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!

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: https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0933.pdf gives you a more detail overview of the program. If you need help understanding it, please call me at 845-896-5760.

THE ECONOMY DOES NOT HAVE TO DETERMINE YOUR DESTINY IF YOU HAVE A PLAN AND YOU FOLLOW IT, YOU WILL BE UNSTOPPABLE!

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

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.

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.

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.

Borrowers Protection Laws Part II

Borrower Protection Laws are put into place to protect you from any harm while you are trying to conduct any type of financial action. It is important to know these laws so you are not taken advantage of.

Here are 3 more laws:

The Expedited Funds Availability Act
This 1987 law specifies when banks must make funds deposited by consumers available to them, and requires banks to inform customers of their funds availability policies.

The Fair and Accurate Credit Transaction Act of 2003
This law was enacted as an amendment to the FCRA in order to assist consumers in combating identity theft and other matters that negatively affect their credit rating. It also allowed consumers to exercise greater control over the type and amount of marketing solicitations they receive, restricted the use and disclosure of sensitive medical information, and established uniform national standards in the regulation of consumer reporting.

The Fair Credit and Charge Card Disclosure Act of 1988
This law regulates credit card offers directed to consumers, and comes into effect whenever a consumer is presented with a credit card application (i.e., through the mail, the Internet, a bank, or a retailer). It requires credit applications to contain information about key terms of the account.

Borrowers Protection Laws

The federal government has enacted numerous statutes, rules, and regulations designed to protect consumers from unscrupulous lenders and other financial entities. These laws govern nearly every financial transaction a consumer might encounter.

Lending institutions, creditors, collection agencies, and other businesses that are regulated by these laws are all required to follow them, but that doesn’t mean that all of them do. As is often the case, what you don’t know can hurt you, and many companies take advantage of consumers’ ignorance of the laws that were enacted to protect them.

What follows is a very brief summary of some of these laws, what they do, and who has to follow them.

The Consumer Leasing Act of 1976
This law requires finance companies to disclose the cost and terms of automobile and other consumer leases.

The Electronic Fund Transfer Act (EFTA)
Enacted in 1978, the EFTA governs the manner in which consumers and financial institutions utilize electronic fund transfer services, such at ATMs, POS (point-of-sale) terminals, and preauthorized transfers directly from one bank account to another. This law comes into effect whenever you withdraw funds from an ATM machine, use your credit card, or pay bills online.

The Equal Credit Opportunity Act
Congress enacted this law in 1974 to prohibit discrimination in credit transactions on the basis of sex, age, race, religion, color, national origin, and other grounds. It requires creditors to grant credit to qualified individuals without requiring signature by spouses, and to inform unsuccessful applicants in writing why they were denied credit.

Over the next few weeks, I will be posting more laws and how they are designed to protect you.

Advantages of Home Mortgage Refinance Loans

There are many great reasons to consider a home mortgage refinance loan.

If you are considering mortgage refinancing but are not sure on how to get started then here are several tips which will help you to decide if it is a right kind of loan.

Every financial situation is different and not all would require a mortgage loan or refinancing. If the property value is increased in the recent time, then there probability of qualifying for a better interest rate with a new home mortgage refinance loan. Interest rate coupled with the repayment period will determine the monthly payment. Extending the period of repayment would offer a lower interest rate and helps in adjusting the monthly bills to be paid promptly.

Advantages of Home Mortgage Refinance Loans
There are lots of benefits left untapped by most of the borrower.

• Tax-deductible Debt consolidation can offer discounts on the amount of tax paid. But it is important to counsel with the appropriate department.
• Lower mortgage payments
• Lower mortgage interest rates will reduce the burden on the borrower to pay a high monthly payment.
• Borrowers can stop paying private mortgage insurance.
• Options to switch to more advantageous term length
• Ability to switch over to Fixed mortgage interest rate

It is important to collect as much information as possible to select the right kind of plan. This research works will prevent the borrowers from overpaying the monthly payments and saves money.

