Fannie Mae and Freddie Mac recently extended their foreclosure forbearance programs to give
short-term aid to unemployed homeowners, but housing counselors warn that these borrowers
will need to look at longer-term solutions.
Making sense of the story
* In a forbearance program, a lender agrees not to foreclose on a property and gives the borrower several months’ grace from or reduction in monthly mortgage payments. The programs work best for temporary setbacks, like job loss, health problems, or natural disasters.
* There are drawbacks to the forbearances though. The most-significant drawback is a larger total debt from the smaller payments. The unpaid balance continues to increase during this time.
* The new temporary mortgage payment is often set to 31 percent of the household
income; in some cases lenders agree to accept no payments. Fannie Mae’s extended
unemployment program, first offered in the fall of 2010, limits any nonpayment or other forbearance plans to one year, with the second six months requiring approval by both Fannie Mae and the lender.
* However, even with the program in place, the lender could still report a mortgage as delinquent, which could adversely affect the borrower’s credit score.
* Because some agreements add onerous term and conditions, homeowners should also consult with a housing counselor certified by the Dept. of Housing and Urban Develpment.
Read the full story The New York Times
A reprieve for unemployed borrowers
State targets property-tax payers
Beginning with the 2012 tax bill (the one due in April 2013), the state Franchise Tax Board will require property owners to break down their property taxes into deductible and non-deductible portions.
Read the full story
Orange County Register
Congress reinstates FHA loan limit
C.A.R. applauds reinstatement of FHA loan limits; urges longer extension of flood insurance
LOS ANGELES (Nov. 18) – The U.S. Congress late yesterday passed a “minibus” appropriations measure that will continue to fund the government and includes a provision to reinstate the Federal Housing Administration (FHA) loan limit in high-cost areas for two years. President Obama signed the measure into law today.
The higher Fannie Mae, Freddie Mac, and FHA conforming loan limits of $729,750 expired Oct. 1, when it was reduced to $625,500. The passage of H.R. 2112 provides for an extension of FHA-insured mortgages at the higher level through December 2013. It also provides for a short-term extension of the National Flood Insurance Program (NFIP) through Dec. 16, 2011. C.A.R. and NAR strongly urge Congress to work on a five-year NFIP reauthorization bill to provide certainty and avoid further disruption to real estate markets.
“C.A.R. is pleased the Senate and House were able to come to a reasonable compromise on extending the FHA loan limit to ensure affordable home financing for middle-class buyers,” said 2012 C.A.R. President LeFrancis Arnold. “However, we are disappointed that the Senate and House could not agree on increasing the loan limits for Fannie Mae- and Freddie Mac-insured loans, especially since the Senate bill included a premium on high-cost loans that protected U.S. taxpayers from footing the costs.”
The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) and the NATIONAL ASSOCIATION OF REALTORS® (NAR) have long advocated making permanent higher loan limits.
A continued government role in housing financing will ensure stability in mortgage markets and that home buyers in high-cost areas will be able to refinance and obtain FHA financing for new home purchases more easily. However, it will cost these home buyers more to finance their homes either through jumbo mortgages or with FHA than it would have through Fannie Mae or Freddie Mac.
The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Non-conforming or “jumbo loans” typically carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable.
Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
C.A.R. November 18, 2011
How to lower your property taxes
Despite home prices in major urban centers decreasing 31 percent between 2005 and 2009, property taxes across the U.S. increased by nearly 20 percent. There is good news, however; homeowners can fight back.
Making sense of the story
Homeowners should keep in mind that property taxes do not always correspond with home values, because local governments typically don’t measure values every year and some have limits on annual property-tax increases.
As a result, current property taxes might reflect the home’s value when the market was healthier. According to the Congressional Budget Office, property-tax adjustments lag behind changes in home prices by an average of three years.
Although homeowners cannot change their property-tax rate, which is set by the local government, homeowners can get their assessment lowered if they appeal to their local assessor.
One key to a successful appeal is fact checking the assessor’s work. About half of all successful appeals come from homeowners pointing out an error in the assessor’s description of the home, according to one property tax expert.
During the appeal process, which is similar to a less-formal court hearing, homeowners may present their case to several local officials or representatives. The simplest way to convince officials that a property has been incorrectly valued is to provide evidence of the sales price of homes that are comparable to the property being discussed. This should include square footage, amenities, and neighborhood characteristics. Sale documents and photos of the property in question, as well as the comparable properties also should be brought in.
Homeowners who have made improvements or substantial changes to the property should be cautious about appealing an assessment though, as it could have negative effects and actually increase theThe Wall Street Journal property’s value and, in turn, the property taxes. Read the full story The Wall Street Journal
Short sales: Are they worth the trouble?
Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.
Making sense of the story
Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss. To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price. According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
Home buyers wanting to purchase a short sale must have patience. In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.
