Monday, December 7, 2009

Treasury to Push Short Sales to Ease the Foreclosure Crisis

The US Treasury Department on November 30th announced plans on how to streamline Short Sales. Even though the Making Home Affordable program has been a borderline failure, the administration continues to spin it as a success. Over 650,000 temporary loan modifications have been approved yet much fewer have been approved for permanent modification status, and stories abound of homeowners in the temporary modification status being foreclosed upon with no explanation.

Here is a summary recap of the changes that have been enacted:

To qualify for a short sale the following has to ocurr:

- Must be the homeowner’s principal residence
- The mortgage must be less than $729,750
- Homeowner is delinquent on the mortgage or “default looks likely”.
- Homeowners mortgage payment exceeds 31% DTI based on gross income.
- The Loan must have closed before 1/1/09.

The qualification of “default looks likely” seems to indicate that the borrower does not have to be in default in order to qualify for a short sale, just that a default “looks likely”. It will be interesting to see mortgage servicer responses, and Treasury’s enforcement, to short sale requests when a default “looks likely” but the borrower is not yet late.

The Changes Enacted:

- $1000 to paid to lender to process the short sale.
- $1500 to sellers for closing costs or moving expenses.
- Up to $3000 to junior lien holders for release of their lien.
- A minimum of 90 days and up to 1 year to market and sell the property.
- No foreclosure may commence during the marketing period allowed above.
- Servicers may not lower agent commissions after an offer is received.
- Standardized paperwork
- Servicers may not charge borrowers fees to participate.
- the Short Sale Must Fully Discharge the borrower !!!!
- A Short Sale request is to be approved or denied within 10 days.

This is very positive news for short sale Realtors and purchasers. These guidelines shift the emphasis toward short sales by allowing a defined marketing time without risk of foreclosure to the borrower. Other exciting changes is that it prevents reductions in realtor commissions, drastically shortens time frames while fully discharging the borrowers. The most profound change is that it allows for submission for short sale approval prior to being in default. That is powerful!

Friday, November 20, 2009

Fannie Mae becomes a Landlord

Fannie Mae said on last Thursday it would allow eligible homeowners to rent back their own homes. Called The Deed for Lease Program, it lets homeowners transfer the deed back to their lender and then sign a lease to remain in the home. It is an effort by Fannie Mae to help those who do not qualify for or cannot sustain a loan modification. Borrowers must live in the home as their primary residence and there cannot be any subordinate liens when the property is transfered to them.

The program aims to reduce the number of foreclosed properties being abandoned because they often fall into disrepair and hurt the surrounding homes' values. It also keeps a roof over troubled borrowers' heads and an income stream coming from the property. Tenants of homeowners may also be eligible for leases.

"This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities," said Jay Ryan, vice president of Fannie Mae.

Homeowners must show they can afford market rent, but that payment cannot be more than 31% of the borrower's pre-tax income. Leases may be up to 12 months, with the possibility of renewal or month-to-month extensions. If the property is sold, the new owner picks up the lease.

Copy and paste in the menue bar the enclosed link: gives you a more detail overview of the program. If you need help understanding it, please call me at 845-896-5760.

Friday, October 30, 2009


Thursday, October 29, 2009

To love what you do and feel that it matters, how can anything be more fun.- Katharine Graham

Wednesday, August 19, 2009

Borrowers Protection Laws Part V

Here are the last three laws that are designed to protect you:

The Real Estate Settlement Procedures Act of 1974
RESPA requires lenders to disclose the nature and costs of real estate settlements, and was also meant to protect borrowers against abusive practices, such as kickbacks, and limits the use of escrow accounts.

The Right to Financial Privacy Act of 1978
This law protects bank customers from the unlawful scrutiny of their financial records by federal agencies and specifies procedures that government authorities must follow when they seek information about a customer’s records from a financial institution.

The Truth in Lending Act
The Truth in Lending Act was originally enacted in 1968 to require uniform methods for computing the cost of credit and for disclosing credit terms. It gives borrowers the right to cancel, within three days, certain loans secured by their residences, prohibits the unsolicited issuance of credit cards, and limits cardholder liability for unauthorized use. It also imposes limitations on home equity loans with rates or fees above a specified threshold.

Truth in Savings Act
This 1991 law requires banks to disclose certain information to depositors about their accounts (including the annual percentage yield, which must be calculated in a uniform manner) and prohibits certain methods of calculating interest. Regulates advertising of savings accounts.

I hope you have found these laws useful. If you have any questions or comments, please do not hesitate to call.

Thursday, August 13, 2009

Borrowers Protection Laws Part IV

Here are four more Borrower Protection Laws:

The Federal Trade Commission Improvement Act
This 1980 law authorizes the Federal Reserve to identify unfair or deceptive acts or practices by banks and to issue regulations to prohibit them. It is similar to the Fair Debt Collection Practices Act (which is enforced by the FTC). Since the law’s inception, the Federal Reserve has adopted similar rules that restrict certain consumer debt collection practices.

The Gramm-Leach-Bliley Act
This law governs the privacy of consumer financial information, and imposes limitations on financial institutions on the disclosure of consumers’ personal information to third parties, and also provides a method for consumers to opt out of information sharing. Financial institutions are also required to notify consumers about their privacy policies and practices.

The Home Equity Loan Consumer Protection Act of 1988
Congress enacted this law in 1988 to protect consumers against unconscionable terms included in home equity loans. It places restrictions on home equity loan offers, and requires lenders to provide consumers with detailed information about the loans they offer, including a brochure describing home equity loans in general. It also regulates the advertising methods employed by of home equity loans and restricts the terms of home equity loan plans.

The Homeowners Protection Act of 1998
This law established rules for automatic termination and borrower cancellation of private mortgage insurance (PMI) on home mortgages.

Thursday, August 6, 2009

Borrowers Protection Laws Part III

As a continuation from the past two weeks, I would like to add more Borrower Protection Laws.

Here are three:

The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) is a major piece of legislation first enacted by Congress in 1970, and has been amended on numerous occasions. The law is designed to protect consumers against inaccurate or misleading information reported to and maintained by credit reporting agencies. It requires credit reporting agencies to provide consumers with an opportunity to correct errors on their credit reports.

The Fair Debt Collection Practices Act
The FDCPA prohibits abusive debt-collection practices employed by third party debt collectors, such as collection agencies, and imposes significant penalties against violators.

The Fair Housing Act

This 1968 law prohibits discrimination in the extension of credit for housing, such as mortgages, on the basis of race, color, religion, national origin, sex, handicap, or family status.