This post will be continuously updated to let you know what's going on in the real estate industry regarding foreclosures. For those who are going through the uncomfortable but now commonplace home ownership turbulence, please view this Foreclosure Survival Guide.
5-27-2011: Average difference in price between sales of typical resales v. foreclosed/distresed homes is 27% - http://www.mortgagenewsdaily.com/05262011_foreclosures_realtytrac.asp
4-19-2011: So who's to blame for the financial system breakdown & foreclosure mess - read all about it in the Senate Subcommittee on Investigations report - Lots of blame to go around - http://levin.senate.gov/newsroom/supporting/2011/PSI_WallStreetCrisis_041311.pdf
3-15-2011: According to 2/24/2011 ABC - Home foreclosures in the Atlanta metro area rose about 11% in 2010. About 40% of all homes sold (30,400 of 78,600) were foreclosures.
3-15-2011: The planned mortgage write downs (even if limited & targeted) may not only cost taxpayers alot (if loans are backed by Fannie and Freddie-owned by the taxpayers), but the mortgage modification process will be extended thereby extending the recovery by delaying the foreclosure process. I am not advocating either way, but it means this is a double edged sword and economic recovery is key to reversing this slide.
3-1-2011: Even though mortgage delinquencies (those at least 30 days overdue) were down (to about 12.9% of all loans), foreclosures remain at an all time high and are not selling to alleviate the inventory. Also, about 4.6% of all US mortgage loans were in foreclosure in December 2010. (WSJ, 2-18-2011, A2)
1-10-2011: In 2009, there were about 14,000 foreclosures in Cobb County, 2010, about 16,000 and already in 2011, there are another 1,256 advertised for foreclosure in the County for February. Coupled with the 1,211 foreclosures in January 2011, Cobb is on track for at least another 15,000 foreclosures in 2011.
1-3-2011: Mark Zandi, chief economist at Moody’s Analytics, estimates 1.8 million foreclosed homes in the United States IN 2010 AND should rise to 2.1 million in 2011.
12-17-2010: The government's Troubled Asset Relief Program's special inspector general recently reported that 5.5 million homes had been the subject of foreclosure filings and that 1.7 million homeowners had lost their homes since January 2009.
12-15-2010: About 22.5% of current homeowners are underwater (i.e., owe more on their homes than what they are worth).
12-7-2010: About 1,750 foreclosures hit the Cobb County Courthouse steps yesterday - I am not sure when they will actually start hitting the market, but the majority should be listed by the end of February.
Note: Nationwide, there are about 13.5 million homeowners who have less than 5% of equity in their homes and 11 million owe more than the home is worth. (Source: WSJ, 11-27/28. 2010, A5)
12-3-2010: Mortgage delinquencies decline but the number of new foreclosures is on the rise. Nearly 13.5% of all home loans were at least 30 days late or in some sort of foreclosure status.
11-23-2010: I agree that there should be restitution for those individuals who were incorrectly foreclosed upon - that is terrible. But without knowing all the details of each situation, I don't know what exactly happened. However, dealing with banks, I sometimes wonder if their logic or procedures are antiquated. And they also misplace paperwork that is often scanned and emailed. But how big of a problem is it by foreclosing on people who are current on their mortgage, nobody knows but it could be about 1% from the recent House subcommittee proceedings.
11-15-2010: Of the 2.1 million mortgages in foreclosures as of 9-30-2010, the average days in foreclosure not making a mortgage payment) is 484 days. Florida alone experiences an average of 573 days (per WSJ 10-3-2010, A3). An interesting statement made in the article is that GMAC (part of Ally Financial - you know them - part of the Federal Government) suspended foreclosures "after" lawyers in Florida withdrew their lawsuits...now, why did they (US Government) do that?(WSJ-Oct 23-24, 2010)
11-9-2010: Buyers are refusing to buy alot of foreclosures an short sales due to all the investigations by the states...estimates of 30-35% of properties in foreclosure were held as second homes or by investors.
11-5-2010: About 200 investors were meeting recently in New York about the robosigning and other possible problems with foreclosing banks. Investors are frustrated with their losses and are looking for someone to blame and therefore pay their losses.
The Obama administration has conducted a 4 month investigation and plans to release results of investigation in the next month. SE (Mary Shapiro) is looking into disclosure, misrepresentation, omissions issues. HUD (Shaun Donovan) has the authority to fine or sanction banks. (WSJ, 10-20-2010, C2)
11-4-2010: Foreclosing mortgage holder - may lose a average of $1,000 per property per month of delay according to FBR Capital Markets. (WSJ-10-23-2010, B1)
11-3-2010: Bank of America (B of A) discovered the 85% of 1.3 million mortgage loans >60 days behind on payments came from Countrywide Financial Corp. 2008 acquisition.
11-2-2010: Ben Bernake was going to investigate if bank policies, procedures, or internal controls caused any improper foreclosures. A recent National Association of Realtors (NAR) survey of 20-25% of about 2,000 agents - they have a client no longer interested in purchasing due to this mess. Also, mortgage applications off about 30% from this time last year due to the federal tax credit surge.
10-28-2010: Some numbers...About 11 million residential properties with mortgages exceed home's value; shadow inventory (not on market yet) of 3.7 million foreclosed homes; prices may fall another 5-10%; - estimated 40% of homes with loans above home value; foreclosure not performed on 25% of people who haven't made a mortgage payment for past 2 years; 8 million homes in some stage of delinquency-default-foreclosure; another 8 million owners have mortgage values of at least 95% of their home's value; about 50% of homeowners using HAMP have defaulted within 12 months of modification; each 1% drop in home price lowers wealth by $70 Billion; and lost 5 million jobs in residential construction. With these facts, it's really not surprising that a home is no longer seen as a long term equity investment.
10-27-2010: Bond and mortgage insurers have filed lawsuits against banks and lenders for bad loans through poor underwriting and problem appraisals. Federal Home Loan Banks in PA, WA, CA have sued some Wall Street banks to force a "buy back" of bad loans. The legal question focus on the "representations and warranties" of a contractual nature. Trustees (administrator in banks who oversee loan pool or securitized loan packages) and loan servicers (daily management of loans including modifications). Example: Trustee determines borrower lied, can force originating bank to repurchase loan.
Bank of America is reviewing 102,000 foreclosure cases. Early reviews of several hundred selected revealed less than 25 had procedural errors like improper paperwork and signature errors, but nothing that would prevent a foreclosure. Also, Wells Fargo found some robo-signer issues without proper documentation but I don't believe it resulted in erroneous foreclosures.
Note: 40,if not all 50, states' Attorney Generals are planning a joint investigation of foreclosure practices of banks in their states. The Ohio Atty General was the first to file a lawsuit (against Ally - Govt owned bank) for signing and filing false documents. (MDJ 10-10-10 12A)
10-22-2010: There are estimates of between $24-180 billion of mortgages to repurchase besides those requested from Fannie, Freddie and insurers. As of October 2010, Fannie & Freddie have managed to get $6 billion repurchased and other banks could repurchase $22 billion. (I would think it's worst case scenario and they would by back loans secured by rel estate so will they really lose anything or make out like bandits if economy rebounds)...A weird take on this is the banks designed this crisis to somehow profit from it and are creating this smoke screen while putting their hand back in the cookie jar. I doubt they planned all this to lose money.
The Federal Housing Finance Agency (FHFA) (Edward DeMarco is acting director) - chief Fannie Mae/Freddie Mac regulator - based on the 64 subpoenas reported in June 2010,
10-21-2010: Impact on investors of these mortgage is unknown at this time but since MERS held many of these loans in their name, the qualification as a REMIC (real estate mortgage investment conduit), which provides for income tax exclusion as it passes income through to investors who pay the tax. One New York state judge thought the investors were partially liable for some of the $8.4 billion B of A settlement since they were perceived to not satisfy terms and condition of the pooling and servicing agreements.
JP Morgan Chase was setting aside $1.3 Billion in mortgage litigation reserves and another $1 Billion to cover repurchase of faulty mortgages from Fannie, Freddie or any one else. They are now reviewing 115,000 loan files.
Wells Fargo set aside $1.3 billion to settle demands to repurchase mortgages by investors.
Bank of America has reopened 100,000 foreclosure files and plans to proceed with foreclosures as of Monday, October 18th.B of A also has expended $1.7 billion related to repurchasing mortgages with $11 billion currently requested.
Estimates of more than 3 million "additional" vacant homes on the market and more are added monthly with foreclosure action.
Two large title insurance companies (Stewart Title and Old Republic) have instituted new, stricter guidelines writing title insurance and may end up rejecting coverage for foreclosures. The largest title insurance company Fidelity National Financial, Inc. has reached agreement with B of A to warrant foreclosures that were not caused by bank errors. (Source: WSJ 10-13-2010, A9)
10-20-2010: About 4.4 million home loans are either in foreclosure or at least 90 days overdue. There have been 6.4 million total actual foreclosures since 2006. B of A services 14 million ($2.1 Trillion) or 20% of mortgages in the US. Ten of the 14 million of Bank of America's (B of A's) total current mortgage loans and 80% of B of A's current delinquent loans came from B of A's acquisition of Countrywide. Note: So why did B of A "ever" acquire Countrywide's loans? - The truth may never be told....But, to coin a media term that was used on the last US President, we might want to try to "connect the dots".
Chris Dodd (Senate Banking Committee Chairman) plans to hold a hearing November 10, 2010 about improper documentation, confusion as to ownership, and whether there were any forced foreclosures that were not supported by proper procedures and documentation. (Note: Ok Chris, where were you in the Fannie/Freddie meltdown and putting a stop to funny loans?)
10-11-2010: Ok, in 25 words or less, "The moratorium on foreclosures is a short run buffer to long term pain thanks to Congress' fear of perception they don't care about homeowners (voters)." Banks may have submitted flawed affidavits (robo signed documents) in lieu of promissory note (that may have been lost or destroyed) and banks need more proof of ownership if that happens. Further complication stems from the Mortgage Electronic Registration System (MERS) temporarily holds a loan (but doesn't own it) while the true mortgage gets bought and sold several times and instead of filing a record in the applicable county for each change of ownership, MERS holds it until the dust settles.
Another problem raised is that in order for the income taxes from the securities to be exempted and passed through to the ultimate investors was to create a REMIC (real estate mortgage investment conduit), where the income generated is passed through to the investors and taxed accordingly. Since MERS held alot of these securitized loans, it may have disqualified the loans from being classified as REMICs and therefore subject to different taxes.
10-9-2010: WSJ Opinion 10-9/10;16/17-2010 A14/A5 - Politicians (Harry Reid, Nancy Pelosi, Debbie Wasserman Schultz)and others) were jumping into the fray by recommending a federal investigation or moratorium on foreclosures until loans were properly researched. President Obama vetoed a bill supporting electronic transmission of notarized documents across state lines which would have expedited foreclosures.
BOA, Wells Fargo, JP Morgan Chase (largest by stock value), and Citigroup service about $4.5-5.0 Trillion of mortgages owned by investors, or about 70% of the investor owned loans.
10-6-2010 (c1) - $2.8 trillion in mortgage backed securities. Upon mortgage foreclosure, holders of junior liens usually suffer total losses and primary liens take less of a hit. If a foreclosure is delayed, the servicer must keep advancing money to all lien holders even when the loan is not producing any revenue. This makes senior or primary lien holders desiring foreclosure faster to reduce expenses. Servicers normally have management agreements to protect the interest of the investors under securitized mortgage bonds. The Association of Mortgage Investors are demanding the loans be repurchased if any documentation is missing.
9-30-2010: JP Morgan was planning to halt the foreclosure process on 56,000 homes currently in some stage of the foreclosure process in 23 states. GMAC was to suspend evicetions/foreclosures/pending sales in certain states.
9-21-2010: Ally Financial (majority owned by the US Government) owns GMAC Mortgage (probably through the recent General Motors bailout). I think the following statement from a 9-21-2010 WSJ article sums up the mortgage mess in 25 words or less..."The securitization process has made it difficult to identify who actually owns the mortgage.".....DOH!
