an effective date of March 7, 2009. Sections 847 through 850 of Act 2 contain the Tenant Protection Act.
The Act requires that the plaintiff in a foreclosure action provide notice to tenants three different times during the foreclosure.
The first notice must be provided to tenants within five (5) days of filing the foreclosure action. The next notice must be provided within five (5) days of the Judgment Entry showing the redemption expiration date. The third notice is sent once notice of confirmation of hearing is scheduled. This is notice of the hearing date and time. All notices must be sent by Registered Mail or personal service.
The Act also gives a tenant the right to remain in a foreclosed property for ninety (90) days after the foreclosure process has concluded. There is a $250.00 penalty, plus attorney fees for noncompliance.
http://www.legis.wi.gov/2009/data/acts/09Act2.pdf
Click the link above to learn more about this law.
The Act requires that the plaintiff in a foreclosure action provide notice to tenants three different times during the foreclosure.
The first notice must be provided to tenants within five (5) days of filing the foreclosure action. The next notice must be provided within five (5) days of the Judgment Entry showing the redemption expiration date. The third notice is sent once notice of confirmation of hearing is scheduled. This is notice of the hearing date and time. All notices must be sent by Registered Mail or personal service.
The Act also gives a tenant the right to remain in a foreclosed property for ninety (90) days after the foreclosure process has concluded. There is a $250.00 penalty, plus attorney fees for noncompliance.
http://www.legis.wi.gov/2009/data/acts/09Act2.pdf
Click the link above to learn more about this law.
Tuesday, April 21, 2009
Freddie Mac Release a bulletin
Freddie Mac has issued the following Single Family Seller/Servicer Guide Update regarding Bulletin 2009-10
Today we issued Single-Family Seller/Servicer Guide Bulletin 2009-10, which announces important updates to requirements for the Home Affordable Modification program, including new criteria for determining whether a borrower is in imminent default, information and tools for Servicers to perform the required Net Present Value (NPV) test, and other changes to borrower eligibility and underwriting requirements.
Criteria for Determining Imminent Default
The Guide Bulletin provides criteria for determining whether a borrower who is current or less than 31days delinquent, and claims a hardship, is in imminent default. Using the process, requirements, and definitions outlined in our revised Guide Section C65.4, Servicers must consider the borrower for a modification under the Home Affordable Modification program if, after using the screening criteria outlined in this Guide section, the Servicer determines:
The borrower’s Debt Coverage Ratio is less than 1.20 and
The borrower’s cash reserves are less than three times the current monthly PITIA payment.
The Borrower Qualification Worksheet may be used to determine if a borrower, who is current or less than 31 days delinquent, is in imminent default. The updated Freddie Mac Borrower Qualification Worksheet will be available as a secure link on our Home Affordable Modification program Web page on Thursday, April 23. In addition, Freddie Mac is developing an automated solution to assist Servicers with the imminent default evaluation, and it will be available at a later date.
Net Present Value Calculations
All mortgages that meet Home Affordable Modification program criteria must be evaluated using the standardized NPV test that compares the NPV result for a modification to the NPV result for not modifying the mortgage. Today’s Bulletin and newly revised Guide Section C65.6 include detailed requirements for performing this test. These requirements include revisions for determining the amount of principal forbearance that may be permitted in order to achieve the Target Payment.
To assist Servicers, we are also introducing the Net Present Value (NPV) Calculator. The NPV Calculator is available on the Home Affordable Modification Servicer Web page. A user ID and password are required for access to the Servicer Web page. Servicers must complete and submit the HMP Registration Form to obtain a user ID and password.
Additional Updates
With today’s Bulletin, we are also announcing revisions and updates to these and other program requirements:
Revising requirements for verification of income when the Servicer uses stated income to create and send the borrower a Trial Period Plan, along with revising the income documentation requirements.
Revising the timeframe for when a borrower must respond to the Trial Period Plan offer package from 14 days to 30 days, and providing additional guidance if the borrower does not submit the required documents by the specified deadline.
Updating the definition of Interest Rate Cap.
Updating requirements for Servicers to continue to report “full-file” status reports to the four major credit repositories when borrowers enter the Trial Period, with criteria for borrowers who are current and borrowers who are delinquent when they enter the Trial Period.
Revising collateral valuation requirements used for the NPV test and for determining the mark-to-market LTV ratio.
Revising eligibility requirements to allow modifications of FHA, VA, and RHS mortgages, in accordance with guidance issued by the respective agency.
