www.HomeCounselor.us

Get $2000 from the City of Sunrise

2012-01-23T14:54:00.006-05:00

The City of Sunrise is now reimbursing homebuyers up to $2,000 for select improvements to a newly-purchased single-family foreclosure or short sale home. Under this New "Homebuyer Incentive Program", the City seeks to attract new residents to Sunrise - and benefit existing residents by helping to improve the appearance and property values in their neighborhoods.

The New Homebuyer Incentive Program is administered by the Redevelopment & Grants Division of the City of Sunrise Community Development Department. In order to claim a rebate, homebuyers should:

•Get pre-qualified for a conventional, fixed-rate mortgage or FHA mortgage

•Work with their Realtor® to find a single-family foreclosure or short sale in Sunrise

•Get pre-qualified for the City’s New "Homebuyer Incentive Program" grant

•Purchase the foreclosure or short sale for use as their primary residence

•Make one or more eligible improvements (including landscaping improvements, exterior house painting, roof replacement, or installation of energy-efficient appliances)

•Submit their supporting documentation to the City of Sunrise

Website Details Here: http://www.sunrisefl.gov/index.aspx?page=558

FHA flip waiver extended through 2012

2012-01-02T09:42:00.000-05:00

Happy New Year everyone!

We start off the year with some good news, for the second year in a row, the Federal Housing Administration is extending a temporary waiver of its "anti-flipping" rule, meaning home buyers can use FHA-insured financing to buy homes that have changed hands in the last 90 days such as those sold by investors.

This waiver is important for our recovery as it allows investors seeking to rehab and flip the huge influx of distressed homes expands the pool of eligible borrowers to include those relying on FHA-backed loans popular with first-time home buyers

In extending the waiver through 2012, FHA still requires the transaction to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the seller can document the justification for the increase in value which is also typical.

Broward and Dade home price declines a thing of the past?

2011-12-15T00:42:00.001-05:00

Finally some good news courtesy of Clear Capital, a California-based real estate research company.

Broward and Miami-Dade counties rank among the nation’s highest-performing major markets when it comes to home prices over the past quarter and year. The two counties saw a 2.1 percent increase in prices quarter over quarter and a 5.4 percent jump year over year.

Broward and Miami-Dade ranked 11th on a list of the top 15 markets!

The Florida Short Sale Relocation Assistance Program has been extended!

2011-12-01T15:44:00.001-05:00

The Florida Enhanced Short Sale Relocation Assistance Program has been extended to Dec. 12, 2011.

This program offers Homeowners needing to sell via short sale relocation assistance between $5,000 and $20,000.

Eligibility:
-Homeowners with property in Florida
-Short sales initiated without an offer between Sept. 26 and Dec. 12, 2011
-The customer will have to be eligible for one of the without an offer programs, such as the Home Affordable Foreclosure Alternatives (HAFA) program or Bank of America's proprietary program (specific investor participation and eligibility criteria do apply to these programs)
Successful closing of the eligible short sale by Aug. 31, 2012

Exclusions:
-Ginnie Mae, FHA, VA and USDA loans are ineligible for participation
-Lot loans are ineligible for participation
-Properties outside Florida are not eligible for participation
-Short sales initiated with an offer are not currently eligible for the enhanced relocation assistance

Frequently Asked Questions:

Do I have to do anything different to initiate or complete the short sale?
No. If the homeowner's short sale is initiated between Sept. 26 and Dec. 12, 2011, and the property closes by Aug. 31, 2012, the homeowner will be eligible.

Will the relocation assistance funds be reported on the HUD-1?
Yes, they will be documented on the HUD-1, and a 1099-MISC will be issued.

Can the relocation assistance funds be used to pay off existing liens?
Yes, if the investor approves it.

Will this enhanced relocation assistance waive the homeowner's deficiency?
An additional benefit for these pre-offer programs, such as HAFA and Bank of America's proprietary program, is that deficiency may be waived for homeowners who qualify.

Is the relocation assistance added to any other incentives, such as HAFA or Bank of America proprietary program incentives?
No. A homeowner will receive the $5,000 to $20,000 in place of the typical incentive paid out by these programs. The relocation assistance is essentially an enhancement to the standard payout offered on these programs.

Is the enhanced relocation assistance available for other programs?
The enhanced relocation assistance is currently available only to short sale programs initiated without an offer. However, as we gauge the success, we may extend this incentive to other programs.

Questions?
Contact my office at 954-441-5366 or call BoA directly at 1.877.459.2852

Buy a Home with only $100 dollars down in Florida

2011-10-31T14:55:00.004-04:00

HUD has approved a program aimed at putting foreclosed homes back into the hands of owner-occupant buyers. In select states, from now until October of next year, buyers need a down payment of only $100 to purchase a HUD-owned REO home!

How it works:
1) Buyer must be an owner-occupant
2) Must utilizing financing insured by the Federal Housing Administration (FHA)
3) Standard FHA underwriting guidelines apply
4) Sale must be for the full amount of the current list price
5) HUD may contribute up to 3% to your closing costs in some cases!

What's even better is that HUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on yourhome. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan!

What this means is you can find a property that needs some TLC, fix it up however they want to (up to $30K), and finance the whole thing for only $100!!!

Qualifying States Are:

Florida
Georgia
Kentucky
Illinois
Indiana
Mississippi
North Carolina
South Carolina
Tennessee
Caribbean
Alabama
Oklahoma
South Dakota
Texas
Wisconsin
Wyoming
Utah
Arkansas
Colorado
Iowa
Kansas
Louisiana
Missouri
Minnesota
Montana
Nebraska
New Mexico
North Dakota

New Short Sale Incentives to Homeowners

2011-10-07T18:51:00.000-04:00

Bank of America is offering Florida homeowners up to $20,000 to short sale their homes rather than letting them linger in foreclosure.

Only homeowners whose short sales are submitted for approval to Bank of America before Nov. 30 will qualify. The homes must have no offers on them already and the closing must occur before Aug. 31, 2012.

A short sale is when a bank agrees to accept a lower sales price on a home than what the borrower owes on the loan.

The Bank of America plan has a minimum payout amount of $5,000.

A spokesman for Bank of America said the program is being tested in Florida, and if successful, could be expanded to other states.

Wells Fargo and J.P. Morgan Chase have similar short sale programs, sometimes called “cash for keys.”

Similar to the federal Home Affordable Foreclosure Alternatives program, or HAFA, which offers $3,000 in relocation assistance, the Bank of America program may also waive a homeowner’s deficiency judgment at closing.

A deficiency judgment in a short sale is basically the difference between what the house sells for and what is still owed on the loan.

Guidelines for Bank of America's new Florida Enhanced Short Sale Relocation Assistance program state that a borrower may use the incentive to pay off existing liens or for relocation expenses. FHA, Ginnie Mae, VA and USDA loans are not eligible. Details are available by calling 1-866-880-1232.

