Archive for the 'Mortgages & Finance' Category
$1,500 for Homeowners to Prevent Foreclosure and Encourage Short Sales
March 10th, 2010 categories: Mortgages & Finance, Real Estate Industry
Beginning April 5, 2010, homeowners in trouble will get a little assistance to prevent foreclosure. HAFA (Home Affordable Foreclosure Alternatives) will encourage banks (by giving them $1,000) and homeowners (by giving them $1,500) to figure out a solution other than foreclosure. The program refers to the money for homeowners are “relocation assistance.”
We all know, foreclosure is bad. Your credit score can drop by as many as 300 points and will prevent you from buying another home for several years. Homeowners face deficiency judgements. Property values in the surrounding neighborhood are negatively impacted. Vacant bank-owned properties invite crime and vandalism.
However, until this recent directive by the US Treasury Department, avoiding foreclosure has been difficult. The loan modification and refinance programs (HAMP) have had some impact but many homeowners don’t qualify. And if the homeowners get their bank to agree to do a short sale, the process can take months longer than a traditional sale and is much more complicated, so much so that homes can still end up in foreclosure.
HAFA also seeks to streamline the short sale process by setting up standards (imagine that!) to make short sales occur more quickly, which increases the marketability of short sales.
There are eligibility requirements:
Homeowners need to first go through the HAMP program to apply for a loan modification.
Home is a principle residence.
Mortgage originated prior to Jan. 2009.
Mortgage is owned or guaranteed by Freddie Mac or Fannie Mae.
Borrower is delinquent or will be in the foreseeable future.
Homeowner has a hardship.
Borrower’s total monthly housing payment exceeds 31 percent of gross income.
Unpaid principal does not exceed $729,750.
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Are Mortgage Rates Going Up?
February 23rd, 2010 categories: Mortgages & Finance
Yes. At least that’s what a lot of experts are saying.
Get Ready for Higher Mortgage Rates- CNN
Marketwatch.com’s Steve Kerch predicted as much in October 2009, saying “Housing Could Take a Double Dip Down in 2010.”
According to David Lowman, CEO of Chase Home Lending, ” if the Federal Reserve ends its purchases of mortgage-backed securities…we’re going to come to a pretty hard stop. We’re likely to see a much smaller mortgage market after the second quarter and later in 2010.”
Which is exactly what the Fed plans to do beginning March 31.
However, the Fed announced these plans last year and rates still haven’t gone up. Why?
CNBC’s Steve Liesman explains:
Anecdotally, I’ve heard from lenders that a lot of buyers have been antsy to lock in their loans now. Like farm animals before a tornando, maybe they feel it coming.
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Is It A Good Time to Refinance?
February 5th, 2010 categories: Mortgages & Finance
In an article on RISMedia.com yesterday called 5 Reasons Why Refinancing May Be a Good Option Now, Bills.com suggests homeowners strongly consider refinancing.
“Low rates and compelling opportunities to refinance into shorter term loans have arrived at the same time as large consumer demand…With some exceptions, a 1/2-point to a 1-point drop in rate will generally make refinancing worthwhile…”
Refinancing from a 30-year mortgage to a 15-year mortgage is a smart idea if you have plans on staying in your home longer and can afford a higher payment.
“The current difference between fixed 15-year and 30-year interest rates is significant, making refinancing into a shorter-term loan a compelling opportunity. This can save hundreds of thousands of dollars over the life of a loan and shorten the time to payoff with sometimes only a slight increase in monthly payment.”
The article also suggests refinancing into an FHA mortgage to pay for home efficiency projects - another good idea if you need to make some improvements but don’t have the cash. Generally, I don’t like the idea of refinancing your home to buy something else. But since these improvements are likely to add value to your home, it’s not the same as refinancing to buy a car or go on vacation - never a good idea.
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No More FHA Spot Approval for Condos
August 19th, 2009 categories: Mortgages & Finance
Back in July I wrote a post about FHA approval for condos and in it I mentioned that FHA can do a spot approval for an individual condo unit in a complex that is not already FHA approved. The spot approval is an option for a home buyer (through their lender) to get a condo they wanted to buy OK’d by FHA.
However on October 1, 2009, the FHA spot approval will be eliminated. In reality though, the deadline is earlier because lenders need to get their loan packages to FHA well in advance of the October 1, 2009 deadline.
If you’re considering a condo that will require a FHA spot approval, my advice to you is get moving fast.
However, if the complex you’re interested in has a “right of first refusal” written into its declarations and by laws, a spot approval will not help you currently since it’s an automatic denial.
What is a right of first refusal?
From National Associations of Mortgage Processors:
“A right of first refusal places a restriction on conveyance of the seller’s title and in short, allows the HOA the right to buy a unit at the price and terms the owner might negotiate with an eligible buyer. Often the association elects to include a right of first refusal clause in their declarations and bylaws because they do not want to allow one of the unit owners to sell at a discounted sales price because they fear that their own market values would be adversely affected.
HUD, however, views a right of first refusal as having the potential to negatively impact the marketability of the property because potential buyers may not be so thrilled about proposing an offer only for it to possibly be refused because of the HOA’s right to override the offer and thus purchase the property themselves. HUD views the right of first refusal as a restriction and thus, an added risk for the property itself. “
It may actually be better to wait until October 1, when FHA will not automatically deny a complex that has this clause in its documents. A full approval will be required for the entire complex and at this point, I’m not sure who will pay for this (the buyer, the lender, or the complex) and how long full approval will take.
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New Appraisal Standards Complicate Real Estate Market
July 1st, 2009 categories: Mortgages & Finance
The problem used to be that lenders and appraisers were too cozy. The lender hired an appraiser for the borrower and more often than not, the appraisal miraculously came in at the buyer’s purchase price. Appraisers felt pressure by their client (the lender) to justify the purchase price so as not to ruin the deal and lose future business. Buyers were skeptical because they thought the appraisal should be a completely independent opinion of price.
In response to a lawsuit from the State of New York, Fannie Mae and Freddie Mac instituted new appraisal guidelines in May 2009 called the Home Valuation Code of Conduct (HVCC). The new code prevents local mortgage brokers from selecting local appraisers; rather lenders will hire appraisers. Also, 10% of all loans bought by Fannie or Freddie will have a second appraisal ordered to validate/invalidate the first appraisal.
To comply, many lenders are hiring appraisal management companies (AMCs) who in turn hire the appraisers.
According to reports from appraisers, the AMCs are demanding appraisers work for less and hand in their reports faster. The initial results seem to indicate that these changes are driving appraisals lower and lower because appraisers can’t spend the time on reports they once did, appraisers hired may not have the local expertise needed, and appraisers are concerned about coming in “too high” on an appraisal and losing future business.
“Lenders burned by huge losses from defaults now are pressing appraisers to be more conservative. And appraising itself is more difficult with home prices fluctuating rapidly and transactions few and far between in some markets; sale prices from a few months back may no longer reliably indicate the value of nearby homes.” Read the rest of this entry »
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