SANPETE HOME OWNER SAVVY

REVERSE MORTGAGE? TOP 9 MYTHS

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Top 9 Reverse Mortgage Myths – Separating Fact from Fiction

^[1]RISMEDIA, January 20, 2010—Recent headlines pointing to the detriments of reverse mortgages aren’t getting the story straight. One of the nation’s leading reverse mortgage lenders, Generation Mortgage Company, wants to separate fact from fiction.

“Because so many Americans over the age of 62 are facing significant financial stress due to dropping retirement and savings account balances, as well as higher healthcare costs, many groups are targeting seniors under the guise of helping them,” said Scott Peters, CEO and President of Generation Mortgage. “HECM reverse mortgages are Federal Housing Administration-insured products and are heavily scrutinized by regulators and legislators looking to protect seniors’ best interests. As a result, more than 600,000 American seniors have obtained reverse mortgages that have enriched their lives by allowing them to stay in their homes and pay off their bills.”

The top 9 most common reverse mortgage myths include:

Myth: If I take out a reverse mortgage the lender will own my home.
Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. As long as the house is maintained and property taxes and homeowners insurance are paid, the loan cannot be called due.

Myth: My children will be responsible for the repayment of the loan.
Fact: False. Reverse mortgages are non-recourse loans. That means, if the property is sold to pay-off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. The maximum amount owed is the current market value of the house. If the homeowner’s heirs want to keep the home, they would pay the balance in-full to the reverse mortgage lender.

Myth: I can’t get a reverse mortgage if I have an existing mortgage.
Fact: False. With enough equity, you may be able to pay off your existing mortgage or other debt with the reverse mortgage. The reverse mortgage must be in a first lien position, so any existing mortgage must be paid off. Seniors who take out reverse mortgages are free to do anything they want with their reverse mortgage proceeds. Paying off an existing mortgage is the number one reason most seniors take out a reverse mortgage.

Myth: Only low-income seniors get reverse mortgages.
Fact: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.

Myth: If I outlive my life expectancy, the lender will evict me.
Fact: False. Reverse mortgage lenders put no time limit on how long seniors can stay in their homes. Since homeowners still own the property, lenders cannot evict them, provided they follow the program guidelines.

Myth: There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
Fact: False. Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

Myth: There are restrictions on how reverse mortgage proceeds may be used.
Fact: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.

Myth: Reverse mortgage lenders take advantage of seniors.
Fact: False. Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. As a consumer, you should only work with lenders who are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members and adhere to those organizations’ strict Code of Ethics and Standards for Trust.

Myth: I’ve heard I won’t qualify for a reverse mortgage because of my limited income.
Fact: Unlike a traditional mortgage where mortgage payments must be made each month, a reverse mortgage pays you. Because of this, many seniors who do not qualify for traditional financing are eligible for a reverse mortgage.

For more information, visit www.generationmortgage.com ^[2].

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com ^[3].

For more top headlines on RISMedia.com, be sure to see:
10 Tips to Prepare for a Market Rebound ^[4]
Prudent Moves – How 3 Leading Prudential Brokers Are Paving the Road for 2010 ^[5]

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[4] 10 Tips to Prepare for a Market Rebound: http://rismedia.com/2009-12-02/10-tips-to-prepare-for-a-market-rebound/

[5] Prudent Moves – How 3 Leading Prudential Brokers Are Paving the Road for 2010: http://rismedia.com/2009-12-01/prudent-moves-how-3-leading-prudential-brokers-are-paving-the-road-for-2010/

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CAN'T AFFORD REPAIRS ON THE HOME YOU WANT TO BUY???

Here's a great article about an FHA program that seems to be a well-kept secret!  NOT ANY MORE!!  (Obviously the article is sponsored by Lowes - check in to their discount program-email me)

^[1]RISMEDIA, December 31, 2009—Driving to work one morning earlier this summer, home buyer Lori Kramer was thinking about the homes she and her husband had looked at the day before. Then, she had a thought that would eventually change the direction of her home search completely. “My home at the time was listed for less than what we were approved for and it needed some work. So I wondered if we could use that remaining money to upgrade a home we were considering and make it our own,” says Kramer of Jacksonville, Florida.

From there, Kramer called her Wells Fargo mortgage consultant, Diana Diallo, who told her about the 203k program. The FHA Section 203k program is specifically designed to rehabilitate and repair single-family homes. The 203k is a single mortgage loan that provides funds to purchase a home and make repairs and improvements.

“As the market turned and we began to see more and more distressed properties, Wells Fargo, as a company, has focused its efforts on developing a more streamlined version of the typical 203k loan,” explains Diallo.

After Kramer received preapproval from Wells Fargo, she consulted with her Realtor, Shawn Norton of Keller Williams Realty, about revisiting a home she and her husband had considered earlier; it needed a lot of work, but Kramer saw the home’s possibilities and later bought it. From there, Diallo worked with Kramer on choosing a home improvement vendor. She selected Lowe’s, a decision Kramer calls “one of the best decisions we made.”

“After comparing service and cost, Lowe’s out-delivered the other vendors,” explains Diallo. “Thus, Lori chose Lowe’s to complete her remodel repairs.” And the renovations were quite extensive.

With their 203k approval, the Kramers completely renovated the kitchen, replacing all cabinets and countertops. They also revamped two bathrooms and added new carpet and fencing to the home.

“Lowe’s was fantastic and they truly deserve some spotlight for their service,” lauds Kramer. “The Lowe’s team and their contractors helped with design, offered us some great tips and helped us with materials and product selection; they did all of this and offered us the selection we wanted for an affordable price—and within 45 days from closing.” The Kramers closed on their home on August 18 and the work was completed by October 1.

“We are extremely happy,” says Kramer. “This program changed the way we looked at buying a home. Thanks to Lowe’s, our home has turned out amazing. The before and after is unreal. My kitchen is particularly amazing.

“In this market, where so many homes have been vacant for so long or gutted in some cases, this program could really change the way people are buying real estate,” adds Kramer. “I would definitely do this again—and would work with Lowe’s to do it.”

Norton agrees.

“I learned so much from working on this with Lori and Diana,” says Norton. “This really opened all of our eyes to see that you can fix something if the structure’s good and you have the right people in place to do the work.”

In many cases, homes that would qualify for the 203k loan are in nice areas but have aesthetic problems. This program—because the home improvements are built into the loan—opens the whole market to the average home buyer. “I never would have bought this home without the program—and I could not be happier,” says Kramer.

“Lowe’s was just awesome,” she adds. “From the program manager and other managers to the contractors, everyone was just outstanding. Our cabinet installer was the best—he was on point and professional. All of our contractors were so good with us. Lowe’s was great to work with, and I would love for other people to experience working with them as well.”

