Donovan: Refinancing Proposals Would Benefit Economy, Borrowers, and Taxpayers

In a press briefing held in advance of President Obama’s appearance in Reno, Nevada,Housing and Urban Development (HUD) Secretary Shawn Donovan gave a preview of the home refinancing aspects of the President’s “To Do List” for Congress which he will be discussing further this afternoon.  Donovan also provided updates on the results of last fall’s executive refinancing initiatives.

Donovan said that last October,  the President had included proposals to increase refinancing in the jobs plan he submitted to Congress.  Ordinarily, the Secretary said, the economy would be receiving an enormous boost from the record low interest rates so refinancing is a critical step in realizing this.  When Congress did not act on the jobs bill the President asked administration officials to identify what could be done without Congressional action to remove barrier to refinancing.  Within six weeks, Donovan said, five barriers were identified and the administration moved to remove or mitigate them.

The result has been a 50 percent increase in refinancing applications, roughly one in three of which is for a HARP loan, up from one in ten a year ago.  The increase has been even greater in areas hardest hit by price declines and foreclosures.  According to data from the Mortgage Bankers Association, refinancing applications are up 240 percent in Nevada, 180 percent in Arizona, and 125 percent in Florida and informal surveys suggest that two of every three refinancing applications in the hardest hit states are for HARP loans.

In January’s State of the Union Address the President laid out the final steps aimed at those borrowers who are doing everything right but still cannot refinance and this week there were three bills introduced in Congress to implement the rest of the President’s program.  The first, introduced by Senators Menendez and Boxer, would remove the barriers remaining for some 12 million borrowers with government-backed mortgages.  The legislation would help borrowers with second liens, cut red tape and costs such as eliminating manual appraisals, and would increase competition.

Donovan said that currently the servicers who are already handling a mortgage have an incentive to refinance it but other lenders don’t.  The goal is to remove the last bar to cross-servicer competition by extending the same streamlined underwriting currently enjoyed by the existing lender to the rest of the market.   This would also extend streamlined refinancing steps to all GSE borrowers including those with significant equity and thus less credit risk.

Donovan stressed that these changes are a positive for taxpayers.  First they will pump billions of dollars into the economy   but they will also lower risk by lowering payments, and ultimately eliminate some of the costs of loans that default.

The second piece of legislation, introduced by Senator Feinstein, would provide simple, low-cost refinancing opportunities to non-GSE borrowers by extended streamlined refinancing to those who have been paying on their mortgages but have private label or bank loans.  The new mortgages would be run through the Federal Housing Administration and open up today’s low rates to an estimated three to four million families.  Donovan said that this program is an issue of fairness; many responsible borrowers who have done everything they were supposed to do are still unable to refinance simply because of who owns their loan.

The third piece of legislation proposes to give underwater borrowers who decide to refinance a choice of taking the reduced interest in the form of a lower monthly payment or applying those savings to rebuilding equity in their homes.  To encourage borrowers to make the latter choice the legislation would cover the closing costs of borrowers, a benefit of about $3,000 per homeowner on average.  Taking this course of action would give the majority of underwater borrowers the chance to get back above water in five years or less.

During the question and answer session Donovan was asked about pay-fors for the provisions and said that, while the President had made a proposal to cover the expected cost, the administration is open to looking at other suggestions.

Another reporter referenced a remark from Senator Boxer that Acting Federal Housing Finance Administration (FHFA) Director Edward J. DeMarco already possesses the authority to implement some of the proposals in her bill.  Donovan said that FHFA was looking at the idea of eliminating manual appraisals and there might be other provisions, but he added that there is an urgency to the President’s proposals.   All of them would help boost the economy, he said, and there is no way of knowing how long we will have these low interest rates.  “We need to move the legislation, not wait for an FHFA analysis.