9-16-2010: MDJ, 9-10-2010 (page A1) - Foreclosures scheduled for October 2010 are about 20% lower than September's; and about 11,500 homes have been foreclosed in Cobb alone by this date (an 11% increase from same date in 2009); with Cobb's unemployment rate at about 10%, more short sales and foreclosures will put downward pressure on home prices; and lenders across the US foreclosed on about 93,000 homes in July 2010 alone (some estimate more than 1 million foreclosures in 2010 alone).
8-31-2010: WSJ, 8-27-2010 (page A4) - Even though the total number of homeowner who missed consecutive mortgage payments fell, the number of new distressed homeowners increased.
According to Jay Brinkmann, chief economist with Mortgage Banker Association, estimate more than 7 million homeowners are behind on payments or in foreclosure.
8-27-2010: WSJ page A4 referred to 4.5 million homeowners are delinquent or in foreclosure.
8-27-2010: MDJ page A1 mentioned 1 of 10 households is facing foreclosure and 2 million home have been foreclosed since the recession began.
8-4-2010: WSJ page C1 Federal Reserve Bank of New York acquired alot (about $29 Billion) of real estate properties in the bear sterns takeover in 2008, which have dropped 35% in value since then. About 50% of residential portion and 13% of commercial portion of the portfolio is non-performing.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Friday, September 24, 2010
Thursday, September 23, 2010
Consumer Credit Counseling Service changed its name...Now CredAbility!
12-26-2010 Update via FHA: CredAbility provides free, confidential budget counseling, housing counseling, comprehensive financial education, bankruptcy counseling and education, and debt management programs to consumers nationwide from all walks of life. Their mission is to help financially-distressed people move from crisis to control by providing compassionate service and innovative and practical solutions. In 2009, CredAbility served more than 750,000 people, a 26% increase from 2008.
The agency provides services around the clock in English and Spanish, 365 days a year. Counseling and education are available in person, by telephone and via the Internet at http://www.credability.org/
This non profit agency has helped thousands of people with their budgets and controlling costs. The difficult part is gathering your courage, swallowing your foolish pride, and face your monsters to talk with them. Yes, there is a fear of working with them and reducing your credit score, but if you are in financial trouble, your score's going to take a hit anyway - they may be of great help.
They have a Debt Management Plan (DMP) where a CCCS counselor negotiates/coordinates a structured repayment plan with creditors to accept lower levels of payments and you make one payment to credibility once a month and that gets distributed to your creditors. Here are some of the conditions you may want to enlist the assistance of Credability:
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
The agency provides services around the clock in English and Spanish, 365 days a year. Counseling and education are available in person, by telephone and via the Internet at http://www.credability.org/
This non profit agency has helped thousands of people with their budgets and controlling costs. The difficult part is gathering your courage, swallowing your foolish pride, and face your monsters to talk with them. Yes, there is a fear of working with them and reducing your credit score, but if you are in financial trouble, your score's going to take a hit anyway - they may be of great help.
They have a Debt Management Plan (DMP) where a CCCS counselor negotiates/coordinates a structured repayment plan with creditors to accept lower levels of payments and you make one payment to credibility once a month and that gets distributed to your creditors. Here are some of the conditions you may want to enlist the assistance of Credability:
- Use credit cards to over daily expenses
- You make only minimum payments on credit cards
- Making late payments
- Charging more money each month
- Credit cards getting close to their limit
- Receive cal from collection services
- If loss in income will cause immediate difficulty paying bills.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Wednesday, September 22, 2010
Will bankruptcy prevent foreclosure? Yes and No
Again, the answer is "it all depends".
Bankruptcy can stall the foreclosure process, but only until state laws allow the mortgage holder can proceed again with foreclosure. For example, in Georgia, unless you follow very strict rules and guidelines, it only delays the inevitable foreclosure process for about a month or less.
Most people file for Chapter 7 bankruptcy (complete forgiveness) and want all their debts forgiven including household, but normally when these situations exist, the homeowner doesn't have the continuing income to make the monthly payments and therefore must then relinquish their home as well.
However, if the homeowner is in a position of Chapter 13 (debt restructuring) and has income but needs a break on debt repayment, then the home may be kept and the mortgage balance may be restructured thereby preventing a foreclosure.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Bankruptcy can stall the foreclosure process, but only until state laws allow the mortgage holder can proceed again with foreclosure. For example, in Georgia, unless you follow very strict rules and guidelines, it only delays the inevitable foreclosure process for about a month or less.
Most people file for Chapter 7 bankruptcy (complete forgiveness) and want all their debts forgiven including household, but normally when these situations exist, the homeowner doesn't have the continuing income to make the monthly payments and therefore must then relinquish their home as well.
However, if the homeowner is in a position of Chapter 13 (debt restructuring) and has income but needs a break on debt repayment, then the home may be kept and the mortgage balance may be restructured thereby preventing a foreclosure.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Tuesday, September 21, 2010
Recycling Programs
RECYCLING CORNERRECYCLING OF HOUSEHOLD ITEMS & ELECTRONICS PRODUCTS | ||||
| NAME of ORGANIZATION | DESCRIPTION of SERVICE | WEBSITE &/or PHONE # | ||
|---|---|---|---|---|
| FREECYCLE.ORG | Recycle Old Stuff in your House - Give old stuff to people instead of tossing it into the garbage. |  Click to join Freecycle_Cobb | ||
| Recycle Refrigerators | Georgia Power offers programs to properly Disposal of non-primary refrigerators. | To find out more about the program, call 1-866-446-9250, or Click here to find out more about Georgia Power refrigerator recycling program. | ||
| Recycle Computers | Proper Disposal of computers in your area. | To find computer equipment recyclers in your area, Click here to find recycling organizations in your area. To find a recycling center closest to your home who does not send junked computers to developing countries, Click here for recyclers. You may even want to try Reboot CLICK HERE to go to ReBoot website and discover more about recycling electronics items. | ||
| Rechargeable Battery Recycling Corporation | Proper Disposal of Rechargeable Batteries-Properly dispose of anything from laptop to cell phone batteries. | To find a recycling center closest to your home, CLICK HERE and type in your city, state, and zip, or call 800-822-8837. I think Best Buy has a station at their entrance/exit area to dispose of rechargeable batteries and cell phone batteries. | ||
| National Cristina Foundation | Where you can donate your old computer. | |||
| CTIA Wireless Foundation | Donate your old, used cell phone to help fight domestic violence. You can donate your used wireless phone to support Donate a Phone CALL to PROTECT, which aids in the fight against domestic violence. Wireless phones are reprogrammed with emergency phone numbers and redistributed free of charge to victims in need. | |||
| Free Mulch - Wood Chips from Tree Companies | Sign up for free delivery of wood chips and wood circles. | |||
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Monday, September 20, 2010
Real Estate Terminology and Definitions
There may be several terms/words you hear or read in real estate that you may not know what they mean. Check my Dictionary of Terms used in Real Estate to learn what they mean (see abuyeragent.com/definitions.htm - I have to use this format since Google will think it's spam and delete all my blog entries if I place a link back to my own website).
TERMS and DEFINITIONS
Acre: 43,560 square feet or 208.71’(L) x 208.71’(W).
Acceleration Clause: A clause in the mortgage loan that permits the lender to call the entire amount due and payable upon certain conditions or violations. (Examples include loan payments stop or upon of sale of property without informing lender.)
Adjustable Rate Mortgage (ARM): A mortgage loan that normally offer a low introductory rate (i.e., low monthly payment to start) and provides for the interest rate to change at specific intervals during the term of the loan. The rate is normally tied to an index like the LIBOR or PRIME interest rate. CAUTION: You need to understand the impact on monthly payments – they could run hundreds of dollars per month higher than the introductory monthly amount.
Appraisal: Valuation of market value by a professional appraiser using standards/guidelines for the local and national real estate industry. The appraisal is critical information used by the lender to confirm/determine loan amounts. NOTE: Under the current environment, appraisers are more sensitive to fluctuating market prices and restrictions on subjective quality factors that were used before.
Back End Ratio:In short, it’s your annual gross income less long term debt (I.e., car loans, student loans, usually not credit card balances, etc,.) divide by your gross annual income.
Balloon Mortgage: Usually fixed monthly payment based on 30 year loan and a lump sum balance at the end of a period of time - normally 3,5, or 7 years.
Balloon Payment: The final payment of a mortgage that is usually a large lump sum that pay off the remainder of the loan amount. Example: Monthly payments of $1,000 per month for 5 years and then a $50,000 lump sum (Balloon) payment.
Builder Warranty: The builder offers homebuyers peace of mind that he/she will come back and try to repair any major structural or system defects. Normally, written guidelines determine what is considered a defect and what repairs will be attempted. Many builders will have a period of time (e.g., 10 months after purchase) that they will return to repair known type repairs of house settlement and normal adjustments.
Buyer Broker/Buyer Agent: Agent hired by the Buyer that represents their best interests in finding a property, negotiating a contract, and all other aspects of the home buying transaction.
CAPS: Amount of rate that can change that is limited each time period and overall. CAPS are listed in X/X format where the first X is the maximum annual rate increase and the second X reflects the total increase over the life of the loan. Under an X/X/X format, the first X reflects maximum rate increase of first adjustment, second X is maximum increase under the next adjustment, and third X reflects maximum rate increase over life of the loan.
Certificate of Occupancy(C/O): The local government issues this document that allows the home to be occupied once the builder has satisfied the building inspector's review of local building codes. WARNING: This inspection is not to be relied upon or considered a thorough home inspection.
Closing: This just refers to when you meet with the closing attorney to sign a lot of papers reflecting the transfer of ownership from the seller to you and your commitment to paying off the loan. Basically, this is where you bring your down payment money and agree to pay on the loan and then you get the house in exchange. The HUD-1 and a lot of other standardized forms and documents are signed here and you understand that if you don’t make payments on the loan, you don’t get to keep the house.
Closing Attorney: An attorney trained and licensed to close loans for lenders. You may also hire one to review your real estate transaction. NOTE: At a loan losing, they do not represent the seller or buyer, but they represent the Lender's best interests.
Closing Costs: Costs necessary to close the loan. They include expenditures like your lender's loan origination fee, underwriting fees, property survey, appraisal fee, credit report, attorney fees, title insurance, recording fees, and any incidental expenses incurred by the lender or attorney. Closing costs (including prepaids/escrows) normally run anywhere from 2.0-3.5% of the amount of your loan. Other expenses to consider are: YOUR Title Insurance coverage; Flood Insurance coverage (if you're in a flood zone); and PMI (Private Mortgage Insurance) or MIP (Mortgage Insurance Premium) that may or may not be required at closing or rolled into the loan. NOTE: You may spend money to "BUY DOWN" (i.e. reduce) the rate of interest your lender would charge you at a competitive market rate based on your credit history. These costs are sometimes referred to as "DISCOUNT POINTS" and may be considered as "ordinary closing costs the seller will cover.
Condominium: This isn’t a style of building, but a form o ownership. This form of ownership means that you share financial responsibility with other owners in the care, insurance, and maintenance of common areas such as parking lot, gates, fitness centers, playground/pool area, walkways, and exterior building maintenance and landscaping.
Contingency Clause: Provisions in a real estate contract that protect either the Buyer’s or Seller’s interest by providing for a critical condition of sale to be satisfied, or else the contract may be terminated.
Deficiency Judgment
TERMS and DEFINITIONS
Acre: 43,560 square feet or 208.71’(L) x 208.71’(W).
Acceleration Clause: A clause in the mortgage loan that permits the lender to call the entire amount due and payable upon certain conditions or violations. (Examples include loan payments stop or upon of sale of property without informing lender.)