For more information on the 203k loan program, visit www.hud.gov or www.re-buildusa.com ^[2].

Lowe’s contractors and installers are licensed where required. For more information, please visit www.lowes.com ^[3].

RISMedia welcomes your comments and questions. Email realestatemagazinefeedback@rismedia.com ^[4].

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HOMEBUYERS ARE PAYINGS CLOSER TO LISTING PRICE, BUT NEGOTIATE DISCOUNTS

U.S. Homebuyers Pay Closer to Listing Price in August, but Are Still Negotiating Thousands in Discounts

lead webRISMEDIA, October 9, 2009—Home buyers in much of the U.S. are still paying thousands of dollars below the home’s asking price, but had slightly less negotiating power in August 2009 than they did in July, according to the August Zillow Real Estate Market Reports. Buyers paid a median $6,525, or 3% less than the last listing price on homes bought in August, down from $7,018, or 3.3%, less for homes bought in July. Negotiating power peaked in January 2009, when buyers were paying 4.5% less than last listing price, a median of $10,096. Meanwhile, sellers continue to cut prices on unsold homes. One quarter (24.7%) of all homes listed for sale on Zillow had at least one listing price reduction as of Oct. 1, 2009. The median U.S. price reduction was 6.6% off the original listing price.

Florida home buyers again in August had the most negotiating power, with buyers in the Vero Beach metropolitan statistical area (MSA) paying 8.9%, or a median $20,974, less than the last listing price. Buyers in the Naples MSA paid 8% less than list price. The Naples, Daytona Beach, Miami-Fort Lauderdale, Ocala, Lakeland, Punta Gorda, Melbourne, Gainesville, Tampa, Jacksonville and Fort Myers MSAs also ranked, in that order, as the top markets for negotiation.

But in two California markets, buyers paid more than asking price during August. In the El Centro MSA, buyers paid 2.2%, or a median $2,479, more than asking price. In the Stockton MSA, buyers paid 1.3%, or $2,515, more.

“Negotiating power is a clear reflection of inventory levels, which dropped nationally in August. Tighter supply in some markets is translating into less of a discount off listing price,” said Zillow Chief Economist Dr. Stan Humphries. “Unfortunately, the brisk spring and summer home shopping season is drawing to a close now, and with foreclosures on the rise again, inventory levels will likely head back up in the coming months, leading buyers’ negotiating power to regain the ground it lost in August.”

For more information, visit www.Zillow.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.


Read more: http://rismedia.com/2009-10-08/u-s-homebuyers-pay-closer-to-listing-price-in-august-but-are-still-negotiating-thousands-in-discounts/#ixzz0TRm5nPP6

CREDIT WOES TO THREATEN HOUSING RECOVERY?

Oh, I HATE articles like this, but to be fair, I want you to read it.  Hmmm...

September 30, 2009—Nearly two-thirds of single-family home builders are reporting a severe lack of credit for housing production, threatening the fragile housing recovery before it has time to take hold, according to a new builder survey of acquisition, development and construction (AD&C) financing conducted by the National Association of Home Builders (NAHB).

“Across the country, home builders and developers are reporting a deterioration in credit availability and intensifying pressure on borrowers with outstanding loans,” said NAHB Chairman Joe Robson, a home builder from Tulsa, OK. “Lenders are cutting off loans for viable new housing projects and producing unnecessary foreclosures and losses on AD&C loans. With the pending expiration of the $8,000 first-time home buyer tax credit, these challenges threaten to halt any positive developments we have seen in the housing market in recent months.”

In the latest NAHB survey of AD&C financing conditions, 63% of builders stated that the availability of credit for single-family construction loans worsened in the second quarter of 2009.

Builders reporting deteriorating credit conditions cited the following reasons: 80% said that lenders are lowering the allowable loan-to-value ratio, 76% reported that lenders are not making new loans, 75% stated that lenders are reducing the amount they are willing to lend and 62% said that lenders are requiring personal guarantees or collateral not related to the project. Two-thirds of respondents reported putting single-family construction projects on hold until the financing climate gets better.

While federal banking regulators continue to maintain that they are not instructing institutions to stop making loans or to indiscriminately liquidate outstanding loans, builders responding to the survey cited the top reason that lenders have given them for restricting the availability of new loans or for tightening the terms of outstanding loans is that “regulators are forcing lenders to do it.”

NAHB believes that regulators and lenders should provide leeway to residential construction borrowers who have loans in good standing by providing flexibility on re-appraisals, loan modifications and perhaps forbearance on loans to give builders time to complete and sell their inventory.

“There can be no meaningful economic recovery until the flow of credit is restored to housing,” said Robson.

For more information, visit www.nahb.org.

TEMPORARY TAX BREAKS END SOON!

If you or someone you know is intending to buy and take advantage of the $8,000 tax credit, they need to GET THE LEAD OUT!

The Economic Recovery and Reinvestment Act of 2009 was a nearly  $800 billion economic stimulus package, including the $8,000 tax credit to new home buyers.  BUT IT'S TEMPORARY.

The tax credit covers homes purchased between January 1 and November 30, 2009.  THE HOMES HAVE TO CLOSE BY NOVEMBER 30.  Given the other news laws in place for lenders, it could easily take FOUR weeks or longer for a loan to fund!  DON'T PUT IT OFF!  If you are intending to buy a new home this year to take advantage of this awesome program, you need to find your home and get the paperwork rolling NOW!

WOOHOO! WHAT "BUSINESS WEEK" HAS TO SAY--It's Dream Home Time

 Now's the Time to Buy Your Dream House

Well, the reason it's a perfect time to launch this column should be clear. There is an opportunity in residential real estate ownership unlike any we've seen in quite a long time, a perfect storm of sorts that is unlikely to last much longer. Home prices are down, interest rates remain near historical lows, and inventory is high. Thus, those with stable jobs and good credit can find their dream home, pay a price lower than any time in the last five or more years, finance it at a very favorable interest rate, and thereby be perfectly positioned for the housing recovery that the magazine wrote about.

Most of us who remember shopping for a home in 2005 and 2006—when national inventories were extremely low—recall how difficult it was to find our dream home in our preferred neighborhood at a price we considered affordable, let alone realistic. With so few houses available, any home in a desirable area sold regardless of its condition or layout—often before it was even officially listed.

According to the National Association of Realtors, the inventory of existing homes for sale peaked in November of 2008 at an 11 months' supply. There was a 9.6 month supply at the end of May and, from what I hear, it has fallen since then.

While you think your dream home will remain on the market forever; the selection is shrinking.

You Can't See the Future

If we all had a crystal ball, we'd time our purchases by buying at the bottom of every pricing cycle. However, we all know that most of us are no better at picking bottoms than we are at selling tops. NAR statistics indicate that the national average for existing home sale prices peaked at $230,200 in July of 2006. In January of 2009, its lowest point, the average fell to $164,800, down 28.3% from its peak.

