Senate Votes to pass Housing Tax Credit
The Senate just voted 98-0 to pass the Tax Credit [within the Unemployment Bill]. It now goes to the House. Expect House leadership to place the bill on a fast track for passage on Thursday. It could get to the President on Friday. John DiBiase Government Affairs Communications Director National Association of REALTORS®
Thursday, November 5, 2009
Monday, November 2, 2009
Will Expected Extension of Homebuyer Tax Credit Help Our Real Estate Clients?
Will the Expected Extension of the US Homebuyer Tax Credit help business in our state, be a boost for our clients, the housing market and be good for our US and local economies?
Good question, and we will all see what develops, whether the measure can be worked out between Senate and Congress, and if it passes whether Obama will sign it into law. Then we'll see how buyers and consumers react between December 1 and April 30 of next year.
WE NEED ENCOURAGEMENT FOR HOME SELLERS HERE AT RIVERSIDE COUNTY. Too many are nervous and waiting to sell their homes.
This new measure could possibly encourage more owners to be sellers, to have positive expectations and get their homes cleaned up and ready for market and sale.
The government's first-time home buyer $8,000 tax credit has inspired a lot of sales this year, estimated as many as 400,000 by the time the program ends on November 30.
US Senate negotiators have agreed on a tentative deal on extending and slightly expanding the tax credit.
•$8,000 tax credit extension would cover first-time home buyers who sign a contract for a home by the end of April 2010 and close by the end of June 2010.
•Creates a $6,500 tax credit for those who buy a home, but have owned a home for at least five consecutive years out of the past eight years.
•Under the $8,000 tax credit extension, income limit would be raised to $125,000 a year for individuals and $225,000 for married couples.
Like most REALTORS and real estate professionals, we are concerned about business and our economy, employment in California, and are in favor of this homebuyer tax credit extension. We believe it can help improve our US and local economies, put buyer consumer money back into the markets, and assist to create jobs in this important real estate industry.
Good question, and we will all see what develops, whether the measure can be worked out between Senate and Congress, and if it passes whether Obama will sign it into law. Then we'll see how buyers and consumers react between December 1 and April 30 of next year.
WE NEED ENCOURAGEMENT FOR HOME SELLERS HERE AT RIVERSIDE COUNTY. Too many are nervous and waiting to sell their homes.
This new measure could possibly encourage more owners to be sellers, to have positive expectations and get their homes cleaned up and ready for market and sale.
The government's first-time home buyer $8,000 tax credit has inspired a lot of sales this year, estimated as many as 400,000 by the time the program ends on November 30.
US Senate negotiators have agreed on a tentative deal on extending and slightly expanding the tax credit.
•$8,000 tax credit extension would cover first-time home buyers who sign a contract for a home by the end of April 2010 and close by the end of June 2010.
•Creates a $6,500 tax credit for those who buy a home, but have owned a home for at least five consecutive years out of the past eight years.
•Under the $8,000 tax credit extension, income limit would be raised to $125,000 a year for individuals and $225,000 for married couples.
Like most REALTORS and real estate professionals, we are concerned about business and our economy, employment in California, and are in favor of this homebuyer tax credit extension. We believe it can help improve our US and local economies, put buyer consumer money back into the markets, and assist to create jobs in this important real estate industry.
Wednesday, October 7, 2009
New Housing Bill Will Force Loan Modification.
Four senators are putting their muscle behind a new housing bill intended to prohibit lenders operating in the U.S. from foreclosing on home owners without first having discussed reasonable modification options with the borrowers.
The bill, called the Preserving Homes and Communities Act is being sponsored by Rhode Island Senator Jack Reed, Illinois Senator Dick Durbin, Jeff Merkley of Oregon and Sheldon Whitehouse of Rhode Island.
Under this bill, lenders will be forced to the negotiating table under the threat of stiff fines and other legal penalties.
All lenders will be required to perform what the bill terms as a "net present value" test for all seriously delinquent borrowers. The test would be a financial analysis weighing the benefits of a modification of loan terms against the benefits of foreclosure.
For borrowers who do not fit into this program, the bill would create a multi-billion national fund for states to make loans or grants in order to prevent foreclosures.
The senators' rationale behind the creation of this bill is that they are frustrated with the slow pace of current loan modification programs and feel that they are not keeping up with the record numbers of foreclosures this year.
"Voluntary efforts to keep families in their homes have failed," said Durbin. "This bill will force lenders to modify qualified mortgages rather than letting them move quickly to foreclosure, which destroys households and neighborhoods."
The act will also set up a mortgage payment assistance program to provide money to state housing agencies to assist people who have lost income and face the prospect of foreclosure.
The most significant aspect of this bill would be to create "mandatory mediation" requirements forcing lenders to allow some mediation efforts between them and their borrowers before being able to file foreclosures against home owners.
This proposal will, no doubt, be met with opposition by banking and mortgage lending groups. It is, however, currently favored to be supported in the House.
The bill, called the Preserving Homes and Communities Act is being sponsored by Rhode Island Senator Jack Reed, Illinois Senator Dick Durbin, Jeff Merkley of Oregon and Sheldon Whitehouse of Rhode Island.
Under this bill, lenders will be forced to the negotiating table under the threat of stiff fines and other legal penalties.
All lenders will be required to perform what the bill terms as a "net present value" test for all seriously delinquent borrowers. The test would be a financial analysis weighing the benefits of a modification of loan terms against the benefits of foreclosure.
For borrowers who do not fit into this program, the bill would create a multi-billion national fund for states to make loans or grants in order to prevent foreclosures.
The senators' rationale behind the creation of this bill is that they are frustrated with the slow pace of current loan modification programs and feel that they are not keeping up with the record numbers of foreclosures this year.
"Voluntary efforts to keep families in their homes have failed," said Durbin. "This bill will force lenders to modify qualified mortgages rather than letting them move quickly to foreclosure, which destroys households and neighborhoods."
The act will also set up a mortgage payment assistance program to provide money to state housing agencies to assist people who have lost income and face the prospect of foreclosure.
The most significant aspect of this bill would be to create "mandatory mediation" requirements forcing lenders to allow some mediation efforts between them and their borrowers before being able to file foreclosures against home owners.
This proposal will, no doubt, be met with opposition by banking and mortgage lending groups. It is, however, currently favored to be supported in the House.
Monday, September 21, 2009
How to keep your team from getting distracted by social networking.
Three Minute Coach
How to keep your team from getting distracted by social networking.
Always: Ensure that every employee knows what work is critical.
Our research shows that about 50 percent of all work is "fake work," or work that is not directly linked to organizational strategy. Social networking and other workplace distractions are symptoms of a common problem—workers without clear expectations. Always translate organizational strategies into clear tasks and provide a forum for team discussion and alignment among coworkers. Alignment requires a concerted effort to create ownership, determine task importance, coordinate workloads and establish accountability for results.
Sometimes: Meet and have strategic conversations and reinforce accountability. Use real work tasks—those that are critical and connected to strategy—to manage and monitor performance. Managers should avoid noticing and rewarding noncritical work. Instead, review the obstacles and resource issues that obstruct real work and let the team help curb social networking distractions.
Never: Assume that strategies are understood and are finding their way into daily work. Managers think they can align people, but employees must adjust and find ways to drive strategies day to day. You can't ignore distracting behaviors, but ultimately you have to focus on monitoring real work tasks and expected outcomes. In areas like IT, exciting new projects often dominate, and strategic links are ignored. Most people don't like doing fake work. They want to accomplish work of value.
Gaylan Nielson and Brent Peterson have been organizational consultants for over 20 years working with Fortune 1000 companies and their subsidiaries all over the world. You can find them at www.fakework.com.
© 2008 CXO Media Inc
How to keep your team from getting distracted by social networking.
Always: Ensure that every employee knows what work is critical.
Our research shows that about 50 percent of all work is "fake work," or work that is not directly linked to organizational strategy. Social networking and other workplace distractions are symptoms of a common problem—workers without clear expectations. Always translate organizational strategies into clear tasks and provide a forum for team discussion and alignment among coworkers. Alignment requires a concerted effort to create ownership, determine task importance, coordinate workloads and establish accountability for results.
Sometimes: Meet and have strategic conversations and reinforce accountability. Use real work tasks—those that are critical and connected to strategy—to manage and monitor performance. Managers should avoid noticing and rewarding noncritical work. Instead, review the obstacles and resource issues that obstruct real work and let the team help curb social networking distractions.
Never: Assume that strategies are understood and are finding their way into daily work. Managers think they can align people, but employees must adjust and find ways to drive strategies day to day. You can't ignore distracting behaviors, but ultimately you have to focus on monitoring real work tasks and expected outcomes. In areas like IT, exciting new projects often dominate, and strategic links are ignored. Most people don't like doing fake work. They want to accomplish work of value.
Gaylan Nielson and Brent Peterson have been organizational consultants for over 20 years working with Fortune 1000 companies and their subsidiaries all over the world. You can find them at www.fakework.com.
© 2008 CXO Media Inc
Wednesday, August 26, 2009
Economic update
LOS ANGELES (Aug. 25) – Home sales increased 12 percent in July in California compared with the same period a year ago, while the median price of an existing home declined 19.6 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
“The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” said C.A.R. President James Liptak. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered.
“Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline, and includes all buyers, not just first-timers.”
Closed escrow sales of existing, single-family detached homes in California totaled 553,910 in July at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 12 percent from the revised 494,390 sales pace recorded in July 2008. Sales in July 2009 increased 8.1 percent compared with the previous month.
The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during July 2009 was $285,480, a 19.6 percent decrease from the revised $355,000 median for July 2008, C.A.R. reported. The July 2009 median price rose 3.9 percent compared with June’s $274,740 median price.
“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.
“The federal tax credit for first-time buyers played a critical role in the purchase decision of many buyers,” said C.A.R. President James Liptak. “Nearly 40 percent of first-time buyers said they would not have purchased a home if the tax credit was not offered.
“Because the tax credit has helped so many first-time buyers become homeowners, it is critical that Congress extends the credit beyond the Dec. 1 deadline, and includes all buyers, not just first-timers.”
Closed escrow sales of existing, single-family detached homes in California totaled 553,910 in July at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local REALTOR® associations statewide. Statewide home resale activity increased 12 percent from the revised 494,390 sales pace recorded in July 2008. Sales in July 2009 increased 8.1 percent compared with the previous month.
The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the July pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The median price of an existing, single-family detached home in California during July 2009 was $285,480, a 19.6 percent decrease from the revised $355,000 median for July 2008, C.A.R. reported. The July 2009 median price rose 3.9 percent compared with June’s $274,740 median price.
