Tag Archives: Housing Market


FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond their control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.

By: Esther Cho, DSNews


3 Financial Reasons to Buy a Home NOW!

Part I – Prices Are Rising at an Accelerated Rate

prices up

The price of a home is the major consideration when deciding whether or not it makes financial sense to purchase a house. Experts are not only projecting that house values will increase in 2013. They are also more optimistic in the level of appreciation they are projecting as the market begins to heat up. Here are some examples:

The Home Price Expectation Survey

The latest survey of a nationwide panel of 118 economists, real estate experts and investment and market strategists reveals they project home values to end 2013 up an average of 4.6% according to the first quarter. This is after they had projected a 3.1% increase just three months ago.

Bank of America

In a report titled, Someone Say House Party?, Bank of America analysts revised their projections upward:

“Home prices continue to show momentum amid shrinking inventory and record high affordability, prompting us to revise up our original forecast of 4.7% for home prices this year. We now expect national home prices, as defined by the S&P Case Shiller home price index, to increase 8% this year.”

Capital Economics

According to a report in DSNewsCapital Economics also upgraded their prediction:

“Strong demand and tight inventory have brought existing home sales back to ‘normal’ levels, and further gains are possible, according to the latest market report from Capital Economics. Additionally, market conditions may prompt lenders to “loosen the purse strings slightly” and lend a little more freely.

These conditions, combined with broader economic indicators, lead Capital Economics to revise its previous forecast of a 5% price gain this year up to 8%.”

Morgan Stanley

In an article from HousingWireMorgan Stanley joined the party:

“Strong momentum in home prices as well as housing activity gave Morgan Stanley analysts enough confidence to upgrade their home price appreciation projections to roughly 7% (from 5%) for 2013, according to its latest global securitized credit report…

“The momentum in most metrics of housing activity is running well ahead of the pace we had expected,” said James Egan, Jose Cambronero and Vishwanath Tirupattur, analysts for Morgan Stanley.”

Not only are prices projected to appreciate. Experts are actually revising their projections upward as demand maintains its momentum.

Part II – Interest Rates Are Increasing

interest rates

A big component in the cost of a home is the mortgage interest rate a purchaser pays. Understanding where rates are headed will help in making a decision whether to buy now or wait.

So, Where Are Rates Headed?

No one can know for sure. The Fed has been artificially holding rates down to stimulate the economy. However, as the economy improves, many experts expect rates to creep up. As an example, HSH Associates, the nation’s largest publisher of mortgage and consumer loan information, recently explained:

“The stronger the economy becomes, the higher rates may grind; the Federal Reserve is keeping them low to goose the economy, but an economy responding to the Fed’s medicine will soon see less of a need for it in order to function. If not otherwise manipulated, higher rates are the natural result of a growing economy, as rising demand for available credit supply and concerns about inflation allow costs to rise.”

The Mortgage Bankers Association (MBA) agrees. They were quoted in HousingWire late last year regarding their thoughts on where rates would be headed in 2013.

“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association predicted.”

In the MBA’s latest Mortgage Finance Forecast they forecast that the 30 year interest rate will be 4.3% by the end of the year. This represents an increase of almost a full percentage point from the 3.4% rate available at the end of 2012.

Mortgage Payments

For example, we show the impact a one percent increase in rate will have on the monthly principal and interest payment on a $200,000 mortgage.

Freddie Mac’s Weekly Primary Mortgage Market Survey reveals that rates have increased by 2/10ths of a percentage point already this year.

As we mentioned, no one knows for sure where rates will be a year from now. But, many experts think they may be as much as a point higher. With rising residential real estate prices and the possibility of higher mortgage rates, waiting to buy a home makes no sense in our opinion.

Part III – Rents Are Skyrocketing

money evaporating house

Whether you own or rent, you will have a monthly housing expense. The question is how that expense will change in the future. When you purchase a home, for the most part, you lock-in that monthly housing expense for the length of the mortgage you take (15 or 30 years for example). When you rent a home, your housing expense is impacted by movements in the supply and demand for rental properties.

Historically, residential rental rates increase by 3.2% on an annual basis. However, in the current housing environment, there is an increasing demand for residential rental properties. This increase in demand has dramatically impacted rates. Zillow, in their most recent report, revealed that rental rates in the U.S. increased by 4.5% over the last twelve months. Other studies have projected rental rate increases of 4-5% over the next few years.

The only way to have control of your housing expense is to buy.