Since then, despite foreclosures still making up a significant portion of the transactions, the average price has slowly climbed each month. It stood at $173,000 at the end of May.

While mortgage rates have always climbed slightly, they, too, are near historic lows. Freddie Mac (FRE) reported recently that the average 30-year fixed mortgage rate is down to 5.32%. When I bought my first home in 1992, I recall paying around 8.5% and thinking it was a good rate. My sentiment back then was largely driven by my vision of my father getting stuck in a rate around 18% back in the early 1980s.

Given the economy over the last couple of years, we are all rightfully skeptical. When you see your investment portfolio drop dramatically—the Dow fell by more than a third, and the S&P and NASDAQ did even worse last year—and the unemployment rate continue to rise you have to think twice when someone tells you home prices are on sale.

A Great Time to Shop

But the numbers—both current and historic—show it is indeed the case. While the unemployment rate is high, the rate of people losing their jobs is slowing and it appears that inflation has moved up the list as a primary economic concern. And it's reasonable to expect any increase in inflation to also include an increase in home prices.

I do not claim to be Nostradamus, but I am observant enough to understand we are at a unique and opportunistic point in time within the realm of residential real estate. There are some terrific homes on the market today, at prices historically quite low, with attractive interest rates available to those with good credit.

I'm not suggesting everyone run right out and buy a home above their means. But I am suggesting that if you don't yet own a home, or if you own a home and have been considering trading up, now is a great time to go shopping.

Rehabilitation loan program lets you buy your home and fix it too--FHA 203k

I PULLED THIS INFORMATION FROM THE FHA WEBSITE -- I have a client who wants to add on a garage.  It will increae the value of the home, and she will feel much safer.

SF Rehabilitation Loan Program (203k)
Funds for Handyman-Specials and Fixer-Uppers

The purchase of a house that needs repair is often a catch-22 situation, because the bank won't lend the money to buy the house until the repairs are complete, and the repairs can't be done until the house has been purchased.

HUD's 203(k) program can help you overcome this obstacle by enabling you to purchase or refinance a property plus the cost of making the repairs and improvements in one mortgage. The FHA-insured 203(k) loan is provided through approved lenders nationwide and is available to persons wanting to occupy the home.

The downpayment requirement for an owner-occupant (or a nonprofit organization or government agency) is approximately 3.5% of the acquisition and repair costs of the property.

The 203(k) loan includes the following steps:

    * A potential homebuyer locates a fixer-upper and executes a sales contract after doing a feasibility analysis of the property with his/her real estate professional. The contract should state that the buyer is seeking a 203(k) loan and that the contract is contingent on loan approval based on additional required repairs by the FHA or the lender.
    * The homebuyer then selects an FHA-approved 203(k) lender and arranges for a detailed proposal showing the scope of work to be done, including a detailed cost estimate on each repair or improvement of the project.
    * The appraisal is performed to determine the value of the property after renovation.
    * If the borrower passes the lender's credit-worthiness test, the loan closes for an amount that will cover the purchase or refinance cost of the property, the remodeling costs and the allowable closing costs. The amount of the loan will also include a contingency reserve of 10% to 20% of the total remodeling costs and is used to cover any extra work not included in the original proposal.
    * At closing, the seller of the property is paid off and the remaining funds are put in an escrow account to pay for the repairs and improvements during the rehabilitation period.
    * The mortgage payments and remodeling begin after the loan closes. The borrower can decide to have up to six mortgage payments (PITI) put into the cost of rehabilitation if the property is not going to be occupied during construction, but it cannot exceed the length of time it is estimated to complete the rehab.
    * Escrowed funds are released to the contractor during construction through a series of draw requests for completed work. To ensure completion of the job, 10% of each draw is held back; this money is paid after the lender determines there will be no liens on the property.

 

INTERESTING RESPONSE TO THE ARTICLE BELOW

Jul 18, 2009

Housing in a nutshell: Foreclosures up. Sales up. Prices down.

New research by Paola Sapienza of Northwestern University and Luigi Zingales from the University of Chicago, provide interesting insight into the foreclosure tsunami.

In the 1990-91 recession the study found that very few people who could afford their mortgage walked away from their homes. The magic number was 10. When equity declines exceeded 10% of the value of the home, owners started to waiver. A 10% loss and the default rate begins to rise. A 50% loss of home value and 17% of all owners preferred default to staying in the game.

The study concludes that in this cycle, a large segment of foreclosures were driven by a different metric. One in four recent mortgage defaults are strategic. Buyers of property make a business decision to walk away because they no longer like the deal. For 25% of all foreclosures, today, its not inability but unwillingness to make payments.

The study makes an interesting observation. The Obama administration is focused on cash flow to owners to keep them in their homes. This study points to a different reason for a large segment of foreclosures. Many people wont stay in their homes when the value of their mortgage exceeds the value of their home by 10% or more.

If the study is correct, then writing down the loan would significantly stem the tide. Since lenders are unlikely to do so, Im betting we will continue to see foreclosures for quite a while.

Thanks for Reading
Howard Bell
yourpropertypath.com

UTAH RANKS IN TOP TEN IN - OUCH! - FORECLOSURES

1.9 Million Foreclosure Filings Reported on More Than 1.5 Million U.S. Properties in First Half of 2009

  ISMEDIA, July 16, 2009-RealtyTrac®, a leading online marketplace for foreclosure properties, has released its Midyear 2009 U.S. Foreclosure Market Report, which shows a total of 1,905,723 foreclosure filings - default notices, auction sale notices and bank repossessions - were reported on 1,528,364 U.S. properties in the first six months of 2009, a 9 percent increase in total properties from the previous six months and a nearly 15 percent increase in total properties from the first six months of 2008. The report also shows that 1.19 percent of all U.S. housing units (one in 84) received at least one foreclosure filing in the first half of the year.

Foreclosure filings were reported on 336,173 U.S. properties in June, the fourth straight monthly total exceeding 300,000 and helping to boost the second quarter total to the highest quarterly total since RealtyTrac began issuing its report in the first quarter of 2005. Foreclosure filings were reported on 889,829 U.S. properties in the second quarter, an increase of nearly 11 percent from the previous quarter and a 20 percent increase from the second quarter of 2008.

“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” noted James J. Saccacio, chief executive officer of RealtyTrac. “Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes’ are now worth represent a potentially significant future risk. Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue.”

Nevada, Arizona, Florida post top state foreclosure rates
More than 6 percent of Nevada housing units (one in 16) received at least one foreclosure filing in the first half of 2009, giving it the nation’s highest foreclosure rate during the six-month period. A total of 68,708 Nevada properties received a foreclosure filing from January to June, an increase of 23 percent from the previous six months and an increase of 61 percent from the first half of 2008.