In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home. In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or forego an inspection altogether.
Even with the challenges associated with short sales, buyers should not avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration and surprises down the line.
Read the full story AOL Real Estate
Cosigning on the dotted line
Tighter lender standards and an unstable job market have made it tougher for some people, especially those just starting out, to qualify for a home mortgage on their own. So, some home buyers are turning to family members or close friends with good credit to co-sign a home loan.
Making sense of the story
While becoming a cosigner may seem like a good solution, money manager and lenders caution against those who are asked to be the cosigner.
A cosigner, even if not living in the house, is really a coborrower, meaning he or she still is responsible for payments if the occupant is unable to meet his or her obligations. In other words, if the principal party defaults on the loan, the cosigner is on the hook.
One financial planner suggests potential cosigners take a less risky alternative, such as providing a cash gift for the down payment. Under current tax laws, a person can give as much as $13,000 to a person, free of gift taxes, or $26,000 per person, if a married couple filing jointly is giving the money.
Those considering cosigning a mortgage must conduct due diligence. First, the cosigner must understand why the family member or friend is asking for help. Potential cosigners shouldn’t be afraid to look into the requestor’s personal finances to help determine whether he or she will be able to repay the loan. Perusing credit reports also will show the track record he or she has for paying off debts.
A discussion about worst-case scenarios also should take place before signing on the dotted line. Working out a written contract containing an agreement about what would happen in the event of a default, also is recommended.
Cosigners also should keep in mind that the mortgage will show up on their credit report, and could affect their own ability to borrow money or buy a second home. If the principal borrower makes a late payment, that also will show up on the cosigner’s report.
Read the full story New York Times
ForSalebyOwner.com founder gives up on own listing, hires real estate broker
Former FSBO CEO sells home the traditional way
Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on his own through online classified ads and FSBO sites, but after six months, he opted to hire New York broker Jesse Buckler who immediately advised a price change as the listing was not attracting the right buyer.
After giving up on the DIY route, Sambrotto’s decision to hire a broker led to attracting multiple offers, closing for $150,000 over the original asking price. The WSJ reports the listing sold for $2.15 million including a 6% commission.
Many FSBOs turn to Realtors
The news stands as an enormous validation of the real estate profession and while some may tease, it is no laughing matter and the former FSBO CEO made a good financial decision.
AGBeat columnist Herman Chan said, “If people want to take a stab at For Sale By Owner (ie FSBO), go for it. But well over 80% of FSBO’s eventually have to list with an real estate agent to get their house sold. It’s harder than it looks!”
Not a new dilemma
Marlow Harris, Seattle Residential and Investment Consultant at Coldwell Banker Bain Associates told AGBeat, “The ForSaleByOwner.com founder’s dilemma is one we see quite often and is not unusual. Trying to sell your own property yourself or using a discount brokerage, is not the solution for everyone. Unusual properties, properties in the higher price range, these are more difficult to sell and often require specialization.”
Harris continues, “We see these choices across the board, from single family homes to huge housing developments. For instance, Vulcan, one of Paul Allen’s companies which has invested heavily in Redfin, does not use Redfin to market their many condominium projects. They use traditional real estate firms such as John L. Scott, Williams Marketing and Matrix Real Estate, finding that the do-it-yourself approach to real estate just doesn’t work for these types of sales.”
AGBeat News | August 3, 2011
Secrets to getting a mortgage with so-so credit
Getting a mortgage can be tough these days – even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren’t as bad as the doom-and-gloom crowd says.
Read the full story CNN SmartMoney
Survey shows opposition to down payment requirements and elimination of
NAR’s ninth housing pulse survey reflects that, as the housing market continues to struggle, Americans worry that policy proposals coming out of Washington could drag the market down further or deter potential new homeowners.
There is particular concern surrounding calls for a required down payment of 20 percent on home purchases. Seven-in-ten Americans say requiring a down payment of 20 percent on the cost of a home would have a negative impact on the housing market. The survey also shows strong concern about the possible elimination of the home mortgage interest deduction. Two in every three Americans, oppose eliminating the home mortgage interest deduction as part of a plan to reduce the federal deficit. A majority of Americans (51 percent) strongly oppose eliminating it. Americans believe that either action would have severe consequences for the housing market.
The survey, which measures how affordable housing issues affect consumers, also found job security concerns remain high, with 61 percent of Americans saying that job layoffs and unemployment are a big problem in their area; eight in 10 cite these issues as a barrier to homeownership.
More info Realtor.org
Lenders prepare for lower loan limits, stop accepting certain applications
In anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America has stopped accepting conventional and government applications for loan amounts that will exceed the permanent loan amounts. The deadline to submit loan applications was July 1.
According to an email from Bank of America, conventional loans that exceed the permanent loan limits will now be required to use non-conforming programs.
Barring congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum. The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
California Association of Realtors
DRE# 00917133