Revising documentation requirements for verifying that eligible mortgages are occupied primary residences.
Updating requirements for verifying installment debt and other expenses that must be included in the calculation of the borrower’s total monthly debt payment-to-income ratio.
Providing further guidance on the Servicer’s “Pay for Success” and Borrower’s “Pay for Performance” incentive fees.
Revising the Hardship Affidavit to now include a section for the collection of government monitoring data.
Adding requirements for reporting data to Fannie Mae in its capacity as Financial Agent.
Adding requirements provided by Freddie Mac, the Compliance Agent for the U.S Department of the Treasury.
Reminders
As a reminder, Servicers should continue to:
Suspend all foreclosure sales on owner-occupied properties for borrowers who may be or are eligible for a modification under the Home Affordable Modification program.
Report weekly Home Affordable Modification activity each Monday using the Program Performance Reporting Spreadsheet.
Please read the original bulletin: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll0910.pdf
Today we issued Single-Family Seller/Servicer Guide Bulletin 2009-10, which announces important updates to requirements for the Home Affordable Modification program, including new criteria for determining whether a borrower is in imminent default, information and tools for Servicers to perform the required Net Present Value (NPV) test, and other changes to borrower eligibility and underwriting requirements.
Criteria for Determining Imminent Default
The Guide Bulletin provides criteria for determining whether a borrower who is current or less than 31days delinquent, and claims a hardship, is in imminent default. Using the process, requirements, and definitions outlined in our revised Guide Section C65.4, Servicers must consider the borrower for a modification under the Home Affordable Modification program if, after using the screening criteria outlined in this Guide section, the Servicer determines:
The borrower’s Debt Coverage Ratio is less than 1.20 and
The borrower’s cash reserves are less than three times the current monthly PITIA payment.
The Borrower Qualification Worksheet may be used to determine if a borrower, who is current or less than 31 days delinquent, is in imminent default. The updated Freddie Mac Borrower Qualification Worksheet will be available as a secure link on our Home Affordable Modification program Web page on Thursday, April 23. In addition, Freddie Mac is developing an automated solution to assist Servicers with the imminent default evaluation, and it will be available at a later date.
Net Present Value Calculations
All mortgages that meet Home Affordable Modification program criteria must be evaluated using the standardized NPV test that compares the NPV result for a modification to the NPV result for not modifying the mortgage. Today’s Bulletin and newly revised Guide Section C65.6 include detailed requirements for performing this test. These requirements include revisions for determining the amount of principal forbearance that may be permitted in order to achieve the Target Payment.
To assist Servicers, we are also introducing the Net Present Value (NPV) Calculator. The NPV Calculator is available on the Home Affordable Modification Servicer Web page. A user ID and password are required for access to the Servicer Web page. Servicers must complete and submit the HMP Registration Form to obtain a user ID and password.
Additional Updates
With today’s Bulletin, we are also announcing revisions and updates to these and other program requirements:
Revising requirements for verification of income when the Servicer uses stated income to create and send the borrower a Trial Period Plan, along with revising the income documentation requirements.
Revising the timeframe for when a borrower must respond to the Trial Period Plan offer package from 14 days to 30 days, and providing additional guidance if the borrower does not submit the required documents by the specified deadline.
Updating the definition of Interest Rate Cap.
Updating requirements for Servicers to continue to report “full-file” status reports to the four major credit repositories when borrowers enter the Trial Period, with criteria for borrowers who are current and borrowers who are delinquent when they enter the Trial Period.
Revising collateral valuation requirements used for the NPV test and for determining the mark-to-market LTV ratio.
Revising eligibility requirements to allow modifications of FHA, VA, and RHS mortgages, in accordance with guidance issued by the respective agency.
Revising documentation requirements for verifying that eligible mortgages are occupied primary residences.
Updating requirements for verifying installment debt and other expenses that must be included in the calculation of the borrower’s total monthly debt payment-to-income ratio.
Providing further guidance on the Servicer’s “Pay for Success” and Borrower’s “Pay for Performance” incentive fees.
Revising the Hardship Affidavit to now include a section for the collection of government monitoring data.
Adding requirements for reporting data to Fannie Mae in its capacity as Financial Agent.
Adding requirements provided by Freddie Mac, the Compliance Agent for the U.S Department of the Treasury.
Reminders
As a reminder, Servicers should continue to:
Suspend all foreclosure sales on owner-occupied properties for borrowers who may be or are eligible for a modification under the Home Affordable Modification program.