But Isn’t Buying Much More Expensive Than Renting?

Not right now! As a matter of fact, with prices down and mortgage rates at historic lows, it is LESS EXPENSIVE to buy than rent in most areas. In a recent reportTruliarevealed it is cheaper to buy than rent in ALL of America’s largest regions.

According to Jed Kolko, Trulia’s Chief Economist:

“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat. Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets.”

However, Kolko went on to say that this opportunity may soon disappear:

“Although buying a home is still cheaper than renting, the gap is closing. In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”

Again, the only way to lock-in your monthly housing expense is to take that decision out of the hands of a landlord by owning. With both prices and interest rates set to increase, the best time to buy is right now.

By: The KCM Crew, KCM Blog


Existing-Home Sales Up in February; Inventory Rises from Prior Month

Existing-home sales rose 0.8 percent in February to a seasonally adjusted annual rate of 4.98 million, the National Association of Realtors reported (NAR) Thursday. Economists had expected the sales pace to climb to 5.01 million from January’s originally reported 4.92 million. January sales were revised up to 4.94 million.

The median price of an existing single-family home rose to $173,600 in February as the median price in January was revised down to $170,600.

The inventory of homes for sale rose for the first time since last July, up 9.6 percent to 1,940,000. At the reported sales pace, that represents a 4.7-month supply of homes for sale, up from the 4.3-month supply reported for January.

The month-over-month increase in sales was the eighth in the last 12 months. February sales were 10.2 percent ahead of the pace one year ago.

The report on existing-home sales tracked NAR’s Pending Home Sales Index (PHSI) which fell in December to its lowest level since June. The PHSI, however, bounced back in January to its highest level since April 2010.

Weak prices continue to contribute to the reluctance of homeowners to list their homes. The median price of an existing single-family home averaged $176,500 over the last six months, down from $180,000 in the previous six months (which included the summer months, typically a stronger sales period). Listed inventory, according to theNAR, is 19.2 percent below a year ago, when there was a 6.4-month supply.

Sales continue to be plagued by weak inventory. The inventory of homes for sale has averaged 2,189,000 for the last 12 months, down from 2,832,000 for the previous 12 months.

Though the February median price was up 11.6 percent from a year ago, the median price of an existing single-family home has fallen for five of the last eight months. The median price is down 24.6 percent from the July 2006 peak of $230,300 and is off 8.1 percent from the 2012 peak of $188,800 in June.

Distressed homes—foreclosures and short sales—accounted for 25 percent of February sales, up from 23 percent in January but down from 34 percent in February 2012. Fifteen percent of February sales were foreclosures, and 10 percent were short sales compared with January, when 14 percent of sales were foreclosures and nine percent were short sales. Foreclosures sold for an average discount of 18 percent below market value in February, while short sales were discounted 15 percent. In January, foreclosures sold for an average discount of 20 percent, while short sales were discounted 12 percent.

Unlike the government report on new home sales which tracks contracts, the NAR report is based on closings, which means this report (though labeled “February”) actually reflects economic conditions in December, when contracts were signed amidst uncertainty that “fiscal cliff” negotiations would affect the mortgage interest tax deductions and other homeownership incentives.

The median time on market for all homes was 74 days in February, 24 percent below 97 days in February 2012, the NAR said. Short sales were on the market for a median of 101 days, while foreclosures typically sold in 52 days and non-distressed homes took 77 days. One out of three homes sold in February was on the market for less than a month.

First-time buyers, according to the NAR, accounted for 30 percent of purchases in February, unchanged from January; they were 32 percent in February 2012.

Regionally, existing-home sales in the Northeast fell 3.1 percent to an annual rate of 630,000 in February, 8.6 percent above February 2012. The median price in the Northeast was $238,800, 7.6 percent above a year ago and up 5.6 percent from January.

Existing-home sales in the Midwest slipped 1.7 percent in February to a pace of 1.14 million, 12.9 percent above a year ago. The median price in the Midwest was $129,900, up 7.7 percent from February 2012 but down 1.1 percent from January.

In the South, existing-home sales increased 2.6 percent to 2.01 million in February, 14.9 percent above February 2012. The median price in the South was $150,500, up 9.3 percent from a year ago and up 2.0 percent from January.

Existing-home sales in the West rose 2.6 percent to 1.2 million in February, 1.7 percent above a year ago. The median price in the West rose to $237,700, 22.7 percent above February 2012, but off 0.4 percent from January.