In addition to the refinancing initiatives laid out by Donovan, the “to do list” the President will detail today contains the following:

• Legislation that gives companies a new 20 percent tax credit to cover costs of moving their operations back to the U.S. This will be paid for by eliminating current tax incentives that allow companies to deduct the costs of moving their businesses abroad.
• Legislation that gives a 10 percent income tax credit for firms that create new jobs or increase wages in 2012 and that extends 100 percent expensing in 2012 for all businesses.
• Legislation that will extend the Production Tax Credit to support American jobs and manufacturing and an expansion of the 30 percent tax credit for investments in clean energy manufacturing.
• Legislation that creates a Veterans Job Corps to help Afghanistan and Iraq veterans get jobs as police, firefighters, and other jobs to help their communities.

Source: Greg Carll Primary Residential Mortgage, Inc.

TheG-Team your Maryland Real Estate Connection, is a full-time team with over 19 years of experience. We provide service to our clients in all areas of Maryland. Our areas of specialty include Real Estate Central Maryland.

If you or someone you know is interested in Buying a home, Selling a home or renting a home, WE CAN HELP! We provide Experience, Integrity and Solutions to help you through the real estate process. Our website http://www.MarylandHomeSearchSite.com has all the information you need. It is designed to share info about the community, it’s neighborhoods, real estate trends, housing prices and the ability to create your own search for listings.

We’re ready to help you. Contact us by phone at (443)790-6918 or email theg-team@theg-team.com or contact.

 

Short Sale & Deed-in-Lieu of Foreclosure:

Possible Crisis? There are Dignified Solutions.

The state of the U.S. economy and housing market has brought many homeowners from security to uncertainty. But within this uncertainty, solutions have been created to assist those who need help. If you or someone you know is struggling to pay the mortgage, it is vital to understand ALL the options available.

The pressures of an upside-down mortgage are not just felt by the homeowner. Lenders are looking to avoid foreclosure and work with homeowners to find solutions to their financial situations. Lenders are not in the real estate business, do not wish to take ownership of a home, and do not want a house to sit idle on the market.

So what options are available to YOU?

If you or someone you know is facing foreclosure and the damages it will cause to credit scores, employment or security clearance, you should consider a short sale or a deed-in-lieu of foreclosure (or “deed-in-lieu”). These options could allow you to sell or walk away from your home without incurring liability for deficiency.

What Are Your Options …

By definition, termination of all rights held by the homeowner covered in a mortgage.The process, in which the lender claims ownership of the property, begins when the homeowner fails to make mortgage payments at the appointed time- this is called delinquency. Typically, a formal demand for payment is issued from the lender through a Notice of Default by state, the lender will often issue this notice when the homeowner has been three months delinquent on the mortgage payments.

Foreclosure can

• Remain permanently as public record on a person’s credit history for 10 years or more
• Lower credit scores anywhere from 250 to more than 300 points
• Deem you ineligible for a Fannie Mae-backed loan for up to seven years
• Challenge current and future employment
• Put homeowners at risk of high deficiency judgments
• Become an issue against security clearance if applicable

Short Sale

In a that’s less than the amount owed on the home. This results in the seller avoiding foreclosure, and allows the lender to avoid taking ownership and selling the property.

Deed-In-Lieu Of Foreclosuren-lieu is

A Deed-in-lieu is a process in which a property is given fully to the lender because the homeowner can no longer make payments. The lender then sells the property in order to retrieve a part, or whole of the loan balance owed. In most cases, the homeowner must attempt to sell the home at fair market value for at least 90 days before a mortgage company will consider a deed-in-lieu. This may not be an option if there are other liens on the property, such as second mortgages, judgments from creditors, or tax liens.

In both a short sale and deed-in-lieu, your lender can claim you owe a deficiency judgment on your remaining balance. This means the lender may have the right to pursue the difference of what you owed and the eventual sale price of the home.

In a foreclosure, all rights to your property are lost, while the lender retains the right to pursue a deficiency judgment. It will also remain on your credit history for ten years or more.

