Wednesday, December 30, 2009

FHA Qualifying AFTER Short Sale

FHA released underwriting guidance regarding handling transactions in which the borrower has experienced a short sale or will require a short payoff in order to refinance their existing mortgage. The guidelines reflect current market conditions due to the deterioration in property values in most areas of the country. An overview of the guidelines for short sales and short payoffs follow:

When are borrowers eligible for a new FHA mortgage if they have experienced a short sale?
- The short sale was for their primary residence, and
- The mortgage payments on the prior mortgage were 0 X 30 days late preceding the short sale, and
- All installment debts were 0 X 30 days late preceding the short sale.
When are borrowers not eligible for a new FHA mortgage if they have experienced a short sale?
- The short sale property was not their primary residence, or
- The borrower took advantage of the declining market conditions to purchase a reduced price similar or superior property within a reasonable commuting distance, or
- The short sale was a pre-foreclosure sale. (Borrowers may be eligible for FHA financing three years after the pre-foreclosure, unless the borrower can document extenuating circumstances and satisfactory credit prior to the circumstances beyond the borrower's control.)

Tuesday, December 29, 2009

First Time Home Buyers – FHA Tax Credit

The latest from the FHA website shows that first time home buyers are those who are purchasing a “primary residence” for the first time. Are you trying to get an FHA loan and interested in this tax credit? FHA loans require you to live in the property you buy, so if you are approved for an FHA loan you meet the “primary residence” requirement for the tax credit.

But this tax break is not just for those who have never purchased a home before. If you have not owned a home in the three years prior to the purchase of your new primary residence, you also qualify if you buy your home between January 1st, 2009 and December 1st, 2009.

The 2009 Federal Tax credit requires borrowers to make no more than $75,000 per year for single borrowers and $150,000 for married couples filing a joint tax return. Married couples filing separately get more leeway with their incomes—you have a higher income limit in these cases. There’s just one catch; married couples who want the 2009 tax credit must BOTH be purchasing their first home. If either spouse has purchased a primary residence in the last three years, the couple cannot qualify for the $8,000 tax break.

It’s important to know that simply having purchased property does not automatically disqualify you from this tax credit. If you have purchased a summer home or any other building that is not considered a primary residence—the place where you live most of the year—you may still qualify for the $8,000 tax credit.

Thursday, December 24, 2009

More Foreclosures Slated to Hit in 2010

Loan Modifications are Up, but so are Foreclosures. The estimated number of homes heading toward foreclosure reached 1.7 million units nationally, up from 1.1 million this same time last year. This data comes from third quarter numbers published this week by First American CoreLogic data. The increase is clearly affecting home sale rates, but at the same time, homes are selling at a faster rate this year than last. The visible inventory supply fell to 7.8 months in September 2009, down from 10.1 in 2008. But the supply of REO home estimates, also referred to as "shadow housing inventory" by mortgage lenders, is at 3.3 months, up from 2.4 months a year ago. Combined, the total unsold inventory by September 2009 reached 5.5 million units, down from 5.7 million in 2008. Shadow housing inventory is comprised of mortgages that are 90 days or more delinquent and that are not included in unsold inventory. This basically means that more homeowners are slated to be foreclosed on this year than last.
If you or someone you know is behind on their mortgage and want to avoid foreclosure, call me today at 703-400-6757. I can give you real answers quickly. Don’t wait!

Monday, December 21, 2009

First Time Homebuyers can actually claim the tax credit on their 2009 return even if they purchase after the New Year!

Homebuyer Credit Expanded and Extended

The Worker, Homeownership and Business Assistance Act of 2009, signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

The new law also:

* Authorizes the credit for long-time homeowners buying a replacement principal residence.
* Raises the income limitations for homeowners claiming the credit.

News release 2009-108 has the details, as do two new IRS videos in English and Spanish.

Members of the military, Foreign Service and intelligence community serving outside the U.S. should also be aware of new benefits in the law that apply particularly to them.

Following is general information for first-time homebuyers who settled on a new home on or before Nov. 6, 2009.
For 2008 Home Purchases

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.
For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010. [Added Nov. 12, 2009]

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.
General Information

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

* Applies only to homes used as a taxpayer's principal residence.
Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405, which you file with your original or amended tax return.