Report weekly Home Affordable Modification activity each Monday using the Program Performance Reporting Spreadsheet.
Please read the original bulletin: http://www.freddiemac.com/sell/guide/bulletins/pdf/bll0910.pdf
Monday, April 20, 2009
President Barack Obama's ambitious plan to rescue the housing market
At the heart of the President Barack Obama's ambitious plan to rescue the housing market is the conviction that restructuring distressed mortgages will keep struggling borrowers in their homes and help insert a floor beneath plummeting property values. With $75 billion dedicated to reworking troubled loans, that's a big bet—especially considering that a top banking regulator said last December that almost 53 percent of loans modified in the first quarter of 2008 went bad again within six months. But supporters argue that mortgage modifications need to be properly engineered to work—and many early ones weren't. To that end, the Obama administration on Wednesday unveiled fresh details on its plan to restructure at-risk loans and help as many as four million home owners avoid foreclosure. Here are seven things you need to know about Obama's loan modification program.
1. Payments, not prices: The plan centers on the belief that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments. Although not everyone agrees with this, billionaire investor Warren Buffett endorsed the philosophy in his most recent letter to shareholders. "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans)," Buffett wrote. "Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay."
2. Thirty-one percent: To that end, the administration's plan requires participating loan servicers to reduce monthly payments to no more than 38 percent of the borrower's gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower's monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that's not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that's still not enough, the servicer would forebear loan principal at no interest. The plan does not, however, require servicers to reduce mortgage principal, which Richard Green, the director of the Lusk Center for Real Estate at USC, considers a shortcoming. "For underwater loans, if you don't write down the balance to be less than the value of the house, people still have an incentive to default," Green says. "Writing down the principal first instead of last—which is what [the Obama administration is] proposing—makes sense to me."
3. Cash incentives: To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.
4. Financial hardship: The Obama administration is pitching its plan as an effort to help responsible homeowners ensnared in the historic housing slump and painful recession—not speculators. As such, only owner-occupied, primary residences with outstanding principal balances of up to $729,750 are eligible. Occupancy status will be verified through documents, such as the borrower's credit report. In addition, the program is designed to target homeowners who are undergoing "serious hardships"—such as a loss of income—which have put them at risk of default. To participate, borrowers will have to sign an affidavit of financial hardship and verify their income with documents. "If we would have had such stringent verification over the last four or five years, we probably wouldn't be in as bad a position as we are in," says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. "It's going to be a very time-consuming process," he says. Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years. Now that the administration's plan is out, lenders are free to begin modifying loans.
5. Net present value: To determine if a particular mortgage will be modified, the servicer will perform a so-called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn't. If the modified loan is expected to produce more cash flow for the mortgage holder, the servicer is to restructure the loan.
6. Second liensThe Obama plan also addresses the issue of second liens—such as home equity loans or home equity lines of credit—by offering incentives to extinguish them. But key details on this component of the plan remained unclear.
7. Will it work? Moody argues that while the plan may reduce foreclosures for primary residences, it could lead to a spike in defaults for another group of homeowners. Although he supports the administration's efforts to focus the initiative on primary residences, Moody notes that "it could be the case that a lot of [real estate speculators] have been just hanging on waiting to see exactly what the details are of this [plan]," Moody says. Now that it's clear the Obama plan leaves speculators out, "we could actually see a spike in foreclosures or at least mortgage defaults among this group."
1. Payments, not prices: The plan centers on the belief that struggling borrowers will stay in their homes—even as values decline sharply—as long as they can make their monthly payments. Although not everyone agrees with this, billionaire investor Warren Buffett endorsed the philosophy in his most recent letter to shareholders. "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called “upside-down” loans)," Buffett wrote. "Rather, foreclosures take place because borrowers can’t pay the monthly payment that they agreed to pay."
2. Thirty-one percent: To that end, the administration's plan requires participating loan servicers to reduce monthly payments to no more than 38 percent of the borrower's gross monthly income. The government would then chip in to bring payments down further, to no more than 31 percent of the borrower's monthly income. In lowering the payment, the servicer would first reduce the interest rate to as low as 2 percent. If that's not enough to hit the 31 percent threshold, they would then extend the terms of the loan to up to 40 years. If that's still not enough, the servicer would forebear loan principal at no interest. The plan does not, however, require servicers to reduce mortgage principal, which Richard Green, the director of the Lusk Center for Real Estate at USC, considers a shortcoming. "For underwater loans, if you don't write down the balance to be less than the value of the house, people still have an incentive to default," Green says. "Writing down the principal first instead of last—which is what [the Obama administration is] proposing—makes sense to me."