During negotiations for both short sales and deed-in-lieu transactions, it is imperative to understand whether your lender reserves the right to pursue a deficiency.

What Are The Possible Tax Consequences?

When it comes to the tax implications of a short sale or deed-in-lieu transaction, you will need to consult a tax professional. As a general rule, any debt forgiven by the lending institution will be considered income. Lenders are required to file a 1099-A with the IRS showing the deficiency, which could have tax implications for you. Once you have received Form 1099-A, you will need to complete IRS Form 982 to report how much of the debt was forgiven by the lender.

Again, consulting a tax professional is a vital part of this process, and can save you from future financial difficulties.

Following is a chart showing the consequences of a short sale, deed-in-lieu, and foreclosure, reflecting the amount of time that the homeowner must wait until being eligible to secure another loan:

Agency/Fixed Rate — Conventional Loans

• Short Sale: 2 Years
• Deed-in-Lieu of Foreclosure: 4 Years
• Foreclosure: 5 Years

FHA

• Short Sale: 3 Years
• Deed-in-Lieu of Foreclosure: 3 Years
• Foreclosure: 3 Years

What’s Your Fastest Way Out?

A deed-in-lieu is the fastest solution out of a foreclosure, compared to the timeline of a short sale. However, very few lenders will negotiate a deed-in-lieu if a lien, or second mortgage has already been taken out on the home. Also, a deed-in-lieu will be a typical question asked on any future credit applications. Your history of short sales will not be a concern. In addition, a short sale provides the feeling of accomplishment for selling your home.

What Should I Look Out For?

If you are considering either a deed-in-lieu or a short sale, it would be wise to review the terms and conditions of your transaction carefully. Make certain your agent can explain whether or not a deficiency balance is forgiven, or how long the lender can pursue this judgment.

Both options can save you from the distress that foreclosure will cause on your credit, finances, future employment and, most importantly, your stability.

I Heard About “Deed-For-Lease” … What’s That?

You might have read about a new program called Deed-for-Lease™. Fannie Mae created this program as an option for homeowners who are in distress but not eligible for a mortgage modification. Through this program, qualifying homeowners have the option to remain in their homes as renters after voluntarily transferring the property deed back to the lender. The homeowners must prove they are able to afford market rent, and then sign a lease with the lender.

Deed-for-Lease provides an additional option for borrowers who do not qualify for, or have not been able to sustain other loan-workout solutions. While this program is unique to Fannie Mae loans, be sure to discover what options your lender offers to homeowners who do not qualify for loan modifications but wish to stay in their homes.

Following are a few of the homeowner qualifications for this program:

• The property is to be used as the occupant’s primary residence
• The occupant’s income is sufficient to cover rental payments
• Inspection shows that the property has been kept in good condition
• The occupant agrees to be responsible for regular maintenance
• The number of occupants is appropriate for the home
• The occupants signing the lease must agree to a credit review

To learn more, please contact me or visit: www.efanniemae.com.

First Step

Talk with an educated real estate professional to evaluate your particular situation and assess your options. As a CDPE®-designated agent, I have received extensive training in foreclosure-avoidance options. Before applying for a deed-in-lieu, you should have a plan of action should you not qualify, or if the transaction does not go through.

I am here to help, call today. 443-790-6918

With more than 1 in 7 U.S. homeowners not paying the mortgage, it’s clear that no one

is immune to the current economic situation. I believe every homeowner deserves the best information and education to protect themselves from losing their home to foreclosure and ruining their credit. For those already struggling to pay their mortgages and unsure of what to do next, understanding short sales and deeds-in-lieu can ease their stress and potentially save them from an impending foreclosure. Deciding on which route will be best for you and your family’s future is the most important decision you can make. Please use this information to better understand the options available.

As a CDPE, I have been trained to assist homeowners in these difficult situations. If I can provide you with more information or assistance, please don’t hesitate to contact me.