Adjustable Rate Mortgage (ARM): A mortgage loan that normally offer a low introductory rate (i.e., low monthly payment to start) and provides for the interest rate to change at specific intervals during the term of the loan. The rate is normally tied to an index like the LIBOR or PRIME interest rate. CAUTION: You need to understand the impact on monthly payments – they could run hundreds of dollars per month higher than the introductory monthly amount.
Appraisal: Valuation of market value by a professional appraiser using standards/guidelines for the local and national real estate industry. The appraisal is critical information used by the lender to confirm/determine loan amounts. NOTE: Under the current environment, appraisers are more sensitive to fluctuating market prices and restrictions on subjective quality factors that were used before.
Back End Ratio:In short, it’s your annual gross income less long term debt (I.e., car loans, student loans, usually not credit card balances, etc,.) divide by your gross annual income.
Balloon Mortgage: Usually fixed monthly payment based on 30 year loan and a lump sum balance at the end of a period of time - normally 3,5, or 7 years.
Balloon Payment: The final payment of a mortgage that is usually a large lump sum that pay off the remainder of the loan amount. Example: Monthly payments of $1,000 per month for 5 years and then a $50,000 lump sum (Balloon) payment.
Builder Warranty: The builder offers homebuyers peace of mind that he/she will come back and try to repair any major structural or system defects. Normally, written guidelines determine what is considered a defect and what repairs will be attempted. Many builders will have a period of time (e.g., 10 months after purchase) that they will return to repair known type repairs of house settlement and normal adjustments.
Buyer Broker/Buyer Agent: Agent hired by the Buyer that represents their best interests in finding a property, negotiating a contract, and all other aspects of the home buying transaction.
CAPS: Amount of rate that can change that is limited each time period and overall. CAPS are listed in X/X format where the first X is the maximum annual rate increase and the second X reflects the total increase over the life of the loan. Under an X/X/X format, the first X reflects maximum rate increase of first adjustment, second X is maximum increase under the next adjustment, and third X reflects maximum rate increase over life of the loan.
Certificate of Occupancy(C/O): The local government issues this document that allows the home to be occupied once the builder has satisfied the building inspector's review of local building codes. WARNING: This inspection is not to be relied upon or considered a thorough home inspection.
Closing: This just refers to when you meet with the closing attorney to sign a lot of papers reflecting the transfer of ownership from the seller to you and your commitment to paying off the loan. Basically, this is where you bring your down payment money and agree to pay on the loan and then you get the house in exchange. The HUD-1 and a lot of other standardized forms and documents are signed here and you understand that if you don’t make payments on the loan, you don’t get to keep the house.
Closing Attorney: An attorney trained and licensed to close loans for lenders. You may also hire one to review your real estate transaction. NOTE: At a loan losing, they do not represent the seller or buyer, but they represent the Lender's best interests.
Closing Costs: Costs necessary to close the loan. They include expenditures like your lender's loan origination fee, underwriting fees, property survey, appraisal fee, credit report, attorney fees, title insurance, recording fees, and any incidental expenses incurred by the lender or attorney. Closing costs (including prepaids/escrows) normally run anywhere from 2.0-3.5% of the amount of your loan. Other expenses to consider are: YOUR Title Insurance coverage; Flood Insurance coverage (if you're in a flood zone); and PMI (Private Mortgage Insurance) or MIP (Mortgage Insurance Premium) that may or may not be required at closing or rolled into the loan. NOTE: You may spend money to "BUY DOWN" (i.e. reduce) the rate of interest your lender would charge you at a competitive market rate based on your credit history. These costs are sometimes referred to as "DISCOUNT POINTS" and may be considered as "ordinary closing costs the seller will cover.
Condominium: This isn’t a style of building, but a form o ownership. This form of ownership means that you share financial responsibility with other owners in the care, insurance, and maintenance of common areas such as parking lot, gates, fitness centers, playground/pool area, walkways, and exterior building maintenance and landscaping.
Contingency Clause: Provisions in a real estate contract that protect either the Buyer’s or Seller’s interest by providing for a critical condition of sale to be satisfied, or else the contract may be terminated.
Deficiency Judgment
Federal Reserve"discount" rate: Interest rate that is set by the Federal Open Market Committee (12 FR Presidents & FR Governors) for banks to borrow money from other banks in the Federal Reserve System/Network. This rate more closely impacts mortgage rates by affecting consumer iquidity.
Federal Reserve"funds" rate: Interest rate the Federal Reserve sets to allow banks borrow money from other banks in the Federal Reserve system. Lowering the Federal Reserve discount rate is normally seen as a measure to improve bank liquidity in a slow economy.
Five (5) year adjustable: Mortgage where interest rate changes every 5 years based on an index (Prime Rate; LIBOR; etc,.) plus a specified margin.
Fixed Rate Mortgage: Mortgage with 15 or 30 year maturity (sometimes longer) where interest rate is fixed for duration of loan.
Good Faith Estimate (GFE): Generally a form you get from the lender you choose to get a loan from that outlines your interest rate; monthly mortgage payment; total estimated closing costs; and total estimated amount to bring to closing. RESPA requires the lender to provide the Borrower a GFE within 3 business days of applying for a loan.
Home Equity Line of Credit (HELOC): A variable rate loan tied to the prime rate and establishes a "line of credit" against a maximum amount and gives borrower quick access to cash.
Home Inspection: A private inspector, normally under certification from CABO/ASHI, that spends 2-3 hours at a home testing and inspecting for defects, functionality, operation, and possible problems and future repairs. There are normally a set of guidelines (i.e., building codes) that the inspector uses to evaluate whether or not the area/system of the house meets that guideline, and writes a report (including photos) to use to negotiate with seller for repairs.
Home Warranty: For used houses, the builder warranty is normally expired. There are private companies that offer assistance to locate plumbers, electricians, HVAC services, and other home services for you if you purchase a home warranty. The home warranty normally covers a period of 12 months and can cost almost $500 per year.
Homeowner’s Association (HOA): A group of homeowners that establish and enforce guidelines to preserve the quality look of the neighborhood and common areas/elements like pool, playground, and exterior of all homes.
Homeowner’s Insurance: Insurance against loss of your home and its contents due to burglary, flood, fire, wind or other provision of the insurance policy. NOTE: Insurers and policies differ so please evaluate apples to apples of coverage and what their performance is when paying claims.
HOA CCRs (Conditions, Covenants, and Restrictions): This is a set of rules of which you must comply as a condition of home ownership in the community. The CCRs usually establish Board Member election guidelines; power of the Board members; and guidelines on what is and isn’t acceptable on the exterior of your home and in your yard. Pros: Ensures look of community is retained and kept maintained. Con: Restricts exterior house colors; fence styles; and items you can place in the yard.
HUD-1 (Settlement Statement): HUD-1 EXAMPLE - This is a standard form used at all residential real estate transaction closings that itemizes all Buyer and Seller closing costs, the total amount due at closing from the Buyer, the total amount of proceeds to Sellers, and serves as the official evidence of transfer of ownership until the Warranty Deed is recorded in the local real estate office.
Index: Floating index tied to mortgage loans normally using either the one year Treasury Constant Maturity Yield or the LIBOR index.
Interest only Loans: Monthly payment covers only interest with the amount of principal adding to the loan for a number of years up to perhaps 10. (See Pros and Cons about Interest Only Loans)
LIBOR(London Interbank Offered Rate): The rate that international banks charge each other on large loans. This rate has been known to fluctuate and increase faster than the U.S. Treasury 10 year bonds that U.S. mortgage rates parallel. Therefore, they are more volatile in Adjustable Rate Mortgages.
Interest Rate Lock: Lender usually "locks" or "guarantees" the interest rate quoted for only a specific number of days...normally 30 days...without a charge. After this period expires, the rate may fluctuate unless you pay extra to lock the rate for more than the initial period.
Margin: The number of percentage points added to the index on adjustable mortgages.
Mortgage Broker: Generally, organizations that do not lend to you directly, but do charge a fee to you to get a loan from a number of wholesalers/other investors but doesn’t service the loan (i.e., collect mortgage payments).
Mortgage Insurance: This (one-time cost) insurance is required by lenders to insure loans greater than 80% of the sale price (due to higher probability of foreclosure). If the home forecloses, the remaining lender balance is paid.
Option ARM: Adjustable rate loans allow for a fixed period of time (1,3,5 years) a low payment based on interest only or no interest and accrue balance - very risky and for sophisticated borrowers.
Points: Percentage of the loan amount - Each point is 1/100th of the loan amount. (Ex: $1,000 = 1 point of a $100,000 loan.)
Prepaids/Escrows: Accounts established upfront by the lender to pay for your annual property taxes and homeowner’s insurance. Your monthly mortgage payment will include 1/12th of your estimated annual property taxes and homeowner’s insurance. At closing, expect to pay one full year of homeowner’s insurance and 2-3 additional months of insurance to start the escrow account.
Property Taxes: Local governments appraise real property, apply the 40% state assessment rate, and then apply a tax rate to the assessed value to determine how much property tax you pay. The government’s appraised value normally has no bearing on current market value. NOTE: Under current environment of property values falling nationwide, many homeowners are upset to pay taxes on values exceeding current market values.
Prepayment penalty: Some investors provide money in exchange for a certain return over a certain period of time. Therefore, certain home loans carry a provision that charges a fee (sometimes in the thousands of dollars) to pay off a loan early (i.e., before the term expires) so the investor earns a minimum return on their investment. WARNING: Always confirm in writing before you agree to the loan if there is a prepayment penalty and stay away from these loans unless you are willing to assume the risk.
Real Estate Settlement & Procedures Act (RESPA): RESPA DETAILS HERE In 1974, US Congress passed a law that standardized real estate settlement that established the HUD-1 Settlement Statement; required escrow rules; disclosure requirements; closing cost estimates; and generally governed a more fair practice of mortgage lenders.
Short Sale:When a Seller is in a position (job loss, major illness, bankruptcy, etc,) that requires the sale of real property and the net proceeds will not be sufficient (i.e., will be short) to pay the remaining balance of the mortgage(s), the bank(s) involved need to agree to sell the real property at a negotiated price that causes the mortgage to be short. (See Deficiency Judgment)
Survey: A formal measurement of the boundaries of a property that also indicates any easements, encroachments, or right-of-ways. Traditionally, lenders have required a survey on new properties or properties of unusual shapes or sizes. In the past several years, if the property is a resale in an established subdivision, or the loan is a conventional type loan, then the lender doesn't require a survey. However, it doesn't preclude you to get a survey in case you plan to install a fence or just want to know where your property lines exist.
Title Insurance: Generally, a closing attorney will investigate the Chain of Title to a property and determine if the Seller has “clean title” allowing the legal transfer of title to a Buyer. At times, due to recording errors, fraud and other reasons, clear title to a property may not legally exit by the Seller thereby resulting in the Buyer losing the property. Buyers may want to purchase this insurance to cover their down payment and their legal expenses challenging title claims in case they lose the home because real owner reclaims property. (This has happened more than once.)
Have you heard of a term, word, or phrase that isn't listed here? If so, please let me know and help you define it and determine its importance in your search or real estate transaction.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Friday, September 17, 2010
Fannie Mae - fired employee over criticism of loan assistance program?
Rep.Spencer Bachus (R) has asked Rep Barney Frank for a hearing into the firing of Caroline Herron (former Fannie Mae Executive) ...Apparently, (according to the 8-7-10 AJC), she was fired after she criticized how the company was running a loan assistance program....She asked that the borrower provide proof of income and these requests were ignored....
Yeah, let's see if (a) Rep Frank holds a hearing and (b) if the real truth is told...I think I know the answer to both concerns...
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Yeah, let's see if (a) Rep Frank holds a hearing and (b) if the real truth is told...I think I know the answer to both concerns...
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Legal Advice Websites
If you need to get an understanding of certain legal matters, you may want to first review one of these websites I saw referenced in one of Clark Howard's older articles in the AJC. Of course, you should always consult the advice of an attorney familiar with matters of particular interest to you since the law field changes daily.
