Posts Tagged ‘foreclosures’
Obama Gives Lenders Approval to Modify Loans
The Obama administration has given lenders the “Go Ahead” to begin modifying mortgage loans for homeowner’s facing financial hardships. 
The Foreclosure Prevention Plan program is designed to ease the downward pressure on home prices, keep qualified people in their homes and prevent more foreclosures.
The Guidelines for Qualifying for this Program are as follows:
Eligiblity and Qualification:
- Loans must be originated on or before January 1, 2009.
- $729,750 is the maximum loan balance.
- The property must be Owner Occupied. Investor-owned, Vacant and Condemned properties are Excluded.
- Borrowers must FULLY document income by providing their last 2 paycheck stubs, tax returns, and must sign an affidavit of financial hardship.
- Owner occupancy status will be verified through credit reports and other documentation.
- Incentives will be given to lenders who modify loans for risky borrowers, who have not missed payments yet.
- Loans can be modified only once.
Loan Terms and Procedures:
- The modified monthly mortgage payment can not exceed 38 percent of the borrower’s gross (Earnings before taxes) monthly income.
- Lenders must follow steps to reduce montly payments to 30 percent of gross income. First, the initial interest rate can be lowered to a floor of 2 percent; Second, the lender can stretch the loan term to a maximum of 40 years; Then, principal debt can be forgiven, but only if the lender agree’s to do so.
- Monthly Payment Calculations must include principal, interest, taxes, insurance, flood insurance and homeowner’s or condo dues.
- Monthly Income includes wages, salary, overtime, fees, commissions, tips, social security, pensions and other sources of taxable income.
Incentive Payments to Lenders and Borrowers:
- Lenders will receive $1000 for each loan they modify. They will also receive $1000 per year on performing modified loans.
- Homeowners who pay their modified loan on time will receive a yearly $1000 principal reduction for 5 years.
- The lender receive a one-tine bonus of $1500 on each loan they modifiy for borrowers who are current on their mortgage payments.
- Similar incentives and bonuses will be paid to Hope for Homeowner refinances.
- Incentives will be given to lenders who extinguish 2nd mortgages on modified loans.
Accountability and Loan Transparency: No More Liar Loans
- Measures to prevent and detect fraud, such as documentation and auditing requirements, are a central point of the program.
- Lenders are required to collect, maintain and share records for verification and review. Records include borrower eligibility, underwriting, property verification and other documentation.
- In some cases, property appraisal will not be required.
To verify eligibility or check requirements, the goverment has a question and answer website. Visit Financial Stability to learn more about qualifying.
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Obama Foreclosure Plan Pits Renters and Homeowners
The Obama foreclosure plan has caused a lot of division among the people of this country. Of, course, there is the giant split between conservatives and liberals. But, the bigger divide, and the more interesting one, is the one it causes between the needs of renters (prospective buyers) and homeowners
I have a “hunch” that nearly all the people in favor of the mortgage support plan are homeowners and lenders. Why? From what I understand, Obama’s plan is to use taxpayer dollars to prop home prices. The logic is that this action will keep banks and people from having to sell their homes for huge losses. Or, in other words, the government is stacking the deck against homebuyers, hoping that they will quickly, rush out to buy an overpriced home, thereby “saving” us all.
Unfortunately, Obama’s plan is likely to fail because it does nothing to correct the overbuilding (supply) and lack of demand that cause prices to drop. It also does little to help the banks, who have discovered that they can only sell property for what they can get, not what they are owed. In other words, if the current owner can’t afford their house at anything close what they originally paid, chances are slim that anyone else can either.
The “housing” bailout hinges on keeping prices high or keeping people in homes they can not afford. It does nothing to erase the over supply of homes, increase demand, nor does it put more qualified buyer’s in the market. The bottom line is that the foreclosure plan pits renter against homeowner, in the hope of keeping lenders in business.
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Buying a Foreclosure is Pure Torture
If you think that banks or lenders are like desperate seller’s, who are willing to do anything in order to find a buyer for their home, think again.
