Buying Arizona Real Estate » Financing

What do you do if the homeowner just doesn’t want to sell their negative equity home? – Thomson Law PLC

Tony Pomykala — Sat, 02 Oct 2010 15:29:51 +0000

What do you do if the homeowner just doesn’t want to sell their negative equity home?

I imagine this is rare, but it has come up more than once when a homeowner is faced with the point today where they can no longer afford their home or it no longer makes sense to keep paying on a negative equity home. They contact you, the Realtor and their Trusted Advisor, to explore options. For the most part those options have consisted of a Short Sale, trustee sale/foreclosure or loan modification exercise that ultimately fails to fix the problem. But, what if a homeowner could keep their home and owe no more than what its current resale value is? We are not talking principal reduction.

We are now late in the cycle of the mortgage crisis. First were the defaults of the sub-prime loans. Then came the Alt A loans. Now we are seeing the defaults of prime loans. With unemployment and underemployment high there is no relief in sight. At this point, these homeowners have tapped their savings and assets. The homeowner has run up their credit cards and now find themselves in dire financial straits. A short sale would be a great solution but they just do not want to or feel they cannot leave their property. Now there is a solution.

The last resort, using the biggest hammer available, also has the greatest social stigma…Bankruptcy. At this point the homeowner feels sick but, we are not talking everyday consumer bankruptcy. Current bankruptcy laws allow, in a strategic fashion, for the stripping of any negative equity subordinate lien. In other words, releasing the second or third mortgage from the property so that it is unsecured. Next the bifurcation or splitting of the remaining first mortgage into a secured portion that is up to the value of the property and an unsecured portion that is above that value and lastly, the discharge of all unsecured debt including the unsecured portions of the mortgage. The result is that the homeowner may be relieved of the residue of this mortgage crisis. They now will own a home with what should be an affordable payment and owing only what the home is currently worth. They now have the ability to restore their credit or to get some time under their belt to re-establish their credit.

With HAMP a failure and the weight of short sales and the subsequent reductions in home values, tough solutions must be considered. Not every homeowner should consider the bankruptcy solution but, the option is available.

Thomson Law, PLC is a full service law firm and has added to its practices a Strategic Bankruptcy Practice focused on assisting homeowners in this situation. We believe that Bankruptcy should be the last option but should not be dismissed from the discussion of options. If you have a client that faces a point today that can no longer afford their mortgage and owes more than their home is worth please call Thomson Law today. We will sit down with them discuss their situation so that all of their legal rights and obligations are understood so that they can make good decisions for their family.

For questions or comments about this or other articles please visit our

blog. blog.MortgageMediationGroup.com

Doug Farnham (Central/Southern AZ)

(602)774-3753

DFarnham@ThomsonLawPLC.com

Bob Verbic (Northern AZ)

(928)899-5765

BVerbic@ThomsonLawPLC.com

www.MortgageMediationGroup.com

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Loan Mods and Unicorns – Thomson Law PLC

Tony Pomykala — Sat, 02 Oct 2010 15:17:04 +0000

The Loan Mod Myth

What do Successful Loan Mods and Unicorns have in common? They are both mythical creations. The difference is that Successful Loan Mods did exist at one time before HAMP, but now seem to have gone the way of the dinosaur. Although there is that rare individual that receives a “permanent” modification, there are also rare individuals that win the lottery. Even if a homeowner does get a “permanent” modification there is about a 50/50 chance it will result in an increase in their monthly payments.

The MSA’s (Mortgage Servicing Agreements) and PSA’s (Pooling and Servicing Agreements) between the lender (servicer) and investment groups, defines the number of loans that can be modified in a portfolio. Typically this number is less than 5%, which is why the lenders allowed some modifications and then stopped. There was no consideration that AAA rated securities would have the default rates occurring today and therefore there were no provisions to handle the mess we are in now. Most of the residential loans were securitized into mortgage backed securities and pieces sold to junior tranche owners that get paid only after the senior tranche owner has been paid in full. The effect of MBS distributions and any funds paid by Mortgage Insurers have created a situation in which investors are typically receiving 95% of market value from a foreclosure of a property.