By: Mark Lieberman, Five Star Institute Economist, on DSNews


Trulia: Owning Costs 44% Less than Renting

Home price gains may be outpacing increases in rent, but the cost of being a homeowner is still much less than that of a renter, according to Trulia’s Winter 2013 Rent vs. Buy report.

After factoring all cost components including transaction costs, taxes, and opportunity costs, Trulia found buying a home is 44 percent cheaper than renting, down slightly from 46 percent a year ago.

“Although buying a home is still cheaper than renting, the gap is closing,” said Jed Kolko, Trulia’s chief economist. “In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”

In the last year, asking home prices showed a 7 percent gain compared to a 3.2 percent increase in rents during the same time period, according to data from the real estate site.

Trulia explained low mortgage rates have kept the cost of owning down; for the analysis, a 3.5 percent mortgage rate was assumed.

The San Francisco-based company also revealed that out of the 100 largest metros analyzed, buying was more affordable than renting in all metros.

In some metros, the cost of buying was much less than the national average. The buy-rent gap was the largest in Detroit, where buying costs 70 percent less than renting. For the next four metros in top five, the cost of owning was 63 percent less than renting; the four metros were Dayton and Cleveland in Ohio; Warren, Michigan; and Gary, Indiana.

Although owning was found to be less expensive in all metros, owners in San Francisco averaged the smallest savings at 19 percent, a steep decrease from the 35 percent savings seen in 2012.

If one were to receive a mortgage rate of 4.5 percent, Trulia noted the cost of buying would be just 9 percent cheaper in San Francisco. However, a rate of 4.5 percent would still make buying more affordable than renting in all metros analyzed.

“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat,” Kolko added. “Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets – so long as they can get a mortgage in the first place.”

Other metros where owning may not be as enticing to borrowers based on savings were Honolulu, where the cost of owning is 23 percent cheaper, followed by San Jose (-24 percent), New York (-26 percent) and Albany (-30 percent).

By: Esther Cho, DSNews


What’s Up with the Housing Inventory?

It’s All About Supply and Demand

Definitions of Supply and Demand:

 Dictionary.com

In classical economic theory, the relation between these two factors determines the price of a commodity. This relationship is thought to be the driving force in a free market. As demand for an item increases, prices rise. When manufacturers respond to the price increase by producing a larger supply of that item, this increases competition and drives the price down.

Investopedia.com

A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply and demand defines the effect that the availability of a particular product and the desire (or demand) for that product has on price. Generally, if there is a low supply and a high demand, the price will be high. In contrast, the greater the supply and the lower the demand, the lower the price will be. The law of supply and demand is not an actual law but it is well confirmed and understood realization that if you have a lot of one item, the price for that item should go down.

In real estate appraisal context, the principle of Supply and Demand states that:

The price of real property varies directly, but not necessarily proportionately, with demand and inversely, but not necessarily proportionately, with supply.

My most simple explanation of Supply and Demand is: It is the relationship between sellers present in a market, which is the supply; and buyers looking, which is the demand. This relationship is reported in months’ supply of inventory.

So, what is the latest challenge?

Some (or most) might say that there are not enough “good” homes for sale. This could represent a shortage of supply, something we have not talked about for several years. It is allowing sellers to raise their asking prices and buyers who have been ‘shopping around’ are now willing to pay higher prices based on other homes they are comparing and/or contemplating to the home that they want.

Why do we have a shortage?

  • We are coming out of the worst decline (or correction) in real estate values for many generations – some pointing back to the early 1980′s, others are pointing back to the Great Depression.
  • In all of Chicagoland, our MLS showed a 37.6% decline in 5 years. The values hit their all-time high in the 3rd quarter of 2007 at $391,272, and by the 3rd quarter of 2012, they hit a low of $244,203.
  • The mean sales price at the end of the year in 2001 was $239,858, and year-end 2002 was $255,001. Therefore pricing as of the end of 2012 is at the same level that we were 10 years ago – sometime in 2002.

Why aren’t there many “good” homes for sale?

There are several contributing factors:

1. New construction – We are seeing new construction picking up again at all price points, which is certainly a positive. But with fewer builders, and more conservative approaches after getting burned, builders are not keeping up with the demand that is present. This is leaving buyers searching for resales. And because of the slowdown in new construction, (few new homes were built between 2007 and 2012) the nearly-new resales rarely exist.

Lack of new construction is a contributing factor as many builders folded or downsized significantly over the past 5-6 years.

