Buying Arizona Real Estate » mortgages

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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MBA to Hill: Expand Home Buyer Tax Credit

Tony Pomykala — Sat, 17 Oct 2009 19:57:55 +0000

Email provided by Kathy Morrow
Branch Manager/Sr. Loan Specialist for CNN Mortgage, Inc.

Article by Sorohan, Mike
The Mortgage Bankers Association, in a statement submitted to a House committee, urged Congress to extend a popular home buyer tax credit set to expire next month, and to expand its scope.

MBA told the House Small Business Committee the $8,000 first-time home buyer tax credit passed by Congress earlier this year has had measurable benefits to both the housing market and the overall economy, and that it should be extended by at least another year and expanded so that all home buyers could use it.

“The first-time home buyer tax credit has had a stimulating impact on our economy, and MBA supports extending and expanding it so it can help more buyers and sellers,” MBA said. “As we approach the end date of the current $8,000 tax credit, we urge Congress to expand the program to include all home buyers, increase the credit up to $15,000, make the funds available for closing and extend the overall program by at least 12 months.”

MBA noted that the “fragile” U.S. economy is just beginning to show signs of stabilizing, but economic recovery will not be complete until the current oversupply of houses on the market has decreased.

“We should not jeopardize our recovery by letting this tax credit expire,” MBA said. “The home buyer tax credit is helping hundreds of thousands of Americans realize the American dream, and it is creating thousands of jobs that rely on homeownership. Problems in the housing industry led us into a global recession, and housing stimuli can help lead us out of the recession.”

MBA has supported the first-time home buyer tax credit since it first passed Congress as part of the Housing and Economy Recovery Act of 2008 and expanded in the American Recovery and Reinvestment Act of 2009. The Internal Revenue Service recently reported that more than 1.4 million taxpayers have benefited from the tax credit; other reports corroborate that figure. However, the credit is set to expire on Nov. 30.

In June Sen. Johnny Isakson, R-Ga., introduced S. 1230, the Home Buyer Tax Credit Act of 2009, that would increase the maximum amount of the credit from $8,000 to $15,000 and expand the current tax credit so that it applies to any buyer of any home, not just first-time buyers. The legislation also would eliminate the income caps of $75,000 for an individual and $150,000 for a couple under the current tax credit so that there is no income limit for eligibility. It would also extend the tax credit for one year from date of enactment and would still allow home buyers to claim the credit on their 2009 tax return for purchases made in 2010.

Although MBA has seen some improvement in the housing market, it said the favorable impact of the first-time home buyer credit should continue beyond the Nov. 30 expiration date.

“We have an excessive inventory of available homes in many parts of the country,” MBA said. “This glut of existing homes will continue to put downward pressure on home values, which impacts the surrounding communities and perceived homeowner wealth, which is a driver of consumer spending. In simple terms, demand is not keeping up with the current supply. MBA supports tax initiatives that would encourage home purchase activity.”

Specifically, MBA recommends the following changes to the current tax credit:

–Expand eligibility to all home buyers.While the tax credit has proven to be effective in helping first-time home buyers, a large number of Americans are thinking about moving from their current home for various reasons and might be incented by a tax credit to do it now, when the economy needs it the most.

–Increase the tax credit to a maximum of $15,000. Increase the tax credit to up to 10 percent of the home purchase price up to a maximum of $15,000. The credit may include a phase-out based upon adjusted gross income as reported on a borrower’s most recent tax returns.

–Require the tax credit to be repaid in certain instances. The borrower should repay the tax credit only if the residence is sold within the first three years (exception for employment-related moves) or in the event of a taxpayer default on any other mortgage that existed at the date the tax credit is claimed. This would discourage “buy and bail” behavior, where a borrower uses the tax credit for his or her advantage and walks away from an existing mortgage obligation.

–Tax credit should be available for settlement. If practical, facilitate the IRS sending funds claimed by the taxpayer directly to the settlement agent of the property transaction for a downpayment

–Enhancements effective immediately. Any enhancements to the program should be effective on the date of enactment and should be in effect for at least 12 months to ensure the greatest economic stimulus.

Have a Wonderful Day!

Kathy Morrow Branch Manager/Sr. Loan Specialist
CNN Mortgage, Inc. San Tan Mall Office ~ Coming Soon!
2151 East Broadway Road #210 Tempe, AZ 85282
Cell: 480-363-8901
E-Fax: 480-383-6141
kmorrow@cnnmortgage.com
equal opportunity lender

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Treats, Not Tricks, Await Those Who Act Now!

Tony Pomykala — Sat, 17 Oct 2009 18:42:21 +0000

Treats, Not Tricks Await Those Who Act!