“July marked the fifth consecutive month of month-to-month increases in the median price,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “This was the largest increase on record for the month of July based on statistics dating back to 1979. The yearly decline in July also was the smallest in the past 19 months.
Wednesday, August 12, 2009
California Housing Market shows signs of recovery!
The median price of a home in California rose for the fourth straight month in June. State wide the median price was $274,740 up 4.2 percent from May but still 26.4% below last June.
June sales slipped 6% from May but showed a 20.1 percent increase over the same period one year ago. While gains are expected be higher during the remaining months of 2009, they gains will not be quite as steep according to CAR economists.
Gains in sales for the first half of 2009 exceeded last year’s pace by 50.6% and are expected to be around 25% ahead of last years pace at year end.
The unsold inventory index in June was at 4.1 months and has decreased at a steady pace from the first of the year when it stood at 6.6 months and is well below the peak of 16.6 months in early 2008. The low inventory may contribute to an upward pressure on home prices.
Folks better gem 'em while they're cheap!!
June sales slipped 6% from May but showed a 20.1 percent increase over the same period one year ago. While gains are expected be higher during the remaining months of 2009, they gains will not be quite as steep according to CAR economists.
Gains in sales for the first half of 2009 exceeded last year’s pace by 50.6% and are expected to be around 25% ahead of last years pace at year end.
The unsold inventory index in June was at 4.1 months and has decreased at a steady pace from the first of the year when it stood at 6.6 months and is well below the peak of 16.6 months in early 2008. The low inventory may contribute to an upward pressure on home prices.
Folks better gem 'em while they're cheap!!
Tuesday, July 28, 2009
Valley home sales up 30% as buyers jump on deals
Valley home sales up; prices dip
Home sales rose 20 percent across the state in June as the Coachella Valley continued to post sales volume gains.
“The trend we are seeing is that prices are stabilizing and sales are spiking, so buyers are getting the message that this is not a time to linger if they are in the hunt to buy a home,'' said Greg Berkemer, executive director of the California Desert Association of Realtors.
Valley home sales rose 30 percent, with 2,898 transactions noted from April to June.
That's up from 2,222 sales during the same period last year, according to Multiple Listing Service data released by the Desert Association of Realtors.
The average MLS home sale price in the valley from April to June was $257,427, up from $250,935 from January through March.
“There was a slight tick up of the average sales price in the second quarter, and people are starting to notice that,” Berkemer said.
But Patrick Veling, president and founder of Brea-based Real Data Strategies, said the enthusiasm about rising home sales must be tempered with statistics that show home sales are largely occurring at entry-level price ranges.
“There's been about a 20 percent increase in sales activity, but that's occurring only when compared to record lows,'' he said.
Average home sale prices are down dramatically from a year ago: The fall in prices nearly equates to two homes for the price of one. Last year, the average MLS sale price on a single-family home was $486,694 in the first three months. It averaged $454,706 from April to June 2008.
The median price of all homes sold in May in the Coachella Valley — that would include existing single-family homes, condos and new construction — was $180,000. That's down 41 percent from a year ago.
The price points have been a catalyst for sales.
James Liptak, president of the California Association of Realtors, said June marked the 10th consecutive month of positive sales gains for resale homes across the state.
“Many first-time buyers, especially those who were previously priced out of certain areas, are realizing that tax credits from both the state and federal governments increased affordability, and low-interest rates are creating a prime time to purchase a home,'' he said.
It was the fourth month of rising median home prices across California, Liptak said.
The state median of $274,740 rose 4.2 percent from May to June but was down nearly $100,000 from one year ago. The state median in June 2008 was $374,100.
Closed escrow sales across California totaled 514,110 in June at a seasonally adjusted rate. The sales pace recorded in June 2008 was 427,910 closed escrow sales.
Home sales rose 20 percent across the state in June as the Coachella Valley continued to post sales volume gains.
“The trend we are seeing is that prices are stabilizing and sales are spiking, so buyers are getting the message that this is not a time to linger if they are in the hunt to buy a home,'' said Greg Berkemer, executive director of the California Desert Association of Realtors.
Valley home sales rose 30 percent, with 2,898 transactions noted from April to June.
That's up from 2,222 sales during the same period last year, according to Multiple Listing Service data released by the Desert Association of Realtors.
The average MLS home sale price in the valley from April to June was $257,427, up from $250,935 from January through March.
“There was a slight tick up of the average sales price in the second quarter, and people are starting to notice that,” Berkemer said.
But Patrick Veling, president and founder of Brea-based Real Data Strategies, said the enthusiasm about rising home sales must be tempered with statistics that show home sales are largely occurring at entry-level price ranges.
“There's been about a 20 percent increase in sales activity, but that's occurring only when compared to record lows,'' he said.
Average home sale prices are down dramatically from a year ago: The fall in prices nearly equates to two homes for the price of one. Last year, the average MLS sale price on a single-family home was $486,694 in the first three months. It averaged $454,706 from April to June 2008.
The median price of all homes sold in May in the Coachella Valley — that would include existing single-family homes, condos and new construction — was $180,000. That's down 41 percent from a year ago.
The price points have been a catalyst for sales.
James Liptak, president of the California Association of Realtors, said June marked the 10th consecutive month of positive sales gains for resale homes across the state.
“Many first-time buyers, especially those who were previously priced out of certain areas, are realizing that tax credits from both the state and federal governments increased affordability, and low-interest rates are creating a prime time to purchase a home,'' he said.
It was the fourth month of rising median home prices across California, Liptak said.
The state median of $274,740 rose 4.2 percent from May to June but was down nearly $100,000 from one year ago. The state median in June 2008 was $374,100.
Closed escrow sales across California totaled 514,110 in June at a seasonally adjusted rate. The sales pace recorded in June 2008 was 427,910 closed escrow sales.
Monday, July 27, 2009
Thursday, July 23, 2009
Troubled owners: 3 warnings about short sales
Many struggling homeowners are considering short sales as a way to avoid foreclosure on their homes, but there are a few things they should know before taking the plunge. Source: MSN Real Estate
Click here for more info.
Click here for more info.
Wednesday, July 22, 2009
Facebook facts
There are three ways to have a Facebook presence
1. A Facebook profile, usually for an individual but sometimes for an organization, includes information about the person, a wall for public messages, and other elements that the user can decide to include or leave out. Users who want to connect with the owner of a personal page become friends.
2. A Facebook fan page, which can be for individuals or organizations, allows Facebook users to join, receive updates and conduct discussions on the group’s wall or in a discussion forum. Users who want to participate become fans.
3. A Facebook group can be created to foster discussion and information-sharing about a common interest. Users who want to be involved join the group.
1. A Facebook profile, usually for an individual but sometimes for an organization, includes information about the person, a wall for public messages, and other elements that the user can decide to include or leave out. Users who want to connect with the owner of a personal page become friends.
2. A Facebook fan page, which can be for individuals or organizations, allows Facebook users to join, receive updates and conduct discussions on the group’s wall or in a discussion forum. Users who want to participate become fans.
3. A Facebook group can be created to foster discussion and information-sharing about a common interest. Users who want to be involved join the group.
Tuesday, July 21, 2009
E-mail lives, but do we need it?
Click line below for more details.
Social-networking tools are increasingly replacing e-mail.
Social-networking tools are increasingly replacing e-mail.
Monday, July 20, 2009
11 essential loan-modification tips
Check this out! Great info for those who need a loan modification.
11 essential loan-modification tips.
Source: MSN Real Estate.
11 essential loan-modification tips.
Source: MSN Real Estate.
Monday, July 13, 2009
Understanding and Using All of Your First Time Home Buyer Options
With all the excitement of the first time home buyer tax credit, buyers often get confused and miss out on other important options.
As a first time buyer, don't let the excitement of the $8,000 tax credit cause you to miss out on many other home buying options. It isn't uncommon for a buyer to confuse the federal tax credit with seller credits, down payment assistance, or first time home buyer grants.
First time home buyers have many options. Utilizing one option does not hold a buyer back from utilizing one or more other options allowed to them as a first time home buyer. This article is written not to go into great depth on each option, but to help you realize the different options available as a first time home buyer and how to utilize each/all of these options.
Read on to understand some common terms and how to take advantage of each option.
Tax Credit
The federal tax credit is the (up to) $8,000 incentive that everyone is talking about. Most home buyers that haven't owned a home in the last 3 years will qualify for this. In general, this credit is realized as a credit for you when you complete your taxes in the spring of 2009 (for 2008's income).
For example, if you would have normally received $2,000 back after completing your 2009 tax returns, the tax credit would add an additional $8,000, to make your total amount received $10,000.
Seller Credit (Seller Concessions)
A seller credit, better known as seller concessions, is a scenario when the seller agrees to pay a certain amount of your settlement costs. The seller may pay a percentage, such as 2, 3, or 6% of the purchase price, or they may pay a dollar amount, such as $2,500 or $5,000.
Grants for First Time Home Buyers
Many people miss out on first time home buyer grant options. Once a buyer hears about the $8,000 tax credit, they sometimes go deaf to other options, either out of excitement or because they don't realize they can utilize more than one option.
A grant is a program often issued by a county or state that offers funds to the home buyer for the purchase of a home. Either a flat dollar amount or a percentage of the loan amount is used to calculate the funds offered. A typical grant percentage would be 2, 3, or 4% of the loan amount. For instance, 4% of a loan amount of $100,000 would give you a $4,000 grant.
Grants can be utilized for down payment requirements and/or to pay for closing costs. Depending on the purchase price and the grant selected, a grant can sometimes even cover all requirements the buyer has concerning both the down payment requirement and closing costs.
Down Payment Assistance
As of the date of this article, down payment assistance in the traditional sense is not available.Down payment assistance programs (DAPs) were an option where the seller would indirectly give a buyer the money needed for down payment requirements. These transactions in general had a higher default rate then most, therefore this option is no longer available. Examples were the Nehemiah program or the Genesis program. There is a movement to reinstate these programs. The mentioning of DAPs here is simply to help you differentiate and not confuse them with other options.
How to Utilize More Than One First-Time Home Buyer Option
Here's where the rubber meets the road. A common example of utilizing all of the above options is as follows:
1. Buyer meets with grant official or loan officer for qualification requirements pertaining to a specific grant option. In our example the buyer will use an FHA mortgage, which requires a 3.5% (of the purchase price) down payment. The purchase price is $100,000, therefore the down payment requirement for this would be $3,500.