3. Cash incentives: To encourage participation, servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments. Borrowers, meanwhile, can get up to $1,000 knocked off the principal of their loan each year for as many as five years if they make their payments on time. Neither party can receive the cash incentives until the modified loan payments have been made for at least three months.
4. Financial hardship: The Obama administration is pitching its plan as an effort to help responsible homeowners ensnared in the historic housing slump and painful recession—not speculators. As such, only owner-occupied, primary residences with outstanding principal balances of up to $729,750 are eligible. Occupancy status will be verified through documents, such as the borrower's credit report. In addition, the program is designed to target homeowners who are undergoing "serious hardships"—such as a loss of income—which have put them at risk of default. To participate, borrowers will have to sign an affidavit of financial hardship and verify their income with documents. "If we would have had such stringent verification over the last four or five years, we probably wouldn't be in as bad a position as we are in," says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. "It's going to be a very time-consuming process," he says. Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years. Now that the administration's plan is out, lenders are free to begin modifying loans.
5. Net present value: To determine if a particular mortgage will be modified, the servicer will perform a so-called net present value test. The test compares the expected cash flow that the loan would generate if it is modified with the expected cash flow it would generate if it isn't. If the modified loan is expected to produce more cash flow for the mortgage holder, the servicer is to restructure the loan.
6. Second liensThe Obama plan also addresses the issue of second liens—such as home equity loans or home equity lines of credit—by offering incentives to extinguish them. But key details on this component of the plan remained unclear.
7. Will it work? Moody argues that while the plan may reduce foreclosures for primary residences, it could lead to a spike in defaults for another group of homeowners. Although he supports the administration's efforts to focus the initiative on primary residences, Moody notes that "it could be the case that a lot of [real estate speculators] have been just hanging on waiting to see exactly what the details are of this [plan]," Moody says. Now that it's clear the Obama plan leaves speculators out, "we could actually see a spike in foreclosures or at least mortgage defaults among this group."
Friday, April 17, 2009
Freddie Mac has issued the following Single Family Seller/Servicer Guide Update
Freddie Mac has issued the following Single Family Seller/Servicer Guide Update regarding Bulletin 2009-9.
Today’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2009-9, expands eligibility for the Freddie Mac Relief Refinance MortgageSM, making it easier for qualified borrowers to take advantage of this offering. Relief Refinance Mortgages are a key component of the administration’s Making Home Affordable Program and we are committed to supporting this national mandate by making Relief Refinance Mortgages available to as many qualified borrowers as possible. Today’s expanded eligibility will allow you to help more borrowers refinance into mortgages that position them for a successful and long-term homeownership experience.
With today’s Guide Bulletin, we are incorporating into the Guide the recently announced increase to our maximum loan limits as permitted under the American Recovery and Reinvestment Act of 2009 (ARRA). We are also announcing revisions to our requirements for super conforming mortgages that include the changes we previewed in our April 10 Single-Family Advisory e-mail.
It is important that you review today’s Guide Bulletin for detailed information on these changes.
Expanded Eligibility for Relief Refinance Mortgages
Today’s Guide Bulletin provides detailed information on updates to our requirements for Relief Refinance Mortgages. The following changes are effective immediately and include:
Clarifying that accrued interest through the payoff date may be included when paying off the mortgage being refinanced.
Permitting up to $250 cash back to the borrower.
Enabling the amortization term of the Relief Refinance Mortgage to be longer than the amortization term of the existing mortgage. For example, a 15-year fixed-rate mortgage may be refinanced as a 30-year fixed-rate Relief Refinance Mortgage.
Allowing second home and investment property mortgages that are now owner-occupied primary residences to be refinanced under the Relief Refinance Mortgage offering.
Permitting the transfer of property insurance from the mortgage being refinanced to the Relief Refinance Mortgage, if permitted by the insurance carrier, to alleviate the need for the borrower to prepay property insurance at settlement.
Additionally, when using Home Value Explorer® to determine property value, we are not requiring you to complete the “Year Built” and “Number of Bedrooms” fields on Form 11, Mortgage Submission Schedule and Form 13SF, Mortgage Submission Voucher.