Options You Have to Avoid Foreclosure

If you are like many people, you may have found yourself in a situation that is leading down the road toward an impending foreclosure. There are several steps that you can take to halt this process:

1. REFINANCE - While this is a legitimate option, it is fairly unrealistic in the light of this economy where more and more homeowners are finding out that their homes are now not worth what they owe on the mortgage. But for some people, it might work!
   
2. REPAYMENT PLAN - This is where the borrower is allowed to catch up on any missed payments by perhaps doubling up on the payments until the account is brought current. Again, while this is an option, it is not very realistic because most people are facing foreclosure because they can't afford even one month's payments let alone doubling them!
   
3. FORBEARANCE PLAN- With this option, the borrower may be allowed to roll the missed payments onto the end of the loan term thereby extending the length of the loan. Sometimes this is what the bank does for its loan modification programs. Again, while an option, it is not very realistic because the borrower still has to make the same monthly payment which they couldn't make before. It is definitely more doable if the hardship was just a temporary glitch.
   
4. LOAN MODIFICATION- Borrowers are seeing more of these being done and it may definitely help out some of you who are facing a hardship! Many banks are now willing to change the original terms of a borrower's promissory note. Some are reducing the interest rate. Some may extend the length of the loan to 40 years. Some include a combination of the two! Most, however, will not reduce the amount of principal owed.
   
5. BANKRUPTCY- This is a court-approved reorganization plan where the borrower's loan may be changed from the original terms based on a loan modification. This is a major hit on a person's credit score and should be the absolute last option to be considered! Some people have even found that after filing for a bankruptcy, they also end up with the foreclosure on their credit score as well! A double whammy!
   
6. DEED-IN-LIEU OF FORECLOSURE- This allows the bank to take back the property without all the expenses incurred in a full foreclosure process. This has slightly less of an impact on one's credit score than a bankruptcy. The bank is unlikely to suggest it to a distressed borrower since they already have plenty of non-performing assets on their books right now!
   
7. SHORT SALE- This may be the best option for many distressed borrower's out there! There must be little or no equity in the property. Wow! Almost everyone facing foreclosure falls into that category. And the homeowner has to have a legitimate hardship. Well, with unemployment rates rising and home values going down who's not in hardship. Now, if you've gone out to buy a new speed boat or Lamborghini, forget it! You were not being financially responsible. But dare I say, not many people would fall into that category. As more and more people are falling into default, the banks are granting more and more short sales because they already have a whole boatload of REO's on their books. These are known as non-performing assets and affect the bank's ability to lend out money for loans and make money from the interest rates they charge. This means that banks are really trying to get rid of the properties they already own and don't want yours!

Affordability is Key

The U.S. economy has entered a recession and will contract for the next three quarters. The recovery, beginning in the second half of 2009, will be slow.

Despite these challenging economic times, existing home sales will be rising. Why? The answer, in a word: affordability.

With home prices falling in many parts of the country affordability conditions have markedly improved. Even with rising unemployment, nearly 93 percent of households will have jobs. These 93 percent of the working households respond to home buying incentives. Measures such as the recently enacted first-time homebuyer tax credit and a larger number of mortgage loans that qualify for purchase by Fannie Mae and Freddie Mac and through the FHA program will further bring homebuyers to the marketplace.

New home sales will be a different story. There is an overhang of inventory and homebuilders are being forced to cut back sharply. New housing starts have fallen by about 60 percent from their peak activity three years ago. That isn’t necessarily all bad news – since so few new homes are being built, the inventory of vacant new homes on the market has fallen. The total housing inventory – new and existing combined – still remains elevated so further reduction in building by builders will be welcomed. Because of low housing starts, new home sales will continue to be soft.

For the rest of the “indicators” we look at, yes, there will be some pain before we have gain. Look for growth in the U.S. gross domestic product (GDP) to contract for two consecutive quarters, in the fourth quarter of this year and the first quarter of 2009, before expanding in the latter part of 2009 as the housing market begins a steady improvement.