•Wells Fargo offers incentives of $10,000 to $20,000 to certain homeowners who opt for a short sale or who transfer a home's title back to the bank. The program is aimed at properties in Florida and other states known for protracted, judicial foreclosures. The money is available only on first-lien loans that the company owns, which is about 20 percent of its portfolio. Details: 1-800-678-7986.

•JPMorgan Chase has not reported how much it offers for short-sale incentives, though real-estate agents have reported sellers getting $20,000. The lender also has declined to specify how it determines the amount of its incentives. Details: 407-248-3945.

•Citibank has reported it offers an average of $12,000 for borrowers when it owns the mortgage. The amount is determined upfront and varies depending on a borrower's financial circumstances and mortgage-payment history. The money is disbursed when the short sale closes. Details: 1-866-272-4749.

Reduction in FHA loan limits

2011-10-03T21:45:00.002-04:00

As of October 1, 2011 the Federal Housing Administration will be reducing the FHA Loan Limits.

The current limits in Dade, Broward, and Palm Beach counties is $417,000. The limits for these counties will be reduced to $345,000. This reduction will affect any loan that has not been approved by an FHA Direct Endorsed underwriter.

If you are looking for homes above this price range or even under contract and not yet approved and you are expecting to finance your home with an FHA insured loan, you will be affected by the drop in the FHA loan limit.

Please remember these are loan limits, not limits on the purchase price. Buyers can always make up the difference between the purchase price and the loan amount by increasing your down payment.

Best time to buy a home in more than 50 years!

2011-09-04T14:18:00.001-04:00

Record low interest rates and bargain home costs...

Interest rates for a 30-year fixed rate home loan fell from 5.06 percent in late March to 4.79 percent by the end of June, according to the Federal Housing Finance Agency's Monthly Interest Rate Survey. Since then, interest rates have continued to drop. The rate on a fixed-rate, 30-year loan dropped from an average of 4.32 percent in early August to 4.151 percent a week later, the lowest since 1971! Combine that with the rock bottom prices of current homes and you are left with the single best time to buy a home in more than 50 years!

New FHA loan limits

2011-07-28T14:33:00.004-04:00

On Oct. 1, we will see the maximum loan sizes for FHA loans reduced back to the original loan levels prior to the run-up in home prices. Buyers and sellers would be best advised to follow this change carefully and plan accordingly.

The lowering of the HUD (FHA) loan limits is but one of many changes headed our way.

To check current loan limits visit HUD's website https://entp.hud.gov/idapp/html/hicostlook.cfm

If you were planning to buy or sell in the higher price ranges, you may want to start now before the new reduced limits take effect!

2011 First-time Homebuyers Program

2011-05-25T13:41:00.003-04:00

· Up to $7,500 awarded for down payment and closing cost assistance

· Funds awarded on a 5:1 match – borrower must contribute a minimum
of $500

· Subject to the following maximum income limits based on number in
household:

· To be eligible to apply, you must not have owned a home during the
three years prior to the date you apply for the program.

· Primary residents only. No investor or vacation homes allowed

· Eligible for use with all FHA loans, including the purchase & repair loan

· Program participants must complete prescribed Home Buyer Counseling

· All borrowers must occupy the home for a minimum of five years or
award money goes back to the bank

· Program ends on December 31st, 2011, or when funds run out

Freddie Mac new Credit requirements

2011-02-07T10:56:00.002-05:00

Are you ready to face a tougher Freddie Mac? The new requirements in Freddie Mac’s Bulletin 2010-19 kicked in last week, and mortgage professionals need to bring their 'A' game:

Be ready to look into every borrower's credit report inquiries made in the previous 120 days — not just the 90 days previously required.
Was the borrower granted additional credit? You need to get verification of the debt and include that debt when you qualify the borrower.
This goes for all loans, not just manually underwritten loans.

Lease as an alternative to foreclosure?

2010-12-27T16:04:00.003-05:00

Did you know that you may be able to lease your property back from your lender as an alternative to foreclosure?

The Deed-For-Lease™ option is a program from Fannie Mae that allows you to lease your home after you have transferred the title to your property to the mortgage company (commonly called a Deed-in-Lieu of Foreclosure). The lease terms are up to 12 months (with the possibility to extend longer). And the monthly rent is based on the current rental rates for your area—not on your original mortgage payment.

Deed-for-Lease is an alternative to foreclosure and may be an option if:

You are ineligible to refinance or modify your mortgage, you are facing a long-term hardship, you are several months behind on your mortgage payments, you may owe more on your home than it’s worth, you have not been able to sell your home, or you want to remain in your home.

Deed-for-Lease is available for loans owned by Fannie Mae. If you loan is not held by Fannie Mae your lender may have similar programs available.

What are the benefits of a Deed-for-Lease?

Eliminate or reduce your remaining mortgage debt; Resolve your delinquency and avoid foreclosure; Stay in your home and neighborhood (no need to move or relocate); Lease at current market rate rent for up to 12 months with a possible option to extend the term; Pay no security deposit; Assistance for relocation may be available at the end of your lease; Start repairing your credit sooner than if you went through a foreclosure; May be able to get a Fannie Mae mortgage to purchase a home sooner (in as little as 2 years) by executing a Deed-in-Lieu than if you went through foreclosure (at least 7 years).

To explore your options I would recommend contacting a good Real Estate attorney.

Broward Homebuyers Can Get $2000 Tax Credit

2010-09-22T12:13:00.003-04:00

The Housing Finance Authority of Broward County has launched a Mortgage Credit Certificate Program to help reduce home loan financing costs for qualified homeowners in Broward County.

The Mortgage Credit Certificate program entitles qualified applicants to a federal income tax credit in an amount of up to $2,000 annually. This enables qualified owners or buyers, who owe federal income taxes, to benefit from a dollar-for-dollar reduction of their tax bills. Additionally, the homeowner will continue to receive the tax credit each year they continue to live in the home financed under the program.

The Mortgage Credit Certificate is not a mortgage; however, it may be used in conjunction with a first mortgage from a participating lender (except a mortgage revenue bond loan.) Borrowers must meet normal mortgage underwriting requirements, which demonstrate credit worthiness, and meet the program's income and home purchase price requirements.

Interested parties should click here to visit the Broward County Housing website or feel free to drop me a line for more info.

New State property laws take effect

2010-08-18T14:08:00.001-04:00

There are a couple of new laws property owners should keep in mind as the 2010 property tax season kicks off.

If you've added buildings, additions or other improvements to your property, you can be spared from the standard retroactive taxes that have been charged in the past.

The state Legislature passed a law this year providing relief for homeowners that have added improvements, buildings or other changes to their property. If the homeowner reports the additions to the county property appraiser before Jan. 1, the improvements will only be reflected in their 2011 assessments. Under normal circumstances, once additions are discovered, the homeowners would be responsible for up to three years worth of back taxes for the value of the improvements.