Source: Maryland Short Sale Information

The G-Team, your Maryland Real Estate Connection: We are located in Millersville, Maryland between Baltimore and Annapolis in Anne Arundel County convenient to Fort Meade. We also service Howard & Queen Anne’s Counties and central Maryland. Whether you are BUYING a Home,  SELLING a Home , RELOCATING or SHORT SALES we can HELP.

 

Streamlined Short Sales—For Real

Bank of America, everyone’s favorite mortgage behemoth, is serious about short sales.  That’s the message behind a media blitz designed to highlight recent improvements in the bank’s short sale process. One of the goals is to reduce the time for short sale approval to 20 days. Sounds like a dream, but they’re putting legs on their good intentions. If you haven’t dealt with BofA for a while, you might be surprised at some of the changes:

• All communication with agents is now being routed through the Equator system—where a single point of contact (SPOC) is also provided.
• Negotiators are now expected to respond to all inquiries within two days. (Gee, what would that be like?) And if they don’t—agents are encouraged to call the team lead and raise the issue.
• If a buyer drops out, you now have five days to submit a backup offer. (Used to be 14 days, but at least you don’t have to submit a totally new short sale request.)
• Short sale submissions must now be accompanied by (just) fivestandardized documents:
  1. Purchase Contract including Buyer’s Acknowledgment and Disclosure
  2. HUD-1
  3. IRS Form 4506-T
  4. Bank of America Short Sale Addendum, which includes the Agent Certification form
  5. Bank of America Third-Party Authorization Form (known to you and me as a letter of authorization or LOA)

The standardized documents, designed to head off some common pitfalls and abuses, are available at the Agent Resource Center at bankofamerica.com.  Along with these required forms, the site contains news, updates and resources specifically for short sale agents.

That Third Party Authorization Form is now the only one Bank of America will accept, so it would behoove agents to get familiar with it.  It’s composed to protect BofA from liability if the Designated Representative (you, as the agent) misbehaves. It also has a common-sense clause making the document “effective until the completion of the Short Sale(s) unless terminated by me (us) in writing.” So, you don’t have to produce a new LOA every 90 days.

As Bob Hora, Bank of America’s point man for short sales and REO’s makes clear, they’re gearing up for a short sale surge. Are you ready?

Source: Partner First Nationwide Short Sale Network

The G-Team, your Maryland Real Estate Connection: We are located in Millersville, Maryland between Baltimore and Annapolis in Anne Arundel County convenient to Fort Meade. We also service Howard & Queen Anne’s Counties and central Maryland. Whether you are BUYING, SELLING, RELOCATING or SHORT SALES we can HELP.

 

Do You Owe More on your MORTGAGE then you could get if you SOLD your HOME!!!!

An expensive car repair, an emergency, an unexpected illness – just a couple of little things and the life you’ve worked so hard to build and your finances can begin to feel completely out of balance. No one is immune from the housing crisis in this country. The foreclosure crisis has hit every income, every region and every education level. Take a look at some of these numbers:

•Number of consecutive years home prices have fallen: 5

•Number of homes lost to foreclosure since 2007: 7.9 million. In 2011

1.9 million homes were foreclosed on. In most economic times, that would be a lot of homes, but that was actually the lowest number of foreclosures since 2007. When you find yourself in financial distress because of an unaffordable mortgage it can make you feel like the scales are tipped against you and that there is no way out. You have options.

Real estate professionals Like TheG-Team your Maryland Real Estate Connection who have earned the Advanced Certified Distressed Property Expert (ACDPE) designation are on a mission to help you. They are specifically trained to provide you with options and help you avoid scams.

REMEMBER: DOING NOTHING DOES NOT SOLVE ANYTHING!

Foreclosure results from non-payment of a mortgage and is the final step in a delinquency proceeding. Far too often, homeowners don’t reach out for help before letting this happen. The unfortunate fact is that there’s a lot more to foreclosure than losing your home. Foreclosure carries long-term consequences. It affects your credit. After foreclosure it will be 7 years or more before any bank will consider letting you buy a home again.

