Real Estate News and Commentary

March 30, 2010October 5, 2019

Benefits for delinquent home owners while reducing foreclosures

by Dan Krell © 2010

Additional assistance for financially challenged home owners was announced last Friday (March 26th) by the U. S. Treasury (ustreas.gov). To assist struggling home owners keep their homes and lessen the number of foreclosures, the expansion of the Home Affordable Modification Program (HAMP) will address unemployed home owners, negative equity, second mortgages, and “premature” foreclosures.

Unemployed home owners take heart. You may be afforded a mortgage forbearance period of at least three months (not to exceed six). Once you find employment you will be considered for a permanent HAMP mortgage modification if you stay current on your forbearance payments and your monthly mortgage payment is more than 31% of your monthly income. You will have to provide proof of income and the modification must meet the standard net present value (NPV) test (The NPV test compares the cash flow of a modified mortgage to the cash flow of an unmodified mortgage). However, if you do not find employment during the mortgage forbearance period, you will be considered for the Home Affordable Foreclosure Alternatives program.

If you are looking to regain some of your home’s equity, you may now have a vehicle to do so through a HAMP mortgage principal write down. Participating lenders will be offered additional incentives to provide onetime mortgage principal write downs when mortgage balances exceed 115% of the home’s value. An alternative principal reduction plan will be combined with a HAMP mortgage modification and may be permanent as long as modification payments are timely for three years.

If you’re seeking to refinance your HAMP eligible mortgage but your loan balance exceeds 115% of your home’s value, you may qualify for a FHA refinance in conjunction with a lender mortgage principal write down. The new loan may not exceed 97.5% of the value of the home (current FHA borrowers are not eligible). The refinance may also qualify to consolidate a first and a second loan under these circumstances.

If a second mortgage is giving you trouble, it may now be eligible for a modification if your first mortgage was already modified through HAMP and your lender participates in the Second Lien Modification Program.

Finally, further protections have been added to assist you if you are pursuing a HAMP modification or seeking bankruptcy protection. In an effort to prevent “premature” foreclosure sales while home owners are seeking modifications, lenders are advised to increase communication with home owners (through telephone and mail) as well as requiring a written certification that the home owner is not HAMP eligible prior to conducting a foreclosure sale. Additionally, home owners who have pursued bankruptcy protection will no longer be excluded from HAMP programs.

Although the HAMP enhancements will not be up and running immediately, the full program is expected to be available by the fall (with pieces implemented gradually). Additionally, mortgage principal write down programs may take some time to implement; however some lenders may already have similar programs in place.

To qualify for these new programs, home owners must be HAMP eligible (and meet other specific requirements). Unfortunately, reports of these programs on the internet and other media outlets are sometimes incomplete, incorrect and/or exaggerated; it is highly recommended that you check the fact sheets on the Making Home Affordable (www.makinghomeaffordable.gov) website as well as talking to a Making Home Affordable counselor.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of March 29, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell

March 26, 2010June 28, 2019

The next round of homebuyer tax credits may be a local incentive

As the home buyer tax credit is set to expire very soon, many are wondering if the credit will be extended again. Earlier in the year, proponents have pointed to increased home sales as a direct result of the home buyer tax credit. However, a a Wall Street Journal article (blogs.wsj.com/developments/2010/03/18/has-the-home-buyer-tax-credit-extension-flopped) points to a recently revised Fannie Mae 2010 housing forecast that indicates the current home buyer tax credit has not been as effective as the credit in 2009.

Fannie Mae’s “March Economic Developments” states:

“There are many reasons why we believe the second tax credit will be much less effective than the first. The 2009 first-time homebuyer tax credit may have dried up the pool of qualified first-time homebuyers. In addition, while the tax credit was extended to cover repeat buyers, the amount of the credit was smaller than that for first-time homebuyers. The tax incentives may not be enough to induce many homeowners to move, given that current homeowners generally must incur commission costs to sell their current homes, a cost not incurred by first-time homebuyers.”

Although there is doubt over the federal home buyer tax credit, states like California that have been hit hard by foreclosures are offering home buyer incentives. Yesterday, Governor Schwarzenegger signed into law yesterday the extension and expansion of the California home buyer tax credit, commenting that the credit is expected to stimulate the economy and put many of the vacant homes back “on the tax role.” Now California home buyers can take advantage of a California tax credit of $10,000 for the purchase of a new home or their first home until December 31, 2010.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

March 24, 2010July 25, 2019

Home Listing Photos: revealing more than ever

If you’ve been looking at home listings online, I’m sure you’re drawn to the photos. In an effort to distribute information to agents and consumers, the real estate industry has embraced cutting edge technologies that include embedding photos in home listings. Multiple photos and virtual tours can make it seem as if you are actually in someone else’s home, but sometimes the pictures (or lack thereof) can be more revealing of a home’s shortcomings.