Arizona registered the nation’s second highest state foreclosure rate in the first half of 2009, with 3.37 percent of its housing units (one in 30) receiving at least one foreclosure filing, and Florida registered the nation’s third highest state foreclosure rate, with 3.08 percent of its housing units (one in 33) receiving at least one foreclosure filing.

Other states with foreclosure rates ranking among the nation’s 10 highest were California (2.94 percent), Utah (1.46 percent), Georgia (1.42 percent), Michigan (1.34 percent), Illinois (1.31 percent), Idaho (1.26 percent) and Colorado (1.25 percent).

California, Florida, Arizona post highest foreclosure totals
A total of 391,611 California properties received a foreclosure filing in the first half of 2009, the nation’s highest total and 2.94 percent of the state’s housing units (one in 34) - the nation’s fourth highest state foreclosure rate. California foreclosure activity in the first half of 2009 increased nearly 14 percent from the previous six months and increased nearly 15 percent from the first half of 2008.

With 268,064 properties receiving a foreclosure filing in the first six months of 2009, Florida documented the second highest state total. Florida foreclosure activity in the first half of 2009 increased 7 percent from the previous six months and was up nearly 42 percent from the first half of 2008.

Arizona’s 89,799 properties receiving a foreclosure filing in the first six months of 2009 was the third highest state total. Arizona foreclosure activity in the first half of 2009 increased 13 percent from the previous six months and was up nearly 55 percent from the first half of 2008.

Other states with totals among the 10 highest in the country were Illinois (68,932), Nevada (68,708), Michigan (60,786), Ohio (58,937), Georgia (56,391), Texas (49,144) and Virginia (28,368).

Report methodology
The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing reported during the first half of the year at the state and national level. Data is also available at the individual county level. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: Default - Notice of Default (NOD) and Lis Pendens (LIS); Auction - Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). If more than one foreclosure document is filed against a property during six-month period, only the most recent filing is counted in the report.

How Does Yield Spread Help Buyers Buy?

Okay - this article has lots of technical stuff, but the bottom line is marked in yellow.  If you or someone you know whats to buy a home and is putting it off because of the economy, consider:  Where (financially) will I be if I buy a home now--lower prices, lower interest--than if I wait for 2 years?
(Reminds me of the guidance counselor talking to a man about his education.  Student:  "I can't get a masters degree now--it'll take me three years. Do you know HOW OLD I'll be in three years?"  Counselor:  "How old will you be in three years if you DON'T pursue a masters degree?"

How Does Yield Spread Help Buyers Buy?

Commentary by Andrew Downs Print Article

RISMEDIA, July 2, 2009-Opportunity is knocking fairly loudly for many considering homeownership. Home prices have declined in many markets around the country and tax incentives and other inducements have first-time home buyers and others weighing the possibilities.

Home affordability, as defined by the National Association of Realtors’ Housing Affordability Index, stands near all-time highs, thanks to declining prices and historically low mortgage rates. Yet, while some consumers hold off on purchases as they attempt to catch the home-price bottom, they could miss the mortgage-financing opportunity of a lifetime.

Consider the weekly average yield spread between Fannie Mae’s 6.5-year bond to the “benchmark” 10-year Treasury note, a classic relationship that involves the cost of making mortgage loans to consumers. Before disarray in the financial markets, the spread ran about 1% above Treasury bonds, reflecting investors’ confidence that owning debt of bonds backed by Fannie and Freddie is nearly as safe as owning government bonds.

The spread began widening in July 2007 as the global financial crisis unfolded, then spiked to above 2% during the next year as the U.S. economy seized and credit grew scarce. It grew to a startling 2.5% late last year as bond investors’ skittishness about continued delinquencies and defaults-and that the risk of these mortgages had not been properly assessed-resulted in higher risk premiums and higher costs to borrowers.

Late last year, however, the Federal Reserve Bank stepped in with a promise to purchase $500 billion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities, and raised that figure to $1.25 trillion in March. The move, combined with loan-modification initiatives and other federal intervention, restored investor confidence in the secondary market and mortgage rates declined rapidly. The yield spread in March dropped to 1% and zero and then fell to an unprecedented minus 0.5% by early May.

This condition is certainly unique and, likely, short-lived. Statistically, when the yield spread deviates from historical norms, the chances are great it will return to those levels. That could quickly drive mortgage rates higher. How much is anyone’s guess, but if the cost of making a mortgage goes up by 1.5% so, too, might mortgage interest rates.

Yet, factor in some additional variables. The marketplace for bonds relies heavily on purchases by offshore buyers who remain skeptical as the global economy continues in flux. Then there’s the inflation-deflation conundrum. Many fear a deflationary spiral-with falling prices for goods and services that lead to falling wages-can still drag down a stabilizing U.S. economy.

Conversely, others believe inflation will kick in, ushering in higher consumer prices, including higher mortgage rates. How this issue shakes out will have important implications for interest rates.

One thing is crystal clear: the odds that mortgage interest rates will rise are much greater than any continued mortgage-rate decline. And for most home buyers, the cost of mortgage financing can be as important as the price of the home itself.

Real estate sales professionals can help their customers make the best long-term decisions by demonstrating the degree to which housing prices and mortgage interest rates could move from this point forward. Customers waiting for the absolute lowest price on a house could miss a golden financing opportunity and the lowest overall cost of homeownership.

Andrew Downs is executive vice president at Prudential Real Estate and Relocation Services.

Read more: http://rismedia.com/2009-07-01/how-does-yield-spread-help-buyers-buy/#ixzz0K8pY41HZ&C

CHANGE IN TAX CREDIT - NOT FOR CLOSING COSTS AFTER ALL

When the announcement about the tax credit first came, it was a media explosion.  This change, however, is announced in a whisper.

Not too much has changed - except that it can't be used to fund closing expenses.  The tax credit will still be there at tax time!

From: stevan@axiomfinancial.com
Date: Wed, 20 May 2009 10:18:31 -0600
Subject: Reversal of HUD's $8,000 tax credit announcement

Dear Agents and Friends:

 This important announcement was released this morning regarding availability of the $8000 Stimulus Tax Credit at closing for home purchases.

As you know HUD made an announcement on May 12 that they were going to allow homeowners to use the $8000 tax credit as down payment monies by empowering state agencies, non profits and HUD approved Mortgagees to lend the monies to home buyers.  HUD drafted HUD Mortgage Letter (2009-15), however, the letter was never officially released. HUD has since reversed their position on allowing the monetization of the tax credit over concerns that the proposal too closely resembles the now illegal practice of seller funded down payment assistance programs.  IRS officials were also concerned that the proposal could create income tax issues.

