HAFA – HOME AFFORDABLE FORECLOSURE ALTERNATIVES – SHORT SALE

As of July 2010, there are an estimated 5.1 million Americans still having trouble paying their mortgages. The sub-prime meltdown is behind us. The main reason for the current delinquencies is loss of income, or other personal hardships.

The current administration has created HAFA. HAFA has now set procedure guidelines for people that need to exit a mortgage and avoid foreclosure.
The HAFA guidelines give people alternative choices to help them in an already bad situation. The basic HAFA guidelines are below. Naturally, there are other requirements the homeowner has to meet for each situation.

Mortgage Modification. This is the first thing the bank will try to work out. Many will not qualify for this because they cannot have over a 31% back end ratio to qualify. This may look complicated at a first glance. But in general, the reduced monthly mortgage payment can’t be more than 31% of your gross income. You also cannot have more than $5000 in cash reserves or 3X your monthly house payment, whichever is larger on deposit in the bank.

Deed in Lieu of Foreclosure. I normally see these when someone files for bankruptcy. In this situation, the bank knows the homes going to be within the bankruptcy and a foreclosure will happen. The bank thus saves the legal cost associated with the foreclosure procedure of taking the home back.

Deed in Lieu of Lease. An example of this situation is when the home is rented and the owner isn’t paying the mortgage. Instead of displacing the tenant they may take the deed back and allow the tenant to remain. I’ve personally never seen this happen but have heard of such instances.

Short Sale. It’s estimated that short sales will outnumber foreclosures this year. It’s a win-win for all parties involved. The HAFA program required Fannie Mae and Freddie Mac to set realtor guidelines for marketing short sales.

Now for the biggest new change people need to know: Fannie and Freddie announced in July 2010 that if someone doesn’t try to qualify for all the HAFA programs then the bank will pursue the homeowner for any mortgage short fall following a foreclosure sale. What does this mean? For example, if you owe $300K and the bank gets $225K in a foreclosure sale, then the bank will pursue that borrower for the $75K mortgage short fall. This is a major problem for many troubled homeowners not willing to participate in the HAFA programs. Banks will file judgments and they’ll make every attempt to collect balances. Fannie and Freddie stresses that wages will be garnished. So if you’re thinking about just walking away from your mortgage, or simply sitting back and allowing the home to go to foreclosure without embarrassing HAFA programs then the bank promises to make every legal effort to get their money one way or another. With this in mind it doesn’t make any since to sit back and allow the bank to take it back through a foreclosure without trying HAFA. The HAFA program will also pay you for moving expenses!

I participated in a webinar this week that included Freddie Mac, Fannie Mae and the US Treasury. They all expressed that people need to be honest and transparent in providing information in resolving a way to exit the home through the HAFA programs. The banks are willing to help people get on with their lives, but for people that keep trying to stay and not pay….they will not have as happy of an ending as the people that participate in HAFA.
I’m a certified Loss Mitigation realtor.

I’ve followed the HAFA program and understand the guidelines. I’ve helped many people exit a mortgage. I understand the guidelines and would be happy to answer any questions you may have if you’re mortgage isn’t something that is affordable anymore.

During these difficult times many homeowners aren’t paying HOA fees. No one wants to enforce other neighbors to pay past fees, but it’s essential for a community to stay on top of this. The reality is when one homeowner isn’t paying their share of the HOA the others have to pick up the slack. A bad misconception many home owners have is the HOA is a profit center for the community. It isn’t by a long shot. Just a few homeowners who stop making HOA payments cut into an association’s budget quickly.

Nationwide, non-payment of HOA fees is among the top problems facing condo and single family homes says Thomas M. Skiba, chief office of Community Associations Institute in Alexandria, VA. When too many homeowners stop paying lenders may become unwilling to make mortgages or refinance properties in the community. Fannie May, for example, won’t guarantee loans in condominiums where more than 15% of the homeowners are 30 days or more overdue on HOA fees.

