Reno Sparks Real Estate Today

Home Affordable Modification Program (HAMP) rolls out new guidelines

The Treasury Department recently announced new guidelines that will require applicants to provide all paperwork before getting a trial modification.  The new policy should make it easier for homeowners to qualify for permanent assistance under President's Obama foreclosure prevention plan, even though it makes it harder for them to start the process.  Borrowers have been complaining that their loan servicers constantly ask for additional documents and lose their forms. Servicers, meanwhile, say that borrowers are not handing in all that's needed.  The new rules, which start June 1, will shift the paperwork burden from the back end to the front end of the process.  Distressed borrowers will have to fill out a three-page request form that asks them to explain their hardship and list their income and expenses.

They will also have to sign an IRS 4506-T form that allows servicers to pull their tax returns. Both forms are available on the Making Home Affordable program's Web site.  Applicants will also have to verify their income. For those earning a salary, two recent pay stubs will be sufficient. Other earnings, such as income from self-employment, benefits, or rental properties, must still be documented.  Servicers must acknowledge receipt within 10 business days and, if the file is complete, let the borrower know within 30 days if he or she is approved for the trial modification. If the documentation is incomplete, the servicer must tell the borrower what is outstanding.  Those who are approved for trial adjustments and make three timely payments will be automatically converted to long-term modifications.  Both servicers and housing experts applaud the move, saying that borrowers will now have a better sense of their chances for permanent help.  "It will not lead to more modifications, but it will lead to more certainty," said Howard Glaser, head of The Glaser Group, a financial services analytics firm.  

 For more information on the HAMP program visit. http://makinghomeaffordable.gov/

FHA Lifts Flipping Rule

This is good news for buyers, sellers, and investors in the Reno Sparks area.

The Federal Housing Administration is temporarily lifting an "anti-flipping" rule, allowing borrowers using government-insured loans to be more competitive in bidding on foreclosed properties recently purchased from banks and even the government.

The Department of Housing and Urban Development's anti-flipping policy prohibits FHA financing on purchase transactions where the seller has owned the property for only 90 days. HUD found this policy blocked potential FHA borrowers from taking advantage of quick resales of real estate owned. REO sellers, generally, are unwilling to go with FHA borrowers because of holding costs and vandalism risk during the 90-day holding period. FHA is lifting the 90-day rule for one year starting February 1. FHA borrowers have "often been shut out from buying affordable properties," said FHA commissioner David Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity." FHA has been burned by property flipping scandals before. This time around it insists that all sales must be arms-length transactions with no evidence of flipping in the previous 12 months. If the resale price is 20% higher than the REO sales price, the lender has to provide supporting documentation and a second appraisal in some cases.

It’s about time!  I applaud the FHA for finally using some common sense. This “anti-flipping” rule was having a negative effect on everyone in the market.  The majority of today’s buyers are using FHA loans to buy homes. Many investors are turning down FHA buyers due to the 90-day rule, or they have to extend the closing period to reach the 90 days, which raises holding costs. Eventually these costs get passed onto the buyer.  A 90-day holding period is doing nothing but extending the transaction.

I’ve long said, to get this market cleaned up we are going to need investors.  Banks are not in the real estate business; they are in the money business. They have already screwed up the money business; we need to keep them out of the real estate business.  Investors are the best group to buy up foreclosed properties, fix them up, and sell them or rent them.   Investors have the knowledge and local resources to get the job done quicker and more cost effectively than banks. 

Is now the time to buy a house?

Interesting story on the Today Show about the real estate market and the economy in general. Many hard hit markets are highlighted, and you can definitely include the Reno Sparks market in the conversation. 

Visit msnbc.com for breaking news, world news, and news about the economy

HUD changes eligibility of buyers who previously had to short sale a home.

If you had to do a short sale on your home and are looking to buy a new one in the future, HUD has updated eligibility guidelines.  

Borrowers are eligible for a new FHA-insured mortgage if;
1. they were current on their mortgage and other installment debts at the time of short sale on their previously owned home, AND
2. the proceeds of the short sale serve as payment in full.

Borrowers are not eligible for 3 years following the date of the short sale if;
1. they were simply taking advantage of declining market conditions, AND
2. are looking to purchase, at a reduced price, a similar or superior property in same area.
3. if they were in default on their mortgage at the time of short sale.
Exceptions may be made to this rule if;
a. the default was due to circumstances beyond borrower's control (death of primary wage earner, long term uninsured illness, etc.), AND
b. review of credit report satisfactory credit prior to the circumstances that caused the default.
 
As always, guidelines will be made clearer as lenders introduce this announcement to their programs.  We will continue to keep you updated.

For official announcement from HUD click on link below.
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-52ml.pdf
 

Obama's HAMP program a failure

An editorial in the Providence Journal succinctly outlines the reasons President Obama’s program to curb foreclosures appears to be failing.  The Home Affordable Modification Program (HAMP) offered incentives to mortgage companies to reduce payments for struggling homeowners, but as of September only about 1,700 homeowners had passed through all the necessary hoops to win a new permanent loan modification. In the meantime, foreclosures are on the upswing and well over a million mortgages were 60 days past due in October.

HAMP was not designed to deal with one of the biggest aspects of the foreclosure problem: falling home values that leave borrowers “under water,” owing more than their houses are worth. Primarily, HAMP is aimed at reducing interest payments but not principal. Not surprisingly, underwater borrowers are not rushing to sign up, and they're not finding much help when they do.  Participants in the program have to show their worthiness by completing a series of trial payments, and around 650,000 borrowers have done that. But many say they are subjected to disorganized claims for additional paperwork, and others fail to provide the necessary documents in the first place.  Last year, foreclosure sales topped 1 million. This year there were fewer, thanks to loan-modification efforts and moratoriums, but the danger of a stalled HAMP is that another new wave of foreclosure sales could swamp the market, sending home prices back down and threatening the economic recovery.