2. Foreclosures – Foreclosures are a trend that is affecting supply of inventory. Banks are slower at foreclosing, in some cases taking over 3 years through the process. In some cases, the buyers aren’t even interested in these properties, and the investors are picking up these properties and flipping them at a profit.

Foreclosure properties, once viewed as a deal perhaps 25% to 40% under market values, are now being sold at only a 7% discount according to RealtyTimes.com.

3. Investors – Investors have entered the market at greater levels, some to purchase properties to rent, others to rehab and flip them. With the high inventory, investors were able to seek out the best deals, now there are fewer homes available for them.

4. Few people really want to sell at the bottom – Personally, I think the biggest reason that our inventory is low is simply because everyone wants to buy at the bottom; but what seller really wants to sell their home at the bottom of the market? That being said, there are many sellers who cannot sell.

Recently, I heard Steve Harney speak at the Leading Real Estate Companies of the World Conference; he stated there are over 10 million people that are still under water and cannot sell their homes. That is a significant number – these are ‘move-up buyers’ that will create a domino effect. A portion may also represent the potential downsizing buyers who have that upper priced home to sell. This is a very complicated situation. There are many opportunities in the market as demand continues to surge.

Move-up sellers have pent up demand and are ready to buy – if they can sell!

Remember, our market dropped 37.6% as a region since 2007 (some areas fell less than 20%, and other areas fell greater than 50%). The buyers with 20% down lost equity in their homes. Buyers with 5% or 10% lost substantial equity in their homes. If they sell today, they don’t have the down payment necessary for that next home.

Various predictions by “experts” suggest our recovery may be anywhere between 2% and 8% annually. At a conservative 4% annual rate of recovery, it is 5 more years before we can reach 20%.  Those who last purchased their home between 2006 and 2008 are being hurt the hardest in today’s market.

One positive is that renters are ready to purchase. Generation X and Y buyers now believe in homeownership; they want to get out of renting apartments because rents continue to go higher than taking out a mortgage. Interest rates remain at historic lows, with no indication of a significant increase of rates on the horizon.

From the 3rd quarter to the 4th quarter, Chicagoland saw its first quarter to quarter increase in sales price since prices began falling five (5) years ago. All indications are that this trend is continuing. But the increase, although welcome news, is very small. (+0.13%). Many communities throughout Chicagoland are seeing more substantial increases, some are not yet seeing increasing values. (44%, or 84 out of 191 communities) saw increases over the past quarter.

Back to Supply and Demand …

A balanced supply of inventory is considered to be 4 to 6 months. A balanced supply is going to be neutral in pricing, while an undersupply is going to lead to upward pressure on prices – a Seller’s Market. An oversupply will lead to downward pressure on prices – a Buyer’s Market.

Our supply of inventory is at its lowest level since the end of 2006 and most areas have been reduced to a balanced supply of inventory, with undersupply observed in many sub-markets in the region.

Chicago Detached housing is 3.88 months, and Attached housing (condos, townhomes, Co-ops and duplexes) is 2.87 months supply!

The anticipation is that the pricing will continue to be pressured upward as the desirable properties (in terms of location and condition/modernization) will be gobbled up. Remember the multiple-contracts driving up values last decade? Many agents are now experiencing these trends again.

Get ready for a wild and crazy ride as our real estate market in Chicagoland is pulled and pushed in all directions in 2013

This could lead to things that do not make sense in the crazed market. Real Estate professionals (Agents and Appraisers alike) must take care to understand all of the nuances in the market signaling the positives taking place.

Just what we need: more complications to try to understand.

Here are a few things to watch…

  • Watch the days on market (DOM). Take time to understand if an area’s high DOM may be due to stale listings of homes that are overpriced, distressed and/or in inferior condition.
  • Trend the increasing Sales Price-to-List Price ratios – in many sub-markets that I appraise in, I have seen these trend from 93% to 96% or higher just in the past year.
  • Track the number of pendings in relationship to the number of listings? One appraiser friend of mine tracks this and calls this “market velocity.” Right now, I see some areas where there have more pendings than listings in a given sub-market.
  • Are the pendings priced higher than the previous sales prices? Another indication of an increasing market that I am seeing in many areas.

Welcome to, we all hope, the Housing Market Recovery!

By: Chip Wagner on the KCM Blog


Homeowners 'Springing' into Action, According to Report

Recent data show homeowners are getting ahead of the curve and listing their properties earlier than in previous years as the spring selling season approaches.