Friday, December 11, 2009

Foreclosures Slow – Short Sales Rise

The foreclosure tide appears to be subsiding, according to the latest numbers from RealtyTrac. The company said Thursday that foreclosure activity fell 8 percent in November, compared to October – it’s the fourth consecutive month that data has shown a decrease in foreclosure filings.
The numbers show foreclosure filings – default notices, scheduled foreclosure auctions, and bank repossessions – were reported on 306,627 U.S. properties during the month. That figure represents one in every 417 homes in the United States.
Although the month-to-month tallies are showing improvement, the number of homeowners facing the loss of their home still equates to an ocean, and is 18 percent higher than in November 2008. However, last month’s foreclosure numbers are down 15 percent from the all-time high hit in July, and at their lowest mark since February of this year.
James J. Saccacio, CEO of RealtyTrac, says the industry’s efforts to keep people in their homes are paying off. According to RealtyTrac’s data, default notices nationwide in November were down 8 percent from the previous month, while scheduled foreclosure auctions were down 12 percent and bank repossessions were flat.
At the state level, the same usual suspects are still leading the nation in foreclosure activity, but even these hard-hit housing markets are beginning to show signs of improvement.
Here in our neck of the woods, we’re seeing a major increase in calls from homeowners looking to Short Sale their homes. Many have contacted their banks over and over again to find relief from mortgage payments they simply can’t afford anymore. Here’s one recent scenario of a call I had recently:
A homeowner in Woodbridge, VA was upside down on their home-they owed 425K on a property that was now worth only 150K. They also had financial troubles because their ARM had adjusted and increased in payment while their hours had been cut at work and they weren’t able to keep up with the payments. They even were foregoing their medicine to try to stay current with their mortgage and just couldn’t do it any longer. They had contacted a loan modification company who they paid $2500 up-front to help them and they hadn’t heard anything back from them in 5 months! Unfortunately this money is long gone and the loan modification just wasn’t going to happen. We worked with them to list their home as a short sale and they will soon be able to walk away from their home , owe their bank nothing and start over fresh. We expect their short sale to be officially approved by the year.
If you know anyone in a similar situation, we can help! Please contact us before you or your friends spend money up-front to do a loan modification that may never actually happen. We are Certified Home Rescue Experts© and we can help you explore your options in this market. Call me anytime at 703-400-6757.

Wednesday, December 09, 2009

Quarter of Loan Mods in Default AGAIN

More than 25 percent of homeowners who have received assistance under the administration’s Home Affordable Modification Program (HAMP) have fallen behind on their new payments – a harrowing statistic that has stirred up more doubt about the effectiveness of the government’s $75 billion foreclosure prevention campaign.

Citing data from a Treasury Department survey of the nation’s largest mortgage servicers, Assistant Treasury Secretary Herbert Allison told a congressional oversight panel that only “73 percent of borrowers are current in their trial plan payments,” according to a written Q&A document obtained by Reuters.
The Washington Post also noted that Allison’s comments to the panel included a redefault forecast of 40 percent for HAMP restructurings, which in all actuality would be an improvement over the track record for non-program modifications. Data from the Office of the Comptroller of the Currency shows that 52 percent of mortgage modifications made in early 2008 had become delinquent again after one year.
Converting borrowers from the trial phase to permanent modifications has become HAMP’s latest sticking point. Last week, the administration announced a new push to pressure servicers into converting more trial mods to “permanent” status, threatening to impose fines, withhold incentive payments, and resort to public humiliation of those companies that don’t pick up the pace.
According to DS News’ Washington Bureau, the Treasury summoned representatives from the 10 largest servicers for a closed-door meeting Monday morning, presumably to ensure each is pulling their weight to meet the Department’s year-end deadline for permanent modifications.
The Treasury is expected to release new numbers outlining servicers’ performance under HAMP later this week, but based on the November report, 650,994 trial mods were underway as of the end of October. Administration officials say 375,000 of those are scheduled to convert to permanent modifications by the end of the year, and they’re pressing servicers to get the paperwork moving and ensure this number is met.
Banks say they are working overtime to fulfill the Treasury’s request, but the biggest obstacle is getting borrowers to submit the additional documentation for conversion to permanent status. According to Bloomberg, Bank of America is trying to make 65,000 trial mods permanent by December 31, but roughly 20 percent of those borrowers haven’t returned the paperwork required.
By Carrie Bay

Monday, December 07, 2009

Foreclosures Still Outpacing Loan Mods

The mortgage servicing industry completed 271,563 total loan workouts in October, according to Hope Now, the private sector alliance of mortgage servicers, investors, insurers and non-profit counselors.
Workouts included 198,373 repayment plans and 73,190 modifications. At the same time, the industry completed 94,450 foreclosure sales and initiated another 222,107 foreclosure starts.
Total 316,557 foreclosure sales and starts outnumbered modifications more than 4 to 1 and repayment plans about 1.6 to 1. Hope Now attributes some of the slow-down in modifications to the Home Affordable Modification Program (HAMP) sponsored by the US Treasury Department.
Under HAMP, the Treasury allocates capped incentives to servicers for the modification of loans on the verge of foreclosure. Hope Now’s reported modifications have slowed as servicers began implementing HAMP, which requires a three month trial period to ensure borrower affordability of modified payments before a HAMP modification is considered permanent.
Servicers are pursuing HAMP modifications before repayment plans — slowing down reported repayment plans — and have to wait through HAMP trials before reporting permanent modifications — slowing reported modifications. Despite the slow reporting of permanent HAMP modifications, the Treasury has said more than 650,000 trial modifications are underway, putting HAMP on track to reach a target 3m to 4m homeowners in three years.
“Our number one priority is to convert HAMP modifications, but also do our best to help borrowers with all solutions available,” said executive director Faith Schwartz in a statement. “This sometimes means a graceful exit via short sale or deed in lieu if a borrower has no other options.”
Short sales might become more prevalent among servicers, now that Treasury will offer incentives through the Home Affordable Forelclosure Alternatives (HAFA) program. HAFA will complement HAMP by providing financial incentives to servicers, borrowers and investors that go forward with short sales or deeds-in-lieu of foreclosure, according to a Treasury announcement late Monday.
Currently, Hope Now only reports HAMP activity when trial mods become permanent, creating the appearance of a slow start to HAMP. It remains unclear how many trial mods have become permanent, although the Treasury said HAMP is on track to boast 375,000 permanent modifications by year-end.
Hope Now expects to change its reporting of industry workouts soon to account for activities outside of HAMP. More comprehensive reporting of industry efforts would likely begin in Q110.