Finally, we are reminding you that Relief Refinance Mortgages may not be sold to Freddie Mac through the selling system’s servicing-released process.
To view the online Bulletin in its entirety, please http://www.freddiemac.com/sell/guide/bulletins/pdf/bll099.pdf
Today’s Single-Family Seller/Servicer Guide (Guide) Bulletin 2009-9, expands eligibility for the Freddie Mac Relief Refinance MortgageSM, making it easier for qualified borrowers to take advantage of this offering. Relief Refinance Mortgages are a key component of the administration’s Making Home Affordable Program and we are committed to supporting this national mandate by making Relief Refinance Mortgages available to as many qualified borrowers as possible. Today’s expanded eligibility will allow you to help more borrowers refinance into mortgages that position them for a successful and long-term homeownership experience.
With today’s Guide Bulletin, we are incorporating into the Guide the recently announced increase to our maximum loan limits as permitted under the American Recovery and Reinvestment Act of 2009 (ARRA). We are also announcing revisions to our requirements for super conforming mortgages that include the changes we previewed in our April 10 Single-Family Advisory e-mail.
It is important that you review today’s Guide Bulletin for detailed information on these changes.
Expanded Eligibility for Relief Refinance Mortgages
Today’s Guide Bulletin provides detailed information on updates to our requirements for Relief Refinance Mortgages. The following changes are effective immediately and include:
Clarifying that accrued interest through the payoff date may be included when paying off the mortgage being refinanced.
Permitting up to $250 cash back to the borrower.
Enabling the amortization term of the Relief Refinance Mortgage to be longer than the amortization term of the existing mortgage. For example, a 15-year fixed-rate mortgage may be refinanced as a 30-year fixed-rate Relief Refinance Mortgage.
Allowing second home and investment property mortgages that are now owner-occupied primary residences to be refinanced under the Relief Refinance Mortgage offering.
Permitting the transfer of property insurance from the mortgage being refinanced to the Relief Refinance Mortgage, if permitted by the insurance carrier, to alleviate the need for the borrower to prepay property insurance at settlement.
Additionally, when using Home Value Explorer® to determine property value, we are not requiring you to complete the “Year Built” and “Number of Bedrooms” fields on Form 11, Mortgage Submission Schedule and Form 13SF, Mortgage Submission Voucher.
Finally, we are reminding you that Relief Refinance Mortgages may not be sold to Freddie Mac through the selling system’s servicing-released process.
To view the online Bulletin in its entirety, please http://www.freddiemac.com/sell/guide/bulletins/pdf/bll099.pdf
Tuesday, April 14, 2009
Financially Stressed Taxpayers
California taxpayers facing income tax troubles are encouraged to contact the California Franchise Tax Board (FTB). An FTB specialist can review accounts and explain available programs that offer assistance. The FTB generally can grant relief from state tax liens within two weeks for financially distressed homeowners trying to sell or refinance their homes. When a home sells for less than the loan balance, FTB sometimes can remove its tax lien from the property to allow the homeowner to complete the sale. Tax liens typically must be paid before a real estate escrow can close. The tax lien remains in effect on any other property the taxpayer currently holds or later acquires.FTB also can help individuals who are refinancing or modifying an existing home loan if homeowners request that the new or modified loan have priority over the tax lien. This allows prior home loans to be refinanced or modified without first having to pay the lien.