Also, if your home is severely tainted with Chinese drywall, your property should be valued at $0, because of a law passed this year in the state Legislature. If the building is uninhabitable, owners will not have to pay property taxes on it until it is repaired. Homeowners still have to pay taxes on the land the property sits on, and Non Ad-Valorem taxes will also be required. Affected homeowners should provide their county appraiser documentation showing that their homes contain the drywall, which emits sulfur odors and can cause structural damage.

MORTGAGE HELP FOR UNEMPLOYED

2010-06-02T14:57:00.001-04:00

HAMP, HAFE and now UP.

UP is the Home Affordable Unemployment Program. It is a new program designed to supplement the Home Affordable Modification Program (HAMP) which provides assistance to unemployed borrowers by granting them a forbearance period which reduces or suspends their monthly mortgage payment.

This program goes into effect on July 1, 2010 for participating HAMP mortgage servicers. It applies to first mortgages taken out prior to 1/1/09 on one to four family units that are the principal residence.

Florida condo association update

2010-06-02T14:52:00.001-04:00

Gov. Charlie Crist signed into law a measure Tuesday that will allow Florida's condo associations to go after up to twice the amount of delinquent dues owed them.

Condo associations had previously been limited to six months' worth in most cases.

When the law takes effect on July 1, associations also will be able to deny owners who owe money access to pools or other common-ground amenities.

Other provisions of the "Distressed Condominium Relief Act" let an association either delay or discard some previously required -- and very costly -- upgrades to a building's fire alarms, sprinklers system and elevators.

The new law is another government effort to help Florida's condo associations recover from a years-long slide in revenue from dues, plummeting unit values and declining occupancy rates as foreclosures ran rampant in the wake of the real estate downturn.

Mortgage rates could go up

2010-03-19T13:53:00.001-04:00

On March 31, the Federal Reserve will stop buying mortgage-backed securities from Fannie Mae and Freddie Mac, returning control of interest rates to private investors.

For months, industry observers have predicted that once government supports are removed, interest rates will rise quickly, discouraging many of the first-time buyers critical to housing's recovery.

In late summer and fall 2009, lured by fixed 30-year mortgage rates under 5 percent and the first $8,000 tax credit, which expired Nov. 30, first-timers pushed sales of previously owned homes to the highest levels in at least three years, reducing record inventories and braking price declines.

That tax credit was renewed Nov. 5 and expanded to buyers who had not purchased a property in five years, although the credit for repeat buyers is $6,500.

The second credit expires April 30, is unlikely to be renewed, and remains the engine moving buyers.

As the date for the Fed pullout approaches, analysts now generally agree that an immediate rate spike is no longer the likely result.

Meanwhile, the Fed repeated Tuesday its pledge to hold interest rates at record lows to foster the U.S. economic recovery and ease unemployment. The Fed held its target range for its bank lending rate at zero to 0.25 percent, where it's been since December 2008.

In response, commercial banks' prime lending rate, used to peg rates on certain credit cards and consumer loans, has remained at 3.25 percent -- its lowest in decades.

But the Fed's assessment of the economy was a bit more upbeat. It said the job market is stabilizing. That was an improvement from its January statement, when it said the deterioration in the labor market was abating.

It also said business spending on equipment and software has risen significantly, also an upgrade from its last assessment.

Still, the Fed cautioned that spending by consumers could be dampened by high unemployment, sluggish wage growth, lower wealth and tight credit.

And it noted weakness in the commercial real-estate and home-building markets. That's one reason why analysts are concerned about a potential rise in mortgage rates when the Fed buyback program ends. But some say they don't expect any increase to be enough to stymie the recovery in the housing market.

Bankrate.com columnist Holden Lewis said rates are so low now -- averaging 4.87 percent for a 30-year fixed -- that an increase ``is inevitable. But maybe they'll rise gradually instead of jumping'' April 1.

FHA Suspends Anti-Flipping Rule to Spur REO Sales

2010-01-18T14:22:00.003-05:00

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS.

On Friday January 15, 2010 FHA announced it is temporarily lifting an "anti-flipping" rule, allowing borrowers using government-insured loans. In most cases, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," HUD Secretary Shaun Donovan said.

In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of "flipping" where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

A Loan Modification should cost you nothing!

2010-01-10T11:08:00.009-05:00

There is no reason to pay someone for something you can do yourself for free. If you want to keep your home, there are some important points you need to know before contacting your lender. I will go over them with you and check your finances to maximize your probability for success at no cost to you! Get caught up and a rate of 2-4% to help get you back on track. To determine if this may be an option for you, see the questions below. If you can answer yes to the questions below, contact me to discuss your next step.

Is your home your primary residence?
Is the amount you owe on your first mortgage equal to or less than $729,750?
Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
Did you get your current mortgage before January 1, 2009?
Is your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) more than 31% of your current gross income?

Note: if you are uncertain, click here to determine percentage

Short sales: Playing by the new rules

2009-12-15T12:39:00.004-05:00

There have been some significant changes to the short sale process which should help us all in closing these types of transactions. Hopefully, we will experience more closings and less frustration.

WASHINGTON - Dec. 8, 2009 - The U.S. Treasury hopes to speed transactions under its new short sale rules, but details count, and Realtors should understand the process if they hope to avoid delays. While the new rules become effective no later than April 5, 2010, lenders have been encouraged to make them official as soon as possible.

The new rules, released Nov. 30, 2009, as the Home Affordable Foreclosure Alternatives Program (HAFA), provide financial incentives to spark short sale or deed-in-lieu (DIL) closings. The change was made to grease the wheels of a short sale transaction, giving potential buyers a shorter wait time from contract signing to lender approval of the contract. It also should make a short sale more attractive to buyers by reducing the number of problems.

The rules do not necessarily simplify the amount or complexity of short sale paperwork, however. The oversight doc, Supplemental Directive 09-09, devotes four pages out of 43 to the new short sale requirements. Real estate professionals working with short sales should review the Short Sale section of the Supplemental Directive (pages 5-9) and review the forms and letters in Exhibits A and B.

Condo Financing Options

2009-09-17T14:50:00.004-04:00

If you are in the market to buy a condo here in the South Florida, you’ve probably figured out that financing it may be a problem. It used to be that condos were treated like every other property. If you qualified for financing, there were loans available. That’s not the case anymore. As a result of the Mortgage Crisis, financing has become harder to get for all properties, but condos have been hit the hardest. A lot of this is due to condos being too successful. Condos fit the life style that works best for many homeowners, especially singles and couples who want prime living space but don’t want to spend their time mowing the lawn. Demand for condos was so high, both here in South Florida and throughout the nation, that it led to a boom in new condo construction and conversions. Over the last 3 years thousands of new condo units have come onto the market, even as the market has softened. Financing was too easy during the boom years, but now the cycle is reversing and guidelines are being tightened to the point where many condo complexes will not be able to get financing, even for the most qualified buyers.