- http://www.nolo.com/
- http://www.findthelaw.com/
- http://www.mylawyer.com/
- http://www.thelaw.com/
- http://www.uslaw.com/
- http://www.legalzoom.com/ (Created by a law firm.)
- http://closingattorneyga.com/ - Glenn Sherman - a good Real Estate attorney
- http://www.gabar.org/ - Georgia BAR Association - Source of attorneys for various specialties
- Quicken software like Willmaker and Lawyer
- Licensed real estate agent for formal real estate documents
- Office supply stores for simple Quit Claim Deeds and other general legal forms - but be careful not to do too much with them - the are jus general formats that may not be state specific.
Thursday, September 16, 2010
Questions to ask your home inspector
Home inspections performed on homes should reveal some possible functional problems, but inspectors don't probe inside walls, under floor coverings, pipes underground, and behind finished walls. Yes, some problems that aren't readily visible won't be revealed, but a home inspection should reveal some potential problems that may not be found by an untrained eye.
HUD has published a list of 10 questions to ask your home inspector Click here for the list of questions to ask home inspectors - http://www.hud.gov/offices/hsg/sfh/insp/inspfaq.cfm
Checkout this HUD's website for information about home inspections. - http://www.pueblo.gsa.gov/cic_text/housing/inspection/home.htm
Another good website to visit for information is the GAHI (Georgia Association of Home Inspectors) - http://www.gahi.com/
A good website report some categories by the National Association of Certified Home Inspectors Click here for summary of inspection items - http://homebuying.about.com/od/homeshopping/qt/091107_homeinsp.htm
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
HUD has published a list of 10 questions to ask your home inspector Click here for the list of questions to ask home inspectors - http://www.hud.gov/offices/hsg/sfh/insp/inspfaq.cfm
Checkout this HUD's website for information about home inspections. - http://www.pueblo.gsa.gov/cic_text/housing/inspection/home.htm
Another good website to visit for information is the GAHI (Georgia Association of Home Inspectors) - http://www.gahi.com/
A good website report some categories by the National Association of Certified Home Inspectors Click here for summary of inspection items - http://homebuying.about.com/od/homeshopping/qt/091107_homeinsp.htm
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Wednesday, September 15, 2010
Title Insurance News: Do I need owner's title insurance?
2-8-2012: Another article supporting reasons to buy title insurance: Source: http://www.philadelphiaweekly.com/real-estate/is_owners_title_insurance_worth_the_cost-138872149.html
4-22-2011: Here's a list of 76 reasons why title insurance is valuable to a home owner - http://www.theclosingcompany.net/76reason.asp
11-15-2010: WSJ 10-29-2010 C3 - Title insurers will not require blanket indemnification...however, Stewart Title Guaranty Company says they'll issue title insurance as long as the lender followed all legal processes..now that's a big hole isn't it? Also, Fidelity isn't going to require banks to sign agreements like B of A's.
11-4-2010: Some title insurers are not writing new policies until the dust settles on all the investigations of foreclosure practices by many banks and financial institutions. Fannie & Freddie are working on an indemnification agreement to serve as a model that may be adopted industry wide and may be similar to the Bank of America agreement with Fidelity National that indemnifies the insurer against any loss resulting from bank errors or misconduct in the foreclosure process. (Oh, isn't that a comfortable thought that those who helped get us in the mess to begin with is writing rules on other aspects of this industry?)
10-22-2010 update: I heard Ilyce Glink say something about Old Republic Title Company refusing to insure Chase foreclosures, but I am not sure if that's true or how long the boycott will last. Other title insurers will probably selectively refuse to insure certain foreclosures if certain proof of ownership wasn't obtained.
Well, that all depends on your level of pain...but I always recommend it. This insurance doesn't duplicate homeowner's insurance, but does provide legal assistance, settlement of legitimate claims, and legal protection from non-legitimate suits. It may also protect you with respect to property line boundary disputes. It also protects your up front down payment in case you lose the home and possible any equity interest. (Yes - there was a case where the entire subdivision in Cobb County, Georgia that reverted back to the rightful owner and some people lost their down payment and house.)
Also, lenders are going to require you to purchase Lender's coverage for them, but your "Owner's" coverage is totally optional.
A "title search/title examination" is normally performed by the closing attorney for a purchase or refinance to verify a "chain of title" (i.e., title history) is clean and free of any "clouded" (i.e., questionable) liens. In other words, you have "clear" title.
With that said, mistakes when recording document/liens (e.g. income tax, property tax, delinquent HOA dues, contractors, etc,.) are made and you are still accountable to clear the title even if you weren't responsible for the lien. Some other things that may happen are non-legal previous actions (forged deeds & wills) regarding previous mortgages, liens from unpaid work by contractors, previously unrecorded right of way/easements, or legality of ownership. I have a list of 73 reasons I can send you.
The important point is that there could have been errors or fraud in the past and you would need to enlist legal assistance on your dime unless you have title insurance that covers your protection.
CHICAGO TITLE INSURANCE COMPANY - 601 Riverside Avenue- Jacksonville, FL 32204 - (888) 866-3684
FIDELITY NATIONAL TITLE INSURANCE COMPANY - 601 Riverside Avenue - Jacksonville, FL 32204 - (888) 866-3684
THE FIRST AMERICAN CORPORATION - 1 First American Way - Santa Ana, California 92707 - Toll Free: 800.854.3643 - Local: 714.800.3000
LAND AMERICA FINANCIAL GROUP - 101 Gateway Centre Parkway - Richmond, VA 23235 - Toll Free: (800) 446-7086
OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY - 400 Second Avenue South
Minneapolis, MN 55401-2499 - (612) 371-1111 (800) 328-4441 (US) (612) 371-1191 FAX
STEWART TITLE INSURANCE COMPANY - 1980 Post Oak Blvd., Suite 800 - Houston, Texas 77056 - Office: 713-625-8100 - Watts: 800-729-1900 - Fax: 713-629-2323
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
4-22-2011: Here's a list of 76 reasons why title insurance is valuable to a home owner - http://www.theclosingcompany.net/76reason.asp
11-15-2010: WSJ 10-29-2010 C3 - Title insurers will not require blanket indemnification...however, Stewart Title Guaranty Company says they'll issue title insurance as long as the lender followed all legal processes..now that's a big hole isn't it? Also, Fidelity isn't going to require banks to sign agreements like B of A's.
11-4-2010: Some title insurers are not writing new policies until the dust settles on all the investigations of foreclosure practices by many banks and financial institutions. Fannie & Freddie are working on an indemnification agreement to serve as a model that may be adopted industry wide and may be similar to the Bank of America agreement with Fidelity National that indemnifies the insurer against any loss resulting from bank errors or misconduct in the foreclosure process. (Oh, isn't that a comfortable thought that those who helped get us in the mess to begin with is writing rules on other aspects of this industry?)
10-22-2010 update: I heard Ilyce Glink say something about Old Republic Title Company refusing to insure Chase foreclosures, but I am not sure if that's true or how long the boycott will last. Other title insurers will probably selectively refuse to insure certain foreclosures if certain proof of ownership wasn't obtained.
Well, that all depends on your level of pain...but I always recommend it. This insurance doesn't duplicate homeowner's insurance, but does provide legal assistance, settlement of legitimate claims, and legal protection from non-legitimate suits. It may also protect you with respect to property line boundary disputes. It also protects your up front down payment in case you lose the home and possible any equity interest. (Yes - there was a case where the entire subdivision in Cobb County, Georgia that reverted back to the rightful owner and some people lost their down payment and house.)
Also, lenders are going to require you to purchase Lender's coverage for them, but your "Owner's" coverage is totally optional.
A "title search/title examination" is normally performed by the closing attorney for a purchase or refinance to verify a "chain of title" (i.e., title history) is clean and free of any "clouded" (i.e., questionable) liens. In other words, you have "clear" title.
With that said, mistakes when recording document/liens (e.g. income tax, property tax, delinquent HOA dues, contractors, etc,.) are made and you are still accountable to clear the title even if you weren't responsible for the lien. Some other things that may happen are non-legal previous actions (forged deeds & wills) regarding previous mortgages, liens from unpaid work by contractors, previously unrecorded right of way/easements, or legality of ownership. I have a list of 73 reasons I can send you.
The important point is that there could have been errors or fraud in the past and you would need to enlist legal assistance on your dime unless you have title insurance that covers your protection.
SOME LARGER TITLE INSURANCE COMPANIES
CHICAGO TITLE INSURANCE COMPANY - 601 Riverside Avenue- Jacksonville, FL 32204 - (888) 866-3684
FIDELITY NATIONAL TITLE INSURANCE COMPANY - 601 Riverside Avenue - Jacksonville, FL 32204 - (888) 866-3684
THE FIRST AMERICAN CORPORATION - 1 First American Way - Santa Ana, California 92707 - Toll Free: 800.854.3643 - Local: 714.800.3000
LAND AMERICA FINANCIAL GROUP - 101 Gateway Centre Parkway - Richmond, VA 23235 - Toll Free: (800) 446-7086
OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY - 400 Second Avenue South
Minneapolis, MN 55401-2499 - (612) 371-1111 (800) 328-4441 (US) (612) 371-1191 FAX
STEWART TITLE INSURANCE COMPANY - 1980 Post Oak Blvd., Suite 800 - Houston, Texas 77056 - Office: 713-625-8100 - Watts: 800-729-1900 - Fax: 713-629-2323
SOME REASONS FOR OWNER'S TITLE INSURANCE
- Married seller who represents himself or herself as single.
- Claims of undisclosed heirs
- Impersonation of owner(s)
- Clerical or recording errors by courthouse clerks
- Incorrect legal description of property
- Previous contracts signed by minors or mentally incompetent persons
- Improperly probated will
- Confusion of title resulting from similar names
- Lost or forged deeds
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Tuesday, September 14, 2010
Penny Mac - not to be confused with a Big Mac - Are they a debt collector?
Ok - We have had Freddie Mac and McDonald's Big Mac, but now there's Penny Mac.
Apparently the private company (Private National Mortgage Acceptance Co - Penny Mac) was formed to purchase the recent shaky mortgage loans from other lenders as well as credit card and auto loans.
Now the big question is "Will they be treated a a mortgage company-servicer, or a debt collector?" for regulatory purposes.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Apparently the private company (Private National Mortgage Acceptance Co - Penny Mac) was formed to purchase the recent shaky mortgage loans from other lenders as well as credit card and auto loans.
Now the big question is "Will they be treated a a mortgage company-servicer, or a debt collector?" for regulatory purposes.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Friday, September 10, 2010
Lien laws in Georgia - Contractors can place a lien on your home
Go to the Georgia Governor's Office of Consumer Affairs (GOCA) website with respect to Liens on your home to review what can happen to your property and steps you can take up front to protect yourself.
People who contribute labor or materials to improve a new or existing home are allowed to file a claim of lien against the home if they do not get paid.
According to the Atlanta Business Chronicle (9-3/9-8, page 7B) - a lien waiver (expiration of lien), becomes effective after 60 days, even if the contractor doesn't get paid.
According to the GOCA, liens expire after twelve months - as long as the contractor doesn't pursue the lien in court - whether small claims or other court.
These are the steps that contractors have to follow to file liens.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
People who contribute labor or materials to improve a new or existing home are allowed to file a claim of lien against the home if they do not get paid.
According to the Atlanta Business Chronicle (9-3/9-8, page 7B) - a lien waiver (expiration of lien), becomes effective after 60 days, even if the contractor doesn't get paid.
According to the GOCA, liens expire after twelve months - as long as the contractor doesn't pursue the lien in court - whether small claims or other court.
These are the steps that contractors have to follow to file liens.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Wednesday, September 8, 2010
FHA offers Short Refinance Program for Homeowners who owe more than their home is worth
Per a recent press release, U.S. Department of Housing and Urban Development - FHA Short Refinance option enables lenders to provide additional refinancing options to homeowners who owe more than their home is worth.
Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain 'underwater' non-FHA, non - Fannie & Freddie borrowers - i.e., some of those "creative financing deals-sub prime/Alt A/stated loans" that were prevalent (from 500,000 to 1.5 million) who are current on their existing mortgage (this seems to contradict some news that lenders advise people to get behind 2+ payments so they can help them with HAMP) and whose lenders agree to write off at least ten percent (10%) of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage. (Note: This program doesn't apply to Fannie Mae or Freddie Mac loans.)
Write downs: First & Second mortgage liens need to be written down to less than 115% of home's value (probably determined by appraisal).
About 11 million borrowers (about 25% of households with loans) owe more than their home is worth.
About $14 billion of the unused TARP funds earmarked for housing assistance will be used to buy the "lower balance" loans....Let's hope it's not as "generous" as the FDIC's 80% of book loss.
Some problems: Possible lawsuits by investors whose money from the write downs and lack of incentive by investors to write down unless there is high probability of borrower default.
Some benefits:
(to Lenders/Investors) - get rid of loans that were already modified and maybe headed there again.
(to Borrowers) - obviously get a lower mortgage and monthly payment, but will the 90% reduction be filed as a lien.
NOTE: Doing the math...if there is only $14 billion available, then at $200,000 per loan, then only 70,000 borrowers could be helped...even using $100,000 loan balance, than only means 140,000 borrowers - a far cry from 500,000 - to 1.5 million borrowers that the Obama Administration wants to help.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Starting September 7, 2010, the Federal Housing Administration (FHA) will offer certain 'underwater' non-FHA, non - Fannie & Freddie borrowers - i.e., some of those "creative financing deals-sub prime/Alt A/stated loans" that were prevalent (from 500,000 to 1.5 million) who are current on their existing mortgage (this seems to contradict some news that lenders advise people to get behind 2+ payments so they can help them with HAMP) and whose lenders agree to write off at least ten percent (10%) of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage. (Note: This program doesn't apply to Fannie Mae or Freddie Mac loans.)
Write downs: First & Second mortgage liens need to be written down to less than 115% of home's value (probably determined by appraisal).
About 11 million borrowers (about 25% of households with loans) owe more than their home is worth.
About $14 billion of the unused TARP funds earmarked for housing assistance will be used to buy the "lower balance" loans....Let's hope it's not as "generous" as the FDIC's 80% of book loss.
Some problems: Possible lawsuits by investors whose money from the write downs and lack of incentive by investors to write down unless there is high probability of borrower default.
Some benefits:
(to Lenders/Investors) - get rid of loans that were already modified and maybe headed there again.
(to Borrowers) - obviously get a lower mortgage and monthly payment, but will the 90% reduction be filed as a lien.
NOTE: Doing the math...if there is only $14 billion available, then at $200,000 per loan, then only 70,000 borrowers could be helped...even using $100,000 loan balance, than only means 140,000 borrowers - a far cry from 500,000 - to 1.5 million borrowers that the Obama Administration wants to help.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Tuesday, September 7, 2010
Reasons why condo sales may slow down
Recently enacted Federal rules regarding FHA loans require these three elements to exist before FHA will approve a loan to purchase a condominium unit:
You may search this HUD condo website to see if your condo is approved and if originally approved before 2000, they will require full (not streamlined) recertification.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
- less than or = 15% of (occupied) units' HOA fees are delinquent
- more than or = 10% of HOA budget must be held in reserves (most HOAs hold some in reserve, but many don't hold more than 10%) - This could require a hike in existing HOA fees even when the HOA has been fiscally responsible and held costs down.
- less than or = 50% of the units can be held/owned by investors
You may search this HUD condo website to see if your condo is approved and if originally approved before 2000, they will require full (not streamlined) recertification.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Mortgage fraud - what's the impact?
According to page 3 of the WSJ - 8-23-2010, losses rose over 15% last year after falling about 60% over the previous 2 years.
In 2009, almost $14 Billion in loans originated were fraudulent.
Mortgage fraud based on false appraisals rose almost half as many between 2008 and 2009.
Loan Application fraud accounts for about 60% of all mortgage fraud, which obviously leave 40% of fraud that involves other non-applicants - real estate agents, appraisers, attorneys, etc,.
In short, the scam was to get someone with good credit applying for no-doc loans (which are now non-existent). Another twist of a scam is when someone rented a property, redirected & collected mail, and acquired the owner's SS# and subsequently their identity, then sold his house.
I believe the above information might only be related to conventional loans backed by the US Government.
Per the 6-4-2010 WSJ (page C10), additional FHA loans may have not met underwriting guidelines. Just the 2008 FHA loans amounted to $205 Billion. FHA has stopped taking FHA loans from several lenders causing some to fold and leave no resources to buy back bad loans. (Maybe FHA loans that shouldn't have been made.) Fannie and Freddie are demanding payments as reimbursements on bad loans.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
In 2009, almost $14 Billion in loans originated were fraudulent.
Mortgage fraud based on false appraisals rose almost half as many between 2008 and 2009.
Loan Application fraud accounts for about 60% of all mortgage fraud, which obviously leave 40% of fraud that involves other non-applicants - real estate agents, appraisers, attorneys, etc,.
In short, the scam was to get someone with good credit applying for no-doc loans (which are now non-existent). Another twist of a scam is when someone rented a property, redirected & collected mail, and acquired the owner's SS# and subsequently their identity, then sold his house.
I believe the above information might only be related to conventional loans backed by the US Government.
Per the 6-4-2010 WSJ (page C10), additional FHA loans may have not met underwriting guidelines. Just the 2008 FHA loans amounted to $205 Billion. FHA has stopped taking FHA loans from several lenders causing some to fold and leave no resources to buy back bad loans. (Maybe FHA loans that shouldn't have been made.) Fannie and Freddie are demanding payments as reimbursements on bad loans.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Thursday, September 2, 2010
Fannie Mae and Freddie Mac - What will be the future burden on US taxpayers?
Update 10-22-2010: Just heard Bloomberg News report that Fannie and Freddie may need up to $360 billion ($148 billion so far) through 2013 (---I guess because they were STUPID and bought alot of CRAP mortgages).
Nutshell lesson for today - Fannie Mae (Federal National Mortgage Association - FNMA) and Freddie Mac (Federal Home Loan Mortgage Corporation - FHLMC), were established decades ago as Government Sponsored Enterprises (basically independent corporations) but with the full backing of the US Government if they failed...and they basically did ...and then went under conservatorships and were absorbed into the US Government Control in September 2008. Their importance in real estate was basically to purchase residential mortgages/loans that met FNMA/FHMLC criteria from lenders.
This created a "secondary mortgage market" (and competing with other investors buying these loans too) which in turn gave money back to lenders to make more loans. This keeps the real estate market/home building/home sales moving because lenders didn't need tie up their money to carry the loans since they had a ready and willing buyer - the US Government----Cha-ching!
Fannie and Freddie hold about $5.5 Trillion in mortgages. Based on current market value of loans held by Fannie Mae alone, the values are down $145 Billion. Also, about 5.5% of the $3 Trillion mortgages (i.e., $165 Billion) are 90 days or more behind
Based on two articles in the WSJ in 5-11-2010 issue, Fannie is requesting another $8.4 billion to cover losses. That means we will have spent $145 billion for Fannie's ($84 billion losses) and Freddie’s ($61 billion losses).
How much more are you and I going to pay for this?
Nutshell lesson for today - Fannie Mae (Federal National Mortgage Association - FNMA) and Freddie Mac (Federal Home Loan Mortgage Corporation - FHLMC), were established decades ago as Government Sponsored Enterprises (basically independent corporations) but with the full backing of the US Government if they failed...and they basically did ...and then went under conservatorships and were absorbed into the US Government Control in September 2008. Their importance in real estate was basically to purchase residential mortgages/loans that met FNMA/FHMLC criteria from lenders.
This created a "secondary mortgage market" (and competing with other investors buying these loans too) which in turn gave money back to lenders to make more loans. This keeps the real estate market/home building/home sales moving because lenders didn't need tie up their money to carry the loans since they had a ready and willing buyer - the US Government----Cha-ching!
Fannie and Freddie hold about $5.5 Trillion in mortgages. Based on current market value of loans held by Fannie Mae alone, the values are down $145 Billion. Also, about 5.5% of the $3 Trillion mortgages (i.e., $165 Billion) are 90 days or more behind
Based on two articles in the WSJ in 5-11-2010 issue, Fannie is requesting another $8.4 billion to cover losses. That means we will have spent $145 billion for Fannie's ($84 billion losses) and Freddie’s ($61 billion losses).
How much more are you and I going to pay for this?
IRS Publication 4681 - Cancelled Debts, Foreclosures, Repossessions and Abandonment
If anyone has a short sale, foreclosure, or HAMP (Home Affordable Modification Program) loan modification, you may refer to
IRS Publication 4681 which outlines the conditions under which you are not required to pay Federal Income Tax on forgiveness/discharge of "net" mortgage related debt via the IRS Form 1099 you'll receive from the discharge...Yes, the amount (between what the bank gets for the sale of the property and the amount you owed would be their loss) would normally be taxed because it is a "benefit" that you don't owe the debt any longer.
I am not certain this is applicable in the case of Deed in Lieu of Foreclosure,
I believe this exclusion runs to 2013, but consult your tax advisor to be sure.
Since this exclusion of income is only applied for Federal income taxes, I am not sure what impact this law has on State income taxes.
I would like to see the tax burden permanently eliminated if the asset is also disposed, but creates a Moral Dilemma or disincentive for people to take unnecessary risk.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
IRS Publication 4681 which outlines the conditions under which you are not required to pay Federal Income Tax on forgiveness/discharge of "net" mortgage related debt via the IRS Form 1099 you'll receive from the discharge...Yes, the amount (between what the bank gets for the sale of the property and the amount you owed would be their loss) would normally be taxed because it is a "benefit" that you don't owe the debt any longer.
I am not certain this is applicable in the case of Deed in Lieu of Foreclosure,
I believe this exclusion runs to 2013, but consult your tax advisor to be sure.
Since this exclusion of income is only applied for Federal income taxes, I am not sure what impact this law has on State income taxes.
I would like to see the tax burden permanently eliminated if the asset is also disposed, but creates a Moral Dilemma or disincentive for people to take unnecessary risk.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Wednesday, September 1, 2010
Changes to FHA Up Front & Annual Mortgage Insurance Premiums
Update 2-16-2011: To quote a famous US President..."Well, there you go again"...FHA will be raising the annual Mortgage Insurance Premium (MIP) by .25, resulting in another $21/month based on a $100,000 FHA loan. (Sources: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-10ml.pdf and http://portal.hud.gov/hudportal/documents/huddoc?id=fromthedeskof021811.pdf)
Effective April 9, 2010 those upfront premiums went from 1.75 percent to 2.25 percent. However, the FHA was not able to raise the annual premium without the permission of Congress as it was already at the authorized ceiling. Under the law (H.R.5981) passed 6-10-2010, the FHA will be allowed to increase its annual premium to 1.50 percent of the unpaid balance of the loan.
Per FHA Commissioner David Stevens' congressional testimony, for new borrowers, the FHA will lower its upfront premium (from 2.25% to 1.0%) simultaneously with the increase to the annual premium (from .55% to .90%). It was FHA's intention to implement that change effective on September 7, 2010 (but now has been delayed until 10-4-2010), FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years.
Example: Based on a $100,000 FHA loan, the new up front premium will be $1,000 (instead of $2,250) and the annual charge would probably be $900 (instead of $550).
The net overall difference is effectively an increase in taxes (to those people making less than $250,000 per year). Even though FHA plans to lower the upfront premium, the monthly MIP charge is going up over the minimm mandatory 5 years of payments - based on a $100,000 loan, it could mean more than $750 over 5 years. You may get a small break if they retain the MIP tax deductibility...
