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The future of loan originators and housing recovery is hanging by a credit thread. According to the Federal Housing Finance Agency (FHFA), the credit composition of originated loans within the Government Sponsored Enterprises’ (GSE) portfolio is showing a tightening trend. From their latest press release: “The increase in the number of loans with 660 or higher credit score and decrease in loans with less than 660 credit score at origination reflect actions taken by both Enterprises (FN/FRE) to increase the credit quality of new business and continues a trend seen over the past year.
The trend is in response to rising delinquencies. The delinquencies are forcing the GSE’s to cut back on taking any loans on their books that do not meet high credit standards.
Where will this push borrowers? Well, if borrowers cannot get a conventional product due to credit issues, they will likely head towards FHA. Can FHA handle any more of the ‘uglier’ side of the mortgage market? According to recent reports of FHA’s struggles to stay out of default, the answer would be “no.”
There have long been discussions on fair and proper credit reporting. With such a large portion of the borrowers now making late payments or defaulting on debts due to unemployment, underwater house values, and general stresses, there will need to be a new FICO model. Without changes in credit measure, there will be exponentially fewer Americans qualifying for credit. The current credit restrictions are putting up roadblocks for many borrowers. Fewer borrowers, means even slower economic growth. *
We welcome your comments and contributions or you can ask our experts any related question. To Your Success
The Tax Credit extension was officially signed into law over the weekend. With over 36% of all home sales in 2009 involving the tax credit, proponents assume that the extension will continue to drive home sales. Realtor® Magazine went as far as to estimate that the extension will drive another $22 billion into the economy. Over 2 million people have used the tax credit so far.
The new deal: Contracts have to be signed by April 30 and close by June 30, Income limits have been increased to $125k for individuals and $225k for couples, homeowners who have been in one home for 5 out of the last 8 years are eligible for $6250, home price cap is $800k, and first-timers still qualify for $8k.
For more information you may visit this useful link below:
One of the many questions that clients ask when attempting a short sale is, ‘how long is it going to take?’ The short answer is that short sale processing time is different from one bank to the next. The answer requires a detailed analysis of the bank’s process system. There are hundreds of banks in the world we are going to examine just a few of the major ones in order to demystify the process for distressed homeowners.
Since Bank of America (NYSE:BAC) is one of the more popular banks it seems fitting to start an analysis with them. If the Bank of America short sale process could be summed up in one slogan it would be, “Catch-22”. BOFA, tends to be pretty economical when considering to approve a short sale or not. They are not the most generous bank in regards to requests for seller/buyer credits and second lien payoffs. However, they are not the greediest bank either. If Bank of America’s short sale process could be compared to a financial savings instrument it would be considered a bond. The process is less volatile in the long run than some of the other banks (i.e. few quick approvals, but also few high payoff demands).
The catch with their short sale process is that because they are such a large bank they handle a lot of short sale requests. The massive amount of recent short sale requests has made the approval process slow. During the process the file is assigned to several different, “negotiators”.
1. The first phase negotiators are the data collectors. They are responsible for making sure the file is complete before being submitted to upper management. During this phase an appraisal should be ordered if needed.
* Times vary during this phase. If within 15 days there has not been any progress it can be moved to a new negotiator. Escalating the file may or may not be in the best interest, it could cause a new time limit to apply,which would extend the short sale process. * Once the phase 1 negotiator approves the file it’s passed to a 2nd phase negotiator
2, Phase 2 negotiator; Sometimes this is the same person as Phase 1. During this phase the file is reviewed and any extra data that might be needed is collected. (i.e. updated bank statements, paystubs, etc…). After this phase of the negotiations are completed the file is passed to a third and final level of approval.
3. An estimated 15 day wait period is again applied when the file moves to this level before escalation can be considered. A general rule with BOFA is that every time a file changes hands 15 days must pass before the file can be brought to a supervisor. The third negotiator (upper management) double checks all the figures and puts the stamp of approval on the file. Usually, once this level approves the loan the automated BOFA status line changes. The status can be changed to approved without an actual short sale letter being issued. This phase negotiator has about 3 weeks altogether to actually stamp approval on the package and send out a letter.