Here are some of the changes we’ve seen in the last year that make financing for condos harder to come by:

All the mortgage insurance companies instituted declining market policies which meant that in most cases 10% is the minimum down payment you can buy with on a conventional loan.
Loan level price adjustments (price hits) were added so that in order to get the best pricing you would need to have a 25% down payment. With less than a 25% down payment there will be an extra .75% charge which means either higher costs or a higher rate.
Fannie Mae and Freddie Mac have made several changes on how they look at condos, but the latest change may have the biggest impact. The pre-sale requirements have been raised from 51% to 70%. This means that new condo developments now must have 70% of their units sold and closed before they are able to take advantage of conventional financing. In the past there were plenty of banks and private lenders who would take on these loans for their own portfolios. But with the banking crisis this money has all but dried up.

Combined, these changes are likely to make a lot of newer projects unsalable. You can have the best amenities and the best location in the market, but if financing isn’t available there are only so many cash buyers. Over time the lending rules will ease up and financing for newer projects will be available again. But by then some of these new projects will be long gone or converted into rental units. The condo market is being divided into two classes, properties that can be financed and those that can’t. For those properties that can be financed, there are two options, Conventional and FHA.

Conventional condo financing

Conventional financing is for those loans that conform to Fannie Mae and Freddie Mac guidelines. This means loans of up to $417,000 (for higher loan amounts Jumbo loans are available, but they will still follow conventional guidelines) and is for well qualified borrowers with good credit scores. A year or two back, there was financing available for any new condo, even if you were the first buyer in the project. That has changed, but for most newer projects conventional financing is still the only option (though some newer projects have portfolio financing available). In order to qualify for conventional financing, we will need to approve both the borrower and the condo project itself. Borrower guidelines are tougher with condos because they look at this as a layering of risk. If you plan on putting down less than a 20% down payment you will need to have mortgage insurance, and mortgage insurance is tighter on condos than on single family homes. The mortgage insurance guidelines have changed along with everything else, and most buyers will need at least a 20% down payment to qualify.

In order for the loan to be approved, the condo building also has to go through an approval process. One of the first things I do when I get a new condo contract, is send out a condo questionnaire to the management company or home owners association. The completed questionnaire gives a quick picture of the financial condition of the project. Some of the things they look for are:

How many units are in the project?
How many are completed?
How many are sold and closed?
How many units are owned by investors?
Is the project complete?
When was the home owners association formed?
What percentage of owners are behind on their HOA dues? (this is a big one)
Is the project adequately insured?
Is the association party to any law suits?

If any of these answers raise more questions, then further research will be done to make sure the project conforms to the guidelines. The appraisal and a review of the condo declarations and by-laws is also part of the condo approval process.

Conventional financing is the best option if you are putting down a large down payment, have excellent credit and are buying a building which meets all the new guidelines. Conventional guidelines are now set up so that the best borrowers will still be in fine shape, but for most borrowers, and especially first time home buyers, if they are able to buy with a conventional loan it will cost them a lot more than it would have before.

This is part of the reason that FHA has become such a big factor in condo financing.

FHA condo financing

FHA is a government program designed to help more people buy homes and more borrowers will qualify with FHA financing than with conventional. It is a low down payment (3.5% down) program and the credit standards are much looser. Because it doesn’t have the price hits that conventional now does, the mortgage rates are better, too. Anyone who is putting less than 20% down should compare both options and see which loan is better for them. Like conventional, we will need to approve both the borrower and the condominium project.

There are two ways that a condo can be FHA approved. The first way is if the developer or home owner’s association applied for and was granted a project approval. This means that FHA has already done all the checking and the project is ready to go. Here is a link to the site which tells whether a project is approved, or not:

FHA Condo Search Tool

This tool is just a starting point. You can search a number of different ways, but the results aren’t always up to date, and if you don’t have the search exactly right you might not find it, even if the property is approved. But it is a good starting point.

One problem with FHA approvals is that most of what you will find are older properties. When the market was booming, FHA was looked at as too old school, and there were conventional options with no down payment where the borrowers (and the developer) didn’t have to go through the extra paperwork that FHA required. So most of the approvals will be older, more established (and usually without the amenities most buyers are looking for) buildings which went through the process some time back, or newer properties that have just gone through it. The good thing is that there is another option, the FHA spot approval.

FHA condo spot approvals

(UPDATED for October 1st 2009)

FHA spot loans are a way to make FHA loans available to home buyers in well run condo projects even if they haven’t gone through the full approval process. The difference here is that these loans are for the individual unit, not the whole building. This is a huge advantage because a good portion of the condos that are eligible for conventional financing also meet the FHA spot approval guidelines. If you have a minimum down payment, or if your credit scores are below 700, this is the only way you will be able to buy a condo. If you are putting 10% to 15% down, this is still likely to be the least expensive way to go.

FHA spot loans won’t work for all situations. They are only an option for properties which have already sold out or are nearly there, and have shown that they have the financial resources to continue to perform well in the future. From the FHA guidelines, here is what is need to approve a spot loan:

Projects consist of two units or more.
Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.
Right of first refusal is now permitted unless it violates discriminatory conduct under the Fair Housing Act regulation in 24 CFR 100.
No more than 25 percent of the property's total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogeneous with residential use, which is free of adverse conditions to the occupants of the individual condominium units.
No more than 10 percent of the units may be owned by one investor. This will apply to developers/builders that subsequently rent vacant and unsold units. For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete; and only one unit can be conveyed to non-owner occupants.
No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.
At least 50 percent of the total units must be sold prior to endorsement of any mortgage on a unit. Valid pre-sales include an executed sales agreement and evidence that a lender is willing to make the loan.
At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units (the minimum presales requirement of 50 percent still applies).
Legal Phasing is permitted for condominium processing. It is recommended that developers submit all known phases for initial project approval. For purposes of calculating the owner-occupancy percentage:

a. On multi-phased projects the owner-occupancy percentage is calculated on the first declared phase and cumulatively on subsequent phases if the ownership of the condominium project remains the same;
b. If multi-phasing includes separate ownership per phase, each phase is calculated individually; or
c. Single-phase condominium project approval requests must meet the owner-occupancy percentage requirement.

FHA Concentration

a. Projects consisting of three or less units will have no more than one unit encumbered with FHA insurance.
b. Projects consisting of four or more units will have no more than 30 percent of the total units encumbered with FHA insurance.

Reserve Study - a current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. A current reserve study must be no more than 12 months old - if recent events or market conditions have affected the finished condition of the property that information must be included. When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed.

The process for approving an FHA spot loan is similar to conventional condo approval. The mortgage lender (that’s me) needs to gather the documentation and prove that the unit meets the FHA guidelines. We do this through the condo questionnaire, the property appraisal and by reviewing the condo docs and by-laws. Once we have everything together we submit the package to the underwriter, along with all the borrowers documentation, and this becomes part of the loan approval. The FHA spot approval takes a little more time and some extra documentation, but for many people it is the best, and some times the only, way to buy a condo.