The fact is foreclosure almost never needs to happen—especially today.

When you contact a CDPE, he or she will go over your options to avoid foreclosure.

 Here are some of them:

 Reinstatement: Was the reason you missed your payments temporary and now the issue has been resolved? If you can make a one-time payment that includes all missed payments, legal fees and late fees, you are eligible to be reinstated back into your loan agreement.

Forbearance or Repayment Plan: If the hardship which caused you to miss your payments was temporary but you cannot afford a payment to qualify for reinstatement, you may be able to negotiate a forbearance or repayment plan. In this case, you may be able to pay the missed payments over time, or the payments can be placed at the end of the scheduled loan amortization.

Sell the property: If you have equity in your property than can cure the foreclosure (and you have time to wait for a buyer) then this may be an option for you. Rent the property Renting your home might be an option which enables you to pay your mortgage. You are still responsible for all costs associated with the house including maintenance and taxes.

Mortgage Modification: In some cases, you may be eligible to modify your loan in a way that reduces principle or lowers payments. Some of these programs vary from bank to bank but there are also government sponsored programs which are available to help homeowners in distress.

Refinance: If you have enough equity in your home, refinancing may help you get back to more affordable payments. This will be determined by your credit, if you are current on your loan and how much the property is worth.

Bankruptcy: In some cases, bankruptcy is an option. It may stop foreclosure and allow you to reorganize your debt. The stoppage is only temporary and if you are still unable to make payments then foreclosure will go through anyway. It also makes a property much more difficult to sell.

Short Sale: You sell your property for less than it is worth and the bank, realizing that some money is better than no money at all, agrees to release you from your obligation to the remainder of the loan. In some cases, you are able to walk away from the loan clear of any obligation.

IF YOU ARE THINKING ABOUT SELLING YOUR HOME PLEASE CONTACT US TO DISCUSS YOUR OPTIONS.

CLICK TRUCK to see Ellicott City, MD Homes for Sale

 

Maryland Short Sale Information, Frequently Asked Buyer Short Sale Questions

1. Q) What is a residential short sale?

 A) A residential short sale is a sale of residential property (single family residence, duplex, triplex, fourplex) in which the contract sales price is less than the amount that the seller still owes on the property.

 

2. Q) How long does it take to complete a short sale?

 A) There is a great deal of variation in timeframes. No two short sales are alike. Some short sales can be completed in 75 to 90 days; others may take 5 to 8 months.

 

3. Q) What factors determine how long a short sale will take?

 A) The factors that affect timelines include, but are not limited to, the following:

• Volume of files being processed by the seller’s lender. As a general rule, the higher the volume the longer the processing time.

• Number of liens. Short sales in which there is only one lien (1st mortgage) take less time to process than short sales in which there are more than one lien holder; the more lien holders there are, the more time it will take for processing.

• Mortgage Insurance. In addition to lien holders, there can also be a Mortgage Insurance company or two involved. This too will add to the time it takes to process the short sale.

• Accuracy, completeness, and legibility of the short sale package that is submitted by the listing agent.

• Experience and skill level of the listing agent.

 

4. Q) If the seller accepts my offer, does his lender have to accept it also?

 A) No. All short sales are subject to final approval by the seller’s lien holder(s). This can include not only the 1st mortgage lien holder, but also all junior lien holders and mortgage insurance provider(s)

 

5. Q) Will I have the opportunity to have an inspection done?

 A) Yes, this is allowed and advised.

 

6. Q) What if the inspector finds problems? Will the seller or his lender make repairs that are needed?

 A) Normally residential short sale listings specify that the property is being offered AS IS. Occasionally sellers will make minor repairs, but this is the exception rather than the rule. The same applies to the lender. One alternative if your inspection uncovers problems is to adjust your offer after the inspection to compensate

for repairs that you will need to make if you go through with the transaction. Sometimes, for example, if repairs must be completed in order for a buyer’s lender to approve financing, seller’s lender will make concessions in order to facilitate repairs.

