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.

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!!

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.

I’ve recently heard several people tell me they were just going to walk away from their mortgage. They said they were just going to move out, give the keys back and notify the mortgage company they can have the home back. Some claimed they were given professional advice telling them to move out and just walk away from the home. Claiming letting the bank have it back would be best and really wouldn’t hurt their credit as bad as a bankruptcy and it wasn’t the same as a foreclosure. It’s amazing how wrong these folks are!!

Walkaway trends started where many homeowners found themselves upside down on their loans, owing tens of thousands more than the current market value of their homes. If they did 100% financing or have very little invested in down payments, some owners reason, continuing to make payments, even if they can afford to, may be throwing good money after bad. These people better beware its going to hurt their credit maybe worse than a bankruptcy or default foreclosure would. Why, first of all walkaway’s will have IRS tax liability. Last year federal legised that allows homeowners who negotiate loan modifications or Short Sales with lenders and have portions of their principal debt eliminated to escape tax liability for the amount forgiven. Walkaway borrows, by contrast, have nothing forgiven, and the IRS may demand taxes on the mortgage balance they never paid. This can be a substantial sum of money. In many cases filing bankruptcy or short sales may be a better route. It may have a faster turnaround time for buying another home when you have things straightened out. I’m by no means giving legal advice; I’m just letting you know you need to discuss selling your home as a Short Sale first before you consider just giving the keys back or waiting on the bank to foreclose. It could save you in a number of ways.

I want to warn people that there are a lot of people out there that are taking advantage of people’s hardships. Web sites are now advertising “I can repair your credit” for $495. Some say they will show you how to hold creditors off and avoid the due process and collection all the other broke folks go through?? Another company is offering, “Send them $995 and they will send you instructions on how to live free for a year and not pay any mortgage payments”. There is nothing legit about these magical offers. They’re rip off’s!!

The best avenue for anyone behind on their mortgage payments is to try to work something out with the lender first. An experienced professional real estate agent can help you prepare you for what the lender will require. Then there are consumer counseling services and attorney’s that can advise you on what’s best for you in the short and long run. Your goal is to make things where your credit lines come back as quick as possible.

I recently read that when applying for a new mortgage after a foreclosure, mortgage underwriters tend to be more sympathetic down the road in regards to people that faced genuine financial hardships leading to the past foreclosure or bankruptcy. Walkway

Trying to fight off a recession the Federal Reserve has cut the short term interest rates another .50%. This takes their benchmark rate to 3%. The Fed has now cut rates by 1.25% in just 9 days. They claim this is to moderate growth but cautions there are risk that still remains.

So what’s up with mortgage rates? Since the FED announcement mortgage rates have climbed. Nationally mortgage rates have climbed .375% since the FED cut rates 1.25%. Why?? Because the rate cut is on short term money, not long term money. It’s meant to stimulate the business sector not the housing sector. I believe the FED will have to lower mortgages rates in the next 60 days to help the housing sector out. One of the main concerns in the mortgage industry right now is the fact foreclosures have risen by 75% over the last 12 months. This causes more risk load that’s factored into current rates. I firmly believe some people looking to buy a home put way to much attention on interest rates. I’m asked several times a day what the rate is?? My standard answer is “depends”. There are still many types of mortgage programs out there. I simply have to know more about your long term goals!

Here are some facts I found interesting on 30 year mortgages that Jim Cramer (Mad Money) published. Did you know that only 28 times since 1971 have rates been below 6%? That means 28 out 444 months were under 6%. Only 2 months have ever been below 5.50%, March 2004 at 5.45%, June 2003 at 5.23%. From November 1978 to November 1990 mortgage rates were double digits nearly every month – including the high of 18.25 in October 1981. So rates shouldn’t be an issue to anyone thinking about buying a home today. If they are, then they’re misinformed or making poor excuses.
Mark my words a turnaround in is INEVITABLE! Buy now!!

If you have a sub-prime mortgage on your home with a escalating interest rate then you may soon get some needed help from our government. If you’ve got one of those adjustable rate mortgages, you may qualify for a rate freeze under certain conditions. Standard fixed rate mortgages will not be affected.

The bailout is really designed for homeowners who are into trouble because their mortgage payments keep going up making it impossible for them to pay their monthly payments. If you have sufficient funds or income to pay your mortgage even if your payments have gone up then you’re not eligible for the rate freeze. You have to live in your home to qualify for the rate freeze, second homes and investment properties will not qualify for this program. You have to have taken the loan out between 2005 & 2007 with rates set to increase between 2008 & July 2010. You have to have less than 3% equity. You must be current on your mortgage payments or no later than 60 days. You have to prove you can handle the locked payment but not the higher payment. Analysts estimate this will help between 240,000 to 250,000 people out. That’s a huge number of homeowners with sub-prime mortgages. And there are many more homeowners with sub-prime mortgages that will not qualify for the rate freeze. This bailout is a half fix at best! Unfortunately many of the people that this rate freeze is trying to help out will eventually end up in foreclosure. We need a plan for other with a sub prime mortgage with diffirent curcimstances.