Effective April 9, 2010 those upfront premiums went from 1.75 percent to 2.25 percent. However, the FHA was not able to raise the annual premium without the permission of Congress as it was already at the authorized ceiling. Under the law (H.R.5981) passed 6-10-2010, the FHA will be allowed to increase its annual premium to 1.50 percent of the unpaid balance of the loan.
Per FHA Commissioner David Stevens' congressional testimony, for new borrowers, the FHA will lower its upfront premium (from 2.25% to 1.0%) simultaneously with the increase to the annual premium (from .55% to .90%). It was FHA's intention to implement that change effective on September 7, 2010 (but now has been delayed until 10-4-2010), FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years.
Example: Based on a $100,000 FHA loan, the new up front premium will be $1,000 (instead of $2,250) and the annual charge would probably be $900 (instead of $550).
The net overall difference is effectively an increase in taxes (to those people making less than $250,000 per year). Even though FHA plans to lower the upfront premium, the monthly MIP charge is going up over the minimm mandatory 5 years of payments - based on a $100,000 loan, it could mean more than $750 over 5 years. You may get a small break if they retain the MIP tax deductibility...
Tuesday, August 31, 2010
New fees are proposed for Government Backed or Insured Loans
The new design of Fannie and Freddie, when or if that happens, may require fees get charged for any federally backed loans - and it's about time...The trick will be to charge a fee sufficient to cover the Government losses and not perceived as charging too much. It was interesting to note that until recently, FHA had turned a profit.
Some suggest private lenders form a cooperative of sorts and pay fees into a "mutualized loss pool" to provide guarantees for mortgages. In addition, pay a "reinsurance" fee to the Government as additional insurance for additional losses.
It is interesting to note that almost $10 Trillion of mortgages have been created over the past 30 years which seems to have outpaced the "capacity" of the nation's banking system.
Source: WSJ, 8-24-2010 page A6.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Some suggest private lenders form a cooperative of sorts and pay fees into a "mutualized loss pool" to provide guarantees for mortgages. In addition, pay a "reinsurance" fee to the Government as additional insurance for additional losses.
It is interesting to note that almost $10 Trillion of mortgages have been created over the past 30 years which seems to have outpaced the "capacity" of the nation's banking system.
Source: WSJ, 8-24-2010 page A6.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Monday, August 30, 2010
Deficiency Judgment - The unfortunate final 'gotchya sucker' from your lender!
Update 2-18-2012: Freddie Mac has decided to prohibit loan servicers from going after borrowers under deficiency judgments under certain short sale or deed-in-lieu of foreclosure actions.
Source: http://realestateinsidernews.com/nar-2/freddie-mac-no-on-deficiency-judgments/
For those who mail house keys back to the lender or have a hardship and have to lose the house, or even sell the home for less than the total mortgage amount, do you think filing for bankruptcy will allow you to settle the debt and move forward and start over? ---Well, not so fast...Get ready to pay later and be hounded for years.
As part of your Security Deed (Mortgage), you agree to pay back the loan. If for some reason you can't pay it back, and you have to give up your home (short sale, deed in lieu of foreclosure, or foreclosure) the debt doesn't just disappear. The lender/loan servicer may file what is called a Deficiency Judgment. It is a court order against borrowers ordering them to make up the difference between the gross amount they receive from the liquidation of the property (minus) the debt (loan balance plus legitimate loan expenditures/losses/legal costs). If there is an overage, you should be clear. If there is a shortage (negative equity), you are on the hook for the shortage.
The deficiency judgment may be filed anytime for up to 5 years after you get rid of the property and they may be able to collect on that debt up to 20 years after they file the judgment. To further agitate you, this Deficiency Judgment may be deemed a "benefit" to you by loan forgiveness and is normally taxable income. However, I believe that the US Congress eliminated this "forgiveness of debt" on a real property and will not taxable again this year.
Also, I do believe that regardless of whether or not you file bankruptcy, the debt can still be held against you.
For example, I know a woman over 60 who lost her job, couldn't afford to make payments on her mortgage, and she filed for Chapter 7 bankruptcy with an attorney who told her the house was protected under the bankruptcy settlement. However, she showed me the paperwork of the bankruptcy settlement and it excluded Deficiency Judgments from the bankruptcy filing. Since that was her whole point of filing bankruptcy, and not having the assets to cover the mortgage payoff, she wonders why she filed for bankruptcy at all since that was her goal - to cover what she could and have the debt relief. I suggested she confirm this with her bankruptcy attorney and GET IT IN WRITING from the attorney.
I had heard that the bankruptcy laws were essentially rewritten a few years ago to make it more difficult to completely discharge your debts, but since I am not aware of the criteria and protections, I am not sure where it all stands. Your credit score will take a hit but after paying on time for 12 months straight, your credit score returns to a much more respectful rating....
In Georgia, the court has to confirm with the lender within 30 days after sale that the sale was made at market value and there is no right of redemption by the Borrower. See the Richmond Federal Reserve Bank Study of the different US States' Laws on Deficiency Judgments.
Does anyone have any more knowledge of these deficiency judgments to shed some light on this unfortunate subject?
Source: http://realestateinsidernews.com/nar-2/freddie-mac-no-on-deficiency-judgments/
For those who mail house keys back to the lender or have a hardship and have to lose the house, or even sell the home for less than the total mortgage amount, do you think filing for bankruptcy will allow you to settle the debt and move forward and start over? ---Well, not so fast...Get ready to pay later and be hounded for years.
As part of your Security Deed (Mortgage), you agree to pay back the loan. If for some reason you can't pay it back, and you have to give up your home (short sale, deed in lieu of foreclosure, or foreclosure) the debt doesn't just disappear. The lender/loan servicer may file what is called a Deficiency Judgment. It is a court order against borrowers ordering them to make up the difference between the gross amount they receive from the liquidation of the property (minus) the debt (loan balance plus legitimate loan expenditures/losses/legal costs). If there is an overage, you should be clear. If there is a shortage (negative equity), you are on the hook for the shortage.
The deficiency judgment may be filed anytime for up to 5 years after you get rid of the property and they may be able to collect on that debt up to 20 years after they file the judgment. To further agitate you, this Deficiency Judgment may be deemed a "benefit" to you by loan forgiveness and is normally taxable income. However, I believe that the US Congress eliminated this "forgiveness of debt" on a real property and will not taxable again this year.
Also, I do believe that regardless of whether or not you file bankruptcy, the debt can still be held against you.
For example, I know a woman over 60 who lost her job, couldn't afford to make payments on her mortgage, and she filed for Chapter 7 bankruptcy with an attorney who told her the house was protected under the bankruptcy settlement. However, she showed me the paperwork of the bankruptcy settlement and it excluded Deficiency Judgments from the bankruptcy filing. Since that was her whole point of filing bankruptcy, and not having the assets to cover the mortgage payoff, she wonders why she filed for bankruptcy at all since that was her goal - to cover what she could and have the debt relief. I suggested she confirm this with her bankruptcy attorney and GET IT IN WRITING from the attorney.
I had heard that the bankruptcy laws were essentially rewritten a few years ago to make it more difficult to completely discharge your debts, but since I am not aware of the criteria and protections, I am not sure where it all stands. Your credit score will take a hit but after paying on time for 12 months straight, your credit score returns to a much more respectful rating....
In Georgia, the court has to confirm with the lender within 30 days after sale that the sale was made at market value and there is no right of redemption by the Borrower. See the Richmond Federal Reserve Bank Study of the different US States' Laws on Deficiency Judgments.
Does anyone have any more knowledge of these deficiency judgments to shed some light on this unfortunate subject?
Friday, August 27, 2010
Ginnie Mae - Who is it and why do we care? Can you say "$9 Trillion of Mortgage Backed Securities"?
Well, maybe not without taking a little antacid and two Advil first...
Who is it? In 1968, Congress established the Government National Mortgage Association (Ginnie Mae)- A government-owned corporation within the Department of Housing and Urban Development (HUD). At this time, mortgages were usually held by local/regional community/commercial banks and not sold in groups to get the money back to reloan to others but held by the institution which only had so much money to lend and that was it. This reduced the number of loans available and restrained the availability of affordable housing.
Ginnie Mae solved this problem (i.e. liquidity-limited dollars for loan and variable interest rates per region) that revolutionized the American housing industry in 1970 by pioneering the issuance of mortgage-backed securities (MBS).
What Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans — mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture's Rural Housing Service (RHS) and the Department of Housing and Urban Development's Office of Public and Indian Housing (PIH).
Today, Ginnie Mae securities are the only mortgage-backed securities that offer the full faith and credit guaranty of the United States government (i.e., You - the taxpayer).
Why do we care? As of right now, it insures about $9 Trillion in Government issued Mortgage Backed Securities...And almost 10% of them are delinquent by more than one month...
Who is it? In 1968, Congress established the Government National Mortgage Association (Ginnie Mae)- A government-owned corporation within the Department of Housing and Urban Development (HUD). At this time, mortgages were usually held by local/regional community/commercial banks and not sold in groups to get the money back to reloan to others but held by the institution which only had so much money to lend and that was it. This reduced the number of loans available and restrained the availability of affordable housing.
Ginnie Mae solved this problem (i.e. liquidity-limited dollars for loan and variable interest rates per region) that revolutionized the American housing industry in 1970 by pioneering the issuance of mortgage-backed securities (MBS).
What Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans — mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Other guarantors or issuers of loans eligible as collateral for Ginnie Mae MBS include the Department of Agriculture's Rural Housing Service (RHS) and the Department of Housing and Urban Development's Office of Public and Indian Housing (PIH).
Today, Ginnie Mae securities are the only mortgage-backed securities that offer the full faith and credit guaranty of the United States government (i.e., You - the taxpayer).
Why do we care? As of right now, it insures about $9 Trillion in Government issued Mortgage Backed Securities...And almost 10% of them are delinquent by more than one month...
Thursday, August 26, 2010
Who really owns your mortgage?
According to a recent WSJ article (4-3/4-2010, Page B1) some lenders who foreclosed on homes thought they owned the mortgage - but they didn’t!
Lender Processing Services (LPS) Inc. is a company who uses a computer software program that most lenders use to track most US mortgages from creation to final payoff. LPS has been so overwhelmed with recording the ownership and transfer of ownership of the recent mortgage volume of the past several years that they have made some mistakes when getting them notarized and recorded in public records. It has become difficult for some banks to truly identify and prove ownership of a mortgage.
Can you say “lawsuit” – not only by banks who think they own mortgage and don’t, but how about homeowners who stop foreclosure proceedings through the courts…
Can you say “Bogus Assignee?”
Lender Processing Services (LPS) Inc. is a company who uses a computer software program that most lenders use to track most US mortgages from creation to final payoff. LPS has been so overwhelmed with recording the ownership and transfer of ownership of the recent mortgage volume of the past several years that they have made some mistakes when getting them notarized and recorded in public records. It has become difficult for some banks to truly identify and prove ownership of a mortgage.
Can you say “lawsuit” – not only by banks who think they own mortgage and don’t, but how about homeowners who stop foreclosure proceedings through the courts…
Can you say “Bogus Assignee?”
Wednesday, August 25, 2010
Did somebody in Congress get sweet deals from Countrywide?
If the investigations result in confirmation of charges, I hope the Senate's Ethics Committee (as well as the House's Oversight and Government Reform Committee) investigations of the 30+ Countrywide VIP loans to US House & Senate member/staffers & the trial of three former Countrywide executives (including Angello Mozilo) results in some hangings, but I'm not holding my breath...my guess---acquittals (like Congress ok'd Dodd's 6 VIP loans) and no penalties for the sleezeballs. (Senators Chris Dodd -who is not running for another term and Kent Conrad were both cleared by Senate Ethics panel.)
The SEC claims the defendants hid ever increasing risks and problems in the loan portfolios.
Was this the reason why other Countrywide shenanigans were ignored?
Note: Remember the comment about "rearranging deck chairs on the Titanic"? Well, the old Countrywide was bought by Bank of America and is now called "Bank of America Home Loans.