In terms of communication most of the time the negotiators will not even talk to you. E-mail may work, but it’s not unusual to go several weeks without hearing any news. The actual approvals are mostly specific to one buyer. If you were thinking about substituting a different buyer into the transaction after the approval letter has been generated you will need approval from BOFA management.
Typically, if a new buyer is brought in on the file while the property is in phase 1 the process resets. If the file has progressed to certain levels of phase 2 there is a higher chance that a new buyer may successfully be brought into the transaction without the process resetting itself. If a new buyer(s) have to be substituted you will want to do it at this phase.
Once the file gets to phase three substitution becomes more difficult with BOFA. Some of the other banks, that will be the subject of future posts, allow for buyer substitution because approval letters are ‘non-buyer specific’, however BOFA is a bit more strict on the issue. When they issue an approval letter it is actually stamped with the specific buyer’s name
Stay tuned for more helpful hints. As always you can contact Rapid Real Estate Solutions (RRES) for help with your short sale challenges. You may also call 616-328-5127
Attention real estate professionals: No more surprises at the closing table. The new Good Faith Estimate (GFE) of settlement charges and the new HUD1 Settlement Statement will be in effect on January 1, 2010. (www.hud.gov/respa) The new procedures and forms stem from a ruling published January of this year. The changes are in direct response to complaints and confusions shared by borrowers.
HUD pushed for the change due to a measured belief that many borrowers have ended up in default because they did not understand their loan. Under the existing rules, settlement charges vary widely between mortgage providers, borrowers rarely see reduced settlement charges on high interest loans, and in-turn, many borrowers who pay points at settlement often do not benefit from lower interest rates. In efforts to preserve homeownership, HUD wants borrowers to be given time and information to shop for loan that best meets their needs and affordability.
The NEW rules and standardized forms will make for lower settlement charges, lower interest rates, and better mortgage products. So, say ‘hello’ to buying incentive from another direction.
Not that I believe that the RESPA rules were the cause of the collapse in housing. The cause is clearly the government itself through the actions of the Federal Reserve, Fannie, Freddie and the FHA that got us in this mess in the first place.
But enough of that—here are some key changes:
Apples to Oranges. Shopping lenders by the GFE: The new Good Faith Estimate will better alert borrowers to the cost differences between their choice to pay upfront settlement charges or to accept a different interest rate. There will be a more thorough disclosure of loan terms including possible increases in interest rates or balances and pre-payment penalties. The over-all structure will give borrowers a simple shopping list to compare lenders from the start. No Surprises: Once a GFE is provided to a borrower, there will clearly be three categories with restrictions to changes. Some items will not be allowed to change prior to closing, some will be restricted to no more than 10% difference and will be from a laundry list the seller can change, and some will be mutable only because they are not within the controls of the loan originator or borrower. The HUD1 Make-Over: 1) Borrowers will be able to clearly match-up charges on page 2 to the line items disclosed on the GFE. 2) A new page 3 will contain the “restricted” category items so that a borrower can see if there were any violations. 3) A summary of the final loan terms and monthly escrow will be enumerated on page 3 and the loan originator will be required to complete it.
For further details in your efforts to inform your buyers – go to the HUD.gov’s NEW RESPA Rules Frequently Asked Questions.
In a continuing effort to blunt the impact of foreclosure on families, Fannie Mae has announced a program called “Deed for Lease” (already shortened to “D4L” in industry publications). Deed for Lease allows a homeowner to a guaranteed one-year lease (aka rental agreement) priced at local market rates for voluntarily signing over the property to the lender. The new program improves on a less formal initiative Fannie Mae started last January that let foreclosed homeowners to stay in the house on a month-to-month basis.