The government may continue to seek other alternatives associated with boosting affordability and circumventing the 3.5% down payment requirement, but until further notice they have apparently killed this initiative.

TOP 10 MYTHS ABOUT CREDIT SCORES DEBUNKED

ALWAYS CONFUSION, ALWAYS SO MANY QUESTIONS...

With many Americans considering a home purchase or refinance, seeking a new job, purchasing a new car, or striving to pay off credit card debt, 2009 might be the year of the credit score, said Bills.com president Ethan Ewing.

“Many Americans hold mistaken beliefs about credit scores,” cautioned Ewing, who heads the free online consumer portal at Bills.com. “Misinformation on television and in hearsay from friends and neighbors only compounds the problem.”

Here are the top 10 commonly held myths surrounding credit scores:

Myth #1: A credit score is a credit report. The credit report is a detailed listing of all debts and payments, going back throughout an individual’s entire payment history, Ewing explained. For each entry, it shows the creditor’s name, amount owed, the highest balance owed, the available credit, whether the account is open or closed (and who closed it), the number of late payments and whether the account is in default. A credit score is a number between 300 and 850 that is based on complex formulas incorporating all the data in the credit report.

Myth #2: Those who are not in default do not need to check their credit report. Everyone should check his or her credit report at least once a year (quarterly is not a bad idea in today’s market) to be sure the report contains no erroneous information. Visit www.annualcreditreport.com for a free, no-obligation copy of the report.

Myth #3: Checking a credit report damages credit. Reviewing your own credit information has no effect on a credit score, Ewing said. Neither does a credit report review by a prospective landlord or employer.

Myth #4: Everyone has one credit score. Credit score calculations are compiled using data from three different credit scoring agencies (Equifax, Experian and TransUnion). The resulting scores might vary slightly among the three agencies if they have slightly different information, but they will be similar.

Myth #5: Married couples share a credit score. If all of a couple’s accounts are joint, their scores will likely be similar, but each individual maintains a unique credit record and credit score. On the flip side, after a divorce, ex-spouses need to follow protocol to have creditors remove either party from a joint account.

Myth #6: Shopping for a loan destroys credit. It is true that “hard inquiries” - examinations of a credit score in preparation for extending credit can have a small negative impact on credit. However, credit bureaus take into account that consumers might inquire about a loan from multiple mortgage companies or auto lenders. “If multiple inquiries are received from the same type of lender within a 14-day period, the credit scoring companies do not count each inquiry against the borrower,” Ewing explained. But credit card account inquiries to open new accounts are counted individually.

Myth #7: To improve a score, close unused accounts. An important component of a credit score is available credit, or the unused credit that has been offered (on a credit card, for instance) but not used. Closing unused cards removes those available balances from the equation and can actually lower a credit score. Today, some banks are automatically lowering limits or closing accounts to reduce their own credit exposure. Individuals whose debt load is manageable should not experience an extreme effect on their scores.

Myth #8: To boost credit quickly, just pay off bills. Credit scores reflect performance over time. Scores will not change overnight.

Myth #9: For a fee, vendors can fix a bad score. Again, credit scores show historic behavior. Be cautious about companies that claim to “fix” or “repair” credit. “You yourself can remove inaccurate information,” Ewing said. “Beyond that, be aware that some companies send credit scorers a deluge of letters asking that they verify - and in the process, remove all past negative information. If and when truthful information is verified, however, it will quickly return to the credit report.”

Myth #10: Never get help - it is too hard on credit. It is true that credit counseling, debt settlement and bankruptcy all can cause significant black marks on a credit report. “If you are in real trouble, however, you can and should seek help,” Ewing urged. “Which option you choose will depend on the severity of your situation. Credit counseling can help to manage bills, and lower interest rates and monthly payments to creditors. Debt settlement firms can negotiate to lower the principal amount of your debts, typically providing a faster path to debt freedom than credit counseling. Bankruptcy, an even more serious alternative, should be discussed with a bankruptcy attorney.”

“Credit is important, but knowing the truth about credit might be even more important,” Ewing concluded. “Before taking action that might hurt or help your score, check your facts to be sure your actions will help your financial picture.”

MORTGAGE MODIFICATION CAN BE AN ANSWER

NEVER has there been such an effort to help homeowners who are struggling to meet their payments.  President Obama's emphasis on modifying home loans has some merit.  To make a modification you must COMMUNICATE with your lender, and that can be the hardest part. 

There are predators out there, as always.  If a modification sounds too good to be true, it probably is. If the lender wants a bunch of money up front  BEWARE! 

Here are seven steps, from an article in Rismedia, to help someone who is looking at loan modification:

1. Don’t fall for any mortgage modification scams (such as advanced fee scams).

2. To learn how to best make your case for a loan modification, contact one of the HUD Approved Foreclosure Avoidance Counselors in your area. They can also inform you about any federal, state or local programs that may assist you.

3. Get an accurate picture of your finances. Your best chance at getting a modification is to demonstrate the ability to repay and a thorough understanding of the costs and income you face going forward.

4. If the problem making payments is short-term, ask your lender about forbearance or postponement of payments for a limited period. Be prepared to demonstrate when you’ll be able to start making payments again.

5. If the problem is long term, and what you need is modification, be prepared to make an offer and demonstrate how you could repay the modified loan. Be sure your lender is up to speed on incentive programs that may be available to help.

6. When negotiating a modification, make sure to understand how it will deal with any fees or penalties that may have accrued. Know what fees are in play and whether the modification will eliminate, reduce or tack them on for repayment.

7. If the lender won’t modify and foreclosure looms, consider asking the creditor to “produce the note,” (particularly when a creditor other than the original lender seeks foreclosure). It’s a stalling tactic, but can sometimes encourage creditors to negotiate.

SCORE BIG WITH A HOME RUN GRANT!! $6,000!

THIS IS BIG NEWS FOR THE UTAH HOUSING INDUSTRY - APPLIES ONLY TO NEW HOMES!  It is intended to help the homebuilding industry, to fill up homes that are now sitting vacant!