2. Loan officer and buyer determine that the use of a 4% grant would be the wisest choice. Since the down payment requirement is $3,500, the financed amount will be $96,500 ($100,000 - $3,500). Based off of $96,500, a 4% grant would be $3,860 (loan amount x 4%, or $96,500 x .04)). Compare the grant amount with the buyer's down payment requirement of $3,500, and the grant amount is $360 more than the required down payment amount. This type of grant covers the down payment requirements and some additional funds to be applied towards the closing costs.
3. Assuming closing costs are $5,000, here is how you can determine what to request from the seller to get the closing costs paid as well. We can subtract the extra money left over from the grant, in this case $360, from $5,000. Our sum is $4,640. FHA requirements allow the seller to pay up to 6% of the buyer's closing costs. We don't need all 6% (or $6,000), we only need $4,640 from the seller. So when the purchase of the home is negotiated, the buyer's agent negotiates with the seller's agent that the seller will agree to pay $4,640 towards the buyers settlement fees/closing costs.
4. Buyer goes to settlement needing $0 to close, and in fact they will get back the money already deposited with the real estate agent and lender.
5. Lastly, the buyer can still maximize the use of the federal tax credit and receive their $8,000 after filing their 2009 tax returns.
All-in-all, in our scenario the home buyer will receive $16,500 for purchasing a home ($3,860 grant + $4,640 seller's concessions + $8,000 tax credit). The buyer is able to utilize three separate home buying options and in the end, still have their own money in the bank, which will then get boosted in several months by the $8,000 tax credit. Now THAT is the kind of lending and buyer representation that creates solid, well founded home owners, which is exactly what we all desire.
By working with knowledgeable professionals, you can utilize multiple buyer options to make your home buying experience an amazing event!
As a first time buyer, don't let the excitement of the $8,000 tax credit cause you to miss out on many other home buying options. It isn't uncommon for a buyer to confuse the federal tax credit with seller credits, down payment assistance, or first time home buyer grants.
First time home buyers have many options. Utilizing one option does not hold a buyer back from utilizing one or more other options allowed to them as a first time home buyer. This article is written not to go into great depth on each option, but to help you realize the different options available as a first time home buyer and how to utilize each/all of these options.
Read on to understand some common terms and how to take advantage of each option.
Tax Credit
The federal tax credit is the (up to) $8,000 incentive that everyone is talking about. Most home buyers that haven't owned a home in the last 3 years will qualify for this. In general, this credit is realized as a credit for you when you complete your taxes in the spring of 2009 (for 2008's income).
For example, if you would have normally received $2,000 back after completing your 2009 tax returns, the tax credit would add an additional $8,000, to make your total amount received $10,000.
Seller Credit (Seller Concessions)
A seller credit, better known as seller concessions, is a scenario when the seller agrees to pay a certain amount of your settlement costs. The seller may pay a percentage, such as 2, 3, or 6% of the purchase price, or they may pay a dollar amount, such as $2,500 or $5,000.
Grants for First Time Home Buyers
Many people miss out on first time home buyer grant options. Once a buyer hears about the $8,000 tax credit, they sometimes go deaf to other options, either out of excitement or because they don't realize they can utilize more than one option.
A grant is a program often issued by a county or state that offers funds to the home buyer for the purchase of a home. Either a flat dollar amount or a percentage of the loan amount is used to calculate the funds offered. A typical grant percentage would be 2, 3, or 4% of the loan amount. For instance, 4% of a loan amount of $100,000 would give you a $4,000 grant.
Grants can be utilized for down payment requirements and/or to pay for closing costs. Depending on the purchase price and the grant selected, a grant can sometimes even cover all requirements the buyer has concerning both the down payment requirement and closing costs.
Down Payment Assistance
As of the date of this article, down payment assistance in the traditional sense is not available.Down payment assistance programs (DAPs) were an option where the seller would indirectly give a buyer the money needed for down payment requirements. These transactions in general had a higher default rate then most, therefore this option is no longer available. Examples were the Nehemiah program or the Genesis program. There is a movement to reinstate these programs. The mentioning of DAPs here is simply to help you differentiate and not confuse them with other options.
How to Utilize More Than One First-Time Home Buyer Option
Here's where the rubber meets the road. A common example of utilizing all of the above options is as follows:
1. Buyer meets with grant official or loan officer for qualification requirements pertaining to a specific grant option. In our example the buyer will use an FHA mortgage, which requires a 3.5% (of the purchase price) down payment. The purchase price is $100,000, therefore the down payment requirement for this would be $3,500.
2. Loan officer and buyer determine that the use of a 4% grant would be the wisest choice. Since the down payment requirement is $3,500, the financed amount will be $96,500 ($100,000 - $3,500). Based off of $96,500, a 4% grant would be $3,860 (loan amount x 4%, or $96,500 x .04)). Compare the grant amount with the buyer's down payment requirement of $3,500, and the grant amount is $360 more than the required down payment amount. This type of grant covers the down payment requirements and some additional funds to be applied towards the closing costs.
3. Assuming closing costs are $5,000, here is how you can determine what to request from the seller to get the closing costs paid as well. We can subtract the extra money left over from the grant, in this case $360, from $5,000. Our sum is $4,640. FHA requirements allow the seller to pay up to 6% of the buyer's closing costs. We don't need all 6% (or $6,000), we only need $4,640 from the seller. So when the purchase of the home is negotiated, the buyer's agent negotiates with the seller's agent that the seller will agree to pay $4,640 towards the buyers settlement fees/closing costs.
4. Buyer goes to settlement needing $0 to close, and in fact they will get back the money already deposited with the real estate agent and lender.
5. Lastly, the buyer can still maximize the use of the federal tax credit and receive their $8,000 after filing their 2009 tax returns.
All-in-all, in our scenario the home buyer will receive $16,500 for purchasing a home ($3,860 grant + $4,640 seller's concessions + $8,000 tax credit). The buyer is able to utilize three separate home buying options and in the end, still have their own money in the bank, which will then get boosted in several months by the $8,000 tax credit. Now THAT is the kind of lending and buyer representation that creates solid, well founded home owners, which is exactly what we all desire.
By working with knowledgeable professionals, you can utilize multiple buyer options to make your home buying experience an amazing event!
Thursday, July 9, 2009
Sellers Market, Buyers Market or ..............Lenders Market?
Buyers rule? Not so fast. Certainly that's not quite true if the property falls under the category of distressed property.
Distressed property usually needs far more than paint job, at least, that's true, or has been up to now. Property is considered distressed if it has been foreclosed by the lender or the owner is seriously late in making payments or the property is upside down. Upside down meaning that the value of the property is less than the mortgage amount.
So what am I meaning by Lender's market? To define a "Lenders Market", let's first review the characteristics of a “Seller’s Market” and a "Buyers Market".
In defining a "Sellers Market", we usually find a lower than usual and faster moving inventory with prices generally increasing and the Seller more clearly in control to determine the outcome of any successful effort to purchase. Buyer's tend to pay more (often times more than property might be listed for). Many of the buyers contingencies are either eliminated or greatly reduced. The time for removal of contingencies is shortened. In some cases many of contingencies are negotiated way, such as a buyers typical request for repairs and the length of time the buyer has to obtain services such as appraisal and loan approval.
In a really hot “Seller’s Market”, buyers typically need more down payment and higher earnest money deposits that may be defaulted if the Buyer fails to consummate the transaction in the exact time frame as outlined in the purchase agreement.
In a “Buyer’s Market”, buyers tend to have greater control of the time frames and also many of the terms and conditions in the contract tend to favor their wants. Sort of a flip of what is found in the “Seller’s Markets”. In a “Buyer’s Market”, buyers typically pay less than they might in an active “Seller’s Market” and usually have a larger selection of properties to choose from.
So what then is a “Lender’s Market”? A “Lenders Market” is typically where there is a large number of or a majority of the market is made up of distressed property sales. Distressed properties being those where the owner is either in default of keeping the mortgage current or has already been foreclosed upon. A property is also said to be distressed if the value of the property is less than the mortgage or trust deed amount and the owners are unable to keep the mortgage current and want to sell the property. When a property has been foreclosed by a lender, it is called Real Estate Owned (REO). When a property owner wants to sell a property for less than is owed on the property, it is referred to as a Short Sale.
A lender's market might have a combination of many of these characteristics. Many of the buyers benefits in their offer to purchase are striped away including the pest inspection and clearance, closing costs, home warranties and repair requests with the lender opting to sell the property is present physical condition. Naturally there are exceptions to this depending on the Lender and whether the distressed property is a short sale or REO. By and large, lenders want the highest possible price with the least number of contingencies. Only Buyer’s with pre-approved loans are considered and in the case of REO’s, the lenders will give greater priority to All Cash offers over offers with financing even if the offering amount is slightly less. All Cash offers have fewer contingencies and can usually close faster clearing the asset from the lender’s books faster without any hassles or delays as may be occasioned by other banks that are providing the Buyer’s loan.
When properties are “Sold in present condition”, Buyers must be extra diligent in their property inspection to ascertain to the extent possible, the true nature of the property.
Typically lenders will tighten down time lines and may impose a penalty if there is any delay in the close of escrow for any reason. The essence of the lenders market is "take it or leave it" As the saying goes, "He who has the gold makes the rules". But it is also important to know that many REO’s and short can be good deals but it does require extra diligence and careful consideration when purchasing them.
To further describe the difference in distressed properties, in a Short Sale the owner of the property remains the Seller and in the REO, the lender is the new owner and the differences between a short sale and REO can be striking.
In the short sale, the lenders key role is to approve taking a loss in the amount owed on the trust deed or the mortgage. When the mortgage is late usually for 3 consecutive pay periods, the lender can file a notice of default. In a short sale, if the owner files documents with the lender explaining the financial distress that is causing the late payment and wants to sell the property, the lender may opt to consider a purchase offer on the property that is short of what is owned combined with the costs of sale. It is a judgment call of the lender since they have the right to file a default notice and if the owner can not correct the default amount, the lender can foreclose. The lender has specific times frames it must follow in this regard. The Buyer as well has a specific amount of time to cure the defaulted payments with any penalties.
Lenders have been encouraged by the government to for stall the foreclosure process and help slow down the excessive number of foreclosures that have taken place over the last couple years on the defaulting loans.
Lenders involved in distressed properties are clearly in charge to determine if they will accept even the highest offer on the property. In the case of short sales, they can either accept writing off the short fall of the outstanding trust deed or opt to continue the foreclosure process. Of late, lenders are becoming much more realistic in understanding that short sales are costing them less than they would have to write off as a bad asset in a foreclosure.