Nothing helps a home sale more than multiple quality photos in the listing. The photos help home buyers see the home from the convenience of their office or family room. Both the exterior and the interior can be viewed without actually visiting the home. Realtor Magazine (published by the National Association of Realtors) has published many articles on the importance of using multiple photos in home listings and marketing to help them sell faster. If your home is on the market (or you are thinking of listing it soon) take note of this April 2nd, 2008 article (“How Photos Help Sell Homes”) which indicated that the days on market is drastically reduced when there are multiple quality photos: “A property with a single photo spent 70 days on the market (DOM) on average, while DOM fell to 40 with six photos, 36 with 16 to 19 photos, and 32 with 20 photos…” The same article also reports that your home will probably sell for more if your agent posts multiple quality photos compared to posting only one photo; “listings with one photo sold for 91.2 percent of the original price, while homes with six or more sold for 95 percent of the original price…”

Although you might think that with the availability of technology allows having multiple quality photos to be standard practice among real estate agents, either through hiring a professional photographer or taking the photos on their own. The fact is that many agents still do not take advantage the technology (for various reasons).

What’s more troubling than not having photos in your listing is having exaggerated photos in your listing. Yes, some agents go to the opposite extreme of using photo editing software to “stretch” the truth in their photos. Some try too hard to emphasize features such that the photos look bizarre and occasionally cartoon-like. Although Article 12 of the National Association of Realtors Code of Ethics states that “Realtors shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations…”, it is becoming more common to find embellished photos.

Home buyers are savvy and can spot “enhanced” photos, often wondering what is being hidden in the photo. Like the listing without photos, home buyers generally skip those listings where they encounter “enhanced” photos. A common complaint from home buyers is, “the rooms look larger in the virtual tour.”

If you’re planning to list your home, make certain that your listing agent uses the technology available to them to give your sale every possible edge; but make sure there are no extra “enhancements” that may turn buyers away. The bottom line is that your sale has a higher probability of attracting home buyers when you have multiple, high quality, and accurate photos of your home.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

March 17, 2010June 28, 2019

HAFA – a misunderstood program

As April 5th approaches, everyone is excited about the official start of the Home Affordable Foreclosure Alternatives (HAFA) program. HAFA is a major development to curb the number of foreclosures by allowing home owners the opportunity to sell their home through the short sale process. Many incorrectly misunderstand the program to approve all short sales; however, it is a measure to facilitate lenders’ loss mitigation processes (the process that lenders use to determine the manner in which to dispose of property and lose the least amount of money) that includes short sales, deed-in-lieu (of foreclosure), and foreclosure.

To provide assistance to financially challenged home owners, the Making Home Affordable program (MHA) was announced February 2009. The program was devised to assist eligible home owners retain their homes by either mortgage modification or refinance. HAFA was introduced in May of 2009 to provide structure to the seemingly convoluted loss mitigation process (www.treas.gov).

You probably already know that a short sale occurs when a home owner sells their home for less than what they owe their lender. In a short sale, the lender is asked to give their blessing and to “forgive” the difference between the sale price and what is owed. Home buyers often seek out short sales as a means of purchasing a “bargain” priced home. Unfortunately, the traditional short sale is typically a lengthy process that is full of pitfalls; but for patient home buyers the short sale is worth the wait.

On average, it is not unusual to wait 2 to 4 months to receive third party approval for a short sale; some short sale approvals can take much longer. Reasons for lengthy waits for short sale approvals are complex and varied, but may be due to (and not limited to) consultations with bond holders (of mortgage backed security within which the loan was pooled), a vast backlog of files, and the loss mitigation process itself.

The HAFA program is intended to reduce the cost and impact of foreclosure to lenders as well as neighborhoods. The program allows the home owner 90 days (or more depending on the market) to procure a buyer for their home at a sale price that is set by their lender; this allows a home buyer to purchase the short sale without waiting months for a short sale approval. If the short sale period ends unsuccessfully, the home owner must give the home back to the lender via a deed-in-lieu.

Foreclosure proceedings are allowed to coincide with the short sale, however the foreclosure sale is deferred until the short sale process is concluded. Monetary incentives are given to participating lenders as well as to home owners who adhere to the program until its fruition. Eligible home owners will be accepted into the HAFA program until December 31, 2012.

Since HAFA will officially begin in a few weeks, information is being provided through many outlets. It is understandable that some of the information provided is incorrect and/or sensationalized. To qualify for HAFA, the home owner must be eligible for MHA (mostly, loans that have been bought by Fannie Mae or Freddie Mac) but either did not qualify for a modification or was unable to complete the process. If you are unsure of your eligibility, program guidelines, and additional information, check with your lender and/or the Making Home Affordable website (www.makinghomeaffordable.gov).

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

March 15, 2010October 5, 2019

Extending Foreclosure Protections for Members of Armed Services

by Dan Krell © 2010

Extending foreclosure assistance for active duty service members
As concerns over increasing foreclosures throughout the country, foreclosure assistance and relief for active members of the United States Armed Services that was included in H.R. 3221: Housing and Economic Recovery Act of 2008 is set to expire December 31, 2010. In response and support for those who are actively serving, Rep. Thomas Perriello (D-VA)introduced legislation October 29, 2009 to extend foreclosure assistance for active members of the U.S. Armed Services.

H.R. 3976: Helping Heroes Keep Their Homes Act of 2009 to extend those protections to expire December 31, 2015 was introduced October 29, 2009. The bill is still alive in Congress and calls for the “Extension of enhanced protections for servicemembers relating to mortgages and mortgage foreclosure under servicemembers civil relief act (section 2203(c)(2) of the Housing And Economic Recover[Y] Act Of 2008 (public law 110-289).”

The bill was last reported by Committee on March 4th and recommended to be voted on by the house. If this bill becomes law unamended, current protections for foreclosure relief for members of the Armed Services would be extended to the end of 2015.