Picture Your Serious Offer Here. Banks are completely under staffed in their REO and loss mitigation departments. Buyer’s and their agent’s report a wait of up to four weeks or more, before a file is assigned to a negotiator, who may or may not, open the file and start to process the offer.
My Way or the Highway. In addition to understaffing problems, lenders adhere to a strict checklist of requirements. If one item is overlooked or missing from their checklist, the file is routinely placed back on the bottom of the pile, where it can take weeks to resurface again.
Don’t Call Us, We’ll Call You. Lenders are famous for being non-responsive to offers, even if they are at full asking price. As a practice, banks hold offers and wait for better ones to come in, before responding. If you find yourself in a “multiple offer” game, be extremely patient. With a little luck, you may hold the winning bid, as other buyer’s drop out due to anger and a lack of patience.
Real Sellers Take Solice. While these cash ready buyers are pulling out their hair in frustration, both buyer and agent are powerless in communicating with or motivating the lending giants. If you are selling a property, you can easily give yourself a huge advantage by responding to offers in a timely manner, extending courtesy to prospective buyers, and by providing access to and information about your home when ask.
Get Ready, Get Set, Stop. Buyers seeking a foreclosure need to accept that both they and their agent’s are in powerless positions. Anyone who attempts to play the distressed property game, needs to accept that their efforts to buy a home will be futile, unless they have all the time in the world and the patience of Job.
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IRS Tax Relief Help for 2009
The IRS is offering some much needed tax help in 2009. The Tax Relief Programs, which address real estate matters are outlined below.
- 1. First Time Homebuyer Tax Credit: People who recently bought a home or those who are considering buying one should pay close attention. The program, which could be worth $7500 to those qualified, defines “first time buyer” as anyone who has not owned a primary residence in the past three years. If this is you, check out the IRS program details.
- Offers in Compromise on Home Values: An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS. An OIC is a viable option for taxpayers experiencing money difficulties, as the agreement settles a tax debt for less than the full amount owed. Under IOC guidelines, the IRS realizes that real estate valuations may not be accurate. In instances of financial hardship, where the accuracy of local real estate values are in question, the IRS will give a new review of the information before determining their final offer.
- Real Estate Tax Deduction: Taxpayers can claim an additional standard deduction, based on state and local real estate taxes paid in 2008. The maximum deduction is $500 per person or $1000 for joint filers.
- Workouts and Foreclosures: For most homeowners, debt forgivenness is now tax free. Homeowners can exclude forgiven debt on their principal residence if their loan was for owe less than $2,000,000. The limit is $1 million for individuals and married couples filing separately.
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Renters can Stay is Good news for Homeowners
The unfolding mortgage crisis ushered in some good news for home sellers and renters, alike. Fannie Mae will allow paying tenants to stay in their rental homes, after a defaulting borrower’s property is foreclosed on.
The new policy brings some much needed relief to tenants, who find that they are often innocent victims of the foreclosure crisis. Landlord’s often use tenants as a revenue stream, long after they quit making mortgage payments. As a result, thousands of renters, who were unaware that their landlord was in foreclosure, have been evicted through no fault of their own.
The new policy is historic because lender’s want to get foreclosed property ready for a new buyer, as soon as possible. Typically, renters make this difficult to do. But, in this environment, thousands of homes sit vacant and fall into disrepair, because the tenant is gone and no one is buying.
This policy is a win-win for lenders and neighboring homeowners, as well. Vacant properties pull down prices and the appeal of any neighborhood, even the good ones. By leaving the paying tenant in place, the lender’s home’s are occupied and maintained, while they collect rent. Homeseller’s benefit from a stable neighborhood, and they don’t have to compete against the vacant foreclosure’s, as they try to sell their owner occupied homes.
Fannie Mae and Freddie Mac have a moratorium on foreclosures and evictions through January 9, 2009. The hold on holiday evictions has allowed 10,000 families to stay in their homes, and the new policy means that thousands of renters may escape eviction after the first of the year.
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Foreclosures Suspended thru the Holidays
It looks like we may all be home for Christmas after all.
Freddie Mac and Fannie Mae, the mortgage-finance companies seized by the U.S. government, will suspend foreclosures and evictions over the holidays.