 

7. Q) What are the advantages of a short sale? Why not just look for traditional listings or foreclosed properties?

 A) Each market is different. But in most markets today, anywhere from 10% to 75% of the properties for sale are short sales. If you steer clear of short sales, you are missing a significant number of potential opportunities. Short sales can often be purchased at below market value; this is much less likely when making an offer on a property that is not distressed. Compared to foreclosed properties, short sale properties tend to be in better condition. Further, when you purchase a short sale you receive a full seller disclosure; when you purchase a foreclosed property, banks are exempt from having to provide seller disclosures.

 

8. Q) If I make a cash offer on a short sale will the bank process it faster than if I finance the purchase?

 A) No. Whether it is your cash or your lender’s cash, the seller’s lien holders will receive cash in the end. Some short sale lien holders look at cash offers suspiciously. They will review the offer to make sure that it is not a lowball offer made by an investor for the purpose of flipping the property.

 

9. Q) Should I keep looking after I make an offer on a short sale? Would it be smart to make shotgun offers to be sure that at least one gets approved?

 A) Lien holders and listing agents are taking steps to prevent this practice. It is best to find a house that you want and commit to it.

If you are thinking about BUYING or SELLING a Property in : : Anne Arundel County, Howard County, Queen Anne County, Baltimore County, Harford County, Annapolis, Arnold, Crofton, Crownsville, Davidsonville, Eastport, Edgewater, Fort Meade, Gambrills, Glen Burnie, Hanover, Linthicum Heights, Millersville, Mitchellville, Odenton, Pasadena, Piney Orchard, Severn, Severna Park, Columbia, Ellicott City, Clarksville, Kent Island, Bel Air, Bowie, Brooklyn Park, Catonsville, Curtis Bay, Dundalk, Elkridge, Essex, Farmington Village, Gibson Island, Grasonville, Halethorpe, Harmans, Laurel, Lutherville, Timonium, Parkville, Perry Hall, Piney Orchard, Queenstown, Riva, Shipley’s Choice, Stevensville, Tracy’s Landing, West River, White Marsh, Middle River, Towson & Abington.

Please Contact TheG-Team

 

Language Of Distress Real Estate

Bank-owned /real estate owned (REO): Properties that have been taken back by the lender during the legal foreclosure proceeding to become an asset of the lender bank.

Broker price opinion (BPO): When the estimated value of a property is determined by a real estate broker or firm based on property characteristics, appropriate comparable properties, and market analysis.

Deed-in-lieu (DIL) of foreclosure: When borrowers can no longer make their mortgage payments, a DIL transfers ownership of a property to the lender, allowing the home owner to avoid foreclosure.

Distressed property: A property that is under a foreclosure order (pre-foreclosure), has undergone the foreclosure process, and is now an REO, or is being marketed as a short sale. (See lender-mediated properties.) Historically, this has also referred to properties in dilapidated condition.

Distressed sellers: Home owners in default on their mortgage or at risk of becoming late on their mortgage payments, due to financial hardship.

Forbearance: A reduction or suspension of loan payments as agreed upon by the lender for a predetermined period of time.

Foreclosure: The legal process in which a lender takes possession of a property as a result of a mortgage default by the owner-borrower.

Home Affordable Foreclosure Alternatives (HAFA): A federal program for home owners who can no longer afford their mortgage.HAFA provides two options for transitioning out of a mortgage: a short sale or a deed-in-lieu of foreclosure. Eligibility requirements:

• You live in the home or have lived there within the last 12 months.
• You have a documented financial hardship.
• You have not purchased a new house within the last 12 months.
• Your first mortgage is less than $729,750.
• You obtained your mortgage on or before January 1, 2009.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering, or tax evasion in connection with a mortgage or real estate transaction.