Government trying to make Short Sales easier

 The Obama administration laid out final guidelines on Monday that should make it easier for some financially troubled borrowers to sell their homes.  The guidelines are designed to encourage the use of short sales, and it also makes it easier for borrowers to voluntarily transfer ownership of properties through a "deed in lieu of foreclosure."  

Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government's loan-modification program but don't end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.  The short-sale program is the latest addition to the Obama administration's $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans.

The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.  Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments.  Borrowers who complete a short sale under the program must be "fully released" from future liability for the debt, according to the guidelines.

Homeowners Facing Financial Trouble Can Stay in Home as Tenants.

Fannie Mae has quietly announced a deed for lease program that enables homeowners who are in financial trouble and facing foreclosure to turn into tenants by leasing their home back from Fannie Mae and turning the property deed over to the lender, basically giving the house back. 

According to Fannie Mae anybody who is not eligible for loan modification can take advantage of this program. It will keep families in their homes during a transitional period, and helps to stabilize neighborhoods and communities.

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. With the deed for lease program, borrowers transfer their property to the lender by way of a deed in lieu of foreclosure, and then lease back the house at a market rate.

To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens (2^nd mortgages, equity lines of credit) on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Borrowers or tenants interested in a lease must qualify and be able to document that the new market rental rate is no more than 31% of their gross income.

Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. A Deed for lease property that is sold includes an assignment of the lease to the buyer.

Download Fannie Deed For Lease program flier. 

Home Buyer Tax Credit - Extended and Expanded

Late last week, the U.S. Senate unanimously passed an extension and expansion of the homebuyer tax credit. The House of Representatives approved the agreement reached in the Senate by a vote of 403-12.

You can check out more details here – Home Buyer Tax Credit           

Below is a summary of the new modifications in the extension and expa nsion of the tax credit:

1)  The $8,000 tax credit will be extended and available for first-time purchases before May 1, 2010.

 

2)  A new $6,500 tax credit will be available for repeat buyers who purchase between December 1, 2009, and May 1, 2010. To qualify for this provision, buyers must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years.

 

3)  Prospective purchasers with binding contracts in place as of April 30, 2010, will be allowed an additional 60 days to complete the transaction.

 

4)  Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.

If you know anyone looking to buy their first home at a time when prices and interest rates are still down, or if you are thinking of buying another home and getting the new $6,500 credit please contact me today.

Here is another great article- 4 tips for the homebuyer tax credit.

Home Buyer Tax Credit Extended

Congress just passed an expanded version of the $8,000 first time home buyer tax credit that was set to expire on November 30. The new version of the tax credit has the potential to stimulate the housing more substantially that the previous initiative. Although the tax credit remains at $8,000 for home buyers that have not owned a primary residence in the last three years, it has been expanded to include a $6,500 tax credit for home buyers that have lived in their current primary residence for at least five consecutive years out of the past eight years. Under the old rules, move-up home buyers did not qualify. Consider these three examples:

Example 1:

Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:

Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:

Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight.  The tax credit applies to homes purchased for less than $800,000 before May 1, 2010.  If you sign a binding contract to purchase a home before May 1st

, you would need to close on the transaction before July 1, 2010. It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit. The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. This means that more people will qualify for the credit – especially in parts of the country with higher costs of living. This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples:

•

The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others

 

 

• If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit.)

•

The credit applies even if you have co-signers on your mortgage loan

 

Jason Norris, MBA, CMPS, President MFG Mortgage Services, LLC 1.775.322.0496

Short Sales 101 -- What is a Short Sale?

If you live in the Reno Sparks area and have had some contact with real estate sales, you have probably heard the term SHORT SALE.  So what does a short sale actually mean? The simple definition is your mortgage balance is greater than the current value of your home. For example, if you bought your home for $250,000 a few years back and got a mortgage for say $230,000.  For some reason you now have to sell your home. Unfortunately, if you sell your home today it will only sell for $150,000. This means the proceeds (selling price) will be “short” $80,000.

Here is an entry from wikipedia. A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan.^[1] It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.                                                                                                               

So why would a bank be willing to take less than the home is worth? First of all, to even be considered for a short sale, you would have to have a signification “financial hardship.”  Loss of a job, escalating mortgage payments, pay cuts, etc.. So the way the bank looks at it is if you are going to quit making payments on your home, we are going to have to foreclose on the house.  The foreclosure process is lengthy and costly for a mortgage company. In addition, after the foreclosure the house will sit vacant and may get vandalized, the lawn will dye, and a stigma will be attached the property. In the end the foreclosure cost more and the property will end selling for less, not to mention the negative impact on the neighborhood. This is a loose-loose scenario for the bank/mortgage company.

With a short sale, the costs are much less, the property remains occupied, maintenance is kept up, and the property will normally sell for a higher price. The bank/mortgage companies will still loose money, but on a short sale the loss will be reduced.

Short sales are usually much better for the homeowner as well. The impact on credit is much less, you are able to stay in the house until it sells, and the neighborhood is saved from foreclosure.

If you are experiencing a financial hardship and are having trouble making your payments, a short sale might be a good option. As always, you should seek guidance from real estate professionals, attorney, and your CPA before you make a decision.

Call or email me if you would like me to take a look at your situation.

Ryan