The six-week pause will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The much needed reprieve is designed to give servicer’s more time to implement a streamlined loan modification program for struggling borrowers.
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5 NEW RULES FOR REAL ESTATE INVESTING
The new, US economy brings with it, a whole new set of rules for investing in real estate. In the past, real estate has been a tried and proven method for quickly building wealth, but the current rules for successful investing have changed.
Making money in real estate is still a possibility, but investor’s must pay very close attention to the changes that this ecomonic cycle brings. Today’s investors need to reexamine their criteria for buying, selling or holding property. They also need a lot of patience and flexibility, along with complete and detailed research, before they jump in and take advantage of some of the best bargains seen in years.
NEW RULES FOR INVESTING IN TODAY’S REAL ESTATE MARKET
NEW RULE #1: LOCATION, LOCATION, LOCATION. For the baby boom generation, the suburbs were “the” location for profit and life style. Fuel was cheap, commutes were short and the ‘burbs’ offered the big house, with picket fenced yards and the image of the Leave It to Beaver lifestyle. Not so much, today. Today, it is the urban scene that is making a comeback. While homes in downtown area’s are generally more expensive on a price per square foot basis, buyer’s today are willing to pay a bit more money for less square footage. Urban center living eliminates long commutes, urban sprawl, expensive fuel bills and provides nearby ammenities without the need to drive.
NEW RULE #2: STAY PUT AND DO NOT REMODEL WHEN THE MARKET IS SLOW. In the past, many homeowners gained equity by renovating their old home while the market was slow. The improvements added value to their real estate, while they waited for more favorable market conditions. In the 2008 housing market, any major renovations should be analyzed purely from a return on investment perspective. According to Remodeling Magazine, which just published its Cost vs Value Report, homeowners should be warned that they will not recover as much of their costs for remodeling as they did in the past. The best investment today’s homeowner can make in terms of renovating fall in the category of paint, landscape and green, energy saving features.
NEW RULE #3: Technology and Networking are the Key to Locating Great Properties. Home listings, valuations and other crucial information for real estate investment used to be available only through a real estate agent. Now, the genie is out of the bottle and the best sources for real estate information can be accessed with nothing more than the click of a mouse. More technology has also made it possible for home seller’s to list their property on the powerful, national MLS, without listing with a agent. Companies like Why 6 Percent.com, and its national network of broker’s, list property for seller’s, investors and builders who want the exposure the MLS provides, but do not want to pay 6 percent of their sales price for the priviledge. Technology has changed the way buyer’s and seller’s connect, and the way that property is advertised. Smart investor’s should take advantage of this new alternative, as it offer’s accuracy, speed and control unmatched by the traditional route of buying and selling through agent’s only.
New Rule #4: BIGGER IS NOT ALWAYS BETTER. In the past, agent’s and home builder’s advised buyer’s to purchase as large of a home as they could possibly afford. As a result, home size in the 1970’s averaged about 1700 square feet, with 3.1 people in the average family. In 2004, the average size of a home was around 2400 square feet with only 2.6 occupants on average. Today’s lending and energy crisis has changed our thinking and bigger is not necessarily the best investment. Buyer’s are looking for a home that meets their needs without paying for space they don’t need. Today’s investor needs to adapt their thinking and focus on useable living space, energy saving ammenities, security and conveniences instead of targeting the over blown McMansion. Another demographic also backs up the theory that smaller may be better. For the next two decades, retiring baby boomers will be scaling out of their McMansions, now that their families have left the nest. The boomer’s will favor smaller homes with more ammenities, located in convenient neighborhoods that are clean and safe.
New Rule #5: FLIPPING IS OUT. BUY AND HOLD IS IN. Today’s falling prices and the huge inventory of unsold property means that potential bargains are plentiful. Smart Investor’s will take advantage of the current market and lock themselves into a good deal now, and hold the property until stability returns. Prospective investors should be warned that the crash we are experiencing will not turn around anytime soon. Prices will continue to fall, though not as dramatically as we have seen in the recent past. As prices firm and inventory is sold, the patient investor will see gains, but they should plan on waiting five years to ring the register.
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