Affordability Will Continue to Improve

The best news out of our forecast is that affordability will continue to improve. NAR’s housing affordability index is expected to average 18 percentage points higher this year than in 2007. That is good news for potential home buyers and good news for the economy. And even though sales are expected to rise, the increase would be more certain – and more robust -- with an additional stimulus to boost home buying. Removing the repayment feature of the homebuyer tax credit and raising the loan limit higher could help achieve that. Once housing gets moving, then the economy can get moving as well.

Why Refinance?

Most people would like to get mortgage refinancing because of one or a couple of reasons. But the fact of the matter is, there could only one main reason why people would like to get mortgage refinancing. And sometimes it is not an easy decision to do. You may need a lot of research or due diligence on your part or ask family members for ideas or options if you are in some situation whereby as refinance is the focus of attention.

If you have a home and a mortgage, and you are thinking about refinancing, first you must know both what you want out of your new mortgage and what your different options are, so that you can pick the refinancing plan that best fits your needs.

But if you think about it, there are numerous reasons why you would like to opt for a mortgage refinancing. Mainly they are to reduce the home loan interest rate, home renovation, debt consolidation, educational needs and expenses, medical expenses and mounting debts and loans.

Home renovations and improvements can sometimes be the reason why you will get into doing a refinance. For instance, your need a deck at the back of your house and you do not have the cash on hand to do it, then you can use this alternative. This you can do if you have equity on the house.

Reducing the interest on your home loan is always a key in paying off your home loan. For most people, whenever they have the opportunity to get their interest rates down, they will do it in a heartbeat so they can reduce their mortgage payments.

For individuals who have accumulated debts and loans to the max, mortgage refinancing is another option of getting all your debts into single monthly payment through debt consolidation. Such situation is when you have too many different types of bills to pay; you can consolidate them into one loan and then pay one single monthly payment. This would ease your burden of managing too many different lenders and or creditors.

You may also like to do this option when you have medical expenses that are getting too much to handle for you. People can quickly get into huge indebtedness when heir medical insurance cannot cover for the most part of their hospital bills and medications. So this can be a viable option if you are this situation.

Another thing is your children who would like to go to university or college and you do not have the money on hand to finance their education. This is another reason that is commonly seen when people approach their local bank or lender for help.

With all these reasons on why people get a mortgage refinancing, you now know that you are not alone when you contemplate on getting refinance.

Remortgage or Mortgage Refinancing is very commonly done to get or facilitate the borrowing of money to ease some problems or get advantage of a situation. But you have to remember that you have to have a plan for these types of borrowing so that the money will not to waste or unplanned spending. You ought to have the main reason on why you are getting remortgaged.

Foreclosure Fix Expanded To Cover Second Liens

This week, the Obama administration announced that it will expand its $75 billion foreclosure prevention effort to cover second mortgages.

Many delinquent borrowers complained after the modification plan was announced in February that they were being left out because their home values had dropped. The administration moved to address the concerns by tweaking the original modification plan, which calls for adjusting eligible borrowers' loans so monthly payments are no more than 31% of pre-tax income.

Loan servicers recently started taking applications. Servicers covering 75% of the nation's mortgages are now participating in the program, which enables some homeowners with little or no equity to refinance. The plans are expected to help up to 9 million homeowners to avoid foreclosure, according to a senior administration official

Up to 50% of at-risk borrowers carry second liens, a popular option during the housing boom that enabled borrowers to put little or nothing down when buying a home. These loans have complicated the modification process, adding to delinquent homeowners' debt loads. Mortgage investors also have balked at reducing payments on first mortgages when the second loan was left intact.

Under the new plan, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.

Servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.

Investors also can receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers' debt levels.

Servicers who join the new program must modify second loans when a borrower's first mortgage is adjusted. It likely will take a month to implement, but it should not slow down the modifications of primary mortgages, the administration said.

Real Estate Outlook: Indicators of Recovery

You may not be quite ready to accept the idea that housing on a national basis has moved beyond bottoming out and is now in recovery mode.