The fact is, there are too many properties that are too new or have issues which make them ineligible for any financing. It is going to take some time for the market to sort itself out. But there are options for home buyers, and with a little persistence condo financing is available.

Property Taxes too High?

2009-08-20T09:51:00.005-04:00

Think your property assessment is too high? File a petition to appeal.

First, get your petition filed on time. The deadline is September 18th in Dade and Broward County and September 14th in Palm Beach. Whether you try to do the appeal yourself or you engage a professional to do it for you, this is the first important step. Secondly, 80% of success is showing up! Make sure you complete the form in full and all information is correct.

To get a tax assessment for your property, the county appraiser will go through the process of the determination of the value. First, he or she will choose a land sale (hopefully in your neighborhood, but not always) on which to base your land value. Land evaluations can be tricky especially since some areas have very few land sales. Values can change from neighborhood to neighborhood or even from block to block. If the land parcel they choose has more value than your land, it can adversely affect your assessment. An assessment can be challenged by using either the tax assessor's method of adjusted SF or the traditional appraiser's method of "under air" living area. Whatever method is selected, it should be applied uniformly across the subject property and all the comparables. Do not use adjusted SF on the comps and living area on the subject property only. You must always compare apples to apples. Make sure your adjustments are plausible and you have data to back them up.

Property Tax Basics

2009-07-22T20:06:00.007-04:00

The 2009 property tax assessments for Dade & Broward County have been certified and are now posted on the their websites. To view your property assessment, go to www.BCPA.net for Broward and click on "Property Search" on the top left, and then scroll down to accept the terms of use. For Dade, CLICK HERE.

You may search for a property by owner name, address, or folio number. Click on your choice, and enter the information. If you search by name, all properties owned by individuals with that name will come up, and you must click on the folio number of the property you wish to view.

When the correct tax comes up, below the name and address you will find "Property Assessment Values". The first line gives the 2009 assessed values. If you are NOT Homesteaded, the Just Value will be equal to the Assessed/SOH Value, and this is the value on which your 2009 property tax will be based. If you are Homesteaded, your taxable value is the Assessed/SOH Value, which is typically less than the Just Value. However, due to declining home values, the SOH Value can be equal to the Just Value.

The actual tax owed is still blank because the millage rates of the individual taxing authorities have not yet been determined. The following is the Budget Timetable:

August 4 - Ad valorum taxing authorities advise the Property Appraiser of their rollback rate, proposed millage rate, and time, date and place of the first required public hearing. Special assessment districts to advise Property Appraiser of their proposed rates.

August 11 - Property Appraiser begins to mail Proposed Property Tax Notices (TRIM Notices)

August 24 - Last day for Property Appraiser to mail TRIM Notices

August 24 to September 18 - Time to file petitions to the Value Adjustment Board (VAB) if you wish to challenge your 2009 Property Tax Assessment

September 3 to 18 - Ad valorem taxing authorities hold public hearings on tentative budget per Tax Notice. Dates and times of these hearings are listed on the TRIM Notices.

Within 15 days after adopting a tentative budget, ad valorem taxing authorities advertise intent to adopt final millage rate and budget. Public hearing to be held 2 to 5 days after published advertisement, after 5 PM if not on Saturday, no Sunday hearings.

Within 3 days after adoption of the final millage rates, ad valorem taxing authorities deliver the Resolution or Ordinance adopting the final millage rate to Property Appraiser and Revenue Collector.

Once the millage rates are determined and the Tax Roll certified to the Revenue Collector, the individual tax bills will be prepared for mailing in November. Even if you have filed a petition to the VAB or have engaged another person to do so in your behalf, it is recommended that you pay your tax bill on time. VAB hearings can go on for a year or more, and the property tax can become delinquent. If your appeal is successful, your excess taxes will be refunded to you.

Broward County officials have publically voiced their intent to keep millage rates down and try to control expenses. However, fees are increasing to make up for the shortfall caused by lower property tax assessments. As you have already heard, Code Enforcement has become more aggressive, and now drivers are even being ticketed for seat belt violations.

Land vs. Building
One last thing...Many people have been questioning the recent changes in the building values vs. land values on the tax records. The BCPA website explains why this was done:

"Starting with the new 2009 real property assessments, our residential land values and improvement (building) values are correctly apportioned. In the past -- because of the antiquated tax roll system this office had used for decades -- we were only able to set correct amounts for the total Just Value of a property, but the internal division of value between the land and the improvements was entirely arbitrary. Using mass-appraisal methods, we equalized land values this year by neighborhood -- not just by subdivision within a neighborhood. This means the square-foot land value for dry lots in a neighborhood should be the same as for other comparable dry lots in the same area ... lots along a golf course will be valued the same as other lots along the same golf course ... waterfront lots will be valued the same as other similar waterfront lots (and point lots valued the same as other nearby point lots) ... and so on. "

In times of declining property values, you should see your land value decrease while the building value stays relatively the same with an allowance for depreciation. The structure itself does not absorb the fall in value. The land does. This has been treated incorrectly on the tax records of Broward County over the past couple of years. It appears that this has been resolved by the recent corrections.

Is Anything in Real Estate Recession Proof?

2009-04-15T23:02:00.005-04:00

The Residential market is cyclical. It goes up and goes down and right now is the best time to buy investment housing due to the low prices and high inventory. The only problem is that residential lending is not what it used to be making it difficult to buy multiple homes. FNMA has increased the amount of homes one individual can own to 10, but after that your options become severely limited. Commercial lending on the other hand is still readily available. Regardless of where you live across the Nation, when the residential market is at its all time low Commercial is red hot.

The mortgage meltdown affects certain aspects of commercial real estate but not all… some properties are recession proof! So what types of Commercial properties are recession proof and why?

Apartments:
It’s natural to gravitate towards multi family Apartments when you first start out in commercial real estate. It’s a concept everyone understands “houses in a box.” When people loose their homes they need a place to live, the next place they go to is apartments.

Self Storage:
So what’s better than apartments with all that income from those tenants in one place? Self Storage, think about it it’s like having an apartment without the people, no toilets, no trash and no tenants to occupy the space just their stuff. When people loose their homes they transition into apartments and if you’ve ever lived in an apartment you know the closet space is limited and the storage space is even less.

Assisted Living facilities:
The next recession proof property type is Assisted Living facilities. It’s nothing more than giving assistance for people in need and most common the elderly. We all know the baby boomers are right upon us and the demand for assisted living is and always will be here.

Senior Living Facilities:
Are a lot like assisted living but much easier to manage. When people get older they either end up in assisted living as we just covered or they look to have a relaxed lifestyle and choose to occupy space in a senior living facility. This is a fifty five plus senior living facility with active seniors who want the done for you lifestyle.