REO's close in the shortest possible time period of property sold in California. In short sales, there is most often a serious lag time (often months) before the lender even agrees to the process. Today with the greater influence of government encouraging banks to accept the short sale process sooner rather than later, we will most likely see the short sales process refined and the time frames for approval to be lessened.
Distressed property sales in the area make up close to 50% of the entire real estate market in reported sales. The good news is that equity sales are increasing and perhaps by spring of 2010, the equity sale will once again be a far greater share of the market.
Distressed property usually needs far more than paint job, at least, that's true, or has been up to now. Property is considered distressed if it has been foreclosed by the lender or the owner is seriously late in making payments or the property is upside down. Upside down meaning that the value of the property is less than the mortgage amount.
So what am I meaning by Lender's market? To define a "Lenders Market", let's first review the characteristics of a “Seller’s Market” and a "Buyers Market".
In defining a "Sellers Market", we usually find a lower than usual and faster moving inventory with prices generally increasing and the Seller more clearly in control to determine the outcome of any successful effort to purchase. Buyer's tend to pay more (often times more than property might be listed for). Many of the buyers contingencies are either eliminated or greatly reduced. The time for removal of contingencies is shortened. In some cases many of contingencies are negotiated way, such as a buyers typical request for repairs and the length of time the buyer has to obtain services such as appraisal and loan approval.
In a really hot “Seller’s Market”, buyers typically need more down payment and higher earnest money deposits that may be defaulted if the Buyer fails to consummate the transaction in the exact time frame as outlined in the purchase agreement.
In a “Buyer’s Market”, buyers tend to have greater control of the time frames and also many of the terms and conditions in the contract tend to favor their wants. Sort of a flip of what is found in the “Seller’s Markets”. In a “Buyer’s Market”, buyers typically pay less than they might in an active “Seller’s Market” and usually have a larger selection of properties to choose from.
So what then is a “Lender’s Market”? A “Lenders Market” is typically where there is a large number of or a majority of the market is made up of distressed property sales. Distressed properties being those where the owner is either in default of keeping the mortgage current or has already been foreclosed upon. A property is also said to be distressed if the value of the property is less than the mortgage or trust deed amount and the owners are unable to keep the mortgage current and want to sell the property. When a property has been foreclosed by a lender, it is called Real Estate Owned (REO). When a property owner wants to sell a property for less than is owed on the property, it is referred to as a Short Sale.
A lender's market might have a combination of many of these characteristics. Many of the buyers benefits in their offer to purchase are striped away including the pest inspection and clearance, closing costs, home warranties and repair requests with the lender opting to sell the property is present physical condition. Naturally there are exceptions to this depending on the Lender and whether the distressed property is a short sale or REO. By and large, lenders want the highest possible price with the least number of contingencies. Only Buyer’s with pre-approved loans are considered and in the case of REO’s, the lenders will give greater priority to All Cash offers over offers with financing even if the offering amount is slightly less. All Cash offers have fewer contingencies and can usually close faster clearing the asset from the lender’s books faster without any hassles or delays as may be occasioned by other banks that are providing the Buyer’s loan.
When properties are “Sold in present condition”, Buyers must be extra diligent in their property inspection to ascertain to the extent possible, the true nature of the property.
Typically lenders will tighten down time lines and may impose a penalty if there is any delay in the close of escrow for any reason. The essence of the lenders market is "take it or leave it" As the saying goes, "He who has the gold makes the rules". But it is also important to know that many REO’s and short can be good deals but it does require extra diligence and careful consideration when purchasing them.
To further describe the difference in distressed properties, in a Short Sale the owner of the property remains the Seller and in the REO, the lender is the new owner and the differences between a short sale and REO can be striking.
In the short sale, the lenders key role is to approve taking a loss in the amount owed on the trust deed or the mortgage. When the mortgage is late usually for 3 consecutive pay periods, the lender can file a notice of default. In a short sale, if the owner files documents with the lender explaining the financial distress that is causing the late payment and wants to sell the property, the lender may opt to consider a purchase offer on the property that is short of what is owned combined with the costs of sale. It is a judgment call of the lender since they have the right to file a default notice and if the owner can not correct the default amount, the lender can foreclose. The lender has specific times frames it must follow in this regard. The Buyer as well has a specific amount of time to cure the defaulted payments with any penalties.
Lenders have been encouraged by the government to for stall the foreclosure process and help slow down the excessive number of foreclosures that have taken place over the last couple years on the defaulting loans.
Lenders involved in distressed properties are clearly in charge to determine if they will accept even the highest offer on the property. In the case of short sales, they can either accept writing off the short fall of the outstanding trust deed or opt to continue the foreclosure process. Of late, lenders are becoming much more realistic in understanding that short sales are costing them less than they would have to write off as a bad asset in a foreclosure.
REO's close in the shortest possible time period of property sold in California. In short sales, there is most often a serious lag time (often months) before the lender even agrees to the process. Today with the greater influence of government encouraging banks to accept the short sale process sooner rather than later, we will most likely see the short sales process refined and the time frames for approval to be lessened.
Distressed property sales in the area make up close to 50% of the entire real estate market in reported sales. The good news is that equity sales are increasing and perhaps by spring of 2010, the equity sale will once again be a far greater share of the market.
Monday, July 6, 2009
Update
Hello all,
We hope you have had a great first half of 2009 and are enjoying your summer! It has certainly been an interesting year so far in the real estate world. The entire first quarter was very slow; however, that is traditional for us to be slow January into March…..we usually see an uptick in OUR market around March through May.
The entire second quarter was an entirely different story, both in our local Coachella Valley market, as well as California and nationwide. California saw an increase in sales the last three months AND what’s even more refreshing, is we also saw an increase in sales PRICES. According to the Wall Street Journal, California’s real estate market is the barometer by which we measure the economy as a whole. This is some fabulous news.
So for all of you out there that haven’t purchased yet, our question to you is what are you waiting for? Have you not seen that “right” house yet? Is there something else that is holding you back? We want to hear from you! Your goals are important to us, and OUR JOB for you is to provide you with all the information and facts that we can, and then negotiate the BEST deal for you! We would hate to have you come to us in a year or two and say….”I could’ve” or “I should’ve” or “What if”……….
We DO want to hear from you. Please call or email us with your story. Let us know how we can help. And remember, if you need a referral for another area, let us do the work and find you an agent that can work for YOU!
Check us out on YouTube. Go to www.youtube.com and enter “The Louise Hampton Team” in the search area. You will find several videos Louise and I have done, with messages to buyers AND sellers! (They are short and fun, so please watch!)
You can also follow us on Facebook under “The Louise Hampton Team”
CAN’T WAIT TO HEAR FROM YOU SOON!
We hope you have had a great first half of 2009 and are enjoying your summer! It has certainly been an interesting year so far in the real estate world. The entire first quarter was very slow; however, that is traditional for us to be slow January into March…..we usually see an uptick in OUR market around March through May.
The entire second quarter was an entirely different story, both in our local Coachella Valley market, as well as California and nationwide. California saw an increase in sales the last three months AND what’s even more refreshing, is we also saw an increase in sales PRICES. According to the Wall Street Journal, California’s real estate market is the barometer by which we measure the economy as a whole. This is some fabulous news.
So for all of you out there that haven’t purchased yet, our question to you is what are you waiting for? Have you not seen that “right” house yet? Is there something else that is holding you back? We want to hear from you! Your goals are important to us, and OUR JOB for you is to provide you with all the information and facts that we can, and then negotiate the BEST deal for you! We would hate to have you come to us in a year or two and say….”I could’ve” or “I should’ve” or “What if”……….
We DO want to hear from you. Please call or email us with your story. Let us know how we can help. And remember, if you need a referral for another area, let us do the work and find you an agent that can work for YOU!
Check us out on YouTube. Go to www.youtube.com and enter “The Louise Hampton Team” in the search area. You will find several videos Louise and I have done, with messages to buyers AND sellers! (They are short and fun, so please watch!)
You can also follow us on Facebook under “The Louise Hampton Team”
CAN’T WAIT TO HEAR FROM YOU SOON!
Thursday, June 25, 2009
SHOULD I PAY MY MORTGAGE? SHOULD I STOP PAYING MY MORTGAGE?
This seems to be THE NUMBER ONE question I get. Unfortunately there are several answers and which is correct for you depends on the Circumstances. I will address the common scenarios in this article.
Policy in my office is to never "tell" - as in "instruct" - our borrower client to pay or not to pay their mortgage. Paying or not paying has a lot of collateral effects and the borrower needs to know what they are before making the decision. We don't make the decision for the borrower (our client) because the effects of paying or not paying are not going to affect me - but they will affect the client, so it is the client that must make the final decision.
Let me make one issue clear - when we are hired to help facilitate a short sale or loan modification it is far easier for us to negotiate with the lender if the payments are late, but it is almost never a requirement. The exceptions to which will be discussed later in this article. Additionally, internal rules change at the banks constantly. A new client came in totally frustrated. They called their bank to help with a modification and the bank said they could not address their situation until they were at least 60 days late. So the near perfect (800+) credit score couple stopped paying for 60 days and then called the bank back. Now the bank says that because they are 60 days late they cannot speak to them about a modification! The point is, if you don't have to be late then why voluntarily create a late payment credit history that will adversely affect your credit-dependent life almost immediately and for years to come?
SO LET'S GET INTO IT - Danger - this is a long article and it covers a lot of ground!
Short Sale:
A borrower that is current and contemplating a short sale wonders if they should stop paying their (first) mortgage. They are upside down and until now they have been current. However they are paying the mortgage at a cost of not paying other bills. (Other or different facts may be that they are paying all their bills but taking the money from savings or a pension fund to make those payments, or they are borrowing money from another equity loan).
Generally, it is not a good idea to get into debt to pay your mortgage, unless you have a solid plan to both (i) keep the mortgage current and (ii) repay the additional indebtedness you are creating. It is not like taking from one pocket to put into another - it is more like taking from someone else's pocket to pay your bills. This would include credit card loans as the source of funds. It all has to be paid back, so if you don't have a plan to pay it back, don't borrow it in the first place! You are only digging a bigger hole for yourself and making it harder to get out of the hole.
If you are taking from your pension or savings money, again you better have a rock solid plan to get that money back into those accounts, or there is no sense in giving up that hard earned and usually irreplaceable retirement money, especially considering these are monies that are usually protected from creditors' judgments including those your mortgage lender could obtain (deficiency judgment)..
