This past week I took a special course in Short Sales and Foreclosures from the creator of the course Frank Serio. Frank is a Broker owner of his own real estate firm in Deleware and has been in the real estate business for 26 years. He is also the President-elect for the Council of Residential Specialists (CRS).
To put it succintly, I was blown away by the incredible content of the couse as presented by Frank Serio! Hence the purpose of my blog, to try to present some of the info I received to help you to either avoid a bank foreclosure or to understand how to work thrugh it, if it has happened to you or you find yourself in this situation.
Here are some strategies to avoid foreclosure:
Be proactive about the problem when the first warning signs appear. Not only does this reduce the stres of not knowing what is going to happen, but it makes it easier for the creditors to work out a plan.
Contact your lender when you become aware that you have a problem. The last thing that a lender wants is to foreclose on the property. Financial institutions lose a significant amount of money by foreclosing on a property ($50,000+/-). Foreclosure is a lose/lose for the lender and the homeowner. It is important to be honest and forthright with your discussions and be prepared to discuss the reasons for your problems.
Read the mail! Not knowing does not solve the problem, it just delays the final result. By not reading the mail, a person avoids the opportunity to get help before it is too late.
Contact a HUD approved housing counselor or call a REALTOR for advice. Call 1-800-569-4287 to find a nearby counselor, or go to www.HUD.gov
Priortize your spending by paying for the necessities of life first. Always pay the house payment and health payment first.
Look for ways to generate cash. Sell those items that have value but are not used or needed, or seek a part-time job to get through the crisis. Not only does this reduce the emotional and financial stress, but it provides evidence to the lender that the borrower is proactively seeing a way to remedy a bad situation.
Don’t get scammed by a private “foreclosure prevention specialist,” instead go to www.HUD.gov to obtain valid information about foreclosure prevention.
Make an appointment with a REALTOR to discuss the problem and to get their advice.
2. Look at your income and expenses and set up a budget.
3. Start paying all your bills on time.
4. Work on one credit card balance at a time to pay off and then cancel.
5. Start using cash for your purchases. If you don’t have the cash, don’t buy it!
6. An older credit history improves your credit score, so don’t close those credit lines.
7. Don’t open new credit cards.
8. Review your credit report to see if there are entries that don’t belong to you.
9. Work with your local bank support staff to remove wrong information on your credit report. Here is a site that offers credit repair.
10. Review your credit annually. You can obtain one free credit report per year at www.annualcreditreport.com.
FHA Makes Changes
On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund - ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
By all accounts the new changes are a victory for home buyers. FHA has carefully balanced the need to make financial reforms with the need to keep FHA available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed.
FHA announced changes in the following areas:
· The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
· Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
· FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium.
· Seller concessions will be reduced to 3 percent from 6 percent.
FHA will make the following lender enforcement changes:
· FHA will implement credit watch terminations at lender underwriting.
· Public reporting of lender performance through scorecard system will be implemented.
· FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.
· FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
· FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.
FHA is an integral part to the continued recovery of the real estate industry and the overall economy. NAR will continue to work with FHA, the Administration, and the Congress to ensure FHA can fulfill its mission while providing for the safety and soundness of the insurance fund. NAR is committed to assisting FHA as they balance risk management with creating homeownership opportunities across the country.
For NAR’s one-page summary brief on this issue, click here.
Great News!
We just heard yesterday that Congress has voted to continue the tax rebate stimulus for the real estate market! It still awaits the President’s signature for final approval.
Here is how it will go:
The legislation extends the availability of the tax credit to purchases before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010 will be allowed an additional 60 days to complete the transaction. The credit will remain $8,000 for first-time buyers, while repeat buyers who purchase between December 1, 2009 and May 1, 2010 will be eligible for a credit of $6,500. Repeat buyers must have lived in their homes consecutively for 5 of the previous 8 years. Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.
This stimulus has been a big factor in the activity of real estate this year and we are glad that Congress is helping in the manner.
Anticipation
There is always an excitement about going away as the time approaches and the anticipation starts building towards the day or the event. Isn’t that true with you too? For me it definitely is!
Well, for me, next week is rebarcamp Ohio and I am getting excited about it. It is my first barcamp to go to. I am been wanting to go to one of them since I first heard about them in New York City before the Inman Conference. Since then, I have been following the rebarcamps in Atlanta, Charlotte, Philadelphia, Boston, Phoenix, and San Francisco. Here is a link to the sites:
Fortunately for me, Bobby Carroll from Dakno Marketing was there to video stream many of the sessions and I was able to participate in a small way and pick up some good ideas and tips. Use this link to watch the next one if you can’t attend the next one.