Last night, Thursday, March 19, Governor Huntsman signed into law a FANTASTIC program for homebuyers in Utah.  Using a combination of Federal and Utah funds, a $6,000 GRANT is available to Utahns who meet the following requirements:

1. Purchase a brand new, never-before-occupied home
2. The home must have an occupancy permit (no partially-built homes).  Home MUST be complete.
3. The loan must be APPROVED in the lender's underwriting department. THIS IS NOT PREQUALIFICATION, WHICH IS USED TO HELP HOME BUYERS GUAGE HOW MUCH THEY CAN SPEND.  That department must send the paperwork to Utah Housing Corporation (a state program) who will then fund the grant.  It will take about a week to do the paperwork to receive the grant money (possibly more when news gets around!) and the money will be sent to the title company that handled the escrow.
4. This money can be used at closing to pay closing costs, or be issued in the form of a check at or after closing, payable to the homeowner.
5. Borrowers are restricted to an income of $75,000 per year for a single person, or a total of $150,000 per year for a couple.
6. This grant money is strictly for people who will live in the home, and must be repaid if the homeonwers live in the home for LESS THAN 3 YEARS.  After 3 years, there is no payback.
7. There are a limited number of these grants available, a few over 1,600, and when the money is gone IT'S GONE.  This is a first-come, first-served program.   The homeowner has 30 days from the time the loan is APPROVED  until closing to receive this money.
8. This is not to be confused with the Federal program allowing an $8,000 tax credit. The Federal program is available to purchasers of ANY home, new or already occupied.
9. You must get your mortgage through an approved lender.  Go to this link to find the name of an approved lender: http://b2b.utahhousingcorp.org/cgi-bin/HRLNDR
10. Loan must be a FIXED RATE loan, not an ARM.

BY THE END OF THE DAY FRIDAY OVER 70 GRANTS HAD ALREADY BEEN AWARDED!  HURRY!

CONTACT ME RIGHT AWAY IF YOU ARE INTERESTED IN THIS PROGRAM!

MYTHS ABOUT FORECLOSURES

As I have studied this problem, I have noticed that there are several misconceptions that buyers and sellers have regarding their rights, responsibilities and the overall process. No matter which side you're on, here are a dozen myths demystified.  For a more in-depth view on these issues, visit the six-part series in this blog, beginning February 19,  'Homeowners in Distress'.

FORECLOSURE OWNER IN DEFAULT MYTHS

1. The bank really wants your home back.

Banks don’t want your home. They want to recover the money lent for its purchase.  Foreclosure
is a time-consuming, last-resort process for banks, and most will do everything possible to work
things out with a homeowner in order to avoid it.  Foreclosures can cost a bank in excess of $40,000!!  At the present moment banks are even being given incentives to STOP foreclosures using loan restructuring.

2.     Filing for bankruptcy stops a foreclosure.

Ouch!  Bankruptcy creates only a temporary delay in the foreclosure process, so it's not a
strategy for stopping it altogether.  Bankruptcies totally destroy a person’s credit rating, and
some of the bankruptcy laws are being changed to make it harder to declare bankruptcy.

3.     You're not responsible for paying the bank's legal fees.

This isn’t a myth—it’ s true, but often misunderstood.  You are responsible for paying the bank’s
legal fees, and you will pay them if you want to hold on to your home.  Pull out your mortgage
agreement (remember all those loan papers you signed at the Title Company office?)  The
details are in that agreement, so take a close look at the fine print.

4.     Even if I pull together the money I owe after the foreclosure process has begun, it's too late
to stop it.

Not so. Most states have laws requiring that foreclosure proceedings be stopped if the homeowner has the money to cover all back payments, late fees and legal fees owed.   Some homeowners have pulled their homes out of foreclosure the day before a Trustee’s Auction!  A mortgage negotiation professional can assist you with this process if needed. There are attorneys who deal with nothing but foreclosures.

5.     The bank will take all my stuff along with the house.

If the bank really doesn’t want your house, why would it want all your furniture and clothing?   All personal property is yours to take; however, fixtures, floor coverings, appliances and anything else permanently attached to the house must remain with the house.

6.     My involvement with the property is over once the bank takes it back.

If only you could walk away from such an unpleasant experience and never have to look back.
Not gonna happen.  Not only the bank, but the IRS has something to say about that.  After foreclosure, if the bank sells the home for less than you owed on the mortgage, you'll still be responsible for the difference or "deficiency." What's more, they can collect interest on that amount.  The IRS sees the deficiency as INCOME, therefore it is taxable.  A deed in lieu of foreclosure or chapter 7 bankruptcy may clear you of owing a deficiency, so consult a bankruptcy attorney if you have questions about your status and options.

Foreclosure Buyer Myths

1.     Foreclosed properties are always in bad neighborhoods.

In the current economic climate, every community and every part of town can contain foreclosed
properties, with abodes ranging from modest town homes to extravagant vacation escapes appearing on the market.

2.     Foreclosed properties are usually in poor condition.

Though this isn't generally the case, there can be significant issues hiding behind an attractive
and seemingly well-tended façade. Do your research before purchasing any foreclosed property,
being sure to find out how long maintenance had been deferred before the house hit the market, as well as how long it's been sitting idle and waiting for a buyer.

Another “caveat:”  Check county records to see if there are liens against the property, and if they have to be satisfied.

3.     A foreclosure sale takes advantage of the owners.

The occasional unscrupulous buyer or investor notwithstanding, purchase of a property that is  being foreclosed upon actually helps the owner via payment of their debt, avoidance of bankruptcy and a bad mark on their credit history, and the possibility of something to show for their equity in a property. Purchases made during the pre-foreclosure period are even more advantageous for both the owner and buyer. 

Still another "caveat:"  There are so many scams out there.  NEVER sign a Quit Claim Deed for someone who promises to help you out.  Clear it through attorney!

4.     Financial irresponsibility is always the source of foreclosure.

Boy, is THAT an unfair belief!  All it takes is the loss of a job, an unexpected health issue or other   life emergency to put a previously solid financial picture in jeopardy, and coverage of such major     expenses as mortgage payments can easily be impacted.

5.     Foreclosure guarantees bargain pricing.

Before falling completely in love with what looks like a can't-miss deal, be sure you know the         property's true market value so you're not paying for more house than you're getting.  I have  seen SO MANY HUD homes sold for market or above-market price.  Why?  The auction bid frenzy.  Look (at the comparables) before you leap!

6.     A lower price equals higher equity.

While it’s nice to hope, this is one equation that won't pan out if a property involves unpaid taxes,  mechanics' liens or an expensive string of repairs, all of which subtract from the equity and add to     the cost.

Please feel free to call me if you have questions about Foreclosures or Short Sales.  I’ll give you my no-obligation, honest opinion!  I can be reached at HomesByElaine@hotmail.com, or by cell phone at (435) 609-9775

HOMEOWNERS IN DISTRESS, PART 6: Short Sales

A "short sale" is considered one of the last options to foreclosure. It's still much better than a foreclosure, and does relieve the homeowner of a huge burden.

When should a homeowner consider a short sale?  When they are "upside-down" on their loan.  This happens for a number of reasons: 

1. Home was purchased when the market was high, and now the market value of the home is less than it was at the time of purchase. 
2. Second Mortgage or Home Equity loan has pushed the owner into owing more than the house can sell for.
3. Market price of the home is about the same, but seller has not been in the home long enough for the home to increase in value (Example: Been in home six months, then job was transferred to another state) and the seller does not have the money to pay the closing costs associated with his part of the sale.
4. While it doesn't happen very often, a home that has been severely damaged by the family will surely not sell at market value, and may be considered for a short sale.