Of course the "amount" of money you have "in reserve" comes into consideration. If you have 2 million dollars in reserve and you decide to spend 10% of it to keep the loans current until you can short sale the property, that plan has a basis that the 10% is not going to make a difference in the way you run your life over the remaining time you have left as a mere mortal.
Sometimes, but rarely, we run into a lender that says they won't approve a short sale or modification because the borrower is current with his payments. When we have encountered this it is in most cases associated with a government backed loan, (but later on we will show you why this may be motivated by plain greed on the part of a loan servicer). A properly compiled financial snapshot of the borrower should show why they are current and what will happen if the short sale or modification is not approved.
Your decision on how to proceed should be based on what goal you are trying to accomplish and how you plan to get to that goal (see how to determine your goal).
Mortgage Modification:
Apart for some voluntary government programs regarding (Fannie Mae or Freddie Mac) government involved mortgages, I know of no lender that absolutely will not deal with a borrower who is current with their mortgage payments. Lenders deal with all sorts of situations and "absolutely not" is just not in the vocabulary. A typical borrower calling a lender may hear that they must be late, but that is more of a "vetting" statement than an absolute policy.
The exceptions are some government program guides for modification. The first step to seeing if your loan comes within this exception is to see if it is a Fannie Mae or Freddie Mac loan. You can do this online at the Making Home Affordable site. Many servicers and lenders whose loans are not "government backed" are now choosing to follow this government plan (known as the Home Affordable Modification plan or more affectionately called the "Obama Plan" - see below) for the simple reason that they are being compensated by the government for each successful modification they execute within its guidelines, and either the servicer or lender receive a residual bonus for the loan staying current under the modification. In these cases we have seen non-government backed loans insist on the borrower being late to qualify for modification as well. What is confusing on this point is that when the plan was introduced it included modifications (and compensation for such) for current loans as well. However, we are told time and time again from the lenders directly that they must be late to qualify. There is no such rule in the guidelines.
While this is contrary to what has been published by the government about the plan, keep mind that following the plan and any of its various aspects is entirely voluntary and up to the Lender or servicer. They can pick and chose from this plan as they see fit for their own internal reasons. Here is a more interesting twist - a servicer that modifies a delinquent loan is paid more under this incentive plan than if the borrower were to modify while the loan is current! If the borrower is current, the servicer can receive up to $3,500 in incentive fees from the government. If the borrower is delinquent, the servicer can receive up to $4,000 in incentive fees from the government. Thus it seems that it pays ($500 to)the servicer to encourage a borrower to be delinquent!
We often see a client that fits the profile for modification under this government plan. Some of these plans are said to require that to be qualified the borrower must be late 60 days (see Guidelines page 5 at bottom). But in fact, being late is not a requirement, but only one factor of many (see Guidelines page 16 at the top - "However, a NPV (net present value) positive result is not necessary to qualify a loan for a Home Affordable Modification"). If the goal is to qualify under such a plan as put in place by the lender at that time, then to accomplish that qualification the borrower may need to make themselves late, but that cannot be determined in a 2 minute telephone call with a lender representative. I cringe when we go this route because just like these "plans" came into existence, I can see them change the plan thus leaving the now 60 day late borrower with ruined credit scores that occurred needlessly.
Generally about a quarter of our modification clients never go late and still get a modification offer from the lender. However, keep in mind that nearly all lenders put up as their first line of defense the policy that going late is a necessity to qualify. We can only speculate this is done to deter the enormous inflow of loan modification requests from borrowers that would come in if this was NOT said to be a requirement. It also helps address those in the most dire amount of need first.
The Pro's and the Con's:
The general rule of thumb we use is if you can pay your mortgage and maintain your life's necessities, you may consider keeping the loan current, taking the points in this article into account. However, if you need to choose between buying food or medications and paying the mortgage, the decision that should be made is clear: your life necessities take precedent.
Here are the pro's to consider when in the short sale or modification process. Keeping the loan CURRENT has the following benefits:
a) Your credit score is not dinged until the short sale transaction occurs (and not at all in most loan modifications) and your overall credit score reduction will be minimized, and b) You will remain in good standing with your lender without worry of penalties, fines, or a foreclosure.
The "con's" of keeping the loan current are that:
(a) You will be out of pocket for the monthly mortgage payment (monies which you may or may not need to survive), and
(b) Your lender may question the sincerity of your claimed hardship, and you may be spending funds that would otherwise be potentially (but rarely) forgiven by the lender. In addition, occasionally the lenders in a short sale may require a lump sum payment above the sale amount from the borrower to forgive the debt. Coming up with that money is sometimes the difference between a deal or no-deal. If you can put your mortgage payments aside and stockpile them, it will help you cover that potential lump sum.
A similar pro/con approach applies to GOING DELINQUENT with your mortgage. In favor of going late is being able to keep the unspent mortgage payments in your pocket (or applied towards other necessities as the case may be) in which event your hardship may appear more sincere to the lender. On the other hand, there are very real consequences to going late with your mortgage payment:
a) You WILL incur late fees and other penalties on the late interest. Usually this is not a large issue as it is part of the forgiven debt in a short sale and usually forgiven in a modification, but it is something to consider,
b) Your credit score downgrade will be harder as you will compound the short sale hit with a 30 day late, 60 day late, etc, (and if this is a modification you will make a non-negative credit score event turn into a negative credit score event), and
c) You will eventually cross a threshold (typical industry standard of 90 days late) where the lender will initiate a foreclosure action in State court.
Going Late on Your Second Mortgage:
Often a borrower comes to us and says that they are late on the first mortgage but current on the second mortgage. The second mortgage is almost always totally upside down with no equity left in the property to secure that financial obligation. The borrower says they paid the second mortgage because they had the money for the smaller payment (second) mortgage but not the larger amount first mortgage. Our answer - if you don't pay the first mortgage they are going to foreclose it and then paying the second mortgage is not going to save your house.
Lately we have seen second mortgage lenders with 90 day late mortgages skipping the foreclosure process (since if they cause a sale of the house it is sold subject to the first mortgage, and thus any buyer still has to pay the first mortgage, which usually makes no economic sense). Instead the second mortgage lender sues the borrower on the promissory note only and gets a money judgment that they can keep for a long time (20 years in Florida).
So if a client says they are paying the second mortgage but not the first mortgage, we usually suggest they look at the common sense approach and what are they likely to gain or lose by doing so.
Effect of Non-Payment / Late Payment on Credit Score:
This is a big question and nowhere is the answer clear cut. Definitely if you get a report on your credit that you were "late" (in mortgages that means 30 days or more late) then your credit has been "dinged" and your credit score is adversely affected.
Credit scores are used for many purposes, including the amount of credit you can get on a credit card, the interest rate you get on credit cards, car loans and mortgages, your ability and price of life and disability insurance and even car or house liability insurance, your ability to get a certain type of job, or to establish business relationships, and your ability to rent a place to live, to name a few. So credit scores are important. If you want to better understand credit scoring you can see the Federal Reserve Board's Report to Congress from April 2008.
How much your credit score is affected by a 30, 60 or 90 day late report depends on a lot of other factors about your financial well being, your past credit history and myriad other issues. Generally though we have our clients reporting drops of as little as 50 points for a no late payment short sale or up to 150 points for a short sale with multiple late payment reports. We have seen an 800 go to 720 and we have seen a 740 go to 500. It all depends on too many uncontrollable credit issues to be able to give a formula that works for everyone. For a discussion on credit scores this our past article.
Confused?
Rightfully so. The fact of the matter is that we are in uncharted waters and there is no industry standard for Short Sales or Loan Modifications, which makes pinning down exactly what the Lenders may do near impossible. Pile on the fact that there are a large number of lenders out there and each have their own internal policies which change as readily as the tides. The best anyone can hope to do is make an educated decision, set a plan, and be ready for anything.
SOURCE: Richard P. Zaretsky
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Policy in my office is to never "tell" - as in "instruct" - our borrower client to pay or not to pay their mortgage. Paying or not paying has a lot of collateral effects and the borrower needs to know what they are before making the decision. We don't make the decision for the borrower (our client) because the effects of paying or not paying are not going to affect me - but they will affect the client, so it is the client that must make the final decision.
Let me make one issue clear - when we are hired to help facilitate a short sale or loan modification it is far easier for us to negotiate with the lender if the payments are late, but it is almost never a requirement. The exceptions to which will be discussed later in this article. Additionally, internal rules change at the banks constantly. A new client came in totally frustrated. They called their bank to help with a modification and the bank said they could not address their situation until they were at least 60 days late. So the near perfect (800+) credit score couple stopped paying for 60 days and then called the bank back. Now the bank says that because they are 60 days late they cannot speak to them about a modification! The point is, if you don't have to be late then why voluntarily create a late payment credit history that will adversely affect your credit-dependent life almost immediately and for years to come?
SO LET'S GET INTO IT - Danger - this is a long article and it covers a lot of ground!
Short Sale:
A borrower that is current and contemplating a short sale wonders if they should stop paying their (first) mortgage. They are upside down and until now they have been current. However they are paying the mortgage at a cost of not paying other bills. (Other or different facts may be that they are paying all their bills but taking the money from savings or a pension fund to make those payments, or they are borrowing money from another equity loan).
Generally, it is not a good idea to get into debt to pay your mortgage, unless you have a solid plan to both (i) keep the mortgage current and (ii) repay the additional indebtedness you are creating. It is not like taking from one pocket to put into another - it is more like taking from someone else's pocket to pay your bills. This would include credit card loans as the source of funds. It all has to be paid back, so if you don't have a plan to pay it back, don't borrow it in the first place! You are only digging a bigger hole for yourself and making it harder to get out of the hole.
If you are taking from your pension or savings money, again you better have a rock solid plan to get that money back into those accounts, or there is no sense in giving up that hard earned and usually irreplaceable retirement money, especially considering these are monies that are usually protected from creditors' judgments including those your mortgage lender could obtain (deficiency judgment)..
Of course the "amount" of money you have "in reserve" comes into consideration. If you have 2 million dollars in reserve and you decide to spend 10% of it to keep the loans current until you can short sale the property, that plan has a basis that the 10% is not going to make a difference in the way you run your life over the remaining time you have left as a mere mortal.
Sometimes, but rarely, we run into a lender that says they won't approve a short sale or modification because the borrower is current with his payments. When we have encountered this it is in most cases associated with a government backed loan, (but later on we will show you why this may be motivated by plain greed on the part of a loan servicer). A properly compiled financial snapshot of the borrower should show why they are current and what will happen if the short sale or modification is not approved.