But think about this: Even if you're bearish on the market, you've got to notice that some extraordinarily positive signs are popping up that point to recovery.

• New mortgage applications last week for home purchases and refinancings were up 77 percent from the same week in April 2008, according to the Mortgage Bankers Association. That's a statistic that's hard to ignore!
• Mortgage rates continue to average well below 5 percent -- 4.7 percent last week on average for 30-year fixed-rate loans and 4.5 percent for 15 year loans. Rates like these are a major factor pushing applications way up, no question, but sharply lower housing prices in many markets are an important part of the equation as well.
• Nearly 600,000 homebuyers have already claimed either the $7,500 tax credit from last year, or the $8,000 credit for this year, according to IRS data cited by the National Association of Home Builders.
• Many of these buyers are true first timers, but plenty of others are people who are now jumping back into real estate after not owning for a few years, drawn in by today's much more affordable prices and financing.
• The rebound underway in mortgages is even creating a mini hiring boom! The Bank of America has just announced that it will be adding 5,000 new positions around the country -- just to deal with its red hot mortgage business, which closed nearly 400,000 new loans during the first quarter. Other big lenders are hiring loan officers and processors again too.
• Hard-hit local housing markets continue to roar back with sales gains. On Florida's west coast, in the Sarasota and Bradenton areas, sales were up 28 percent in March over last year, and pending sales -- pointing to more purchases in the pipeline but not yet closed -- were up 27 percent.
• Inventories of unsold houses in the Sarasota-Bradenton area are down 31 percent, to the lowest level since December 2005, according to a report from Trendgrafix.
• Nationally, house prices have begun moving up again after many months of declines. According to the Federal Housing Finance Agency, prices rose by seven tenths of a percent on average last month - after falling by six and a half percent during the previous 12 months.

There is no other way than to read these signs for the best. The market is turning itself around, and nothing but good can come from now.

Goals of the New Mortgage Bailout Program

As we have previously discussed, President Obama has recently unveiled a new mortgage bailout program. Its goal? To help many homeowners in this mortgage turmoil that has gripped the whole country.

With the former administration, several mortgage rescue plans came out under President Bush's administration. However, the problem mortgages continued to rise. They were hoping the mortgage crisis would bottom out, but we have yet to see a bottom in the housing market. The problem with the mortgage bailout under the prior administration is that a lot of homeowners were excluded out of that plan. The plan was set to modify homes of individuals who might have been able to qualify for a refinance, but many opted for a loan modification instead. Many homeowners did not qualify.

The new plan is expected to take this mortgage rescue plan to the next level. It is believed to be the plan that will allow the market to bottom out which will stable the housing market, in turn which stabilize our economy, start creating new jobs and boost our economy. Under the new homeowner affordability and stability plan, eligible borrowers who are on time with their payments, but have been unable to refinance due to their home value eroding, may now have an opportunity to refinance into a new 15 or 30 year fixed rate mortgage loan. Fannie Mae and Freddie Mac will be allowing refinancing of loans that they hold or that are have been mortgage backed securities.

The following are goals of this new program:

• Help credit worthy borrowers who have been committed to paying their mortgages with affordable payments for the rest of their loan. Individuals with high interest, or if they had a teaser rate that will now be increasing might see a big difference in their house payment if they were to refinance. For those submitting a loan application, they will get a "Good Faith Estimate" which will include their new mortgage payment amount, the interest rate, and the total payment over the life of the loan. That homeowner can now use that "Good Faith Estimate" to compare it with what they are paying now and if it makes sense they can go with that option or stick with their original mortgage.
• Provide help with an affordable fixed rate mortgage. Every loan refinanced under the plan will have either a 15 or 30 year mortgage option with a fixed rate interest. Which ends up giving the borrower tremendous savings over the life of the loan. This plan will not reduce the total amount owed on the loan.
• Encourage borrowers to work towards maintaining ownership of the property. The plan will give incentive payments as a borrower makes there modified payments on time. This reduction will accrue on a monthly basis and will be applied directly to the mortgage.