You may notice that we have used quotes on the word “permanent”. That is the term used by lenders as it is defined in HAMP. The reality is that these loans in almost every modification are not permanent; meaning they are not fixed for balance of the term of the loan. Rather, the loan is modified for 3 to 5 years and then adjusts or returns to an increased interest rate. The 3 to 5 year period is just long enough to get the homeowner past the 2012 deadline for the Mortgage Debt Relief Act. This means that the homeowner could miss their opportunity for an exit without tax consequences by accepting a modification.

Another reason that the term “permanent” is illusory as it relates to loan mods is that many of the lenders will repeal the modification that was supposedly approved and granted. This leaves the homeowner unable to pay off the accrued, unpaid payments, interest and fees to prevent a default and the home will usually be taken in a foreclosure.

Even if the homeowner is extremely lucky and gets a loan modification, that lowers their monthly payment, the issue of negative equity has not been addressed nor resolved. Unless and until the homeowner receives a loan modification that includes a reduction of the principal balance so as to eliminate or appreciably reduce the negative equity, the primary problem faced by the homeowner will continue to exist.

The reason it is important to understand the fallacy of a loan mod is that homeowners spend months or in some cases even years playing this game with the lender and may miss their best opportunity for a clean exit from the property through short sale. As a Realtor you may already be explaining this to homeowners, but we hoped that this information may help the homeowners you consult with to better understand their options.

Below are some other tools that can help a homeowner separate their emotions from what should be a strictly financial decision.

Short Sale Decision Tree

Stay or Go Calculator

For questions or comments about this or other articles please visit our blog. blog.MortgageMediationGroup.com

Doug Farnham (Central/Southern AZ)

(602)774-3753

DFarnham@ThomsonLawPLC.com

Bob Verbic (Northern AZ)

(928)899-5765

BVerbic@ThomsonLawPLC.com

www.MortgageMediationGroup.com

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The Upside of Short Sales

Tony Pomykala — Tue, 18 May 2010 20:01:22 +0000

note: I received this in an email, and thought it was worth sharing:

For the last few months we have been writing articles to keep Realtors informed on issues relating to short sales. We have had comments from some Realtors that they are afraid to handle short sales because of the risks involved. But lets look at the future of short sales and the potential benefits:

First, from the Realtor’s perspective, there isn’t much of an option. Since REOs and short sales account for 59% of homes sold in April, Realtors must be willing to take these listings. That percentage is expected to increase since there is a huge shadow inventory of homes that will be hitting the market in the next few months as lenders have stopped their moratorium on foreclosures after the beginning of the year. JPMorgan Chase Warns Investors about Strategic Defaults.
Short sales becoming more socially and ethically acceptable to homeowners because of government programs like HAMP and HAFA that have legitimized this option.
For homeowners that face a potential deficiency liability, a short sale gives another opportunity to get a release from that liability. If the lender will not allow the language necessary for this release, a short sale may still reduce the amount of that liability as opposed to a trustee sale.
If a homeowner knows there will be tax implications as a result of exiting a home, that liability may be reduced through a short sale as opposed to trustee sale that will typically fetch a lower price.
More and more homeowners are deciding to exit their property compared to a year ago when most were trying to keep their home through a loan modification. The reality that loan mods are a failed exercise and that lenders are not doing as promised has seemed to reach consumers. Here are 8 reasons that loan mods fail.

1. Lenders make promises and later deny or retract loan mod offers.
2. Temporary mods are often required but 3 to 5 months later they are told they do not qualify for a permanent mod.
3. Lenders continually request updated financial records. This is not just a nuisance but is a method used by lenders to extract further payments from the homeowner and try to determine available assets for lawsuits.
4. After following the lender’s instructions to make reduced payments as part of a temporary mod, when the lender later rejects that loan mod that borrower is now in default and the lender can file for trustee sale.
5. Most loan mods are only a forbearance under which the missed payments, penalties and interest are added as a balloon to the end of the loan, further increasing the homeowner’s negative equity.
6. Failure to disclose the investor and their NPV (Net Present Value) calculations to the homeowner make the decisions of the banks seem unreasonable and counter to financial logic.
7. “Permanent” mods are not typically permanent. In most cases the lower interest rates are only fixed for 3 to 5 years.
8. If a borrower decides to exit the property after receiving a permanent loan mod, it may be too late to receive the benefit of the Mortgage Debt Forgiveness Act (through 2012) creating a tax obligation that the borrower may not have faced, if they made their decision earlier.