Thank you sir,... may I have another?
Source: WSJ Article 8-14-2010, Page B1
Update WSJ 8-24-2010, A6 - The Securities and Exchange Commission (another SEC), is investigating Angelo Mozilo to see if he and other Countrywide executives hid some substantial risks from investors.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
The SEC claims the defendants hid ever increasing risks and problems in the loan portfolios.
Was this the reason why other Countrywide shenanigans were ignored?
Note: Remember the comment about "rearranging deck chairs on the Titanic"? Well, the old Countrywide was bought by Bank of America and is now called "Bank of America Home Loans.
Thank you sir,... may I have another?
Source: WSJ Article 8-14-2010, Page B1
Update WSJ 8-24-2010, A6 - The Securities and Exchange Commission (another SEC), is investigating Angelo Mozilo to see if he and other Countrywide executives hid some substantial risks from investors.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Tuesday, August 24, 2010
Fannie Mae and Freddie Mac....unfortunately, these dollars make sense
• Former Fannie Mae Franklin Raines made $91 million from 1998 thru 2003;
• Top five (5) Fannie Mae executive earned $34 million in compensation;
• Top executives at Freddie Mac earned $35 million in 2006;
• In 2009 (after the downturn in mortgage business), the top five (5) executives at Fannie Mae made $19 million, collectively. The CEO earned $6 million;
• From 2001 through 2006, Fannie Mae spent $123 million to lobby Congress (second highest total lobbying expenses in the US);
• Alt-A loans accounted for 9% of Fannie Mae's business but represented 40% of credit losses in 2009;
• Losses as of 5-10-2010 have amounted to $146 billion - the ceiling of debt losses back by the Federal Government (i.e., taxpayers) had been raised to (and expected to reach) $400 billion;
• Both Fannie and Freddie were delisted from the New York Stock Exchange;
• Armando Falcon (former head of Fannie's and Freddie's Federal regulator) said they had a culture of arrogance and greed and the failure of management that caused their collapse;
• By June 2010, 5.1 million homeowners will own a home worth 75% or less of the mortgage amount Broker's Blog 2-3-2010; and
• Fannie, Freddie, and the FHA now comprise 90% of mortgages.
No prosecutions, investigations, or correction of this mismanagement:
PRICELESS!
As a side note (per WSJ 4-9-2010-page 4B) - Robert Rubin (former Treasury Secretary under Clinton and former Chairman of the Board at Citigroup) said that everyone in the industry failed to see this crises...
Does that give you faith and confidence in the entire financial and regulatory system?
UPDATE 8-9-2010: Per the 8-6-2010 WSJ page A2, loans acquired since the beginning of 2009 have performed better than in the past due to "tighter lending standards" by Fannie and Freddie....well a little late don't you think? DUH! (Oh and Fannie and Freddie have required $146 billion since 2008 to cover losses on loans they purchased.)
• Top five (5) Fannie Mae executive earned $34 million in compensation;
• Top executives at Freddie Mac earned $35 million in 2006;
• In 2009 (after the downturn in mortgage business), the top five (5) executives at Fannie Mae made $19 million, collectively. The CEO earned $6 million;
• From 2001 through 2006, Fannie Mae spent $123 million to lobby Congress (second highest total lobbying expenses in the US);
• Alt-A loans accounted for 9% of Fannie Mae's business but represented 40% of credit losses in 2009;
• Losses as of 5-10-2010 have amounted to $146 billion - the ceiling of debt losses back by the Federal Government (i.e., taxpayers) had been raised to (and expected to reach) $400 billion;
• Both Fannie and Freddie were delisted from the New York Stock Exchange;
• Armando Falcon (former head of Fannie's and Freddie's Federal regulator) said they had a culture of arrogance and greed and the failure of management that caused their collapse;
• By June 2010, 5.1 million homeowners will own a home worth 75% or less of the mortgage amount Broker's Blog 2-3-2010; and
• Fannie, Freddie, and the FHA now comprise 90% of mortgages.
No prosecutions, investigations, or correction of this mismanagement:
PRICELESS!
As a side note (per WSJ 4-9-2010-page 4B) - Robert Rubin (former Treasury Secretary under Clinton and former Chairman of the Board at Citigroup) said that everyone in the industry failed to see this crises...
Does that give you faith and confidence in the entire financial and regulatory system?
UPDATE 8-9-2010: Per the 8-6-2010 WSJ page A2, loans acquired since the beginning of 2009 have performed better than in the past due to "tighter lending standards" by Fannie and Freddie....well a little late don't you think? DUH! (Oh and Fannie and Freddie have required $146 billion since 2008 to cover losses on loans they purchased.)
Fannie Mae/Freddie Mac says "Buy Back these crappy loans!"
Lenders made representations and warranties that certain loans were good loans. Now that those loans are delinquent, Fannie and Freddie are finally doing their "due diligence" investigating each loan and renegotiating their agreements of purchases of those loans.
If they find the borrowers or lenders lied about information in loan applications and documents, they are requiring the lender to "buy" the loan back.
Mortgage insurers can rescind mortgage insurance - which triggers Fannie & Freddie buybacks - and lenders end up paying insurers to prevent Fannie/Freddie buyback .
Morgan Stanley alone estimates their buybacks to amount to about $17 billion through 2014. (But watch out or the next wave of losses and write-offs - and then more layoffs due to these losses.)
Note: Federal Housing Fiance Agency (FHFA) now regulates Fannie and Freddie. But once Fannie & Freddie get reorganized and either spun-off, or absorbed into government grasp, who knows what Congress is up to. I recently heard Matt Taibbi mention on C-span that AIG was classified as a thrift and not an insurance company and regulated by only one insurance expert in the regulatory agency (Office of Thrift Supervision). I believe the new Financial Regulatory Reform bill (code named - the wimpy milk toast bill) called for a new agency to head up oversight in these areas. Can you say "rearrange the deck chairs on the Titanic, please"?
After the fat,dumb, and happy eater has indulged themselves at the "all-you-can-eat" buffet, they are looking to lose weight.
Too little...too late?
Note: About 9 out of every 10 loans is a government backed loan (about 40% FHA and about 50% Fannie or Freddie Loan) and there are at least $5 Trillion in government backed mortgages...And about 4.5 million homeowners are at least 30 days delinquent on their mortgage right now.
If they find the borrowers or lenders lied about information in loan applications and documents, they are requiring the lender to "buy" the loan back.
Mortgage insurers can rescind mortgage insurance - which triggers Fannie & Freddie buybacks - and lenders end up paying insurers to prevent Fannie/Freddie buyback .
Morgan Stanley alone estimates their buybacks to amount to about $17 billion through 2014. (But watch out or the next wave of losses and write-offs - and then more layoffs due to these losses.)
Note: Federal Housing Fiance Agency (FHFA) now regulates Fannie and Freddie. But once Fannie & Freddie get reorganized and either spun-off, or absorbed into government grasp, who knows what Congress is up to. I recently heard Matt Taibbi mention on C-span that AIG was classified as a thrift and not an insurance company and regulated by only one insurance expert in the regulatory agency (Office of Thrift Supervision). I believe the new Financial Regulatory Reform bill (code named - the wimpy milk toast bill) called for a new agency to head up oversight in these areas. Can you say "rearrange the deck chairs on the Titanic, please"?
After the fat,dumb, and happy eater has indulged themselves at the "all-you-can-eat" buffet, they are looking to lose weight.
Too little...too late?
Note: About 9 out of every 10 loans is a government backed loan (about 40% FHA and about 50% Fannie or Freddie Loan) and there are at least $5 Trillion in government backed mortgages...And about 4.5 million homeowners are at least 30 days delinquent on their mortgage right now.
Monday, August 23, 2010
Yield Spread Premium - Gone or changed form?
The basic truth about matter in the universe is...it doesn't disappear, but only changes form.
The WSJ on 8-17-2010, page A6, raised one of the "dirty little secrets" in the mortgage business.
The Yield Spread Premium - Basically, loan originators "could" give the borrower a lower rate, but charged a higher rate and were paid by the lenders a "bonus" for that higher rate. Was it disclosed? Yes, but in a somewhat overlooked fashion.
Now I don't know how may times this happened, but it has happened in the past - hence the change by the Federal Reserve (albeit under pressure by public outrage and not by the choir boys at the Fed...).
I have never and will never recommend any lender who does this. Yes, some clients have used lenders of their choice who charged this YSP. I don't remember many, but they tend to be obscure, off branded lenders - some of which do not exist any longer.
The Federal Reserve has "now" banned the YSP (Effective April 1, 2011)..
(Hey - why not make it effective now and why wait so long?)
I don't think anyone objects to compensating loan originators, but to reward them in a "bait and switch" manner is unconscionable.
As much as my Libertarian self shudders, my personal belief is that if the Federal Government can't hang anyone over this, but they should at least make the lenders who did this refund the amount paid to the loan originators to the home buyer or reduce their loan balance by that amount.
My skepticism makes me believe that this "reward or bonus" will exist in this or other form in somebody's pocket besides the borrower.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
The WSJ on 8-17-2010, page A6, raised one of the "dirty little secrets" in the mortgage business.
The Yield Spread Premium - Basically, loan originators "could" give the borrower a lower rate, but charged a higher rate and were paid by the lenders a "bonus" for that higher rate. Was it disclosed? Yes, but in a somewhat overlooked fashion.
Now I don't know how may times this happened, but it has happened in the past - hence the change by the Federal Reserve (albeit under pressure by public outrage and not by the choir boys at the Fed...).
I have never and will never recommend any lender who does this. Yes, some clients have used lenders of their choice who charged this YSP. I don't remember many, but they tend to be obscure, off branded lenders - some of which do not exist any longer.
The Federal Reserve has "now" banned the YSP (Effective April 1, 2011)..
(Hey - why not make it effective now and why wait so long?)
I don't think anyone objects to compensating loan originators, but to reward them in a "bait and switch" manner is unconscionable.
As much as my Libertarian self shudders, my personal belief is that if the Federal Government can't hang anyone over this, but they should at least make the lenders who did this refund the amount paid to the loan originators to the home buyer or reduce their loan balance by that amount.
My skepticism makes me believe that this "reward or bonus" will exist in this or other form in somebody's pocket besides the borrower.
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them.
Friday, August 20, 2010
Credit Score - What is it and how it's used
You may already have a good idea that a good credit score means you can obtain credit easier or at a better interest rate, but have you ever considered how it's calculated or what it's based on?
The closely guarded formula (algorithm) that "predicts your financial debt behavior" (i.e., credit risk) is compiled from all sorts of financial information about you. All the FICO (Fair Isaac Company) score is trying to do is to give creditors your "predictive" behavior of handling money and debt. Generally, the more fluctuation in debt or erratic your financial behavior, the lower the score. It an also be used by employers as part of their analysis of your total profile. Sometimes, employers considering people in positions of high responsibility will look at your amount of debt to determine the likelihood of you selling information to competitors to pay your debts.
5 major factors comprise the credit score and what % of the score:
- Payment history (37%) - Basically, Do you pay on time? If you've ever been late (especially within the past 12 months), your score gets reduced.
- What you normally owe, how much of the available credit balance you have, and how many accounts you have. (29%) For example, if you open a bunch of retail accounts, and use a large % of the balance, this could score negatively.
- Length of time you have carried a credit history. (7%) In other words, have you used credit wisely. Also, if you open a number of accounts, or purchase major items on credit shortly before you apply for a mortgage, this could also negatively impact your score.
Are you increasing the amount of debt? (12%) Opening new credit lines within a short time (whether special similar retail offers from Kohl's, Macy's, etc or different types for car, student loan, furniture, clothing, etc,).
Note: I understand that you can apply/research any number of mortgage rates within a 14 to 45 day period and it will not seriously degrade your credit score. However, since the Fair Isaac website mentioned it's up to the lender to use anything between 14 to 45 days, ask the lender what formula they use.