Mobile Home Parks:
While not as sexy as the other types of property types (most people envision mobile home parks to be in bad areas with management stealing from you), people who loose their home in a recession and they cannot afford to move into an apartment will occupy a mobile home in a mobile home park. It costs much less than a home or apartment and because of that reason alone, it’s classified as a recession proof commercial property.

Why is Commercial Real Estate the all time wealth builder?
The reason is simple… cash flowing properties. There are four reasons to keep cash flowing properties and each one has its own separate benefit.
1. Cash Flow
2. Appreciation
3. Depreciation
4. Cash Out
Most investors purchase commercial properties for one main reason other than Cash Flow and its Appreciation. Unlike residential property, commercial property goes up in value much quicker and when the rents increase, the NOI (net operating income) goes up, when the NOI goes up, the value goes through the roof. Next, good old “Uncle Sam” will allow you to right off a portion of the property each year. This is a right off for wear and tear known as Depreciation. Cash out is a huge wealth builder. When you fill vacancies on a commercial property and keep it at market occupancy for just 180 days, this is called seasoning. Once you meet lender requirements for season, then you can do a Cash Out refinance using your new NOI.

Here’s the wealth explosion; you can pocket the equity in the property and not pay taxes on that money until you sell! That is unless you use a 1031 tax deferred exchange and roll it into another asset without having to pay capital gains ever ;-)

Fed action sends mortgage rates below 5%

2009-03-24T16:47:00.002-04:00

Less than a day after the Federal Reserve said it would double its purchases of mortgage debt, fixed rates on conforming 30-year mortgages fell well below 5 percent, and there's thought rates may stay there for a while. The last time mortgage lenders offered rates this low was 1965!

Obama's Housing Rescue Plan Simplified

2009-03-05T20:52:00.003-05:00

Obviously there is a lot of information coming out of the Obama camp and getting the answers can be frustrating. After all, knowing that there is help out there means nothing if you don't know what that help is. I will try to simplify it as best I can:

The first part of the program, called Home Affordable Refinance, is aimed at homeowners whose property has lost value as housing prices have plummeted. It is only open to borrowers with conforming loans backed by Fannie Mae and Freddie Mac (no FHA, VA, or subprime). The program does not reduce principal, but rather allows the borrower to refinance up to 105% of the current value. Usual fees would apply, though for many borrowers the procedures would be streamlined. Unfortunately, since most values have doped over 40%, this program will help only a small amount of people in my opinion. Interested borrowers should contact their loan servicers to determine whether their mortgages are held or guaranteed by Fannie Mae or Freddie Mac. You can also contact me to determine what your home is worth if you are unsure.

The second program, called Home Affordable Modification, is more complex (and more interesting) and is aimed at borrowers whose mortgage payments have become unaffordable either because of a hardship such as job loss or illness or because the interest rate has been reset higher on an adjustable-rate mortgage.

For those borrowers, the government would provide cash payments and financial subsidies to help the lender lower the monthly payment to no more than 31% of the borrower's gross monthly income. In most cases the lender would reduce the interest rate on the loan to as low as 2% for five years. If that was inadequate to bring down the payment, the lender also could extend the term of the loan to 40 years or temporarily reduce the loan principal. In those cases, the set-aside portion of the loan principal would be repaid to the lender in a balloon payment when the house was sold or refinanced.

The 31% target income level would apply only to the borrower's primary mortgage payment; second mortgages, home equity loans and other consumer debt would not be included in that calculation.

However, administration officials said they would offer additional financial incentives to servicers to reach agreements with second-lien holders to accept partial repayment of those debts. Details of that policy are still being worked out.

To address the problem of borrowers who default again on mortgages, the government would provide additional payments to lenders and servicers the longer the borrower stays current on the loan. And borrowers would also see a benefit: For each of the first five years that they continue to pay the mortgage, the government would reduce the loan principal by $1,000.

And those whose interest rates are reduced below market value would see rates float back gradually after the initial five-year loan period -- at 1% a year, up to the market rate on the day the loan modification was signed. Interested borrowers should contact their servicers directly, administration officials said, and should pay no fees to access the program.

Finally, if neither one of these programs work for you, or perhaps you have an investment property, you still have the option to Short Sale it and spare your credit the stigma of Foreclosure...

Protecting Your Family

2009-02-19T12:46:00.002-05:00

The single most important document in your estate conservation strategy might not be your will or any of the other instruments that you probably paid an attorney to create such as Revocable Living Trusts. In fact, what is likely to be your single most valuable asset will convey directly to your heirs without going through probate or any of the typical estate distribution channels.

In this case, the asset is your retirement savings, and the document is the retirement account beneficiary form. Because your beneficiary designations will override any instructions in your will regarding who will inherit your IRA or employer-sponsored retirement plan, ensuring that the correct beneficiary is named on the account form might be the easiest, most inexpensive step you can take toward a sound estate conservation strategy.

Yet experts say it is fairly common for beneficiary designation forms to be outdated. This can be an especially serious problem when a beneficiary was named years ago and the designation was never reviewed. Then, because of life events — marriage, divorce, birth, or death — the named beneficiary is no longer the person whom the account owner wishes to inherit the money. If this information doesn't come to light until the account owner’s death, it’s too late to do anything about it. The custodian of the plan has no choice but to follow the instructions on the form, even if it means the decedent’s children are deprived of their inheritance because a former spouse or now-estranged family member was the designated beneficiary.

Fortunately, there’s an easy fix to avoid this scenario. Regularly reviewing and updating your beneficiary designations can help ensure that your loved ones inherit your retirement savings.

Foreclosures Stoppage Awaiting Obama's Plan

2009-02-16T13:46:00.004-05:00

Citigroup, Chase, Bank of America, Wells Fargo, Morgan Stanley, Bank of New York, and greed to suspend foreclosures to give time to the Obama administration as it continues to craft a housing plan to modify mortgages for troubled borrowers.

Citigroup will halt foreclosures through March 12, or until a plan is completed, the company said Friday. Wells Fargo said its moratorium is in place until a plan is announced. The other lenders said foreclosures will be stopped on owner-occupied homes until March 6.

Fannie Mae and Freddie Mac said they will suspend foreclosure sales involving occupied single-family and two- to four-unit residential properties through March 6.

New Condo Guidelines for Fannie Mae loans

2009-01-29T14:40:00.002-05:00

Fannie Mae has issued new guidelines that Florida condos and condo conversions, and, in some cases, old condos, must meet before it will fund loans:

• At least 70 percent of the units in new condos must be pre-sold.

• No more than 10 percent of units can be owned by a single entity.

• No more than 15 percent of units in all condos can be more than 30 days past due on association fees.

• No more than 20 percent of a condo can be devoted to commercial use.

• All condos, new and old, must have fidelity insurance, which protects association funds from fraud.

• The seller is not allowed to help with down payments or offer other perks, like deductions of association fees, unless they are disclosed.

• Condos must have hazard insurance.

• When investors buy in established projects, at least 51 percent of units must be owner-occupied.