A report by Realtor.com shows listing inventories increased by 1.15 percent month-over-month in February, and houses stayed on the market for an average of 98 days, down 9.26 percent from January. Month-over-month list prices also increased to $189,900.

“As we enter the busiest time of the year for home buyers and sellers, our latest housing trend data shows just how competitive the market is with a significant national housing recovery well underway,” Steve Berkowitz, CEOof Move, Inc., said in a statement.

“Looking ahead, we can expect the amount of inventory to increase this spring along with higher list prices as sellers become more comfortable with the market conditions,” Berkowitz added.

This recent spate of news indicates to some that a growing number of “move-up” homebuyers are less reluctant about venturing into the market and are taking early advantage of the recent uptick in housing prices. This positive swing coupled with the consistent, gradual downward trend of annual inventory levels, which decreased by 15.97 percent over the last two years, are giving sellers more motivation to strike while the iron is warming.

Nationally, the median list price also rose by 1.55 percent during the month of February and 1.01 percent annually, while the median age of inventory dropped in nearly all of the 146 markets Realtor.com tracks.

California markets showed the biggest decreases with year-over-year declines in for-sale inventories. Declines averaged 48 percent in Sacramento, Stockton, Oakland, San Jose, Orange County, Los Angeles, Seattle, San Francisco, Riverside, and Ventura.

Cities in coastal areas stayed on the market longer according to the report, with Seattle and Denver posting record low inventory median ages.

By: Ashley R. Harris, DSNews


Short Sales – 10 Common Myths Busted

It’s likely you’ve heard the term “short sale” thrown around quite a bit. What exactly is a short sale?

A short sale is when a bank agrees to accept less than the total amount owed on a mortgage to avoid having to foreclose on the property. This is not a new practice; banks have been doing short sales for years. Only recently, due to the current state of the housing market and economy, has this process become a part of the public consciousness.

To be eligible for a short sale you first have to qualify!

To qualify for a short sale:

  • Your house must be worth less than you owe on it.
  • You must be able to prove that you are the victim of a true financial hardship, such as a decrease in wages, job loss, or medical condition that has altered your ability to make the same income as when the loan was originated. Divorce, estate situations, etc… also qualify. There are some exceptions to hardship now, but for the most part the bank or investor will need to verify some type of hardship.

Now that you have a basic understanding of what a short sale is, there are some huge misconceptions when it comes to a short sale vs. a foreclosure. We take the most common myths surrounding both short sales and foreclosures and give a brief explanation. LET’S BUST SOME MYTHS!!

 

1.) If you let your home go to foreclosure you are done with the situation and you can walk away with a clean slate. The reality is that this couldn’t be any farther from the truth in most situations. You could end up with an IRS tax liability and still owing the bank money. Let me explain. Please keep in mind that if your property does go into foreclosure you may be liable for the difference of what is owed on the property versus what is sells for at auction, in the form of a deficiency balance! Please note this is state specific and in most states you will be liable for the shortfall, but in some states the bank may not always be able to pursue the debt. Check your state law as it varies widely from state to state.

Here is an example of how a deficiency balance works:

If you owe $200,000 on the property and it sells at auction for $150,000, you could be liable for the $50,000 difference if your state law allows it.

Not only could you be liable for the difference to the bank, but in some situations you could also be liable to the IRS! Although there are exemptions (mostly for principle residences) under the Mortgage Debt Forgiveness Act, there are times when you could be taxed on both a short sale and a foreclosure, even in a principle residence situation. Since the tax code on this is a little complicated and I am not a CPA, I advise always talking to a CPA when in this situation as you are weighing your options. Banks and the IRS can go as far as attaching your wages. Not to mention if you let your home go to foreclosure you will have that on your credit, as well.

Guess What? A short sale can alleviate your liability to the bank, in most situations. There are also exceptions to this, but in most cases banks are releasing homeowners from the deficiency balance on a short sale.

2.) There are no options to avoid foreclosure. Now more than ever, there are options to avoid foreclosure. Besides a short sale, loan modifications along with deed in lieu are also examples of the many options. In most cases (but not all) a short sale is the best option. Either way, there are more options today than there have ever been to avoid foreclosure.

