After a rejection Some borrowers think that because their mortgage application is turned down the first time, they won’t ever be approved. In reality, some borrowers succeed on the second or third attempt, usually with a different mortgage professional, and often several months later, after they have saved more money for a larger down payment or improved their credit score.
Making sense of the story
* Before reapplying for a mortgage, borrowers are advised to look at the reasons they
were initially rejected.
* The Equal Credit Opportunities Act requires lenders to give loan applicants specific
reasons in writing within 30 days of their decision. If it’s based on a problem in the
borrower’s credit report, the lender must tell the borrower the name and address of the credit agency that provided the information.
* Talking to the loan officer who denied the application to see how close the borrower was to being approved also can be helpful. Sometimes the gap is small and could be
bridged with a larger down payment or another home appraisal, for example.
* It also may be worthwhile to shop around for other lenders. Borrowers can work with a mortgage broker or an online network like LendingTree or Zillow’s Mortgage
Marketplace.
* A credit union also might be a better bet for some applicants. Credit union loan
committees may permit better deals for longtime members; they might also modify loan terms for borrowers they already know.
* However, first-time buyers may need to scale back their aspirations. One reason people get turned down for a mortgage is because they try to buy more property than they can afford based on current incomes.
* Applicants also should look at ways to strengthen their financial picture. If a borrower’s credit is poor, paying down credit-card balances can help to increase a FICO score.
Read the full story The New York Times
After a Rejection
FHA extends waiver of anti-flipping regulations
The Acting FHA Commissioner has extended a temporary waiver of FHA’s anti-flipping regulation through 2012.
“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Carol J. Galante. “FHA remains a critical source of mortgage financing and stability, and we must make every effort to promote recovery in every responsible way we can.”
With certain exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, FHA temporarily waived this regulation through Jan. 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
The extension announced is effective through Dec. 31, 2012, unless otherwise extended or withdrawn by FHA. All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.
California Association Realtors.org
FHFA revises HARP to help more borrowers
The Federal Housing Finance Agency, along with Fannie Mae and Freddie Mac, on Monday announced changes to the Home Affordable Refinance Program (HARP) to help more borrowers.
The program will continue to be available to borrowers with loans sold to Fannie Mae and Freddie Mac on or before May 31, 2009, with current loan-to-value (LTV) ratios above 80 percent.
The new program enhancements address several other key aspects of HARP including:
Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;
Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;
Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;
Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the Enterprises; and
Extending the end date for HARP until Dec. 31, 2013, for loans originally sold to the Enterprises on or before May 31, 2009.
Fannie and Freddie plan to issue guidance with operational details about the HARP changes to mortgage lenders and servicers by Nov. 15. Since industry participation in HARP is not mandatory, implementation schedules will vary as individual lenders, mortgage insurers and other market participants modify their processes.
CAR.org
Gov. Brown signs AB 771
Last week, Gov. Brown signed AB 771, a bill that prevents home buyers in a common interest development (CID), such as a condominium or townhome, from being charged excess document fees.
Homeowner associations (HOAs) are required to provide specific documents to prospective purchasers of homes in a CID — a form of real estate ownership in which each homeowner has an exclusive interest in a unit and a shared interest in the common area property. In addition to the standard residential property disclosures, purchasers of a unit within a CID must receive basic information about the structure, operation and management of the HOA that operates the CID.
Current law requires that this information come from the HOA and prohibits it from charging fees in excess of what is “reasonable,” not to exceed the actual cost of processing and producing these documents. HOAs generally have provided the documents for approximately $75 to $250. Increasingly, HOAs have been delegating document preparations to third party vendors or contractors who, under a 2007 court decision, are exempt from this fee limitation. This delegation of responsibility by HOAs sometimes resulted in home purchasers being forced to pay additional fees, as much as $1,000, for other documents which were “bundled” with the required documents.
Assembly Bill 771 (Betsy Butler, D-Torrance) addresses this situation by specifying that only fees for the required documents may be charged when such documents are provided, effectively prohibiting any “bundling” of fees for other documents with these fees. The bill also creates a new form detailing which documents are required, and requires the provider to disclose the fees that will be charged for the documents before they are provided. The seller of a CID must complete this form and transmit it to the prospective purchaser along with the required documents. This will eliminate any uncertainty for the prospective purchaser as to exactly which documents are being provided and the precise fees being charged for those documents.
CAR.org
Homeownership hits lowest level since 1965
Last Friday, the Census Bureau reported that the percentage of people who owned a home had dropped to 65.9 percent during the second quarter – its lowest level since the first quarter of 1998 and far from the high of 69.2 percent in late 2004.
Read the full story CNN Money
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
Trying to time the bottom may hurt your bottom line
It’s no secret the U.S. has been in a real estate tailspin since June 2006. More than one-fourth (27 percent) of single-family homeowners are now in negative equity, which means their homes are worth less than what they owe on them. As a result of dropping home values, we are all caught in a sort of real estate limbo: homeowners are waiting on the sidelines to sell and home buyers are trying to time the bottom, waiting for the ultimate rock-bottom bargain. All of this leads many to wonder: “when will the bottom happen?” When will this frozen real estate landscape begin to thaw?
What many people don’t consider is that home prices are only one factor in how much a home will actually cost per month. The other major factor to take into consideration is mortgage rates.
Read more Zillow
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
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