The policy is aimed at minimizing the disruption caused by foreclosure proceedings, which put the family out on the street when the property is seized by the lender. With Deed for Lease, the family loses ownership, but can stay in the house. Put another way, they can walk away from the loan without walking away from the house, as they must do in a traditional foreclosure.
"The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications," said Jay Ryan, Vice President of Fannie Mae. "This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities."
The big advantage of the program comes from the money households save when they swap mortgage and other housing expenses for a rental payment. The new program is designed for borrowers who do not qualify for or have not been able to sustain other loan-workout solutions, such as a modification.
Some stipulations of this program are:
The homeowners cannot be eligible for a mortgage modification
The new rent payment cannot be more than 31% of the household’s income
Lease is for 12 months, with the possibility of becoming month-to-month
The questions arise what will happen at the end of 12 months. This does give the homeowner some time to begin to recover financially. On a positive note, it may give the homeowner some time to recover their credit and buy back the property at a reduced price if they can find the cash to make the purchase. Time will tell how this affects our market and if the homeowners who couldn't make the mortgage payment can make the rental payments.
As everyone is well aware of, our economy is not in the best place at the moment. To be able to recover, it will require money to start flowing freely through it. Part of how that can be accomplished is when more money is spent on various goods and services. Every time a short sale is denied and a property goes to foreclosure, there are many providers of goods and/or services that don’t see a penny, and so the economy is unable to receive the boost it needs.
With all the news about who loses money when a bank forecloses on a property as opposed to who loses money when a successful short sale transaction occurs. However, we seem to forget how many people and businesses actually stay in business when the a short sale transaction occurs. We don’t realize the complex engine that makes up the real estate industry, and that is isn’t just agents and attorneys that make money, but so many other related industries as well. And if these thousands of short sale transactions aren’t able to close, then many of these industries are in danger of having to close their doors, and thus the economy suffers.
What the bank doesn’t realize are all of the facts that go along with the above scenario, such as when a rehabber or landlord seeks to purchase a property by way of a short sale. Let me break down the facts that everyone, especially the government, is missing!
Here are some of the related industries who make money off of a successful short sale:
Foreclosing Lender (they make far more in a short sale then when they foreclose)
Listing Agents and Buying Agents
Attorneys and Title Companies
Mortgage Broker/Direct Lender
Fannie Mae, Freddie Mac, FHA or whomever buys this loan in the secondary market
The Appraiser
The Home Inspector
Plumbers
Contractors
Electricians
Cities and Towns
Insurance Company
The IRS
Accountants
Marketing Companies (Direct Mail and Signs)
Printing Shops
Etc
And so it can be plainly seen that whether it be rehabbers, landlords, or other buyers…that the successful closing not only benefits them, but also all of the industries that are also part of the real estate industry, the foreclosing lender(s), but more importantly…the economy.
By Donna Tashjian with information from http://www.RealEstateBusinessmentors.com
It has been quite a while since I last posted. I have been so busy that I haven't been back here. Rapid Real Estate Solutions is exploding. I will need to hire more staff soon, which is a good thing. As a Realtor, I changed companies since I last posted as well. I am now with Keller Williams. This have been a very exciting and profitable move for me and my clients. I have a new website for this part of my business if you would like to check it out. http://www.DonnaTashjian.com
Time is running out for the first time home buyers tax credit. But there are still incredible deals available. The interest rate to buy has not been this low in a very long time.
As always, we are here to serve if you,your friends or neighbors need ANY real estate services. Until next time....Make it an Amazing Day!
14 million Americans are currently “underwater”, according to an executive at Deutsh Bank last week. The same executive went on to forecast that home prices will likely fall another 14% before bottoming out. So, as prices continue to fall, the number of over-leveraged mortgagors could reach 25 million. That would mean that over 48% of ALL mortgagors have negative equity. (Full interview @ CNNMoney.com)
The foreclosure filings for July were 7% higher than June and 31% higher than July of 2008 according to RealtyTrac. That is the third time in 5 months that there has been a record set.