3.) Banks do not want to participate in a short sale, or, it is too hard to qualify for a short sale. Banks would rather perform a short sale than a foreclosure any day. A foreclosure takes a long time and creates a huge expense for the banks; a short sale saves both time and money. In working with some of the biggest lenders and servicers in the country they have told me that on average they net 17-25% more on a short sale than on a foreclosure. A testament to this is the financial incentives now being offered by banks, and how much the entire process has recently changed to try and streamline the process for all parties. Banks more than ever welcome short sales. Qualifying for a short sale is easier than you think, you need to have a true financial hardship, or a change in your finances and your house has to be worth less than what you owe on it. Not only do consumers, but banks also now have government incentives to participate in short sales.

4.) Short sales are not that common. At this present time, short sales range from 10-50 % of sales in various markets and it is predicted that in 2013 we will have more short sales than any other year, to date.  One of the biggest reasons is that MHA(Making Home Affordable expires December 2013). Many of the Government incentives like HAFA, will expire the end of this year. Due to economic changes in the last few years, this is something that is affecting millions of Americans. Short sales are in every market, and are not just limited to any particular income class. This has affected everyone from all facets of life. A short sale should be looked at as a helpful tool, not a negative stigma.That is why the government is offering programs that actually pay consumers to participate in short sales. It is not just affecting one community; it is affecting communities and consumers across the nation.

5.) The short sale process is too difficult and they often get denied. Though the short sale process is time consuming; it is not as difficult as the media would have you believe. The problem is that most short sales are denied because of a misunderstanding of the process. It is true that if the short sale process is not followed correctly there is a good chance of getting denied. An experienced agent knows how to avoid this. Short sales require a lot of experience, and a special skill set. If you are looking to go the option of a short sale make sure your agent is skilled and experienced in this area.

6.) Short sales will cost me money out of pocket. A short sale should not cost you any out of pocket money. In fact, you could get between $3000-up to $30,000 to participate in a short sale. In many ways, a short sale may put you in a better financial position than prior to the short sale. Almost every short sale program now has some type of financial incentive for the home owner, as long as it is a principle residence, and we are even seeing relocation money being paid on some investment/second homes. As a seller of a property you should never have to pay for any short sale cost upfront to any professional service. Realtors charge a commission that is paid for by the bank. In most communities there are also non-profits and HUD counselors who can help you with foreclosure prevention options for free. The only potential cost you could incur is if the bank would not release you from a deficiency balance in the short sale, which is happening less and less now.

7.) If I am behind on my payments, I can perform a short sale any time. The farther you get behind on your payments, the harder it is to get a short sale approved. The closer a property gets to a foreclosure the harder it is to convince the bank to perform a short sale. As they get closer to a foreclosure sale more money is spent, thus deterring them from doing a short sale. If you think you need to perform a short sale, time is of the essence; the sooner you start the process, the better. Waiting too long can trigger the ramifications of a foreclosure, losing the ability to do a short sale as a viable option.

8.) I have already been sent a foreclosure notice so I can’t perform a short sale. For the most part just because you received a foreclosure notice or notice of default it does not mean that you do not have time to perform a short sale. The timeline and specifics do vary from state to state, but having done short sales all over the country, I have seen banks postpone a foreclosure to work a short sale option as close as 30 days prior to the scheduled foreclosure auction, but the longer you wait the less chance you have. If you have received a legal foreclosure notice, please reach out to a professional right away. The longer you wait, and the closer you get to foreclosure, the fewer options you have. If you have received a notice to foreclose this means the bank is filing paperwork and starting the process to take legal action to repossess the house. You still have time at this point to prevent foreclosure, but do not hesitate! The closer you get to the foreclosure date the harder it becomes to negotiate with the bank for whichever option you choose.

9.) I was denied for a loan modification, so I know I will get denied for a short sale. Short sales and loan modifications are handled by two separate departments at the bank. These processes are totally different in approval and denial. If you got denied for a modification you can still apply for a short sale; in some cases you can get a short sale approved faster than a loan modification, as some loan modifications are denied because they cannot reduce the loan low enough based on the consumers income.

10.) If I go through a short sale I cannot buy another house for a long time. The time to buy another house depends on your entire credit picture and can vary from 2-3 years. Fannie and Freddie just came out November first and said a homeowner may be eligible two years after a short sale to repurchase. There are even a few FHA programs that allow for a purchase sooner than that, but the guidelines are fairly strict. Some regional and local banks will finance 16-18 months after a short sale, but the interest rate will more than likely be higher than one of the national chains, and this is based on their specific under writing guidelines.