Advantages to Pricing Your Home Correctly

A few days ago, I discussed how to properly price your home correctly. Today I want to talk about the advantages to be gained from this.

Here are some of the advantages for pricing your property correctly:

• A property usually gets the most attention just after it is placed on the market. If it is priced competitively it will most likely get the most attention.
• Real Estate sales agents are drawn to properties that are priced competitively and you will have more showings. More showings equals better opportunities to sell.
• If a property is priced competitively there is usually less negotiation on the price.
• Competitive pricing will attract more qualified buyers
• Besides correct pricing there are other things you can do to help sell your property. Creative marketing can help distinguish your property from all the other available properties, and in today's buyer's market, you want to stand out from the crowd.

Price Your Property to Sell!

If you really want to sell your property when you put it on the market there are some things you must know. For example, the most important thing is the actual current market value of the property.

Follow these instructions and you can appraise your own property and come up with a figure that's accurate within a couple of percentage points.

1. Find and call at least three local realtors and tell them you're thinking about selling your property. Ask the agents to make a comparative market study of your property. Tell them to include every sale in your market area that compares to your home or property. They'll call you back later and want to set an appointment to deliver the information and tell you about their company and ask you to list your property with them.
2. Make an appointment and let them make their presentation, then ask them to leave all the information on the property analysis and their company, so you can study it and make a decision.
3. Once you have information from all three realtors, lay it out on a table and create a work sheet. List each of the Sold properties on a separate line, with their selling price per square foot on the far right. Don't include the active listings that are up for sale, because they aren't relative to your study in determining the value of your property. Hold on to the information, active listings will be important later in determining the price you wish to ask for your property, because active listings will be the properties you are competing with. In other words, you will be competing for the buyers that are available in the current market who will be looking at other listed properties.
4. Add up the column on the right and divide the results by the number of properties on your list. Multiply this number by the number of square feet in your home, and the result should be the current value of your property, within a percent or two. The number you arrive at may be lower than you are comfortable with, and in some parts of the country it's a shocking reality.

If you are going to put your house on the market and want to sell it you must be competitive. More than ever you will have strong competition such as from properties that have been foreclosed on for default on loans and taxes. These homes are often priced below the market for quick sales. You are in competition with other property owners who are selling their properties to avoid foreclosure and these are often priced below the market. There isn't nearly as much demand as there is product. In other words, there are a lot of homes/properties for sale now, making it a "buyers market."

So there you have it: a simple approach to pricing your home correctly.

Stay tuned for my next blog where I explore the advantages of pricing your home to sell.

Qualifications for the Mortgage Bailout Plan

In previous blogs, I have discussed the two parts of President Obama's new mortgage bailout plan: The loan modification plan and the loan refinancing plan.

I have decided that I would like to break down what qualifes you and what doesn't for each of these components.

Option Number 1: Loan Modification

Qualify

• Have payments of more than 31% of pretax monthly income and can prove hardship.
• Occupy a single-family home
• Can prove the home is a primary residence
• Have an unpaid principal balance of $729,750**
• Make all modified payments over a trial period of three months or more.

Don't Qualify

• Aren't about to default.
• Investor with a home that isn't owner-occupied.
• Have a home that is vacant or condemned.
• Have an unpaid principal balance of more than $729,750.**
• Have a mortgage packaged into securities whose rules explicitly forbid modification.
• Have loan officers who can't be reached or are unwilling to consider modification.

Option Number 2: Loan Refinancing Plan

Qualify

• Have loans owned or guaranteed by Fannie Mae or Freddie Mac.
• Are current on mortgage payments.
• Can prove the ability to afford the new mortgage.
• Mortgage balance of no more than 105% of the current estimated home value.

Don't Qualify

• Have loans owned or guranteed by a company other than Fannie Mae or Freddie Mac.
• Have been more than 30 days late on a payment during the previous 12 months.
• Can't afford the new mortgage debt.
• Home value has fallen so far that the loan is more than 105% of the home's worth.