But isn’t the Obama Plan Working?
Simple answer is NO. Banks are not moving fast enough to make the modification programs effective for the millions promised relief. Bank of America for instance has modified the loans of ONLY 4% of their eligible borrowers since the program was unleashed months ago. What is worse after struggling through red-tape, run-arounds, and delays, the majority of home-owners that successfully modify end up becoming a short sale candidate in months. What are the banks that received bail-out money using the money for?
The rest of the programs are not set to bring long-term economic repair either. Cash for Clunkers will only bring car part and car price inflation while encouraging more Americans to open lines of credit they cannot afford. The Cap–n–Trade Bill will only cause housing inflation, more over-leveraged property, and unnecessary tear down of properties that meet the price criteria for first-timers and rehabbers. The bill will also bring even more unemployment. Taxpayers who have managed to maintain employment now have to work harder to earn less and pay more taxes. ...and Never before has a government mandated program stood to unravel the very basis of American Capitalism and our historical economic strength like the health bill. We are not facing an end of the recession that should be left to occur organically by free trade and an investor driven market, but are instead facing mandated government pocket picking that is building a hollow future.
One solution we can bring to this situation is short sales. Short sales solve a problem and fill a need.
Seller ends up with a better situation: out from under debt and credit salvaged
Lenders NET MORE versus REO sale
Neighborhood values are not as impacted
Less vacancies and vandalism
Municipalities get their tax money
For those of us in the Real Estate Industry finding a team to work to bring more Short Sales to close is vital. One solution is Loss Mitigation. There all types of loss mitigators to review so choose carefully. You may wish to check out http://www.RRES.ManageMyShortSale.com.
Time is running out on the $8000 Tax Credit. The average time to close a home is 45 days now. So to take advantage of the Tax Credit a purchase offer should be accepted by October 15, 2009 to close by the November 30th deadline. Review the highlights below: March 19, 2009 -- The American Recovery and Reinvestment Act of 2009 was just signed into law. One of the major provisions provides an $8,000 tax credit to qualified First Time Home Buyers defined as those who have not owned a home in the last three years. $8000 tax credit highlights:
• The $8000 tax credit or 10% of the home’s purchase price, whichever is less, is available only for first time home buyer defined as those who have not owned a home in the last three years.
• There is a $75,000 adjusted gross income limit for tax filers filing as single and $150,000 limit for joint return filers. It is available only for primary residence.
• The tax credit does not require a repayment in most cases. The tax credit does have a repayment provision if the homeowner does not occupy the property for a minimum of 3 years from the closing date.
• The home buyer must purchase a home between January 1, 2009 and close by November 30, 2009
• The $8000 tax credit is received when you file your tax return. Home buyers may file an amended 2008 tax return with a 1040X form. You should consult with a tax ad visor to ensure you file this return properly.
Every time a short sale does not close & goes into foreclosure many people & industries that provide goods & services don’t see a penny. This continues the downward spiral to the US economy instead of boosting it. Successful short sales get money moving back into the economy. Nobody benefits when a home goes into foreclosure. The Bank owns a property they don’t want. The property owner loses any equity they had in the property. They also get a poor credit score, preventing them form making another purchase in the near future. Also neighbors home values depreciate. Many people benefit from a successful short sale. It doesn’t matter if a real estate investor, landlord, or a prospective homeowner makes a successful short sale transaction. They are putting money back into the economy. This is something the Banks & the government don’t see. Many industries make money with each short sale completed. Bank makes more on short sale than on foreclosure Realtors & Real Estate Companies Lawyers & Title Companies Mortgage Brokers & Lending Companies Appraisal Companies Home Inspectors Electricians Plumbers Contractors Hardware & Home Supply Stores County, Town, & City Government. Taxes are paid up & tax base increases. Insurance Companies Neighbors (their home value began to stabilize) The successful closing of a short sale not only benefits the new property owner. It creates jobs and puts money into local business large & small, that are also involved in the industry. Every successful short sale is putting money back into our economy.