Buying Time Against Foreclosure
Buying “T I M E”Never before has the expression “If I could just buy some time” meant so much to people. When you are facing foreclosure you need time to discover your options, analyze your situation and implement an action plan. Your most precious commodity is time…And it’s running out. When your money is running out… You don’t have time to wait for the trickle down effect of the stimulus package to make a difference in your personal situation. While the package will make a significant difference over the long haul for thousands of Americans, anyone who thinks it is going to quickly make a difference for EVERY American is kidding themselves. Facing reality is hard, but necessary. As a country, we have ignored hard truths with disastrous consequences for too long. Nothing will be gained by continuing to point fingers. However, we must immediately recognize that each of us has a role to play in correcting the serious housing problem we face as a country. (Even if your home is paid off, FREE and CLEAR). The housing market holds the key to stabilizing our country, so anything we can do to keep people in their homes is a step in the right direction.First thing’s first...DO NOT ABANDON YOUR HOME. Even when you are behind on your mortgage, no matter how far behind you are, DO NOT abandon your home until the entire legal process has been played out. You can stay in YOUR house until your right to possession has ended. Exactly when that time is will be determined by three (3) factors:1. Type of foreclosure in your state: judicial or non-judicial2. Whether you have a mortgage or a deed of trust3. State statutes regarding sheriff or trustee sale and possession timeframesFind out the answers to items 1, 2 and 3, and then abide by them. Make sure your lender abides by them as well. Things could improve while you are holding out. Hold on.Things are changing radically and very quickly because of the magnitude of the housing problem. Your local courts could dramatically change the way they process pending foreclosures so that you have a chance to work things out with the lender. Stay in our home and fight for the chance to work things out. More banks are willing to work with borrowers today simply because they really can’t manage the huge backlog of homes which have already been lost to foreclosure. If you can present a viable plan, your chances of retaining home ownership are pretty good.Second thing’s second… I know you know that, but I needed to get your attention. Probably the second most valuable thing anyone will ever tell you to do to save your home from foreclosure is to:1. Demand the lender or servicer who is threatening to sue you for foreclosure produce the original note/deed of trust which says you owe them. In legal terms you are asking them to demonstrate that they are the “real party of interest.” In common language that means, prove I owe you. Prove you have the right to demand payments from me. (This has been discussed on our blog, which can be found at homeownershipmatters.blogspot.com).2. The most effective way to demand this documentation is with a “qualified written request”. You are entitled to request that and any other information you want which is related to servicing on your loan (any mortgage loan in the United States) under federal RESPA regulations.What Choices do I have?Let’s consider the answer to that question. It is critical that you start with an honest inventory of your situation. How far behind are you? Do you have the resources to resume payments? If not now, when will you be able to do so? What do you want to do? What are you ABLE to do? Why should the bank consider your proposal? You’ll need to able to defend it as being reasonable, based on your current circumstances.Space in this article will not allow me to go into detail but I will provide you with the options you can consider. Do further research on each of them, online, in the library, on websites such as HomeOwnershipMatters.com Or at the blog: HomeOwnershipMatters.blogspot.com.a. Options to keep the house—special forbearance, loan modification or a partial claim. You need to learn what each of these means and how it worksb. Options to let the house go—short sale, assumption or deed-in-lieu. All of these options are better than foreclosure but you need to know exactly how they work to avoid creating yet another problem for yourself down the road.c. Reverse mortgage could be considered, it could be your solution. Be sure to use a government backed reverse mortgage if you decide to use this option.d. Receiving disability payments (if you have a claim pending) could make the difference. Hold on until you know what you will be receivinge. Acquiring a roommate could change your finances—get started working on it (I mean a roommate who will PAY—not one who will add to your expenses)f. Selling unnecessary items in order to cover the gap until you get a permanent solution. Ebay or Craigslist could bring in some immediate cash. (Stop crying—we are trying to save your home and Buy “T I M E”).g. Some other solution which has not even occurred to me“Answer” the summonsThe summons is your official notification that the lender has moved to legal action. The court notifies you via the “summons”. Your response should be to the clerk of the courts, the lender/servicer and their attorney. It is critical that your answer be received within the legally stipulated timeframe in your state. It is strongly recommended that the answer be sent by certified mail, with a signature required. This is a task which you can handle on your own, with a little coaching.Basically, an answer should acknowledge that you are aware of your situation and that you are working with the lender on a plan. Specify what that plan entails. If you are challenging whether or not the lender has the legal right to foreclose (due to failure to produce the original note or demonstrate that they are the “real party of interest”) this is your time to say so. The foreclosure is likely to be stalled based on the quality of a timely, well prepared “answer”.Local initiative is neededWe all have high expectations of the new administration but our President has said repeatedly, and has demonstrated with his grassroots campaign, that the masses can make a difference, when they choose to become involved. If every person who reads this article would share it with the people in your personal database, you would help several people to avoid foreclosure.If the leaders of organizations would share the articles and the link to the blog with your entire company, you might save not only their home but the home of some of their family members or friends. Driving people to the blog and website so that they can get practical, easy to understand information to help them with their personal choices could make a big difference. Anyone reading this who has the connections to have a workshop in your city or a program aired on Public Access or Government Access television or local radio show could reach thousands of folks with some concrete/self help which could make all the difference in your community. I am a teacher and a writer. I know the role I am to play. I ask each of you to find your role in helping our country get back on its feet. We must find some resolution to our housing problems. Mildred Wilkins, founder and president of Home Ownership Matters, LLC.
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