**For a first lien on s one-unit home

Sell Your Home Fast!

mailto:arestivo@financeyourhome.com
(845) 896-5760

Making Homes Affordable Plan Part II

A few days ago, I wrote the first of two parts on the Homeowner Affordability & Stability plan that was released by the Obama administration on Wed March 4th. As we know, it contains two major parts that will have an impact on assisting homeowners with a troubled mortgage situation. The first part of the plan is a modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure. The second part of the plan which I am blogging about today, is a refinance program for existing Fannie Mae or Freddie Mac loans.

1st Metropolitan Mortgage CEO, Daniel Jacobs and others are still assessing the details of the Homeowner Affordability & Stability plan to determine our next steps, but in the mean time we are trying to provide a summary of its major points so that it might help other to better understandable it.

So here we go:
The second part of the plan is a refinance program for existing Fannie Mae or Freddie Mac loans. Fannie Mae is offering two different programs:

1. The Refi Plus Program that requires the servicer of the loan to be the originating lender.
   
2. The DU Refi Plus Program (DU is the Automated Underwriting System for Fannie Mae) that allows any lender using DU to originate the loan as long as the existing loan is a Fannie Mae loan.
   

Freddie Mac requires the servicer of the loan to be the originating lender. Some specifics of the program are:

• Existing mortgage must currently be a Fannie or Freddie loan.
• Existing loan may not be considered ineligible (must get an Approved/Eligible from DU).
• Ineligible loans include existing mortgage loans that received a DU Expanded approval (EA).
• Maximum LTV for 1-2 unit properties is 105% and require an appraisal.
• Maximum LTV for 3-4 unit properties is 80% and also require an appraisal.
• No maximum CLTV.
• Existing mortgage must be current and have acceptable mortgage payment history. No minimum FICO score is required although borrower must meet bankruptcy and foreclosure requirements. In addition, borrower must demonstrate credit worthiness.
• Rate and term refinance only (No Cash Out) - purchase money seconds MAY Not be included.
• Loan level price adjustments (points) will apply (determined by credit score on credit report)
• MI required (same coverage factor of existing loan) for mortgage loans that had original LTV’s greater than 80%.
• DU Refi Plus must receive Approve/Eligible and will not be available until April 4. Income and employment verification is required.
• Refi Plus is a manual underwrite and requires verbal verification of employment. Lender must determine that the borrower has a reasonable ability to repay the mortgage based on current information provided by borrower.

There it is in a nut shell. I feel this part of the plan stands a chance to actually help those who have good credit and have little to no equity in their property. This offers a second option, to use FHA, which will allow a borrower to go to a 96.5% LTV on a No Cash Out Refi.

Information on the New Presidential Making Home Affordable Plan

I have been asked many questions about President Obama's Homeowner Affordability and Stability Plan, and would like to share some information regarding the plan and how it will work. Like many government programs and documents, the plan may be hard to understand sometimes. Let me break it down for you:

President Obama's Homeowner Affordability and Stability Plan can help you refinance your home, 105% of its value.

The program is broken doen into two (2) areas:

1. The Home Affordable Refinance
2. The Home Affordable Modification

The Home Affordable Refinance

Qualifications:

• If the home you want to refinance is your primary residence,
• The loan on your home is controlled by Fannie Mae or Freddie Mac (it must be a conforming loan — you can call Fannie at 1-800-7FANNIE and Freddie at 1-800-FREDDIE or submit online forms with Fannie and Freddie)
• If you’re current on your mortgage payments (meaning you haven’t been more than 30 days late on your mortgage in the last 12 months)
• If you have sufficient income to support a new mortgage….. then, you might qualify.

It gets a little more complicated however: You can’t be too far underwater on your mortgage (owe more than the home’s market value) to qualify for the refinance.

What Do I Need to Provide?