Homeowners have a multitude of questions when facing the possible loss of a home.The main two questions we here are: “How will a short sale affect my credit?” … and “when will I be able to buy another home.Did you know that Fannie Mae wants homeowners who short sale to own another home as soon as possible?
When every a homeowner ask you a financial or legal questions it is imperative that you advise them to seek the advice of professionals unless you are one.Some of the professionals they may speak to are major credit reporting bureaus, lawyers, mortgage professionals and even a financial advisor. Then communicate Fannie Mae policies on those who choose a short sale as an alternative to a foreclosure or deed in lieu.
Fannie Mae desires short sale borrowers to own again.In as little as two years those who have had a short sale may be considered for any type of loan program without restrictions. Homeowners that choose the deed in lieu option must wait 4-7 years before being consider for another loan.Borrowers that permitted their home to go to foreclosure must wait between 5-7 years before they are eligible for a loan for a primary residence with a sizable down-payment and strong credit score.
Here is the principal message Fannie Mae will loan to a borrower who took the short sale option faster and with less restrictions than those who choose foreclosure or deed in lieu.Short Sales save the homeowner, the lender and help the community.
This does not mean that Fannie Mae loans are fast to process as short sales.Fannie Mae’s should compel servicers to become more efficient in their review and processing of short sales.Fannie Mae preference of short sales is not reflected in their control on servicers handling the short sale reviews.
Short Sales help the homeowner, the lender and our community!Welcome your feedback!
[Based on information released by Fannie Mae in 08 and Short Sale Daily News]
More people are becoming landlords in an economy where selling a home can be challenging.
The nation’s second-largest home insurer, Allstate Corp., says the number of homeowners converting their homeowners insurance to landlord policies rose 27 percent in the first quarter of 2009.
Many Real Estate companies are beginning to offer property-management services for absent owners, many of whom are convinced it will be easier to sell in a couple of years.
Holding on probably isn’t the best answer, says economist Edward Leamer, director of the UCLA Anderson Forecast. Leamer suggests negotiating a short sale instead. “Better to take your losses and move on.”
But with good property management it can be a solution for distressed homeowners.
Another factor to consider is whether renting will reduce or eliminate the value of the capital-gains tax exclusion. Federal tax law requires living in the home at least two of the previous five years to qualify for the full capital-gains tax exclusion when the house is sold. Of course, if there is no profit to be had, then this isn’t a problem.
As always Rapid Real Estate Solutions are here to assist you with complicated real estate challenges. You may call us at 616-328-5127.
Our market has changed drastically. For example look at the following stats:
1 in 4 listed homes are a Short Sale
1 in 5 people NEED TO LIST their home as a Short Sale
Foreclosure rates are hitting historic highs
The credit crisis is affecting our buyers
National Association of Realtors, President Richard Gaylord stated, "Homeowners who are struggling to make their mortgage payments must have more options available to them to avoid foreclosure. Short sales can benefit not only the homeowners in question, but also buyers, Lenders and the surrounding community. With their established lender relationships and insights into complicated real estate transactions, Realtors can add real value for both sellers and buyers interested in short sales."
Realtors are being faced with this crisis. They have struggled to adapt the the market changes. The amount of work that has been placed on their shoulders can be staggering. I began to search for a way to help relieve some of the work load that Realtors carry. In my search I have discovered a incredible service. This service will help homeowners, Realtors, Lenders and investors. It is called RRES.ManageMyShort Sale.com
What RRES.ManageMyShortSale.com will do for you:
Provide lender specific requirements
Create Short-Sale Packages for you
Handle ALL Lein Holder Negotiations
Assist with Buyers Expectations--Unique to each deal
HUD-1 Settlement statements
..........Save Time and Frustrations.........Most of all have More Closings
You owe it yourself and your clients to check out this service. Their contact information is: http://www.RRES.ManageMyShortSale.com or you can call 616.929.7304. You will be glad you did!