**If the condo you wish to purchase or refinance has any of these issue, it may still be possible to go FHA. Contact me with the address and I can check whether or not the project is approved by them...

Rates Plummet to mid 4's

2009-01-09T13:52:00.002-05:00

US Treasury begins purchasing FNMA and FHLMC Backed Securities - On Monday January 5, 2009, The US Treasury initiated their purchase of mortgage backed securities as previously announced on November 25, 2008. As a result, mortgage rates have plummeted to the mid 4's causing a renewed interest in refinance applications and those buyers willing to jump back into the real estate market yet another incentive to buy now.

HOW TO - Break The Cycle of DEBT

2008-12-03T14:59:00.002-05:00

With all that has happened over the last three short years; from the housing crisis causing mortgage companies to go out of business (or get absorbed) ceasing lending as we knew it, to the stock market crash and the Credit collapse…to our personal rising debt trying to make ends meet in this crap economy where layoffs and downsizing are the norm. Not to mention the Trillion Dollar debt of our own government which have been “surfing” their debt for years with no solid plan to deal with it…has given me a sore distaste for borrowing money.

Let’s face it, if we all lived within our means, only bought what we could afford, and saved up instead of borrowed money to buy large items, none of us would be suffering right now.

Up to this point, I have never thought of debt as a negative but rather a tool to create more wealth. That was, of course, until I lost the means to pay that debt off. I now understand that we as a society have it all wrong. DEBT IS NOT OK and we cannot continue down this road and expect to be fine.

One can argue that the only exception to this are mortgages on investment properties, but due to the drastic drops in home values, we are learning the negatives of leverage the hard way on that as well. If you have purchased or refinanced within the last 4 years, chances are you are now upside-down on your equity.
-Average homeowners stay in their homes for 7.1 years [NAR®]. With an average 7% mortgage, they will sell their homes still owing over 90% of the principal. If they continue this trend, they will NEVER pay off a home in their lifetimes!
-85% of Americans have a true net worth of less than $250! - Social Security Administration
-The average savings of a retired couple is only $7,000!
HOW DO WE BREAK THE CYCLE?!?
Step 1- You have to stop taking on new debt.
If you cannot stop the flooding, how can you keep from drowning? Which brings us to…

Step 2- Make a list of ALL your expenses. Click here to download my spreadsheet
This is vital as you need to know exactly how much you are spending every month and compare it to your net income. If you have money left over (discretionary income) then you are on the road to financial freedom. If not, look hard to see what can be cut or adjusted. Even if you only have $1 left over, you are on your way!

Step 3- Invest in a program that will guide you to financial freedom.
Make no mistake; this undertaking will require discipline and determination. The idea is to payoff your highest rates or highest monthly payments first to free up cash flow that can then be applied to your next debt paying it off quicker and so on until you are debt free.

Step 4- DO IT AND LIVE IT! Becoming debt free will not happen overnight, but imagine 8-13 years from now with NO Mortgage, NO credit card debt, NO car loans, and taking ALL that money you would have spent on interest and investing it in a safe 2-5% return over the next 10-20yrs. We are talking Hundreds of Thousands of dollars set aside for your retirement!

This is real and this is the pyridine shift we need to make as a society if we ever wish to regain balance and power.

Short Sale FAQ

2008-11-17T21:00:00.000-05:00

Question: What is a Short Sale?
A short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property. In a short sale, the mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the owner. This negotiation is all done through communication with a bank's Loss mitigation department.

Question: Can I do a Short Sale myself?
Negotiating a short sale is a long and complex procedure that requires a strong knowledge of the process and should be left up to a professional. In this difficult market, it would be in your best interest to use a competent Realtor to find a buyer and negotiate the sale. Mishandling a file can cost you precious time and put you in danger of foreclosure.

Question: So if I choose to list my property with a Realtor, who pays your commission?
The bank will pay the commission along with all the other usual closing costs. A properly executed short sale should cost you nothing!

Question: I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale?
Typically, the process begins in the 90-120 days late area and can take an additional 4-6 months after that. Nowadays lenders are very willing to postpone or prolong foreclosure if you have listed the property and have a willing and able buyer. Hiring a knowledgeable Realtor who can handle this for you is extremely important.

Question: If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?
The mortgage insurance is not there for your protection, just the mortgage lender.

Question: Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale?
No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.

Question: Will I still have to pay property taxes if I do a short sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.

Question: I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale?
The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.

Question: Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true?
It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.

Question: Do I have to miss a payment to do a Short Sale?
No, most lenders will consider a short sale without being in default assuming you can still show hardship and do not have the assets to pay down the mortgage.

Question: I want to do a short sale and have a 2nd mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then we just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.

Question: How long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. This is one of the main benefits of a Short Sale and also a reason why you should not wait to the last minute to do one. The more proactive you are about your situation, the better off your credit will be...

If you have any questions, feel free to contact me at (954) 441-5366 or email me @ HomeCounselor@bellsouth.net for a no obligation consultation.
I am here to support you!

FANNIE AND FREDDIE TO ASSIST OWNERS IN FORECLOSURE

2008-11-14T11:44:00.000-05:00

- On Monday, November 10, 2008, Fannie Mae and Freddie Mac announced they are going to work with homeowners that are in default of their mortgages. Where TARP and Hope For Homeowners have sorely disappointed to date, Fannie and Freddie are taking a real first step at trying to address the number of foreclosures. Fannie and Freddie will be modifying loans by temporarily or permanently reducing the interest rate and / or extending the loan, and deferring a portion of principle interest free to bring the debt to income ratio to 38%.

The homeowner must meet the following criteria to qualify:

The loan must be owned by Fannie Mae or Freddie Mac
It must be the borrower's primary residence. (They must still live in the property)
The loan to value must be greater than 90%
The homeowner must be at least 3 months behind on their mortgage loan
The borrower has NOT filed for bankruptcy
The borrower must have reliable and verifiable income

Hope for Homeowners...What is it?

2008-11-13T13:47:00.000-05:00

Hope for Homeowners is HUDs response to the foreclosure problem. While it's far from perfect, it is a start in what needs to be a more aggressive solution by all lenders to address this problem.
The basic idea is that HUD will insure FHA financing up to 90% of the current value of your home IF (and that's a big if) your current lender is willing to reduce your payoff and forgive the balance of your debt. Essentially it's a short refinance but the problem is that this is optional for lenders and most lenders won't help you unless you are in default.

SIDE NOTE: One reoccurring theme you will notice is that if you are one of the few that is not in default, you are essential punished by the lender because they will not even listen to you or try to help you out. Even if you can prove that you are in trouble and are just barely getting by in this economy, if you are not defaulting, the lender will do nothing proactive to keep it that way.

OK, so back to H4H.