• If you think you might qualify to refinance, you’ll need to give the following documents to your mortgage lender:
• Your monthly gross (before taxes) income of your household, including recent pay stubs.
• Your last income tax return.
• Information about any second mortgage on the house (you can only refinance your first mortgage under the plan, but having a second mortgage won’t automatically exclude you).
• Account balances and minimum monthly payments due on all your credit cards.
• Account balances and minimum monthly payments for all your other debts, like student loans or car loans.

How Will They Decide What My Home is Worth Today?
This part of the Obama housing plan has not been released yet. It’s possible that lenders are expected to use their traditional procedures, but it hasn’t been officially stated.

When Will This Help Me? When it comes to refinancing under the Making Home Affordable plan, patience is going to be a virtue. With so many homeowners in some sort of distress (one in six American homeowners has negative equity, and foreclosures and home values fell 11.6% nationwide last year), there is likely to be a flood of applications and queries for lenders.

What If I Don’t Qualify to Refinance?
Don't give up. You may still qualify for other programs.

Why 2009 is a Great Year to Buy Real Estate

We all know the real estate market has recently had its fair share of ups and downs. The sub-prime loan disaster has hit real estate hard, but there's good news: A recovery is around the corner.

It's predicted by economic analysts that 2009 will be a great year to buy real estate. In spite of this economic disaster the real estate market goes in cycles. Economists have been observing it for decades. Ever 3-5 years the market peaks, and then drops. After a few years, it's ready to roll again.

Of course, cycles change and we can't base everything on past observations. Just look at the economy in the last few months. Things are starting to turn for the better. Recent months have seen growing consumer confidence and a drop in prices of oil and other daily goods.

Right now, the government is trying to stimulate the economy. This means that interest rates are as low as they might be for years. Another bit of good news is that housing prices are low right now. These changes are just starting to take effect, so it is likely that the middle and later part of 2009 will be an even better time to buy real estate.

The trick to buying real estate and getting a great deal in '09 is that you really have to qualify for the loan. What got us into this whole mess in the first place were bad loans and too much government de-regulation. From now on, you'll have to really be economically viable, meaning
you have a job and a steady work history.It also means you have your credit and finances together.

Despite the recent negativity, I am more than positive that this year will be a great one for buying and selling real estate.

Provisions of Economic Stimulus Bill

The following is Provisions of the Economic Stimulus Bill, information you must know.

The 2008 tax credit provision has been amended as follows:

• Tax credit is increased to $8,000
  
• The income limits remain the same: ($75,000 for an individual; $150,000 for a couple).
  
• First-time home buyers are principal residences only.
  
• Tax credit is available until December 1st (previously it expired July 1st)
  
• Waiver of recapture (i.e. no repayment requirement) for properties purchased in 2009 prior to December 2009
  
• The provision is retroactive to purchases made on or after January 1, 2009
  
• Recapture section does apply to properties sold in first three years
  
• Waiver of prohibition on financing by mortgage revenue bonds is included

Here is even more information to give you a more thorough understand of these new provisions:

Time Frame to buy? – By December 1, 2009
First-time home buyer? – A buyer who has not owned a home for three years.
Married first-time home buyer? – Both buyers have not owned a home for three years.
Claim tax credit? – Claim the tax credit on your federal income tax return.
Other form or forms? – No other form except your federal income tax return.
Credit limits? – Single $75,000, Married $150,000.
Building a custom home? – You qualify, but you have to occupy the home by Dec. 1, 2009.
Buying a new home? You qualify, but the settlement day has to be by Dec. 1, 2009.
Tax credit pay back? – You are not required to repay except for certain conditions.
Access the tax credit now? – Change your withholding numbers.
Mortgage Revenue Bonds? – Allow tax credit home buyers to participate.
Loan credit? – State housing finance agencies to help buyers at closing by advancing the credit amount as a loan.

5 Steps to a Credit Makeover

A lot of homeowners have the mind set that making payments on time automatically equates to good credit and credit scores.