Based on the results of loan mods to date, it seems a reasonable assumption that the whole process is not to help the homeowner, but to keep the homeowner making some kind of payment.

In the last HAMP report released in December of 2009, it is easy to see why homeowners need alternatives to loan modifications. In AZ only 4,137 homeowners have received a permanent modification. Nationally, out of 3.5 million homeowners that should have qualified, only about 66,000 received permanent mods and about half of those homeowners had their monthly payments increase.

Here are some tools that may be able to help homeowners decide whether or not a short sale is their best option.

Last chance to register for the free “Short Sales Exposed – Insiders Tell All Seminar“ on May 19th, 9:00AM to 12:00PM at the Scottsdale Center for the Performing Arts. Click here for more info or to register.

Doug Farnham (Central/Southern AZ)

(602)774-3753

dfarnham@tcmmg.com

Bob Verbic (Northern AZ)

(928)899-5765

bverbic@tcmmg.com

www.MortgageMediationGroup.com

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New Fannie Mae Waiting Periods for Sellers of Distressed Homes

RebeccaRoberts — Mon, 10 May 2010 18:31:06 +0000

from Rebecca Roberts, Mortgage Banker with The Lending Company, Inc.

Advising Short Sale and Deed-in-Lieu Clients 2010

If you are working with a client who has had a short sale or a deed-in-lieu in their past…or you are listing a home and your sellers may have the same issues…Fannie announced new waiting periods, as of July 1, 2010, before being eligible for another loan. The waiting period is defined as “from the date of the pre-foreclosure to the date of application”.

Fannie defines ALL Pre – foreclosure events as any one of the following:
Deed-in-Lieu
Preforeclosure Sale
Short Sale
Full Foreclosure retains a 5 yr waiting period

New Waiting Periods Effective July 1, 2010

Preforeclosure Event	Current Waiting Period Requirements	New Waiting Period Requirements
Deed-in-Lieu of Foreclosure	4 years Additional requirements apply after 4 years up to 7 years	2 years – 80% maximum LTV ratios 4 years – 90% maximum LTV ratios 7 years – Standard LTV ratios
Preforeclosure Sale	2 years
Short Sale	No specific policy currently exists

For extenuating circumstances, for all 3 event scenarios, it’s a 2-year waiting time and 90% LTV.

Rebecca Roberts    Mortgage Banker
The Lending Company, Inc.
6910 E. Chauncey Ln. Ste. 220 Phoenix, AZ 85054
Phone: 602-791-6262                Fax: 866-559-9097
License: NMLS #231543 – BK0909441
rroberts@thelendingco.com
www.thelendingco.com

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Purchase a New Home with only a 1% Down Payment?

RebeccaRoberts — Thu, 22 Apr 2010 21:41:38 +0000

Introducing the Arizona Home Buyer Solutions™ Program
from The Lending Co. and Rebecca Roberts

Purchase a New Home with only a 1% Down Payment*

Up to a 2.5% gift
Gift to be used for a down payment by homebuyers utilizing an FHA 1st mortgage.
Down payment requirements as low as 1%
Seller can contribute up to 6% for closing costs and pre-paids
Expanded Income Limits based on county.
Competitive interest rates.
Flexible loan approval guidelines.
Not just for first time home buyers.
Applies to ANY FHA-Approved Property in AZ!

This program is ideal for low to moderate income individuals and families looking to obtain quality affordable housing with only 1% down. And the better news is the 1% down payment can be a gift from a family member!

The Arizona Home Buyer Solutions Program is offered exclusively through The Lending Company, a direct endorsed U.S. Housing and Urban Development lender.

* Plus, the Down Payment can be a Gift from a Family Member!