You might ask, What is a rebarcamp? It is an unconference where real estate agents and others get together to learn from each other. It has grown out of a desire for real estate agents to network and improve their business by using social media.
Since their inception last year in August at the Inman Conference in San Francisco, they have sprung up all over the country. Once again real estate agents are taking the lead to use and promote the newest technologies in their business.
Are you? If you aren’t call me, no twitter me at @RochesterREguy and I’ll get you started.
How much is your Home Worth?
Whether you are selling or buying or refinancing or paying taxes, it’s important to know how much your home is worth.
Many people will tell me what their tax assessment is and think that it represents their home’s worth. Others will measure their home’s worth by comparing it with homes that are on the market or even worse, homes that have expired on the market.
The value your home has is never a fixed value. It is constantly changing with the economy. The interest rates affect it, the world economy affects it, the local economy affects it, and the real estate market affects.
Fortunately for us that live in Rochester, our home values have increased each year for the past 30 years that I have been in the real estate business until 2008 when they dropped slightly, about 1-3%.
What Realtors do to determine your home’s value is to do a CMA, comparative market analysis, which is a snapshot in time of your home. It is arrived at by a careful review of the recent sold homes that are similar to your home in square footage and features.
Usually we also have to make some additions or subtractions for features present or absent in the sold homes as they are compared to your home. This is a subjective valuation by the Realtor doing the CMA. Because of this subjective value, you could get different values for your home if you were to have several Realtors do a CMA for you.
This is why it is important for sellers who are interviewing several agents for listing their home that you don’t want to make your decision based on the highest price received from an agent, because they could be too high in their subjective additions. You need to look at the agent’s years in the business, experience, credentials, and marketing plan.
So if you would like to know you home’s worth, just call me or a Realtor in your area and we will be happy to meet with you and work up a CMA on your home.
Federal Bailout—Helping Banks? or Homeowners?
We have all been reading and hearing about the bail out programs for the banking industry. The numbers are staggering of the billions of dollars appropriated by the government for this relief!
Those of us in real estate know how this developed and how the banking industry created their own problem by lowering the standards for getting a loan, especially for the investors.
Today thousands of homeowners are upside-down with their mortgages. This means they owe more on the loan than the property is worth. When this happened, the investors walked away from the properties, leaving them vacant. I remember hearing from a Realtor in Las Vegas after the crash that there were over 10,000 homes vacant that had never been lived in. Wow! Can you picture that?
However, a homeowner who is living in their home with their family, has no choice but to stay and stick it out. So along comes the government, spending yours and my tax dollars to bail out the banking industry. Many of us were naïve in thinking that the plan would include the individual homeowners who at no fault of their own was put in a bad situation.
This all hit home to me yesterday when I met with a homeowner who had lost her income because of the economy and had been struggling for the past 10 months to keep her head above water.
She had not made a mortgage payment since August, but had tried to contact the bank to talk to someone who could offer some advice or help. No luck! Months had gone by and suddenly she gets a letter saying they are going to help her! Wow, really??
Tell me if this is helping her, they sent her a document to sign within 5 days which was a new mortgage document. Here are the terms, they were adding $12,000 in late charges and attorney’s fees to her mortgage balance, then charging her 7% when the going rate is 5% and then amortizing the remaining loan over 40 years!
Doesn’t it make you mad? It does me! What is this money, yours and my tax money, being used for if not for people who have been affected by the downfall of the economy? I would like you to join me in contacting your representatives and senators and ask then why aren’t the American people being helped! Thanks, if we each do what we can, it will make a difference!
the Capitol
We also had the Secretary of HUD, Shaun Donovan, speak to our Realtor delegation and the outcome was a modification that is going to be a tremendous benefit to the first-time home buyers. It is this: HUD has approved the amount of the Tax Credit to be able to be used for the downpayment, through a bridge loan by the bank offering the loan to the home buyer.
This means the home buyers only need good credit and employment and very little money to buy though the FHA mortgage program. This should definitely bring some extra home buyers into the picture who earlier were short on the downpayment.
We all have heard of the $8,000 Tax Credit that the Administration signed to law to help stimulate the real estate industry in an effort to get the economy going. Over the past month, it has definitely helped to get many first-time home buyers off the fence and out buying houses, but it could be better.
Just received word that the new change is temporarily on hold until some details with the advance for the downpayment are figured out. Click here to go to the Mortgagee letters.