Here is a list of what you need to know:
· Property must be owner occupied
· Your mortgage must have originated on or before January 1, 2008
· Your mortgage debt-to-income ratio must be over 31%
· You CANNOT be on title to any other property
· You did not "intentionally" miss mortgage payments

And here is the catch, you still have to actually qualify for an FHA loan AND participate in Equity Sharing. You can contact me to see if you can qualify for an FHA loan (or any loan for that matter) but let me breakdown how the equity sharing works:

Examples of How Equity and Appreciation Are Shared

Let’s say your home appraised for $200,000 at the time you receive your FHA mortgage. So your mortgage is 90% of this, or $180,000. The initial equity is the difference between 1 and 2, or $20,000.

In this example, you and the FHA share this $20,000 when you sell your home or refinance your loan.

Here’s how that $20,000 would be split:

If you sell or refinance:
Year 1 FHA gets 100%, or $20,000.......You receive 0%, or $0
Year 2 FHA gets 90%, or $18,000........You receive 10%, or $2,000
Year 3 FHA gets 80%, or $16,000........You receive 20%, or $4,000
Year 4 FHA gets 70%, or $14,000........You receive 30%, or $6,000
Year 5 FHA gets 60%, or $12,000........You receive 40%, or $8,000
After Year 5 FHA gets 50%, or $10,000...........You receive 50%, or $10,000

So, if you sell or refinance right after receiving the new loan, the FHA keeps the equity that was created, and you don’t receive any of it. On the other hand, let’s assume you stay in this loan and don’t sell or refinance for ten years. At that point, you’re entitled to half of the equity – in this example, that’s $10,000 – and the FHA is entitled to the other half.

In addition to this equity sharing, you will have to share any future home price appreciation with the FHA. This means that, if your home has gone up in value between the time you receive your FHA mortgage and the time of your home sale (or other disposition), you will share the amount of this increase with the FHA (less closing costs and a portion of any improvements you have made).

This is a 50/50 split that does not change over time.

But what if the value of your home continues to go down?

Because the appreciation is actually negative (the home has depreciated), so there is nothing of financial value to share, neither you nor the FHA would receive anything.

To keep it simple, these examples assume that there are no closing costs when you sell your home and that you have made no improvements to your home.

Again, keep in mind that these are just examples, and your actual experience will vary depending on factors such as: How much your home is worth when you get a new HOPE for Homeowners loan, how long you stay in your home, and how much your home is worth when you sell.

Credit Crisis. Let's clear up what happened in Florida.

2008-11-12T13:52:00.000-05:00

I think it's best to start this blog with an explanation on how we got here so that we can try to figure out were we need to go from here.

The headlines are all very clear; Florida is number one nationwide in mortgage fraud and number two nationwide in foreclosures. For obvious reasons, it is likely that these two facts go hand in hand.

Looking back, the entire spectrum of mortgage fraud has taken place in Florida. From expansive flipping scams involving brokers, lenders, appraisers, real estate agents and title companies to loan originators and/or borrowers simply lying about the qualifying income; Florida has seen it all.

It would be irresponsible to not point out that much of the increase in the number of foreclosures rests solely on the fact that many Floridians acted like so many of their American counterparts. They simply bought above their heads. Many stretched their wallets and equity lines to buy second homes and investment properties with the dream of quick cash and early retirements.

Mortgage fraud is nothing new. For as long as there have been mortgages, there have been originators and borrowers looking for ways to defraud and beat the system. So why do America and Florida continue to see an implosion in the banking and lending industries? Additionally, why are there so many foreclosures? The answer to both of these questions is the same; sub-prime mortgages.

When the bust first started, and foreclosure numbers started to rise, all finger pointing was directed towards the mortgage brokers. The mortgage brokers were forced to fend for themselves against state and federal legislation designed to punish them.

For over a year, the disregarded victim of the bust was the broker. The media and legislators blamed them for the condition of the mortgage market. They did not care that thousands of small businesses folded under the unearned weight of blame.

Then, bit by bit, the ugly truth began to shine through. First, a wave of local and national retail lending firms folded as their lines of credit, heavy with unsold sub-prime mortgages, failed. Then we saw many Wall Street investment banking firms, which in many cases owned their own sub-prime lending companies and securitized their own mortgages, begin to fail as their real estate backed securities went bust.

Shortly after these Wall Street firms began to fail, both Freddie Mac and Fannie Mae announced they had become insolvent. In a mad rush to stop the bleeding, the federal government rushed in and took control of these two giant semi-private firms. Both Freddie and Fannie attributed their losses to sub-prime loans. The most recent victims of the bust have been huge banks. Quiet while the brokers were taking the blame, these huge banks had loaned billions in sub-prime loans and were taking huge losses. What they needed, and what they hoped for, was a quick market recovery. With time working against them the added weight of sub-prime losses quickly became more than many could bear.

I have outlined the results; now let's take a look at the cause. In the late nineties President Clinton set a goal to increase the availability of mortgage loans to low and moderate income Americans. Congress passed the Community Reinvestment Act, which forced Fannie and Freddie to lower lending guidelines in support of President Bill Clinton's goals. With expanded guidelines, more and more Americans were able to qualify for mortgages. The increased rates of these expanded guideline loans proved a winner on Wall Street. The perceived security of these mortgage-backed securities (MBS) was gobbled up by investors. Based on these results Wall Street began to seek out mortgage lending firms that could supply these higher risk, higher reward mortgage-backed securities. President George Bush echoed the call from his predecessor and encouraged more lending to more Americans.

Therefore, with the support of Congress, the President and the leading GSE's (Fannie and Freddie) more and more lenders created more and more sub-prime products. With additional sub-prime products a greater number of Americans could qualify for mortgages. More buyers meant less inventory and prices skyrocketed.

Some of you may read this and think the true villain is greed. I would agree that as the market run-up was taking place many parties, from originators to securitizers, were indeed blinded by greed. However, it was not the free market "running amuck" that caused the current problem. No, it was the intervention of government in the free markets that lead to our current situation. Our federal legislators decided to push more loan products into the market in order to allow more people to qualify for home loans. Many, on both sides of the congressional aisle, declared the majesty of the new America. The new America where everyone could own a home.

This shortsightedness, the forcing of now disgraced Fannie and Freddie to lend outside of their well-established lending parameters, lead directly to the crash we see today. The saddest part to me is that Congress blames everyone but themselves. "It's the brokers, no it's the investment banking firms, no it's the greedy CEOs of America's banks and insurance companies. It's the poor management of Freddie and Fannie." So where do we go from here? First, the Federal government needs to allow the free market to clean up the mess it helped create. The best bailout Congress could offer the American People is to get out of the way. Sure, some large firms will fail, but most of the dying firms will be broken apart and purchased in pieces by other more stable firms. Second, Congress needs to release Freddie and Fannie back to the private sector. Not as the ugly, double-headed, semi-private duopoly monster Freddie and Fannie has become, but as 50 or 100 smaller private mortgage securitizing companies that can compete openly in the secondary mortgage market.

*Thanks to Ritch Workman, President of the Florida Association of Mortgage Brokers for this fine article.