Your decision on how to proceed should be based on what goal you are trying to accomplish and how you plan to get to that goal (see how to determine your goal).
Mortgage Modification:
Apart for some voluntary government programs regarding (Fannie Mae or Freddie Mac) government involved mortgages, I know of no lender that absolutely will not deal with a borrower who is current with their mortgage payments. Lenders deal with all sorts of situations and "absolutely not" is just not in the vocabulary. A typical borrower calling a lender may hear that they must be late, but that is more of a "vetting" statement than an absolute policy.
The exceptions are some government program guides for modification. The first step to seeing if your loan comes within this exception is to see if it is a Fannie Mae or Freddie Mac loan. You can do this online at the Making Home Affordable site. Many servicers and lenders whose loans are not "government backed" are now choosing to follow this government plan (known as the Home Affordable Modification plan or more affectionately called the "Obama Plan" - see below) for the simple reason that they are being compensated by the government for each successful modification they execute within its guidelines, and either the servicer or lender receive a residual bonus for the loan staying current under the modification. In these cases we have seen non-government backed loans insist on the borrower being late to qualify for modification as well. What is confusing on this point is that when the plan was introduced it included modifications (and compensation for such) for current loans as well. However, we are told time and time again from the lenders directly that they must be late to qualify. There is no such rule in the guidelines.
While this is contrary to what has been published by the government about the plan, keep mind that following the plan and any of its various aspects is entirely voluntary and up to the Lender or servicer. They can pick and chose from this plan as they see fit for their own internal reasons. Here is a more interesting twist - a servicer that modifies a delinquent loan is paid more under this incentive plan than if the borrower were to modify while the loan is current! If the borrower is current, the servicer can receive up to $3,500 in incentive fees from the government. If the borrower is delinquent, the servicer can receive up to $4,000 in incentive fees from the government. Thus it seems that it pays ($500 to)the servicer to encourage a borrower to be delinquent!
We often see a client that fits the profile for modification under this government plan. Some of these plans are said to require that to be qualified the borrower must be late 60 days (see Guidelines page 5 at bottom). But in fact, being late is not a requirement, but only one factor of many (see Guidelines page 16 at the top - "However, a NPV (net present value) positive result is not necessary to qualify a loan for a Home Affordable Modification"). If the goal is to qualify under such a plan as put in place by the lender at that time, then to accomplish that qualification the borrower may need to make themselves late, but that cannot be determined in a 2 minute telephone call with a lender representative. I cringe when we go this route because just like these "plans" came into existence, I can see them change the plan thus leaving the now 60 day late borrower with ruined credit scores that occurred needlessly.
Generally about a quarter of our modification clients never go late and still get a modification offer from the lender. However, keep in mind that nearly all lenders put up as their first line of defense the policy that going late is a necessity to qualify. We can only speculate this is done to deter the enormous inflow of loan modification requests from borrowers that would come in if this was NOT said to be a requirement. It also helps address those in the most dire amount of need first.
The Pro's and the Con's:
The general rule of thumb we use is if you can pay your mortgage and maintain your life's necessities, you may consider keeping the loan current, taking the points in this article into account. However, if you need to choose between buying food or medications and paying the mortgage, the decision that should be made is clear: your life necessities take precedent.
Here are the pro's to consider when in the short sale or modification process. Keeping the loan CURRENT has the following benefits:
a) Your credit score is not dinged until the short sale transaction occurs (and not at all in most loan modifications) and your overall credit score reduction will be minimized, and b) You will remain in good standing with your lender without worry of penalties, fines, or a foreclosure.
The "con's" of keeping the loan current are that:
(a) You will be out of pocket for the monthly mortgage payment (monies which you may or may not need to survive), and
(b) Your lender may question the sincerity of your claimed hardship, and you may be spending funds that would otherwise be potentially (but rarely) forgiven by the lender. In addition, occasionally the lenders in a short sale may require a lump sum payment above the sale amount from the borrower to forgive the debt. Coming up with that money is sometimes the difference between a deal or no-deal. If you can put your mortgage payments aside and stockpile them, it will help you cover that potential lump sum.
A similar pro/con approach applies to GOING DELINQUENT with your mortgage. In favor of going late is being able to keep the unspent mortgage payments in your pocket (or applied towards other necessities as the case may be) in which event your hardship may appear more sincere to the lender. On the other hand, there are very real consequences to going late with your mortgage payment:
a) You WILL incur late fees and other penalties on the late interest. Usually this is not a large issue as it is part of the forgiven debt in a short sale and usually forgiven in a modification, but it is something to consider,
b) Your credit score downgrade will be harder as you will compound the short sale hit with a 30 day late, 60 day late, etc, (and if this is a modification you will make a non-negative credit score event turn into a negative credit score event), and
c) You will eventually cross a threshold (typical industry standard of 90 days late) where the lender will initiate a foreclosure action in State court.
Going Late on Your Second Mortgage:
Often a borrower comes to us and says that they are late on the first mortgage but current on the second mortgage. The second mortgage is almost always totally upside down with no equity left in the property to secure that financial obligation. The borrower says they paid the second mortgage because they had the money for the smaller payment (second) mortgage but not the larger amount first mortgage. Our answer - if you don't pay the first mortgage they are going to foreclose it and then paying the second mortgage is not going to save your house.
Lately we have seen second mortgage lenders with 90 day late mortgages skipping the foreclosure process (since if they cause a sale of the house it is sold subject to the first mortgage, and thus any buyer still has to pay the first mortgage, which usually makes no economic sense). Instead the second mortgage lender sues the borrower on the promissory note only and gets a money judgment that they can keep for a long time (20 years in Florida).
So if a client says they are paying the second mortgage but not the first mortgage, we usually suggest they look at the common sense approach and what are they likely to gain or lose by doing so.
Effect of Non-Payment / Late Payment on Credit Score:
This is a big question and nowhere is the answer clear cut. Definitely if you get a report on your credit that you were "late" (in mortgages that means 30 days or more late) then your credit has been "dinged" and your credit score is adversely affected.
Credit scores are used for many purposes, including the amount of credit you can get on a credit card, the interest rate you get on credit cards, car loans and mortgages, your ability and price of life and disability insurance and even car or house liability insurance, your ability to get a certain type of job, or to establish business relationships, and your ability to rent a place to live, to name a few. So credit scores are important. If you want to better understand credit scoring you can see the Federal Reserve Board's Report to Congress from April 2008.
How much your credit score is affected by a 30, 60 or 90 day late report depends on a lot of other factors about your financial well being, your past credit history and myriad other issues. Generally though we have our clients reporting drops of as little as 50 points for a no late payment short sale or up to 150 points for a short sale with multiple late payment reports. We have seen an 800 go to 720 and we have seen a 740 go to 500. It all depends on too many uncontrollable credit issues to be able to give a formula that works for everyone. For a discussion on credit scores this our past article.
Confused?
Rightfully so. The fact of the matter is that we are in uncharted waters and there is no industry standard for Short Sales or Loan Modifications, which makes pinning down exactly what the Lenders may do near impossible. Pile on the fact that there are a large number of lenders out there and each have their own internal policies which change as readily as the tides. The best anyone can hope to do is make an educated decision, set a plan, and be ready for anything.
SOURCE: Richard P. Zaretsky
Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.
Friday, June 12, 2009
Monday, June 8, 2009
Wednesday, June 3, 2009
New home development springs to life!
Escena model homes reopen, crews working to make golf course playable.
The stalled Escena development in Palm Springs is springing back to life.
Palm trees and desert-tolerant plants are being planted along the outer perimeter of the eventual 1,450-home community project that includes the fallow golf course on 460 acres along Vista Chino Road and Gene Autry Trail.
Landscaping teams are working their way around the corners.
The guard-house entrance is being spruced up.
And Greg McGuff, division president of Lennar Corp., said the Escena model homes have reopened to spur the sale of a standing-stock of 38 homes.
It comes at a time the California Desert Association of Realtors reported a 47 percent increase in Multiple Service Listed sales in April compared to the year before. It noted an 11.7 percent gain over the previous month, and a decline in inventory for the third month in a row.
Lennar is not only working on perimeter landscaping.
McGuff said the company is working to make the Jack Nicklaus-designed golf course that closed in November 2007 playable again. “By September, we expect to have the clubhouse completed,” he said.
For months, the sprawling master- planned community that includes models built by Standard Pacific Homes has seemed frozen in time.
The biggest step to spur the Escena restart came in March and April.
New Valley PS, a subsidiary of New Valley LLC, a limited liability company engaged in the real estate business, acquired all the land but that on which the homes of Lennar and Standard Pacific already sit.
New Valley Palm Springs LLC became the new owners of roughly 450 acres in the community when it bought a loan out of foreclosure.
The loan was acquired at its $20million face value, plus accrued interest and other costs, for about $1.5million, according to the parent company New Valley LLC of New York.
It was the collateral property for the debt accrued by Lennar Homes of California Inc. and Empire Land LLC, which were equal partners of Escena. Standard Pacific bought home sites from the Escena venture, and were not involved in the foreclosure action, McGuff said.
“That's history, and I'd rather not relive it,” McGuff said. “I'd rather talk about the future.
L.J. Edgcomb, a builder in Southern California for 20 years who is working as an agent of New Valley Palm Springs LLC, said the new buyer has laid claim to 252 detached home sites, the golf course and land that has been entitled for 615 attached products: townhouses, condos and possibly a hotel.
Asked if New Valley is mulling construction starts at this time, Edgcomb said it's too early to tell.
“We're focusing on the community improvements now,” he said.
“We have owned the property now for just over one month, so as any new owner would do, we are just now still sorting out the details.”
The real estate market is changing so rapidly that it would be premature to say what's in the cards right now, he said.
At the same time, he added: “This is positive. Any movement forward is positive.”
The stalled Escena development in Palm Springs is springing back to life.
Palm trees and desert-tolerant plants are being planted along the outer perimeter of the eventual 1,450-home community project that includes the fallow golf course on 460 acres along Vista Chino Road and Gene Autry Trail.
Landscaping teams are working their way around the corners.
The guard-house entrance is being spruced up.
And Greg McGuff, division president of Lennar Corp., said the Escena model homes have reopened to spur the sale of a standing-stock of 38 homes.
It comes at a time the California Desert Association of Realtors reported a 47 percent increase in Multiple Service Listed sales in April compared to the year before. It noted an 11.7 percent gain over the previous month, and a decline in inventory for the third month in a row.