These are just a few of the common myths surrounding short sales and foreclosure. With the options available today, no homeowner should ever have to go through foreclosure, and hopefully this information can help a few more homeowners think twice before walking away from their home not realizing the possible long term ramifications a foreclosure can have.


Best Places to Buy Foreclosures

In some parts of the country, it’s much easier to land a good foreclosure deal than in others.

In the Palm Bay, Fla. metro area, for example, buyers have plenty of foreclosed homes to choose from and pay an average of 28% less for repossessed homes than in conventional sales, according to RealtyTrac, an online marketer of foreclosed homes. Last year, nearly 24% of all sales were foreclosures.

As a result, it landed at the top of RealtyTrac’s best places to buy a foreclosure in 2013 list. Other metro areas where home buyers will have better luck include Rochester and Albany, N.Y., the New York City metro area, and Lakeland, Fla.

Those shopping around in McAllen, Texas though, shouldn’t hold their breath. The supply of foreclosed homes there are limited, according to RealtyTrac, and only made up 7% of all home sales last year. Other markets where it’s tough to find a deal on a foreclosed home include Ogden, Utah, Little Rock, Ark., Las Vegas, and Salt Lake City.

“The challenge of the 2013 market, for many cities, is a lack of [foreclosure] inventory,” said Daren Blomquist, RealtyTrac’s vice president. “The best places to buy are where a lot of homes will become available.”

Many foreclosures have been in limbo since fall 2010 following the so-called robo-signing scandal, when banks allowed employees to sign off on thousands of foreclosure documents a month with little verification.

The backlog in foreclosures had become particularly bad in judicial states like Florida and Illinois, where judges must approve the paperwork. But after a massive foreclosure abuse settlement was reached between the state attorneys general and the nation’s five biggest lenders, foreclosure processing has picked up again in those states.

The rebound in housing markets — gains in existing home sales, new home sales and home prices — has added strength to the case for buying foreclosures. Now that home prices are starting to stabilize, buying a foreclosed home isn’t as risky as it was a few years ago.

“The underlying fundamentals in many of those [top] markets are slowly improving, making it an opportune time to absorb additional foreclosure inventory this year,” Blomquist said.

Yet, not every bargain basement foreclosure is a good deal. Many are sold as-is and come with issues. Get the home inspected and have the heating, air conditioning, electrical and plumbing, as well as the structural integrity checked out before you sign a contract.

Also, analyze the neighborhood carefully and check out local crime rates. When there are a lot of foreclosures in one place they can drag down the home values around them. 

10 best places to buy foreclosures:

These markets have plenty of foreclosures to choose from and steep price discounts.

 
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Source: RealtyTrac and Les Christie, CNNMoney

Fla. Pushing Ex-owners to Apply for Lawsuit Money

 If you know of homeowners who lost their homes to foreclosure between Jan. 1, 2008, and Dec. 31, 2011, Florida Attorney General Pam Bondi asks that you provide them with this website address – nationalmortgagesettlement.com – and tell them to act now.

Part of the $32 billion national mortgage fraud settlement with Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo included a $1.5 billion fund to compensate borrowers who were foreclosed on after Jan. 1, 2008.

Approximately $170 million is available for cash payments to Florida borrowers. As of last Thursday, 51 percent of eligible homeowners had applied for assistance. Many others have not responded to multiple mailers and live operator calls informing them they may be eligible for modified loans and reduced mortgages.

“This week, I’m going around the state to find these individuals,” Bondi told Realtors attending the Florida Realtors Mid-winter Meetings last week in Orlando. “If I have to, I’ll stand on the steps of every city hall in the state and beg people who deserve their money to come forward.”

Borrowers who submit a claim online will see a deadline notice of Jan. 18, 2013. However a spokesperson for the Attorney General’s office says claims administrators will accept claims forms through Feb. 15, 2013. The form must be filled out completely and properly or the claim will not be paid.

Individuals who have questions or need help filing their claims can contact the settlement administrator, toll-free, at 866-430-8358, or send questions by email to administrator@nationalmortgagesettlement.com.

Source: Florida Realtors


CFPB Launches National Mortgage Servicing Rules

An outright dual-tracking ban and serious consideration of loan modification requests are just two provisions in a series of national servicing standards rolled out by the Consumer Financial Protection Bureau late Wednesday.

The CFPB’s official servicing rules, which take effect Jan. 2014, create a baseline set of standards for all U.S. servicers to follow.