HOA committees must act fast to collect overdue HOA fees. Work with distressed homeowners with a payment plan. Seek help from experts about your collection options as your bylaws may govern. Consider taking any community privileges away like, fitness, pool and tennis. If a proper lease is in place you can make the renters pay the HOA direct once it becomes delinquent. Last but not least put a lien on a home that’s delinquent.

It’s now required for a bank or lending institute to pay HOA fees from the day of foreclosure to the day it re-sales. Any prior fees owned are not collectable from the bank or lending institute. However, the HOA can peruse the old homeowner for any delinquent HOA fees as a personal debt. Depending on your bylaws HOA’s may be able to garnish wages or sell back HOA fees to collection agencies.

In this state when you have a mandatory HOA it should be disclosured in the Purchase and Sale Agreement Exhibt Community Association Disclosure and or Sellers Disclosure. Every buyer signs documents at closing acknowledging they know of the mandatory HOA fees and agree to abide by its bylaws. HOA committees have no choice but to enforce them. This helps assure a stable community in many ways.

More than 20% of Americans do at least some of their work at home, so home offices are an attractive feature for many homebuyers.

If you’re one of the more than 20% of Americans who do some or all of their work at home, a comfortable, functional home office is a must-have. And it’s a feature that’s growing in popularity: When the National Association of Home Builders asked builders, manufacturers, and marketing experts what features would be important to future home buyers, 94% said a home office would be “critical” or “very critical.”

Still, when it comes to adding value, a home office ranks last among the 21 midrange projects analyzed in Remodeling Magazine’s annual Cost vs. Value report. Converting a 12-by-12-foot bedroom into an office costs a national average of $28,375 and recoups $13,648 at resale, for a 48% return on investment, according to the 2009-2010 report. Construction costs include custom cabinetry and work surface, wall-mounted storage, a wiring upgrade, and new floor and wall finishes.

Regionally, returns varied only slightly, with the highest rate of return, 56%, in the Pacific region, and the lowest, 41%, in the upper Midwest.

National average cost to convert an existing 12 x 12 room into a home office:

Job cost: $28,375

Resale value: $13,648

Cost recoup: 48.1%

Regional info: South Atlantic

Lots of changes were announced this week in regards to FHA Mortgages.

FHA is changing the upfront funding fee from 1.75% to 2.25%. You’ll still be allowed to add the funding fee to your mortgage. This will not affect the buyer’s monthly payments very much at all.

Credit scores less than a 580 will now be require to have a minimum of 10% down, this is up from 3.5%. Not really a big change as most banks currently require a minimum of a 640 score, so this shouldn’t be that big of a problem.

FHA has changed the seller’s contribution for buyers closing cost and prepaid’s. Now the seller’s contribution cannot exceed 3% of sales price, it was 6%. The closing cost is usually about 3% of the mortgage amount. Buyers will now have to fund the prepaid’s which are approximately 1% of the purchase price. This change shouldn’t have little effect on the market.

A major change is FHA will no longer do spot approvals for condos. This is a major problem for the condo market. Many condo buildings/communities are not currently FHA approved. We used to be able to get a spot approval. If the community met the FHA approval guidelines then it was spot approved. This procedure will no longer be allowed. The big picture for condos isn’t looking good right now. Today any condo purchase that’s mortgage is headed to Freddie Mac and Fannie Mae now requires a minimum of a 20% down payment. FHA is the only program with a minimum of 3.5% down payment. This is going to have a major impact on condos. We’re hoping FHA changes their policy in regards to this new ruling.

The condo market in Atlanta has been very tough the last few years. The new lending guidelines is going to create a lot more problems. Many condo owners don’t have the option to rent due to HOA rules. Condo HOA’s can cap the rentals to as little as 15% of the total units. Lenders will not lend money if the total rental to owner occupancy ratio is great than 30%. I feel you’re going to see more distressed condo situations in the coming year as money tightens for a potential buyer.