Unfortunately, this couldn't be further from the truth.

While paying your bills on time accounts for a large portion of your credit score, there's still a lot more to it. In fact, paying your bills on time only drives 1/3rd of the points in your credit score, which means that 2/3rds of your score has nothing to do with making on time payments.
Five main categories go into making up your overall credit score calculation. Let's briefly review each category and how much they count:

1. Payment History - The Most Important Category This category is pretty self-explanatory. It doesn't take a rocket scientist to figure out that if you pay your bills on time, you'll do well in this category. Likewise, if you have a history of late payments, collections, charge offs, public records, etc. - you're not going to do so well in this category.

In addition, the number of negative items on your credit reports is important. The more incidents of credit transgressions, the more your score will suffer. And if you have recent negative information that will punish your scores more than if they are several years old.

2. Debt - A Very Close Second The most important non-payment category in your credit score is, by far, the amount of debt that you carry. And while your installment debt (auto loans and mortgages) are factored into your scores, it's really your credit card debt that's most important.

This includes anything from Visa, MasterCard, Discover, American Express, gas cards and/or retail credit cards like Macy's or Target. The balances that you carry on your credit cards can affect your scores almost as much as whether or not you make your payments on time.

This category calculates the proportion of balances to credit limits on your revolving credit card accounts - also referred to as 'revolving utilization'. Simply put, the higher your revolving utilization percentage, the fewer points you will earn in this category.

So what is revolving utilization and how is it calculated?

Total Revolving Credit owed divided by the total available credit equals the percentage of debt to credit ratio

To determine your revolving utilization, you'll need to add up all of your current balances and all of your current credit limits on your open revolving credit accounts (except for Home Equity Lines of Credit). This will give you a total balance and a total credit limit. Divide the total balances by the total credit limit and then multiply that number by 100. This will give you your total revolving utilization percentage.

See the example provided below: Remember, the lower your utilization percentage, the more points you'll earn and the higher your credit score will be. To earn the most possible points in this category, you should try to keep your revolving utilization at 10% or less. If you can't reach 10%, just remember that the lower the better. While 50% is better than 60%, 40% is better than 50% and so on.

How you pay your bills and your revolving utilization are by far the most important factors used to determine your credit scores. They account for 2/3rd of the points in your score. That's a hefty chunk! Needless to say, if you don't do well in both of these categories, your scores aren't going to be very good regardless of how you do in the remaining categories.
While the remaining categories are worth fewer points, they are still very important for consumers who want to earn the highest scores possible, certainly a requirement in today's difficult credit environment:

3. The Age of Your Credit History - Secondary Category Don't confuse this with your age. It's the age of your credit reports. Basically, the score is looking to see if you have a lengthy history of managing your credit obligations. The age of your credit history is determined by the "date opened" on the oldest account listed on your credit report. The older your credit report, the more points you will earn in this category.

There's really not much you can do in this category except wait it out. As your reports get older, you will gradually earn more points. This means that you should never try and get old, good accounts removed from your credit reports.
You want the history!

4. New Credit/Inquiries - Secondary Category When you apply for credit you are giving the lender permission to pull your credit reports and credit scores. Each time this happens, your credit report will reflect what's called an "inquiry." To perform well in this category, you should really only apply for credit when you need it.

5. Credit Mix - Secondary Category What types of accounts do you have? You will do well in this category if you have a nice diverse list of different types of accounts in your credit report. This includes mortgages, auto loans, installment loans, credit cards, etc. If your credit report is dominated by one type of account (or lack of others), this could negatively affect the number of points that you earn from this category.

That pretty much covers the factors that are used in determining your credit scores. Let's do a quick recap:

1. How you pay your bills - on time is good, late is bad
2. How much you owe your creditors - keep your credit card debt low (10% utilization is optimal)
3. How long you've had credit - the longer the better
4. How often you apply for credit - apply only when you really need it
5. Account mix - diversity is good

If you can stick by these five key principles, you should be well on your way to healthy credit and credit scores.