Friday, December 04, 2009

Fannie Raises Minimum Credit Score to 620!

As the Federal Housing Administration (FHA) considers raising the minimum credit score requirement for new borrowers to reduce risks to the single-family insurance fund, Fannie Mae has now jumped ahead, increasing the minimum borrower credit score from 580 to 620.
Brian Faith, a spokesperson at Fannie, confirmed the minimum hike to HousingWire, adding that the adjustment reflects a careful analysis of borrowers’ ability to repay their mortgage obligations over the life of the loan.
“Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period,” Faith said in a statement.
Fannie also reduced the allowable debt-to-income (DTI) ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure.
Faith said that high DTI ratio loans also have higher levels of serious delinquency.
“It’s not enough to help borrowers buy a home – we must also ensure that they can stay in the home over the long term,” Faith said.

For more information on your buying power, call me at 703-400-6757. Have a great weekend!
December 3, 2009

Wednesday, December 02, 2009

Treasury Hopes to Simplify Short Sale Process

NEW YORK (Reuters) – The U.S. Treasury on Monday set long-awaited guidance on a plan for mortgage companies to speed "short sales" of homes and other loan modification alternatives to stem a rising tide of foreclosures.
The Home Affordable Foreclosure Alternatives Program provides financial incentives and simplifies the procedures for completing short sales, a growing practice in which a lender agrees to accept the sale price of a home to pay off a mortgage even if the price falls short of the amount owed, according to an announcement on the Treasury's website.
Guidelines address barriers that have often sidelined short sales by setting limits on the time it takes a bank to approve an offer, freeing borrowers from debt and capping claims of subordinate lenders.
The incentives, first announced in May, expand on the government's Home Affordable Modification Program, known as HAMP, that has seen limited success in lowering payments for distressed homeowners. The Treasury earlier on Monday stepped up pressure on mortgage companies to make permanent the 650,000 trial modifications they have started.
"While HAMP program guidelines are intended to reach a broad range of at-risk borrowers, it is expected that servicers will encounter situations where they are unable to approve" or offer a modification, the Treasury said in its announcement.
Financial incentives for completing short sales or similar deed-in-lieu transactions -- in which the deed is simply transferred to the lender -- include a $1,000 payment to servicers, and a maximum of $1,000 to go to investors who sign off on payments to subordinate lien holders, the Treasury said. Borrowers would receive $1,500 in relocation expenses.
Short sales are favored by real estate agents and community groups over foreclosure because they can preserve the borrower's credit rating and leave the property in better condition than when a homeowner is evicted. While primary lenders typically realize steep losses, their recovery is typically far better than under foreclosure.
But short sales have been frustrating for borrowers and real estate agents, often hung up by negotiations with multiple lien holders and mortgage insurance companies. Real estate agents have complained that sales fall through as lenders bicker over the sales price, what they should receive from the proceeds, and whether the borrower will be held accountable for the debt in the future.
Among requirements, mortgage servicers have 10 days to approve or disapprove a request for short sale, and when done the transaction must fully release the borrower from the debt.
It also prohibits mortgage servicing companies from reducing real estate commissions on the sale, a practice that has dissuaded many agents from taking short sale listings.
In one of the most contentious issues gumming up negotiations between lenders, the guidance caps the aggregate proceeds to subordinate lien holders at $3,000.
Second lien holders in recent months have begun demanding more money from the first lender, seller, buyer or agent in exchange for releasing their claim, agents have said. Because primary lenders would face larger losses in a foreclosure, some subordinate lenders have felt empowered, the agents said.
The largest second-lien holders are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc.
Second lien holders may proceed with a short sale outside of the Treasury program, if they felt the cap was too low, a Treasury official said in October.
"If there was a short sale program that didn't recognize the second lien holder position, it could have pretty damaging consequences for the industry," Sanjiv Das, chief executive officer of CitiMortgage, said in an interview last week.