A short sale will give you a mark on your credit score, but Fannie Mae (the largest lender in the world) will let a buyer come back 24 months after a short sale, and every product they have is available to them!  You CAN'T do that with a foreclosure. In fact, it will be five years before Fannie Mae will give a loan to a buyer whose home was foreclosed.(At the five year mark they must have a credit score of at least 260-280, and the interest rate may be a little higher than the going rate.)

A short sale allows you to sell the home BEFORE it is foreclosed on.  Banks are willing to participate in short sales because they stand to collect more on the loan amount.  Remember, foreclosures can cost the lender in the ballpark of $40,000! (And they won't always get market value when the home is resold.)

Banks generally will not approve a short sale unless you are working with a licensed realtor.  The paperwork is daunting but doable, and your realtor will help you.  After you have signed a release of information form giving your realtor permission to talk with your lender, she will contact the lender's Loss Mitigation Department" and explain that the homeowner needs to sell the home as a short sale.  The LM department will ask the homeowner to write a letter explaining the situation that has caused the need for a short sale, and will send other forms as well. 

When the realtor is confident that the home can sell as a short-sale she will put the home on the market.   When offers are received, the buyer "accepts" the offer, but that acceptance is not binding. The final decision is made by the lender.   It's the realtor's responsibility to notify all people making an offer that this is a short sale, and that multiple offers have been or will be submitted.  Most lenders will not even LOOK at an offer unless the buyer has at least been "prequalified" for a loan.  (See blog February 17, "The Buyer Who's Wise Prequalifies")  The lender usually has its "secret" amount that it will not go below when accepting an offer. It's usually around 15% to 18% lower than the amount owed.  However, it depends on the property and -- get this --whether your loan was sold to them as a block with other loans that were "at risk" loans.  (Back we go to the "finance of risky buyers.") 

 Homes in this category are often purchased by investors who will "buy low" and "sell high."  Savvy home buyers are also on the lookout for a home that is being sold at or below market.  If you fall into this category, a short sale is beneficial to you.

The seller will not have to pay any closing costs, and simply walks away from the home.  He will not receive any proceeds from the sale.  But he is out from under the burden of debt.

Note:  The IRS CAN TAX YOU for the difference between the loan amount and the sales amount--as INCOME!  Sellers should have their accountant or tax man prepare an IRS FORM 982 (Reduction of Tax Attributes due to Discharge of Indebtedness,  Section 1082 Basis Adjustment)

HOMEOWNERS IN DISTRESS, PART 5: Loan Modification

Loan modification is one of the principal emphases of the President's stimulus package for real estate.  One estimate I read recently said that one out of ten homeowners face loan problems.   I guess this is one of the symptoms of our "recession." 

A loan modification is a procedure in which a loan's terms, such as interest rate, monthly payment, or duration, are altered. For some homeowners a loan modification can help them keep their home, restructure their mortgage, and avoid foreclosure and bankruptcy.  In a modification a lender agrees to modify any or some of the terms of the mortgage, making it more affordable for you.  These changes may include:

1) Reducing or modifying the interest rate
2) Extending the term of the loan
2) Changing the monthly payments
4) Combining any of the above

A loan modification is negotiated between the homeowner and the lender, and takes time.  If homeowners think this is a step they want to take, they should look into loan modification as soon as they feel they are in trouble.  First thing to do: Call your lender.

In light of recent legislation in Washington, lenders have been promised incentives to renegotiate loan terms.  The money for the incentives is to go to lenders soon, as early as the next two months.  Of course, there will be red tape, but lenders stand to make money by modifying loans.

Now, to turn a little negative for a few paragraphs.
 
Realize two things: First, the lender is acting in its own self-interest, not yours. So be careful. Second, all workout offers are negotiable.  Even loan modification offers which seem etched in stone may be negotiable. 

If the homeowner actually has a considerable amount of equity it's likely that the lender will be less agreeable to modify the loan.  It's possible the lender would be willing to foreclose, because the home's value will more than pay the balance due.

Since we are in the mortgage fiasco in part because some lenders were not honest and loaned money to people who could not pay it back.  It makes sense that some lenders will be more willing than others to participate in the loan modification program.  According to some estimates, as many as half of all loans written in the last seven years in one way or another violated the Truth In Lending Act, which is a federal offense. Lenders will do whatever it takes to avoid possible legal challenges, and not just with regard to the mortgage itself but also in the manner in which is has been administered, or "serviced."

This begins to sound a little sinister, doesn't it?  This post isn't meant to scare, but as with all things in life, there are some caveats.
 
Some lenders, who used predatory tactics could be in legal trouble as well.  It's possible that the threat of legal action against a lender could result in more leverage for the borrower, helping them to get better terms.  One article I read warned of a potential trap that borrowers should be aware of--an agreement prepared by a lender requiring the borrower to waive their legal rights to sue the lender in the future.  The question is, "Sue for what?"
 
If the loan was made in bad faith, had predatory characteristics (loan originator knew he couldn't afford the loan, told you one thing but delivered something else at closing, charged excessive fees, etc.), the homeowner may wish to have an attorney skilled in lending practices look over the original loan documents as well as the proposed loan papers. 

If you are charged a fee in connection to the loan modification, be sure to request a point-by-point breakdown of the charges. Beware of excessive legal fees charged by the lender or "reinstatement" fees paid to the loan servicer and not applied to your delinquency if, indeed, you are delinquent.
         

HOMEOWNERS IN DISTRESS, PART 4: Options to Foreclosure

WHAT CAN BE DONE TO STOP FORECLOSURE?

Oh, boy!  That's a question with a myriad of answers, especially in light of the recent legislation the federal government.  Of course the simplest answer is "The loan is brought current, with all late fees paid".

Other options are:

1. Negotiate a change in the loan terms, also called a loan modification.  In the next post I'll explain this in more detail.
2. Forbearance. Negotiate with the lender to have lender accept lower payments than originally agreed to in loan documents, for a specified time period to allow borrower to recover financially; borrower eventually must repay missing or reduced payments an all other remaining payments on the loan. (similar to loan modification)
   
3. Put the home on the market and sell it. 
4. Short sale.  The homeowner is "upside-down", owing more than he can sell the home for.
5. Foreclosure.  The last resort.  Credit rating takes a hit, and it's very hard to get a loan of any kind for at least two years.

HOMEOWNERS IN DISTRESS, PART 3: The Trustee's Auction

Do all foreclosures proceed as indicated in Part 2 of this series.  In theory, yes, but in actuality there are many actions that can delay or cancel a foreclosure.  I've seen foreclosure take place within six months of the Notice of Default being filed, and I've seen some foreclosures take over a year.