Home Affordable Modification Program (HAMP): A federal program that provides foreclosure-prevention initiatives to help borrowers in or at risk of default avoid foreclosure via loan modification or principal reduction to lower their monthly mortgage payments. The FHA and VA also offer HAMP programs for struggling home owners. See second-lien modification program. Eligibility requirements: ? You obtained your mortgage on or before January 1, 2009. ? You have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income. ? You owe up to $729,750 on your home. ? You have a financial hardship and are either delinquent or in danger of falling behind. ? You have sufficient documented income to support the modified payment. ? You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

Home Affordable Refinance Program (HARP): A federal program for mortgage borrowers who are current on their payments but having trouble acquiring traditional refinancing because the value of their home has declined. These borrowers are usually underwater, meaning they own more on their mortgage than what their home is currently worth. Eligibility requirements:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

Insolvency: When a borrower does not have enough liquid assets to pay down a mortgage.

Lender-mediated properties: Homes that are in the pre-foreclosure process, are already bank-owned, or are subject to a lender-approved short sale.

Loan modification: Changes to the loan terms and conditions to reduce monthly payments for the borrower.

Portfolio loan: A loan or asset owned and controlled in-house by the lender itself.

Principal Reduction Alternative (PRA): A federal program for home owners who owe significantly more on their mortgage than what their home is currently worth. The program encourages non-GSE mortgage servicers and investors to reduce the principal loan amount. Eligibility requirements:

• Your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.
• You owe more than your home is worth.
• You occupy the house as your primary residence.
• You obtained your mortgage on or before January 1, 2009.
• Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
• You owe up to $729,750 on your 1st mortgage.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering, or tax evasion, in connection with a mortgage or real estate transaction.

Refinance: The replacement of a loan (mortgage) with a new loan at a lower interest rate and under different terms and conditions, often reducing monthly payments, the term of the loan, or the loan risk.

Second Lien Modification Program (2MP): A federal program for borrowers who have two mortgages on the same property and the first mortgage was permanently modified under HAMP. 2MP provides a modification or principal reduction on the second mortgage as well. Eligibility requirements:

• Your first mortgage was modified under HAMP.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
• You have not missed three consecutive monthly payments on your HAMP modification.

Servicing agent: A lender or other entity that services a loan or asset on behalf of the investor that owns the loan. Often, the lender that originates the loan is neither the owner nor the servicer.

Shadow inventory: The cache of homes that have undergone the foreclosure process and are on the balance sheets of banks and GSEs but are not yet on the market for resale.

Short sale: A property transaction in which the lender or lenders agree to accept less than what is owed by the current home owner. Because the net proceeds from the sale are not enough to cover the sellers’ mortgage obligations, the difference is forgiven by the lender, or other arrangements are made with the lender to settle the remainder of the debt.

Workout sale: A situation in which the lender agrees not to move forward with foreclosure proceedings for a specific period of time, allowing the home owner to sell the property and pay off the loan.

Sourcs: National Association of Realtors

 

Foreclosure Solutions

The current U.S. housing market and national financial crisis has caused untold stress and heartache for many American families. Foreclosure is one of the most devastating financial challenges that a family can face and one that many times can be avoided. The options available to Millersville-area residents for foreclosure are many. Following is a brief explanation of these solutions, including their benefits and drawbacks:

Reinstatement A reinstatement is the simplest solution for a foreclosure, however it is often the most difficult. The homeowner simply requests the total amount owed to the mortgage company to date and pays it. This solution does not require the lender’s approval and will ‘reinstate’ a mortgage up to the day before the final foreclosure sale.

• Benefit: Does not require the mortgage company or lender’s approval.
• Drawback: Requires that a homeowner be able to pay all back payments, fines and fees.

Forbearance or Repayment Plan A forbearance or repayment plan involves the homeowner negotiating with the mortgage company to allow them to repay back payments over a period of time. The homeowner typically makes their current mortgage payment in addition to a portion of the back payments they owe.