Lennar is not only working on perimeter landscaping.
McGuff said the company is working to make the Jack Nicklaus-designed golf course that closed in November 2007 playable again. “By September, we expect to have the clubhouse completed,” he said.
For months, the sprawling master- planned community that includes models built by Standard Pacific Homes has seemed frozen in time.
The biggest step to spur the Escena restart came in March and April.
New Valley PS, a subsidiary of New Valley LLC, a limited liability company engaged in the real estate business, acquired all the land but that on which the homes of Lennar and Standard Pacific already sit.
New Valley Palm Springs LLC became the new owners of roughly 450 acres in the community when it bought a loan out of foreclosure.
The loan was acquired at its $20million face value, plus accrued interest and other costs, for about $1.5million, according to the parent company New Valley LLC of New York.
It was the collateral property for the debt accrued by Lennar Homes of California Inc. and Empire Land LLC, which were equal partners of Escena. Standard Pacific bought home sites from the Escena venture, and were not involved in the foreclosure action, McGuff said.
“That's history, and I'd rather not relive it,” McGuff said. “I'd rather talk about the future.
L.J. Edgcomb, a builder in Southern California for 20 years who is working as an agent of New Valley Palm Springs LLC, said the new buyer has laid claim to 252 detached home sites, the golf course and land that has been entitled for 615 attached products: townhouses, condos and possibly a hotel.
Asked if New Valley is mulling construction starts at this time, Edgcomb said it's too early to tell.
“We're focusing on the community improvements now,” he said.
“We have owned the property now for just over one month, so as any new owner would do, we are just now still sorting out the details.”
The real estate market is changing so rapidly that it would be premature to say what's in the cards right now, he said.
At the same time, he added: “This is positive. Any movement forward is positive.”
Tuesday, June 2, 2009
HOMEBUYER TAX CREDIT
DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME.
FHA plan will stimulate new home sales and help stabilize housing market.
WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.
The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.
"We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."
Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.
According to estimates by the National Association of Home Builders, the Administration's homebuyer tax credit will stimulate 160,000 home sales across the nation - 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.
Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option.
For every FHA borrower who is assisted through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary.
FHA plan will stimulate new home sales and help stabilize housing market.
WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.
The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.
"We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."
Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent downpayment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.
According to estimates by the National Association of Home Builders, the Administration's homebuyer tax credit will stimulate 160,000 home sales across the nation - 101,000 of which will be first-time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first-time buyer purchased their home. Given FHA's current market share, it's estimated that thousands of families will be able to purchase a home by allowing the anticipated tax credit to be applied toward their purchase together with an FHA-insured mortgage.
Homebuyers should beware of mortgage scams and carefully compare benefits and costs when seeking out tax credit monetization services. Programs will vary from organization to organization and borrowers should consider whether the services make sense for them, as well as what company offers the most suitable and affordable option.
For every FHA borrower who is assisted through the tax credit program, FHA will collect the name and employer identification number of the organization providing the service as well as associated fees and charges. FHA will use this information to track the business closely and will refer any questionable practices to the appropriate regulatory agencies, as necessary.
Wednesday, May 20, 2009
Buyer Tax Credit Loan "Guidance" Coming Soon
Detailed guidance on the federal government's plan to provide short-term loans to borrowers using the First-Time Homebuyer Tax Credit is expected to be out shortly, but a spokesperson from the U.S. Department of Housing and Urban Development, which is writing the guidance, couldn't give a firm release date. HUD policy staff are "still working out the details on it," HUD spokesperson Lamar Wooley told REALTOR® Magazine today. "So we expect it to be published shortly."
The short-term loan program, which would effectively monetize the first-time homebuyer tax credit by permitting eligible lenders to make bridge loans collateralized by the borrower's expected tax credit, was announced by HUD Secretary Shaun Donovan at the Real Estate Summit NAR hosted on the opening day of its 2009 Midyear Legislative Meetings in Washington last week. At the summit, Donovan said the loans would enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash could be used as a downpayment.
"FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to 'monetize' the tax credit through short-term bridge loans," Donovan said. "We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly."
It's unclear at this point what shape the guidance will take and whether authorization for the loans will be available across the board or only in states in which the state housing finance agency already has a tax credit bridge-loan program in place. There are 10 states today that have such a loan program, according to the National Council of State Housing Agencies: Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. (Of course, California isn't there yet.)
When it's released, the guidance is expected to be issued as a HUD Mortgagee Letter and will likely discuss which federal, state, and local governmental agencies and nonprofit organizations will be permitted to make the loans, and whether lenders such as FHA-approved mortgagees will be permitted to make the loans. The guidance could also cover how loan amounts will be limited, what happens if repayment problems occur, and what repayment terms would look like.
The short-term loan program, which would effectively monetize the first-time homebuyer tax credit by permitting eligible lenders to make bridge loans collateralized by the borrower's expected tax credit, was announced by HUD Secretary Shaun Donovan at the Real Estate Summit NAR hosted on the opening day of its 2009 Midyear Legislative Meetings in Washington last week. At the summit, Donovan said the loans would enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash could be used as a downpayment.
"FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to 'monetize' the tax credit through short-term bridge loans," Donovan said. "We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly."
It's unclear at this point what shape the guidance will take and whether authorization for the loans will be available across the board or only in states in which the state housing finance agency already has a tax credit bridge-loan program in place. There are 10 states today that have such a loan program, according to the National Council of State Housing Agencies: Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. (Of course, California isn't there yet.)
When it's released, the guidance is expected to be issued as a HUD Mortgagee Letter and will likely discuss which federal, state, and local governmental agencies and nonprofit organizations will be permitted to make the loans, and whether lenders such as FHA-approved mortgagees will be permitted to make the loans. The guidance could also cover how loan amounts will be limited, what happens if repayment problems occur, and what repayment terms would look like.
Thursday, May 14, 2009
Tax credit can be used as down payment on FHA Loans !!
The government today gave the green light to the financing of bridge loans of up to $8,000 to first time home buyers who qualify for tax credits under the Obama Administration’s economic stimulus plan. The new mortgagee letter stipulates that government agencies, non-profits and FHA-approved lenders can give advances on the tax credits. Housing secretary Shaun Donovan told a national Realtor group Tuesday that, “We want to enable FHA consumers to access the tax credit funds when they close on their home loans so that cash can be used as a down payment.
WASHINGTON, May 12, 2009
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment. Secretary Donovan said that important changes, which the National Association of Realtors® has been calling for, will help consumers purchase a home. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said. According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
Donovan said the Obama administration plans to further stabilize the housing market. “I do think we have some early signs hat the market overall is stabilizing,” said Donovan. “Since January we’ve seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate.”
WASHINGTON, May 12, 2009
Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a down payment. Secretary Donovan said that important changes, which the National Association of Realtors® has been calling for, will help consumers purchase a home. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” Donovan said. According to Donovan, the FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
Donovan said the Obama administration plans to further stabilize the housing market. “I do think we have some early signs hat the market overall is stabilizing,” said Donovan. “Since January we’ve seen both home sales moving up and down around a relatively stable number and we are seeing the first signs that the rapid decline in home prices is starting to abate.”
Tuesday, May 12, 2009
Big U.S. banks selling stock to repay government
NEW YORK (Reuters) - Four big U.S. banks on Monday said they would sell $6.55 billion of common stock and repay funds from the government's bank bailout program, after federal stress tests showed they can weather a deep recession without new capital.
U.S. Bancorp plans to sell $2.5 billion of stock, and sold $1 billion of five-year notes. Capital One Financial Corp sold $1.55 billion of stock, BB&T Corp said it will sell $1.5 billion, and Bank of New York Mellon Corp said it will sell $1 billion.
BB&T also cut its quarterly dividend 68 percent to 15 cents per share to save $725 million a year, after 37 straight years of higher payouts. Chief Executive Kelly King in an interview said the decision marks "the worst day in my 37-year career."
Separately, KeyCorp said it would sell $750 million of stock to help plug what regulators called a $1.8 billion capital shortfall. KeyCorp said it may take other actions, including converting other securities to common stock.
The offerings were announced three days after Wells Fargo & Co and Morgan Stanley sold a combined $12.6 billion of stock. Morgan Stanley also sold $4 billion of debt.
These banks were among 19 lenders to undergo government tests of their ability to weather a deep economic downturn. Regulators last week ordered 10 lenders, including Wells Fargo and Morgan Stanley, to raise a combined $74.6 billion.
Banks are raising capital after improved investor sentiment caused shares in the sector to more than double from their lows in early March, despite worsening credit conditions in housing, commercial loans and credit cards.
"They're trying to get while the getting is good," said Walter Todd, who helps invest $650 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. "Fundamentals of banks appear not as bad they were, but they are still not good given the underlying conditions in the economy."
U.S. Bancorp is based in Minneapolis; Capital One in McLean, Virginia; BB&T in Winston-Salem, North Carolina; Bank of New York Mellon in New York, and KeyCorp in Cleveland.
In Monday trading, shares of U.S. Bancorp fell 9.9 percent to $18.50; Capital One fell 13.5 percent to $27.10; BB&T fell 7.6 percent to $24.34; Bank of New York Mellon fell 8.1 percent to $29.55, and KeyCorp fell 9.9 percent to $6.28.
Bank of New York Mellon announced its offering after markets closed. The 24-member KBW Bank Index, which includes all five banks, fell 7.1 percent. Capital One's close was below the $27.75 per share price of its stock offering.
BB&T CEO CRITICIZES TARP
U.S. Bancorp took $6.6 billion from the government's Troubled Asset Relief Program, while Capital One took $3.55 billion, BB&T $3.1 billion and KeyCorp $2.5 billion.
Hundreds of lenders took money from TARP, which was designed to spur lending and improve the economy.
Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.
"Rational, objective lending is one of the most important purposes of the banking system, and when you inject Congress and the administration into it, it effectively politicizes the process, which is not healthy," BB&T's King said.
King also said the stress tests unnecessarily created "huge levels of anxiety and concern" among investors. "Regulators have always had the ability to assess the capital of institutions, and require more if they chose," he said.
At least one dozen lenders have repaid or gotten permission to repay TARP, and Goldman Sachs Group Inc and JPMorgan Chase & Co have said they want to do so as well.
Goldman Sachs & Co and Morgan Stanley are arranging the offerings for U.S. Bancorp and Bank of New York Mellon. Barclays Capital arranged the Capital One offering. Goldman Sachs, JPMorgan and Morgan Stanley are arranging the BB&T offering. Morgan Stanley is arranging the KeyCorp offering.