Last chance, last dance, last call. All sayings conjure up images but one thing remains constant. Miss the opportunity and it’s gone. Home loan rates recently hit all-time lows, and if you don’t act now, you could miss your chance to save thousands of dollars over the life of your loan!

According to Freddie Mac, interest rates recently dropped to all-time lows in some categories, and within a hair of all-time lows in others. We will likely never see rates at these levels again. If you missed the chance to refinance earlier this year, you just got a do-over. Don’t miss out a second time!

Why Act Now?
While the reasons to act now are numerous, here are just a few.

No one, not even George Washington, had a chance to borrow money at these rates…but you do!

The Federal Reserve implemented a mortgage-backed securities buying program to artificially lower rates, and that program is nearing its end. The originally scheduled end date was December 31, 2009. While this deadline has been extended the amount of purchases remains the same, which means the level of participation will wane, decreasing by half as much. Rates will be forced to levels seen before the program started, likely near 6.50% and in short order.

Inflation, while currently contained, is likely to show its ugly head as all the stimulus from Washington continues to pour into the system. The end result will be increasing inflation pressure across the board, which will cause all interest rates to rise.

Don’t Miss the Boat Here
Sydney Smith, an English clergyman from the 1800′s once said, “Regret for the things we did can be tempered with time; it is regret for the things we did not do that is inconsolable.”

It is likely that interest rates at these levels will never be seen again in our lifetime. Take advantage of them today while you still can so you’ll never have to look back and say, “I wish I had….” If you took advantage of this opportunity earlier this year, congratulations! If not, call me so we can discuss your situation.

Likewise, if you know someone else who can benefit, be it a family member, friend, or co-worker, please have them call me or let me know who they are and I will reach out to them. This could be the greatest gift you could offer someone this year.

I look forward to speaking with you soon, but if not, I hope you have a Happy Halloween!

Christopher Holmes Prospect Mortgage 5301 N Pima Rd #130 Scottsdale, AZ 85250

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Will Homeowners and Buyers Lose $45,000?

Tony Pomykala — Fri, 14 Aug 2009 21:10:46 +0000

An email article I received from Christopher Holmes of Prospect Mortgage. Very informative stuff!

Buyer Urgency – Interesting Article

This article says much better than I have been saying, why rates will be headed up by the end of the year and early in 2010. - Christopher

Will Homeowners and Buyers Lose $45,000?

Ann Arbor, MI August 13, 2009 –
Federal Reserve officials met yesterday and issued a statement saying that their program to purchase $1.25 trillion of mortgage-backed securities will be winding down by the end of year. “The Fed is the single largest buyer of mortgage bonds in the market today,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. “The way mortgage companies set their interest rates is by figuring out the price that Fannie Mae and Freddie Mac are willing to pay them for the mortgage. Fannie and Freddie set their price by figuring out what investors on the bond market are willing to pay them for the Mortgage-Backed Securities (mortgage bonds) that they issue. When the Fed stops buying mortgage-backed securities, the demand for these bonds will be much less, and mortgage rates will go higher.”

Since the Fed began purchasing mortgage bonds and intervening in the mortgage markets, interest rates on fixed rate mortgages have dropped a full percentage point below where they would be otherwise. “Take out the Fed’s subsidy, and mortgage rates are likely to drift back up by at least one percent,” Nicholas said. “A one percentage point increase in mortgage rates – from 5.25% to 6.25% – would cost an extra $127 per month and $45,730 in interest over the life of a $200,000 30 year mortgage. This is exactly what could happen in 2010 once the Fed stops buying mortgage bonds.”

Fed officials have been signaling for some time that their unprecedented interventions in the mortgage markets may come to an end or even be reversed once the economy begins to improve. “While we don’t believe the Fed will start selling mortgage bonds right away, we do believe that rates will start drifting higher in 2010 once the Fed stops purchasing mortgage bonds,” said Nicholas. “After all, it’s not every day that the Fed spends a whopping $1.25 trillion to subsidize mortgage rates. Take out this enormous subsidy, and the average person with a $200,000 mortgage who refinances or buys a house stands to lose $45,000 over the life of their home loan. That is why homeowners and buyers should really talk to their Certified Mortgage Planning Specialist and take advantage of this window of opportunity to refinance or buy a home while rates are still artificially low.”

Christopher Holmes, Certified Mortgage Planner
Prospect Mortgage 5301 N Pima Rd #130 Scottsdale, AZ 85250
Phone: 602-525-9593 | Toll Free: (800) 329-1817
ChristopherHolmes@cox.net www.ChristopherHolmes.web-loans.com
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