The Lending Company is a Direct Endorsed H.U.D. Lender. The 1% down payment program is a qualified gift program. It is available statewide in ARIZONA to qualified homebuyers. The minimum down for FHA financing is 3.5%. The gift is available up to 2.5%. Example for illustration purposes only: $100,000 sales price. $1,000 down (1%) PLUS closing costs. 6.0%/6.684 APR. 30 year fixed rate. Subject to income and credit qualifications. Rates and fees subject to change without notice. Call your representative for current low rates and further details.

*Must be Owner Occupied.

Rebecca Roberts
Mortgage Banker
The Lending Company, Inc.
Phone: 602-791-6262
Fax: 866-559-9097
License: NMLS #231543 – BK0909441
rroberts@thelendingco.com
http://www.thelendingco.com/

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Cash Strapped Buyers Could Get Shut Out (100% financing)

Tony Pomykala — Thu, 11 Mar 2010 23:56:54 +0000

Cash Strapped Buyers Could Get Shut Out

If you have buyers in need of 100% financing, take notice! One widely popular tool for funding is about to run out of money. Buyers that need a no down payment loan guaranteed by the USDA are running out of time to get their deal done.

USDA Rural Home Loans have been a phenomenal tool for helping cash strapped buyers get into homes for no down payment. Unlike many other loan programs though, the amount of funds available to fund these loans are set and capped at the beginning of the fiscal year.

Notice was delivered from Washington on March 9 that the funds are nearly exhausted, with expectations that they will run out in late April.

Unlike years past when similar notifications have been delivered, the USDA will not be issuing conditional commitments for buyers as the program awaits new appropriations from Washington. The USDA states they are “not certain when additional funding will be available.”

What does this mean for your buyers?

If your buyers need 100% financing and are not eligible for a VA loan, they have to act quickly or they will have to seek other options. Combined with tightening from HUD on FHA loans in April and potentially later this summer, cash strapped buyers may be shut out if they miss this opportunity.

If you have any questions, call me and let’s discuss them.

Sincerely,

Rebecca Roberts
Mortgage Banker
The Lending Company, Inc.
Phone: 602-791-6262
rroberts@thelendingco.com
BK0909441 NMLS#231543

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Those Who Wait Will Pay Thousands More This Spring

RebeccaRoberts — Thu, 04 Mar 2010 16:23:24 +0000

Those Who Wait Will Pay Thousands More This Spring

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

It is important to note that in order to be eligible for the lower cost up-front mortgage insurance, a lender has to order a case number from the FHA before April 5th. A case number can only be generated for loan applications where a property is involved and a fully executed purchase contract exists. Home buyers who have been pre-approved but are not under contract will not be eligible for the reduced premium effective April 5th.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me. I appreciate your business.

Sincerely,

Rebecca Roberts
The Lending Co.
602-791-6262
rroberts@thelendingco.com
equal opportunity lender
BK0909441 NMLS#231543

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Loss Mitigation Programs

Tony Pomykala — Wed, 10 Feb 2010 16:35:59 +0000

An interesting email I received from Stan Van Dyk of Cash Funding Options:

Hi All:
Today, I’m going to show you how the government’s
moratoriums and loss mitigation programs have affected
foreclosures and shadow inventory.

Shadow inventory is made up of all the properties that are
in foreclosure or headed toward foreclosure that haven’t
hit the market yet. There are 7 million homes in this shadow
inventory category. What the government isn’t telling you
is that their moratoriums and loss mitigation programs
created a huge surge of foreclosures that are about to pop.

Their effort to decrease foreclosures has backfired.

According to the National Association of Realtors, there
were 3.6 Million unsold homes in September. You think there
are a lot of homes on the market now? There are 7 Million
more coming that the government has created in this shadow
foreclosure inventory. That’s 2 times the amount of homes
that are currently on the market now!

The government’s Making Home Affordable (MHA) modification
program and FHA’s Hope for Homeowners refinance program DO
NOT WORK for borrowers that are too wealthy or owe too much
on their homes. The number of foreclosures for high end and
luxury homes in increasing and there are a ton of luxury
homes in this shadow inventory.

So what does all of this mean to you as a real estate
investor?

Opportunity, a lot of opportunity to help high-end
homeowners by offering them a short sale while making a
killing in the process.

So when can we expect to see the surge in foreclosures from
this shadow inventory?