The guidelines apply to all mortgage servicers, except for smaller servicing shops that deal with 5,000 or fewer loans. 

THE CFPB SERVICING RULE IN A NUTSHELL

The CFPB’s official mortgage servicing guidelines released Wednesday forbid dual-tracking, or from starting a foreclosure if a borrower already submitted a completed application for a loan mod or foreclosure alternative.

To give borrowers time to submit loan-mod applications, the CFBP rule prevents servicers from making a first foreclosure notice or filing until a mortgage is at least 120 days delinquent.

Furthermore, servicers must inform a borrower of all loss mitigation options after the homeowner has missed two consecutive mortgage payments. This requirement forces servicers to provide a written notice with examples of options that could be available to troubled borrowers.

The CFPB servicing rule also mirrors guidelines outlined in the national foreclosure settlement and by prudential regulators last year. The new CFPB rule says servicers must deploy policies and procedures that provide delinquent borrowers with direct, easy and continuous access to servicing employees who can assist with loan issues.

In addition, these servicing employees are responsible for alerting borrowers who miss information on loan modification applications and for ensuring documents reach the right personnel for processing. The contacts also have to provide continuous updates to the borrower on loan modifications.

HANDLING LOAN MOD REQUESTS

Mortgage servicers must deploy a fair review process that considers all foreclosure alternatives available from either the investors or mortgage owners.

Servicing shops are no longer allowed to steer borrowers to options that are most financially favorable to the servicing shop.

Furthermore, if an application for a loan modification arrives at least 37 days before a scheduled foreclosure sale, servicers must consider and respond to the borrower’s request.

In addition, if the servicer offers a foreclosure alternative, the borrower must be given time to accept the offer before the servicer can move for foreclosure judgment or sale. The CFPB added that servicers cannot foreclose if a borrower reaches a loss mitigation agreement, unless the borrower fails to perform their part of the deal.

KEEPING THE BORROWER INFORMED

The servicing guidelines from CFPB require servicers to offer borrowers regular and clear monthly statements, showing the amount owed and due date of the next payment. These statements should also break down payments by principal, interest, fees, escrow and include recent transaction data.

If a mortgage rate is about to adjust for the first time on an adjustable-rate mortgage, servicers have to provide the borrower with a disclosure.

The CFPB says borrowers can no longer be surprised by forced-placed insurance policies attached to their accounts. If such a transaction is required, the servicer must provide advance notice and pricing information before charging consumers. In addition, a servicer has to have a reasonable basis for concluding a borrower lacks this type of insurance before acquiring a policy. When servicers do buy insurance and find out it was not needed, the policy must be terminated within 15 days with all premiums refunded.  

CLARIFYING MISTAKES

The CFPB guidelines also require servicers to promptly credit a consumer’s account on the day that a payment is received. If partial payments are put in a suspense account, the account must be credited to the borrower’s account as soon as the suspense account includes an amount equal to a full payment.

When receiving a request for payoff balances on mortgages, servicers must provide a response within seven business days of receiving the written request.

Servicers must quickly respond to borrowers who point out account errors. Servicers have to acknowledge receipt of written notices and must do the following within 30 days: correct the error and provide the information requested; lead a reasonable investigation and inform the borrower of why the error did not occur; or inform the borrower that the information asked for is not available.

Servicers also are required to store borrower information in a manner that makes it easily accessible. This means having policies and procedures in place to ensure information is passed on to borrowers, investors and the courts in a timely fashion.

NEW BORROWER STANDING

Officials with the CFPB said Wednesday that loss mitigation issues are only enforceable through the bureau and enforcement agencies, not the borrower. However, a consumer not receiving the benefits of the CFPB’s outlined servicing processes – such as an end to dual tracking – can go to court to stop the rule violation.

CFPB director Richard Cordray sees the creation of national servicing standards as a direct result of the housing meltdown, which led to obscene foreclosure levels and a dramatic increase in processing issues.

“Servicers were unprepared to work with borrowers that needed help to deal with their individual problems,” he wrote. “People did not get the help or support they needed, such as timely and accurate information about their options for saving their homes.  Servicers failed to answer phone calls, routinely lost paperwork, and mishandled accounts.”

The CFPB said half of the complaints reported to the bureau in the second half of 2012 related to loan modifications, collections and foreclosure issues on mortgages.

A summary of the rule can be accessed here. The final rule will be available on the CFPB’s website Thursday.

By: By Kerri Ann Panchuk, HousingWire