If all proceeds according to schedule, the auction will take place--on the date set, after the notice of auction has appeared for at least three weeks in a local newspaper.

Most auctions will take place on the steps of the county courthouse or other public building, on the date specified, and at the time specified.  The Trustee or his representative will open the auction at the appropriate time, and all present may bid.  The minimum amount of the bid is usually the amount still owed on the loan, plus the legal fees and other expenses.  Sometimes there are several bidders, and bidding continues until the property is won by the highest bidder.  The winner of the bid then submits a specified amount of money, usually $5,000, as a deposit.  The balance of the purchase price is delivered to the trustee the following day.

HOW MUCH ARE HOMES AUCTIONED FOR?  The primary lien holder (the lender) will sell the home for at least the amount of the balance owed on the loan, plus expenses that have been incurred.  Sometimes this is as little as one cent over the amount.  Depending on the number of bidders, it can be sold for more.  If any money is collected at the auction above that minimum amount, it will be paid to the next junior lien holder (for example, the lender holding the second mortgage).  There may be taxes owed, as well, which MUST be paid. 

WHAT ABOUT OTHER LIEN HOLDERS?  Other liens can be placed against the property, such as Mechanics Liens (a lien brought by a contractor or subcontractor against the property).  These liens will be paid IF there is money left over from the sale.  How likely is it that they will be paid?  Well, how often will people pay more at auction than they NEED to?  Being in second or third position as a lien holder is not a good place to be.  There is seldom any money left to give the homeowner

HOMEOWNERS IN DISTRESS: PART 2, Overview of the foreclosure process with a Deed of Trust

The Notice of Default letter has arrived in the mail, which means that a homeowner is over thirty days late making the payment.  The Notice Of Default is filed with the county recorder, and the letter indicating that it has been filed is sent to the homeowner.  The letter will usually give the homeowner a grace period in which to bring the payment current, along with late fees assessed.   If the loan is brought current and late fees paid, the Notice of Default is cancelled or "cured"  and the county recorder is informed.  Nothing more happens.  If the default is not cured, then foreclosure begins.

FORECLOSURE STEPS:

1. Loan is at least 3 months in default
2. A Trustee (an attorney or law firm specializing in foreclosures) is appointed by the lender to  handle  foreclosure proceedings.
3. The Trustee files a Notice of Foreclosure with the county recorder
4. The Trustee sets an auction date.  This date is based upon legal notices being printed in local newspapers at least three successive weeks before the auction.
5. The loan is not brought current, and the auction continues as specified, and an attempt is made to sell the home at auction.
6. If the home is not sold at auction, ownership reverts to the lender, and the home is eventually b listed for sale with the lending institution as the seller.  The homeowner in default must have moved by this time.

Note:  Lending institutions are in the business of lending and collecting money- they do not want to be PROPERTY OWNERS.  A foreclosure will cost the lender around $40,000 or more.  Lenders are willing to stop the auction if it is possible to sell the home or to "cure the default".
I've seen auctions cancelled the night before because the homeowner brought the payments up to date somehow, or was able to actually find a buyer.  (That's a whole 'nother article).

HOMEOWNERS IN DISTRESS: PART 1, Communication

Years ago my husband and I faced a challenging year.  Our business was doing OK, but inflation and staffing were eating up our profits--and we had an unhappy experience with a "partner".  We had missed a house payment and were sent a letter indicating that if we continued to be late the mortgage company would have no choice but to send us a "Notice of default", and would then go into foreclosure proceedings.  (By the way, this was a bit of overkill on their part.)  I called our mortgage lender, expressed our problem and asked if we could just make interest payments for a while. BIG LEARNING MOMENT  (more later on that one). As we spoke I felt my heart begin to pound out of my chest, couldn't catch my breath, and I had to hang up without any resolution of the problem. I stared at the dead receiver, tears streaming down my cheeks, and wondered "What just happened?"  (ATOMIC REACTION)   Raising two busy little boys, spending hours in the emergency room for one thing or another, had never prepared me for THIS moment when I was treated totally like a piece of meat, and I felt vulnerable and naked (ever have one of THOSE dreams?), and of no value at all in the world.

WORRIED ABOUT FORECLOSURES? WANT TO KNOW MORE ABOUT FORECLOSURES?

Everywhere you turn nowadays you hear about foreclosures.  Yes, this is a very real problem--for the seller. And a good thing for the buyer, maybe.   Here is one of the generic articles you're no doubt seeing around--from our own local Pyramid Shopper.  It's a good article, but somehow the HEART of this issue is lost.  After reading, please drop below to see my comments.
This is painful reading for me! No one wants to see someone they care about go into foreclosure on their home.   In a conversation recently with a local banker, I heard the saddest story of his SISTER who was afraid to talk about the situation with anyone because she was embarrassed, and who WALKED AWAY FROM $60,000 in EQUITY!  She lost her home, her equity, her self-esteem...  THIS SHOULD NEVER HAPPEN--because there are ways to help out!   Because we work with lenders, continue our education, study the market, sometimes realtors can help you "brainstorm", get creative, know what helps are out there.   We don't always have to make a commission, you know.

There are so many ways to handle such a situation. Over the next few days I'm going to be posting some articles on the subjects of how to avoid foreclosure, what to do if you can't avoid it, softening the blow, mortgage helps, short sales-all targeted at the current homeowner.  WHY WALK AWAY IF YOU DON'T HAVE TO?

Later, watch for articles on how this double-edged sword can be a boon to the buyer.

THE BUYER WHO'S WISE PREQUALIFIES (whooo me?) *ouch*

 Prequalification is a process whereby a buyer contacts a lender,  gives them personal financial Information so the lender can pull credit records and compute credit scores.  Then the loan officer can tell you how much the lender is willing to loan you and the approximate interest rate AT THE CURRENT TIME.  It DOESN'T  mean your loan is APPROVED , but it gives you a good ballpark for home prices for which you can get a loan.

It’s painless—it’s free—and it can be done over the telephone.  It’s a good way to shop for a lender.  Ask them what their loan origination fee is, what the total cost of the loan will be--the APR  (see below).

To prequalify you the mortgage company will need:

1. Your monthly income
2. Approximate monthly debt (Any bills paid in installments, such as car payments, credit cards,    medical bills--this does not include utilities.)
3. Your name(s)
4. Your social security numbers

 Be sure to ask for the APR.   “APR” is not the actual interest rate of the loan.  It is a device that includes all the costs to get the loan(such as loan origination fees, underwriting costs, commmissions) PLUS the amount of the loan itself.  The interest rate is applied to all these costs, and is called the ANNUAL PERCENTAGE RATE, or APR.  The APR is intended to HELP YOU SHOP FOR A LOAN.  It is a great tool that can save you a lot of money, USE IT!