We are in the first phase of shadow inventory right now and
it will continue into 2010. The second wave will start in
2010 and will continue into 2011 because the national
foreclosure moratoriums ended in March and the government
intensified its HOPE NOW Alliance program as well as its
Home Affordable Modification Program (HAMP). These programs
were released in the first week of March but the problem
was that the servicers and lenders did not receive training
until the middle of June. Then, the programs had to be
updated because they weren’t effective and they became more
complicated to implement effectively.

This created a huge amount of people that have not paid
their mortgage and their houses have not been taken back by
the lenders yet. Basically the government only delayed the
inevitable foreclosure process but they made it worse
because all of the homes will be entering foreclosure at
the same time and with more debt owed on the mortgages.

This is the ultimate short sale environment. These homes
are ripe for the picking. Many of these homeowners have thrown
their hands up and have vacated the houses. These vacant
houses are gold for you as a real estate investor.

The third phase of shadow inventory will be borrowers that
have exhausted their options on long term government
sponsored payment plans, forbearances, and failed
modifications. These will show up in 2011 and continue into
2012 as their foreclosure timelines were delayed or reset
by the latest HAMP efforts.

As you can see, the biggest mass of foreclosures hasn’t
even hit us yet!

Call us to see how you can help and profit from the the credit and housing crisis.

Thank you,

Stan Van Dyk – Managing Partner
Cash Funding Options
4625 S Lakeshore Dr Tempe, AZ 85282
888-341-3802 Toll Free 602-314-1025 Office 480-516-4364 Cell
480-240-1316 e-Fax
Stan@CashFundingOptions.com http://www.cashfundingoptions.com/

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The Phoenix Real Estate Weekly 2/5/2010

Barb Savoy — Fri, 05 Feb 2010 14:35:26 +0000

Courtesy of Barb Savoy-Pacella ABR, CNRS, CHMS
Director of Business & Career Development
Keller Williams Arizona Realty

This week appears to be a good news/perhaps not so good news week in the market.

The good news is that the totals for notice of trustee sale for the month of January are in. In Maricopa County 6,762 notices were served in January, which is the lowest number since November of 2008.

However, in reviewing the market for the past week, we are observing an increase in listings (typical for this time of year), and the first sign of slowing pending sales. The slowing is not dramatic, but something that we will obviously be observing.

Overall, price per square foot increased by $.52 cents for the month of January, bringing overall depreciation from -16.7% to -1.9%, but if pending sales remain slow, that could change.

Current Conditions in the Phoenix Market:

* There are 27,494 single family detached homes actively for sale in MLS. That is an overall increase of 46 listings from last week.
* There are 35,102 total homes (including condos, patio homes, town homes and lofts) actively for sale in MLS.

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FHA waives the 90 day flip rule

Tony Pomykala — Mon, 18 Jan 2010 17:09:56 +0000

I received a nice email from Michael Neill of American Alliance Mortgage Company with the following fantastic news:

BREAKING NEWS!!!!!FHA WAIVES 90 DAY FLIP RULE

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes…

…The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

· All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

· In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.

· The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website at: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

Mike Neill
480-505-2202 ext 208
mike@aamcbank.com

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Buying Arizona Real Estate » Financing

What do you do if the homeowner just doesn’t want to sell their negative equity home? – Thomson Law PLC

Loan Mods and Unicorns – Thomson Law PLC

The Upside of Short Sales

New Fannie Mae Waiting Periods for Sellers of Distressed Homes

Advising Short Sale and Deed-in-Lieu Clients 2010

Preforeclosure Event

Current Waiting Period Requirements

New Waiting Period Requirements

Purchase a New Home with only a 1% Down Payment?

Introducing the Arizona Home Buyer Solutions™ Program from The Lending Co. and Rebecca Roberts

Cash Strapped Buyers Could Get Shut Out (100% financing)

Those Who Wait Will Pay Thousands More This Spring

Loss Mitigation Programs

The Phoenix Real Estate Weekly 2/5/2010

FHA waives the 90 day flip rule

Introducing the Arizona Home Buyer Solutions™ Program
from The Lending Co. and Rebecca Roberts