The current Bush administration is concerned about the fallout from the housing slump. The repercussions of the high rate of foreclosures will have a series of problems for the housing industry. Ten of thousands of American could be forced from their homes. This will slow consumer spending hurting the economy overall. All of this will cause home prices to fall even more.
This bailout deal will add some stability to the housing market, but it will not stop all the problems we face in the real estate industry right now. The same day Bush announced his plan, the Mortgage Bankers Association said that foreclosures had reached a record high in the third quarter. Mortgage foreclosures hit a record .78% up from the previous high of .65%. At the same time, delinquencies for all mortgages rose to 5.59%, from 5.12% in the second quarter. So we still have more people out there that will end up in foreclosure as time moves on. As I stated in a earlier blog, we haven’t hit bottom yet.

The Atlanta real estate market has had its share of higher than normal foreclosures this year. However it hasn’t drastically affected home prices in the North Metro Atlanta area. Supply and demand has softened our home prices more than anything else so far. It’s projected that we’ll get over million more people moving to the Atlanta area by 2011. Our job growth looks good. Atlanta will fair pretty well through this real estate downturn in the long run. The national news media wants you to think all the flood gates are open and look out below. The truth is the majority of the foreclosures are happening in three states, California, Florida and Ohio. Folks in these states will have a long journey back before they can say the word equity!! Reports claim some homeowners in these states have homes that are worth 37% to 40% less than 2006. Be glad you own a home in Atlanta. We’re actually project to have a slight increase in home values this year! But certain areas of Atlanta have been hard hit.

Keep in mind this rate freeze is really going to be a problem for the mortgage industry. Investors will think twice about backing mortgage programs that have been big money makers in the past due to uncertain returns. I don’t want to see anyone lose their house in foreclosure but Wall Street and many such firms have invested in securities that back your mortgage – there also tied into pension funds as well as mutual funds. Their clients include all sorts of people like you, teachers, fireman, policemen, etc. So……some people will have lower payments which are good……but other people will not have the kind of return on their investments which is bad for their retirement. We need much more of a fix to help the housing industry.

I’ve don’t believe the average person has any idea how many people are involved in the home buying process and the supply chain involved. The current mortgage problems are undermining what made America great! Long term financing!!

As many of you know I’ve been very optimistic as to how far home prices in Atlanta will fall and how long it will take for values to start moving up again. I still strongly feel there isn’t a bubble in Atlanta that’s just waiting to pop. Right now we’re going through a market correction. Atlanta’s population growth has us positioned for major housing needs in the very near future. But overall the US real estate market has had numerous issues and factors that’s compounding and causing some unexpected new problems that hurting the already troubled real estate industry. It’s not all because of the collapse of Sub Prime loans and that’s a fact. FHA will now finance homes up to 346K and has filled the Sub Prime void pretty well. Thursday the US government reported that new home sales hit their lowest point in seven years. Let me repeat…..seven years???

Builders are slashing new homes prices 7.5% on average in the US. With a bloated supply of new homes for sale it’s clear it’s a buyer’s market. The Atlanta Builders have clearly realized this and are making the price adjustments and concessions to try to stimulate sales. But the resale home market isn’t following this trend. Thus leaving the new home builders without many move up buyers.

I recently attended a Re/Max of Georgia Platinum Club meeting. The format was town hall, round table, questions and answers. During our time together a very successful agent made the statement “without listings your dead”. I replied “No sir, the fact is without good listings your dead”. Listings and good listings are two totally different animals.

I’ve been fortunate to have had a steady flow of business this year and I’m very thankful for people putting their trust in me. However, most of my commission checks this year have come more from buyers I represented, not sellers I’ve represented in 2007. I’ve always consistently had equal buyers to sellers in the past. But this year representing buyers has kept me alive. However, buyers are struggling to find good homes to purchase in the Marietta, Smyrna, Powder Springs, Acworth, Kennesaw, Roswell and Alpharetta areas. Over my 15 year career my average buyer looked at 17 homes before buying. If we looked at many more than 20 homes I would scheduled a meeting with the buyer to analyze what the problem was. Could it be that I’m not be listening to them? Or was it the fact their dream home didn’t exist within their limits??

Today my buyers are having too view 25 to 40 homes before finding the one they may consider buying. Nothing is knocking them over right now. Why can’t these buyers find homes? A huge percentage of the resale homes on the market have either pricing problems or neglected maintenance issues. Surprisingly most don’t have as much of a home pricing problem as they do with neglected maintenance issues. I don’t blame the sellers in regards to this situation. I fully blame Atlanta Real Estate agents for not telling the sellers the right price and the condition a home has to be in order to sell.

Regardless of what you’re selling, whether it’s a car, playground equipment, or a house, the consumer has to see the value. Something they feel good about. Something that will make them say “I’ll take it”!! Nobody pays full book value for a car with a dent in the fender and a busted tail light; nobody pays full retail for a swing set missing a sliding board. So how are you going to sell that house that needs paint and carpet?? You’re not!! If you cannot sell your home stand back and take a good look at the things you would do if you were going to stay in the home. Then do them!! Don’t wait!! Real estate agents need to be honest with their sellers and let them know buyers want move-in condition. Inside and out! We will all see a significant upturn in the market if the median priced home inventory looked better. If this price range home begins to move faster, then the dominions will start falling and higher priced homes will have buyers that sold the median priced homes. I believe one of the reasons the Atlanta real estate market has slowed is because the median priced home inventories aren’t in the best selling condition!!