I want to be sure people understand that townhomes are not affected by the FHA changes the same as condos. If you don’t know the differences between a condo or townhome give me a call. I also have access to the FHA Condo Approval website. Call me if you want to know if your condo is currently FHA approved.

On Wednesday, October 21st, the National Association of Mortgage Brokers used this petition hvccpetition.com to help convince the House Financial Services Committee to pass an amendment that will finally put an end the mess that HVCC has been making of the real estate and lending industries. More than the 102,000 signatures on the petition, it was the pace at which the petition is growing and the HVCC horror stories signers included with their electronic signatures. Now more than ever we need everyone to rally behind this cause to make absolutely certain it continues to gain the momentum necessary to make it through the House and Senate votes that are forthcoming. Please, please, Please, sign this petition if you haven’t done so already and more importantly, send it to everyone you know in any sector of the real estate and lending industry as well as to all the current, past and future clients in your database. The new petition website makes it abundantly clear how all homeowners are losing equity and being harmed directly by HVCC as well as how it is blocking any chance at the real estate recovery our economy needs so desperately. Everyone you send to hvccpetition.com will be indebted to you for looking out for their best interest. We won the first of three battles which is more than anybody thought could happen and if we get serious and rally together now for one last massive push we should be able to put HVCC behind us forever. Thank you for your time, effort and support.

We now have new rules for appraisals effective May 1st 2009 for all conventional, single-family homes that’s destiny is Freddy Mac or Fannie Mae. In effort to curb fraud, padded or wink-wink appraisals we now have HVCC (Home Value Code of Conduct).
Trying to build to a firewall between appraisers and loan offices, many banks have formed AMC’s (Appraisal Management Companies). AMC’s are essentially booking agencies ordering lenders appraisals. AMC”s orders the appraisals from a pool of appraisers that’s rotated in an effort to curb any business relationship between the mortgage brokers or loan officers. Sounds good so far doesn’t it? Should protect you and the banks financial position? Well it’s not by a long shot!!

The problem is the new appraisal guidelines. They are killing home values. AMC’s are also taking a big chunk of the appraisal fee. The reality is only about 50% of what the bank is charging on the HUD is being paid to the appraiser. Good appraisers are leaving the business or not working for AMC’s. With this happening we are now seeing the AMC’s recruiting new or inexperienced appraisers. We’re seeing appraisers from other counties driving over an hour, hired to determine the value and market conditions for homes and areas they’ve never seen the likes of. It’s starting to be a mess and deals are dying that shouldn’t be. I recently had an appraisal come in real low. The appraiser was from Stone Mountain and used comps that weren’t apples to apples by a long shot. One of his comps was over 20 years older than the subject property. In fairness to many appraisers I believe they’re simply using the guidelines provided by the HVCC. But those guidelines to me just do not make since nor are they accurate in regards to the true value of a property. Foreclosures are a major problem for appraisals right now and at least one of them will be used in all appraisals if they’re in your community.

I understand what the lenders are trying to do, but as a broker from North Carolina put it, “It appears to be a horse put together by a committee and the result is a camel”. The new HVCC guidelines are so difficult to understand that Fannie Mae produced eight pages of frequently asked questions; Freddie Mac recently published help guidance also. Obliviously there is confusion!

With the decline in home values the lending industry needs to be sure they’re sending the best qualified appraiser to that property and pay them a fair appraisal fee. This will do more to protect the integrity of the property’s current and future value which they hold a financial position in. Low and inaccurate appraisals can hold the housing recovery back even when we’re seeing stronger demand.

There seems to be fee greed on the AMC’s part, paid for by consumers that aren’t getting what they’ve paying for in many cases. Many AMC’s are owned by banks trying to increase their bottom line and not truly watching out for the customer!! You know the ones that bailed them out!!