U.S. Bancorp plans to sell $2.5 billion of stock, and sold $1 billion of five-year notes. Capital One Financial Corp sold $1.55 billion of stock, BB&T Corp said it will sell $1.5 billion, and Bank of New York Mellon Corp said it will sell $1 billion.
BB&T also cut its quarterly dividend 68 percent to 15 cents per share to save $725 million a year, after 37 straight years of higher payouts. Chief Executive Kelly King in an interview said the decision marks "the worst day in my 37-year career."
Separately, KeyCorp said it would sell $750 million of stock to help plug what regulators called a $1.8 billion capital shortfall. KeyCorp said it may take other actions, including converting other securities to common stock.
The offerings were announced three days after Wells Fargo & Co and Morgan Stanley sold a combined $12.6 billion of stock. Morgan Stanley also sold $4 billion of debt.
These banks were among 19 lenders to undergo government tests of their ability to weather a deep economic downturn. Regulators last week ordered 10 lenders, including Wells Fargo and Morgan Stanley, to raise a combined $74.6 billion.
Banks are raising capital after improved investor sentiment caused shares in the sector to more than double from their lows in early March, despite worsening credit conditions in housing, commercial loans and credit cards.
"They're trying to get while the getting is good," said Walter Todd, who helps invest $650 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. "Fundamentals of banks appear not as bad they were, but they are still not good given the underlying conditions in the economy."
U.S. Bancorp is based in Minneapolis; Capital One in McLean, Virginia; BB&T in Winston-Salem, North Carolina; Bank of New York Mellon in New York, and KeyCorp in Cleveland.
In Monday trading, shares of U.S. Bancorp fell 9.9 percent to $18.50; Capital One fell 13.5 percent to $27.10; BB&T fell 7.6 percent to $24.34; Bank of New York Mellon fell 8.1 percent to $29.55, and KeyCorp fell 9.9 percent to $6.28.
Bank of New York Mellon announced its offering after markets closed. The 24-member KBW Bank Index, which includes all five banks, fell 7.1 percent. Capital One's close was below the $27.75 per share price of its stock offering.
BB&T CEO CRITICIZES TARP
U.S. Bancorp took $6.6 billion from the government's Troubled Asset Relief Program, while Capital One took $3.55 billion, BB&T $3.1 billion and KeyCorp $2.5 billion.
Hundreds of lenders took money from TARP, which was designed to spur lending and improve the economy.
Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.
"Rational, objective lending is one of the most important purposes of the banking system, and when you inject Congress and the administration into it, it effectively politicizes the process, which is not healthy," BB&T's King said.
King also said the stress tests unnecessarily created "huge levels of anxiety and concern" among investors. "Regulators have always had the ability to assess the capital of institutions, and require more if they chose," he said.
At least one dozen lenders have repaid or gotten permission to repay TARP, and Goldman Sachs Group Inc and JPMorgan Chase & Co have said they want to do so as well.
Goldman Sachs & Co and Morgan Stanley are arranging the offerings for U.S. Bancorp and Bank of New York Mellon. Barclays Capital arranged the Capital One offering. Goldman Sachs, JPMorgan and Morgan Stanley are arranging the BB&T offering. Morgan Stanley is arranging the KeyCorp offering.
Monday, May 11, 2009
U.S. threatens to rescind stimulus money over wage cuts
The Obama administration threatens to rescind billions in stimulus money if Gov. Schwarzenegger and lawmakers do not restore wage cuts to unionized home healthcare workers.
Reporting from Sacramento -- The Obama administration is threatening to rescind billions of dollars in federal stimulus money if Gov. Arnold Schwarzenegger and state lawmakers do not restore wage cuts to unionized home healthcare workers approved in February as part of the budget.
Schwarzenegger's office was advised this week by federal health officials that the wage reduction, which will save California $74 million, violates provisions of the American Recovery and Reinvestment Act. Failure to revoke the scheduled wage cut before it takes effect July 1 could cost California $6.8 billion in stimulus money, according to state officials.
The news comes as state lawmakers are already facing a severe cash crisis, with the state at risk of running out of money in July.
The wages at issue involve workers who care for some 440,000 low-income disabled and elderly Californians. The workers, who collectively contribute millions of dollars in dues each month to the influential Service Employees International Union and the United Domestic Workers, will see the state's contribution to their wages cut from a maximum of $12.10 per hour to a maximum of $10.10.
The SEIU said in a statement that it had asked the Obama administration for the ruling.
The cut was highly contentious during last winter's budget talks. Republican lawmakers insisted that the rapidly growing, multibillion-dollar state program, In Home Supportive Services, be scaled back significantly.
Democrats fought major reductions in the program, which they say is a cost-effective alternative to nursing-home care, but ultimately compromised.
Reversing the wage cut would require a two-thirds vote of the Legislature, meaning Republican support would be needed.
Schwarzenegger on Wednesday sent U.S. Secretary of Health and Human Services Kathleen Sebelius a letter urging the federal government to reconsider.
"Neither the Legislature nor I make decisions to reduce wages or benefits lightly, but only as a last resort in response to an unprecedented fiscal crisis," Schwarzenegger wrote.
Reporting from Sacramento -- The Obama administration is threatening to rescind billions of dollars in federal stimulus money if Gov. Arnold Schwarzenegger and state lawmakers do not restore wage cuts to unionized home healthcare workers approved in February as part of the budget.
Schwarzenegger's office was advised this week by federal health officials that the wage reduction, which will save California $74 million, violates provisions of the American Recovery and Reinvestment Act. Failure to revoke the scheduled wage cut before it takes effect July 1 could cost California $6.8 billion in stimulus money, according to state officials.
The news comes as state lawmakers are already facing a severe cash crisis, with the state at risk of running out of money in July.
The wages at issue involve workers who care for some 440,000 low-income disabled and elderly Californians. The workers, who collectively contribute millions of dollars in dues each month to the influential Service Employees International Union and the United Domestic Workers, will see the state's contribution to their wages cut from a maximum of $12.10 per hour to a maximum of $10.10.
The SEIU said in a statement that it had asked the Obama administration for the ruling.
The cut was highly contentious during last winter's budget talks. Republican lawmakers insisted that the rapidly growing, multibillion-dollar state program, In Home Supportive Services, be scaled back significantly.
Democrats fought major reductions in the program, which they say is a cost-effective alternative to nursing-home care, but ultimately compromised.
Reversing the wage cut would require a two-thirds vote of the Legislature, meaning Republican support would be needed.
Schwarzenegger on Wednesday sent U.S. Secretary of Health and Human Services Kathleen Sebelius a letter urging the federal government to reconsider.
"Neither the Legislature nor I make decisions to reduce wages or benefits lightly, but only as a last resort in response to an unprecedented fiscal crisis," Schwarzenegger wrote.
Tuesday, April 28, 2009
U.S. to pay off mortgage investors
Treasury Department announces new mortgage incentives for lenders, which will reduce monthly payments for millions of borrowers.
WASHINGTON (Reuters) — The U.S. Treasury Department will Tuesday tap a $50 billion housing rescue fund to pay off mortgage investors and reduce monthly payments for millions of borrowers, said a senior administration official.
Mortgage servicers that own a small stake in costly loans will receive a cash payment to either erase the debt or agree to accept a reduced return on their investment.
“It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments,” a senior administration official told Reuters.
During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien, and many of those loans are now failing as the economy and housing market struggle.
Second liens typically carry a higher interest rate than primary mortgages but those second liens will have a lower rate under the modification plan, the officials said.
“The second lien holder, as is appropriate in the junior position, is taking more of a reduction in interest rate,” one official said. “The interest rate will go at least as low as the interest rate on the first and it will (fall) much further to get there.”
Tuesday’s announcement will build on President Barack Obama’s housing rescue plan announced in February that aims to reduce the cost of homeownership for up to 9 million borrowers straining to make their monthly payments.
Rescue gets a revamp
Officials will also announce new incentives for the Hope for Homeowners program conceived last summer to refinance hundreds of thousands of struggling borrowers.
In fact, the program has only aided a handful of homeowners and the Department of Housing and Urban Development will offer mortgage servicers thousands of dollars for each home loan that they successfully modify under that troubled program, the officials said.
The officials said that they will continue to remove other bureaucratic encumbrances and expand incentives where needed to steer more homeowners away from default.
Some analysts have faulted officials and lawmakers for leaving Hope for Homeowners hamstrung by the question of second liens as those investors have had a near veto power on modifications.
“It has taken policymakers a long time to realize that second liens are a showstopper,” said Dwight Jaffe, a professor of housing finance at Berkeley University in California
WASHINGTON (Reuters) — The U.S. Treasury Department will Tuesday tap a $50 billion housing rescue fund to pay off mortgage investors and reduce monthly payments for millions of borrowers, said a senior administration official.
Mortgage servicers that own a small stake in costly loans will receive a cash payment to either erase the debt or agree to accept a reduced return on their investment.
“It will be a shared effort with lenders, investors, borrowers and the government to ease or extinguish second-lien mortgage payments,” a senior administration official told Reuters.
During the height of the housing boom, some borrowers were able to buy a home with no downpayment by adding a second lien, and many of those loans are now failing as the economy and housing market struggle.
Second liens typically carry a higher interest rate than primary mortgages but those second liens will have a lower rate under the modification plan, the officials said.
“The second lien holder, as is appropriate in the junior position, is taking more of a reduction in interest rate,” one official said. “The interest rate will go at least as low as the interest rate on the first and it will (fall) much further to get there.”
Tuesday’s announcement will build on President Barack Obama’s housing rescue plan announced in February that aims to reduce the cost of homeownership for up to 9 million borrowers straining to make their monthly payments.
Rescue gets a revamp
Officials will also announce new incentives for the Hope for Homeowners program conceived last summer to refinance hundreds of thousands of struggling borrowers.
In fact, the program has only aided a handful of homeowners and the Department of Housing and Urban Development will offer mortgage servicers thousands of dollars for each home loan that they successfully modify under that troubled program, the officials said.
The officials said that they will continue to remove other bureaucratic encumbrances and expand incentives where needed to steer more homeowners away from default.
Some analysts have faulted officials and lawmakers for leaving Hope for Homeowners hamstrung by the question of second liens as those investors have had a near veto power on modifications.
“It has taken policymakers a long time to realize that second liens are a showstopper,” said Dwight Jaffe, a professor of housing finance at Berkeley University in California
Friday, February 27, 2009
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