• Benefit: Allows the homeowner to make back payments over time.
• Drawback: Requires that a homeowner be in a financial position to pay not only their current mortgage, but also a portion of the back payments owed. Some mortgage companies will require a homeowner to ‘qualify’ for forbearance.

Mortgage Modification A mortgage modification involves the reduction of one of the following: the interest rate on the loan, the principal balance of the loan, the term of the loan, or any combination of these. These typically result in a lower payment to the homeowner and a more affordable mortgage.

• Benefit: Reduces the payment a homeowner is required to make on a monthly basis and may reduce the principal balance of the loan
• Drawback: Requires that a homeowner ‘qualify’ for the new payment and will often require full documentation. Lender has to be actively pursuing modifications.

Rent the Property A homeowner who has a mortgage payment low enough that market rent will allow it to be paid, is able to convert their property to a rental and use the rental income to pay the mortgage.

• Benefit: Allows homeowner to keep property indefinitely.
• Drawback: The issues that can arise with a rental property are many, and rent often does not cover the full cost of property ownership and maintenance.

Deed in Lieu of Foreclosure Also known as a ‘friendly foreclosure’, a deed in lieu allows the homeowner to return the property to the lender rather than go through the foreclosure process. Lender approval is required for this option, and the homeowner must also vacate the property.

• Benefit: Many times in a successful deed in lieu, the lender will forego their right to a deficiency judgment.
• Drawback: Requires that a homeowner vacate the property, and a deed in lieu may be reported to credit bureaus as a foreclosure.

Bankruptcy Many have considered and marketed bankruptcy as a ‘foreclosure solution,’ but this is only true in some states and situations. If the homeowner has non-mortgage debts that cause a shortfall of paying their mortgage payments and a personal bankruptcy will eliminate these debts, this may be a viable solution.

• Benefit: Does not require lender approval.
• Drawback: If a homeowner cannot afford their mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.

Refinance If a homeowner has sufficient equity in their property and their credit is still in good standing, they may be able to refinance their mortgage.

• Benefit: In some cases, this will lower payments.
• Drawback: In today’s market, a refinance will almost always raise mortgage payments, and is an expensive process.

Servicemembers Civil Relief Act (military personnel only) If a member of the military is experiencing financial distress due to deployment, and that person can show that their debt was entered into prior to deployment, they may qualify for relief under the Servicemembers Civil Relief Act. The American Bar Association has a network of attorneys that will work with servicemembers in relation to qualifying for this relief.

• Benefit: If qualified, this will lower payments on all consumer debt in addition to mortgage payments.
• Drawback: Must be active military to qualify.

Sell the Property Homeowners with sufficient equity can list their property with a qualified agent that understands the foreclosure process in their area.

• Benefit: Allows homeowner to avoid foreclosure and harvest some of their equity.
• Drawback: In many cases today, homeowners do not have sufficient equity to sell their property without negotiating a short sale (see next solution).

Short Sale If a homeowner owes more on their property than it is currently worth, then they can hire a qualified real estate agent to market and sell their property through the negotiation of a short sale with their lender. This typically requires the property to be on the market and the homeowner must have a financial hardship to qualify. Hardship can be simply defined as a material change in the financial stability of the homeowner between the date of the home purchase and the date of the short sale negotiation. Acceptable hardships include but are not limited to: mortgage payment increase, job loss, divorce, excessive debt, forced or unplanned relocation, and more.

• Benefit: A short sale allows the homeowner to avoid foreclosure and salvage some of their credit rating. This also keeps foreclosure off the individual’s public record, and in many cases will allow the homeowner to avoid a deficiency judgment. Borrower may qualify for another mortgage in as little as 24 months (as opposed to five years for a foreclosure).
• Drawback: Short sales can be a trying process in which a homeowner is best served by contracting with a qualified real estate agent to guide the way.

This represents only a summary of some of the solutions available to homeowners facing foreclosure. Please call me today for a free confidential evaluation of your individual situation, property value, and possible options.

Source: Sell Before Foreclosure