Short Sales are when a lender or lenders accept the sale of a property that nets less than the payoff amount. The main three things an owner has to show is a hardship, behind in payments and a monthly P & L showing all your bills are more than what you make. A few common hardships are health, lose of job or income, relocation due to job or family illness. Naturally there can be other hardships, and they are each weighed individually. Any home that cannot go through a judicial foreclosure is a great candidate for a short sale. I had one of these in the Above The Four Seasons Hotel condos. It’s not at all easy to get the bank to except short sales. Do not just stop paying your monthly payments thinking you can get a short sale approved. Banks will first try to do loan mortifications before they will open a short sale file for consideration.

I’m a Loss Mitigation Certified Agent! I’ve been involved with shorts sales for over 2 years and it’s a very fast changing business day to day. It’s not for the average agent and it’s not for buyers that have to close by a certain date. Some banks are much faster than others in accepting or countering short sale offers. I currently have one that’s been before the bank since April 24th and seems to be in nowhere land. Recently another was countered in seven days. Naturally all short sale sellers are expecting the bank to forgive the balance, but banks do have the right to ask for a promissory note for any short fall. You will also receive a 1099 tax form on the short fall as income. It is possible to get the 1099 waived with the right circumstances.

In the last few weeks things have really changed and I foresee short sales becoming a bit hard to get approval. FHA has new guide lines that will limit shorts sales for that type of mortgage. Fannie Mae the largest mortgage holder released guidelines in the last few weeks that will also change things.

If you want to know more about short sales please contact me. I’m a qualified agent and that can answer your questions and pre-qualify you for a short sale. I want to warn you there are agents leading people down the wrong path. Keep in mind you have to have a documented hardship to even get past go!!

The Georgia Realtor Magazine just published that of all the homes sold in 2008 only thirteen percent sold with out the assistances of an agent. Six percent of them knew the buyer prior to selling their home.

Being pro-active I contact FSBO’s every day. Most are very nice people, but some must sprinkle gun powder on their cereal. I truly wish them the best! They can be tough on me in the beginning, but seem to soften over time! They’re great leads for me as the majority of them end up listing with a realtor after about 30 days as a FSBO.

A misconception FSBO’s have is it’s easier to market a home for sale because of the internet. But you cannot support this theory with any data. Actually the data shows something different. The number of successful FSBO’s hasn’t grown in several years, showing the internet isn’t making it easier for them to sell homes. Considering eight-nine percent of home buyers in 2008 started their home search on line, FSBO’s aren’t attracting the buyers on the web in growing numbers.

Honestly I feel FSBO’s lost one of the best marketing tool’s they ever had….the Atlanta Journal & Constitution. The Saturday and Sunday Weekend Addition gave equal opportunity to all willing to pay for it. Today the AJC is struggling to attract front page readers. Some may not agree with me but it’s actually harder for FSBO’s to market their home for sale. Bottom line, most free classified sites produce very little results when selling a home, but are great for renting a home. Another misconception people have about internet marketing is it’s free! It’s not…..I wish it was!! It’s not cheap by a long shot!!

I now offer a new Sellers Marketing Advantage program that’s working for most of the FSBO’s I speak with. It’s a safe, reasonable and effective way to sell a home in today’s world! FSBO’s simply cannot duplicate the exposure I can provide! I think America is looking for a value! I’ve got one! Contact me if you would like to know more.

As a part of the stimulus package being signed February 19th, FHA has raised the maximum loan amount! This is effective today! If you are a borrower who may potentially now be eligible for financing and was otherwise restricted by the previous limits, now would be a good time to reconnect!

Metro Atlanta’s FHS limit is $346,250

In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for first-time home buyers. First-time home buyers (anyone who hasn’t owned a home in the last three years) can claim a credit worth up to $8,000 (or 10% of the home’s value, whichever is less) on their 2009 taxes for a primary residence purchased January 1st, 2009 and December 1, 2009.

Unlike the $7,500 credit from the previous stimulus bill, this is a true tax credit, in that it doesn’t have to be repaid, as long as the buyers remain in the home for at least 3 years. Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. Use the links below to find out more details about the Home Buyer Tax Credit.