- Types (credit cards; installment - car/furniture; retail (clothing) accounts; and finance companies-student loans) of credit you are using. (15%) A good mix of types and consistent payment helps raise score.
- New debt (10%) - Are you opening alot of new accounts from retailers offering incentives or applications for several other types credit?
Notes: Judgments, liens, and paid collection items stay on your report for 7 years.
For more information about credit scores, check this website from FICO.
Thursday, August 19, 2010
1,616 Foreclosures headed to the Cobb County courthouse steps in September 2010
That beats the previous record of 1,609 in October 2009. We certainly want to pray for the homeowners and their families.
President Obama announced the Housing Finance Agency Innovation Fund will issue $2 Billion to help unemployed homeowners in 17 states (including $126.6 Million for Georgia). It is estimated that the total federal money for Georgia alone will only help 4,000-5,000 of the almost 260,000 Georgians in this situation.
Also, HUD will provide $1 Billion to the Emergency Homeowners Loan program to provide assistance up to 24 months to homeowners who experienced a "substantial reduction" of income and are at risk of foreclosure.
No details of how they will help but significant loan balance reduction and permanent reduction of monthly payments would help.
President Obama announced the Housing Finance Agency Innovation Fund will issue $2 Billion to help unemployed homeowners in 17 states (including $126.6 Million for Georgia). It is estimated that the total federal money for Georgia alone will only help 4,000-5,000 of the almost 260,000 Georgians in this situation.
Also, HUD will provide $1 Billion to the Emergency Homeowners Loan program to provide assistance up to 24 months to homeowners who experienced a "substantial reduction" of income and are at risk of foreclosure.
No details of how they will help but significant loan balance reduction and permanent reduction of monthly payments would help.
Wednesday, August 18, 2010
Are there any down payment assistance programs left to use?
Are there any down payment assistance programs left to use?
Not much remains now, but maybe there will be in the future...and the future has arrived - at least loan programs sponsored by these four states: Idaho, Massachusetts, Minnesota and Wisconsin. They are offering ZERO DOWN PAYMENT loans - more Exotic State Mortgages.
However, most other programs have been terminated. For instance, the Georgia Dream Program ended June 30, 2010. See other programs that at one time were available here at the FHA website.
On July 30, 2008, the Federal Government passed H.R. 3221 - Housing and Economic Recovery Act of 2008. Section 2113 of the bill prohibits seller-funded DPA (Down Payment Assistance) for loans backed by the Federal Housing Administration.
Prior to this bill, the seller could contribute up to 6% to the buyer to cover either a down payment or closing costs on an FHA loan. The changes are effective October 1, 2008.
The bill is means the elimination of Non Profit Down Payment Assistance. Only Government funded housing grants are available for Down Payment Assistance under the American Dream Down Payment Assistance Act.
8-20-2010 Update: Almost 625,000 people were helped with DPA programs from 2000-2005; in 2004, 31% of 510,000 FHA single family DPA from non-profits v. about 6% in 2000; the GAO warned that the DPA programs were artificially inflating prices; and IRS Commissioner (Mark Everson) raised concerns.
8-26-2010 Update: The Atlanta Development Authority offers a downpayment assistance program for properties within the Atlanta BeltLine Tax Allocation District city limits.It appears that the only low cost loan program available for home Buyers is an FHA loan that requires only 3.5% down payment.Note: According to http://www.mortgageloan.com/mortgage-delinquency-rates-decline-mba, about 25% of subprime loans; 7% of prime loans; 14% of FHA loans; & 7% of VA loans were delinquent as of Feb-2010.
Not much remains now, but maybe there will be in the future...and the future has arrived - at least loan programs sponsored by these four states: Idaho, Massachusetts, Minnesota and Wisconsin. They are offering ZERO DOWN PAYMENT loans - more Exotic State Mortgages.
However, most other programs have been terminated. For instance, the Georgia Dream Program ended June 30, 2010. See other programs that at one time were available here at the FHA website.
On July 30, 2008, the Federal Government passed H.R. 3221 - Housing and Economic Recovery Act of 2008. Section 2113 of the bill prohibits seller-funded DPA (Down Payment Assistance) for loans backed by the Federal Housing Administration.
Prior to this bill, the seller could contribute up to 6% to the buyer to cover either a down payment or closing costs on an FHA loan. The changes are effective October 1, 2008.
The bill is means the elimination of Non Profit Down Payment Assistance. Only Government funded housing grants are available for Down Payment Assistance under the American Dream Down Payment Assistance Act.
8-20-2010 Update: Almost 625,000 people were helped with DPA programs from 2000-2005; in 2004, 31% of 510,000 FHA single family DPA from non-profits v. about 6% in 2000; the GAO warned that the DPA programs were artificially inflating prices; and IRS Commissioner (Mark Everson) raised concerns.
8-26-2010 Update: The Atlanta Development Authority offers a downpayment assistance program for properties within the Atlanta BeltLine Tax Allocation District city limits.It appears that the only low cost loan program available for home Buyers is an FHA loan that requires only 3.5% down payment.Note: According to http://www.mortgageloan.com/mortgage-delinquency-rates-decline-mba, about 25% of subprime loans; 7% of prime loans; 14% of FHA loans; & 7% of VA loans were delinquent as of Feb-2010.
Tuesday, August 17, 2010
Conference on the Future of Housing Finance on Cspan 8-17-2010
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT - PANEL DISCUSSION
Housing Finance Reform and Broader Financial Markets
Conference on the Future of Housing Finance on Cspan - Moderated by Treasury Secretary Tim Geithner
The following individuals are panelists at the conference:
Cluster*&%$ or the beginning of something better?
You listen and decide...
Housing Finance Reform and Broader Financial Markets
Conference on the Future of Housing Finance on Cspan - Moderated by Treasury Secretary Tim Geithner
The following individuals are panelists at the conference:
- Barbara J. Desoer, President of Bank of America Home Loans
- Ingrid Gould Ellen, Professor of Urban Planning and Public Policy at New York University's Wagner Graduate School of Public Service and Co-Director of the Furman Center for Real Estate and Urban Policy
- Bill Gross, Co-founder and Co-chief Investment Officer of PIMCO
- Mike Heid, Co-president of Wells Fargo Home Mortgage
- S.A. Ibrahim, Chief Executive Officer of Radian Group Inc.
- Marc H. Morial, President and Chief Executive Officer of the National Urban League
- Alex Pollock, Resident Fellow at the American Enterprise Institute
- Lewis Ranieri, Chairman of Ranieri and Company, Inc.
- Ellen Seidman, Executive Vice President for National Policy and Partnership Development at ShoreBank Corporation, and Chair of the Board of Directors at the Center for Financial Services Innovation
- Michael A. Stegman, Director of Policy and Housing for the Program on Human and Community Development of the John D. and Catherine T. MacArthur Foundation
- Susan Wachter, Richard B. Worley Professor of Financial Management, Professor of Real Estate, Finance and City and Regional Planning at the University of Pennsylvania's Wharton School
- Mark Zandi, Chief Economist of Moody's Analytics
Cluster*&%$ or the beginning of something better?
You listen and decide...
Monday, August 16, 2010
"Biggest bang for your buck" in home improvements!
It really depends on a few factors..
What is everyone else doing in your neighborhood? - What will a Buyer look for in your home compared with other homes in your neighborhood?
Start with smaller improvements and ladder upward - light fixtures, doors, windows, upgrade in flooring, fresh paint inside and windows/trim/exterior, adding heated/cooled square footage, etc.,.
Consult some remodeling resources - Click here and go to General Maintenance Tips for several links to remodeling suggestions and costs - http://www.abuyeragent.com/maintips.htm
What does an appraiser consider value? Mostly good condition of interior and exterior; additional functionality of structures or systems; and heated/cooled square footage are good starts. Appraisers don't really care if the siding is pressboard or concrete siding, but value brick more than concrete siding. Also, appraisers assign single pane and thermal pane windows the same value; carpet v. vinyl, no difference but hardwood is better value than carpet. A new roof doesn't necessarily mean you'll get a higher price, but it helps. New v. old HVAC systems perform the same function and therefore, don't add to appraisal value. Granite or Corian (not laminate) counters add value.
Think British - bland or earth tones, stay middle of the road with neutral colors if you are reselling - don't over personalize unless you (a) want to stay there forever, or (b) intend to change it all back and make it all neutral before you put the house on the market. Think of it as a blank canvas against which a fresh brushstroke of living can be expressed by the next owner.
Bottom Line: Hey - it's your house, do with it what you want but try not to listen to remodeling contractors or vendors of household improvement products. They tend to want to "sell" you on what "they" say has value, not what "really" has value in the real estate marketplace.
What is everyone else doing in your neighborhood? - What will a Buyer look for in your home compared with other homes in your neighborhood?
Start with smaller improvements and ladder upward - light fixtures, doors, windows, upgrade in flooring, fresh paint inside and windows/trim/exterior, adding heated/cooled square footage, etc.,.
Consult some remodeling resources - Click here and go to General Maintenance Tips for several links to remodeling suggestions and costs - http://www.abuyeragent.com/maintips.htm
What does an appraiser consider value? Mostly good condition of interior and exterior; additional functionality of structures or systems; and heated/cooled square footage are good starts. Appraisers don't really care if the siding is pressboard or concrete siding, but value brick more than concrete siding. Also, appraisers assign single pane and thermal pane windows the same value; carpet v. vinyl, no difference but hardwood is better value than carpet. A new roof doesn't necessarily mean you'll get a higher price, but it helps. New v. old HVAC systems perform the same function and therefore, don't add to appraisal value. Granite or Corian (not laminate) counters add value.
Think British - bland or earth tones, stay middle of the road with neutral colors if you are reselling - don't over personalize unless you (a) want to stay there forever, or (b) intend to change it all back and make it all neutral before you put the house on the market. Think of it as a blank canvas against which a fresh brushstroke of living can be expressed by the next owner.
Bottom Line: Hey - it's your house, do with it what you want but try not to listen to remodeling contractors or vendors of household improvement products. They tend to want to "sell" you on what "they" say has value, not what "really" has value in the real estate marketplace.
Friday, August 13, 2010
How are mortgage insurers fairing these days?
Back in 10/2007, the WSJ reported that mortgage insurers were covering lot of home loan losses and getting hit pretty hard with losses/payouts.
MGIC Investment Corp reported a net loss of $372 million and likely be 2009 before it became profitable (like it wasn't before and won't charge extra in the future, right..)
Old Republic International was planning to get hit too. In fact, seven of the largest mortgage insurers (including PMI Group, Radian Group, and Triad Guaranty Inc.) were to report losses on loans up to 35% of the loan's value.
Note: The WSJ article mentioned the housing downturn would bottom out in 3Q08...I guess that's why they call it "a guess".
Update 8-11-10: MGIC posted its first profit in 12 quarters last month as the cost of claims declined.
Oh, and here's an interesting twist - even if your lender doesn't file a deficiency judgment, maybe the mortgage insurance company will - see this article.
Check out more information about deficiency judgment in each state at http://www.foreclosurefish.com/blog/index.php?id=994
MGIC Investment Corp reported a net loss of $372 million and likely be 2009 before it became profitable (like it wasn't before and won't charge extra in the future, right..)
Old Republic International was planning to get hit too. In fact, seven of the largest mortgage insurers (including PMI Group, Radian Group, and Triad Guaranty Inc.) were to report losses on loans up to 35% of the loan's value.
Note: The WSJ article mentioned the housing downturn would bottom out in 3Q08...I guess that's why they call it "a guess".
Update 8-11-10: MGIC posted its first profit in 12 quarters last month as the cost of claims declined.
Oh, and here's an interesting twist - even if your lender doesn't file a deficiency judgment, maybe the mortgage insurance company will - see this article.
Check out more information about deficiency judgment in each state at http://www.foreclosurefish.com/blog/index.php?id=994
Thursday, August 12, 2010
Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA)
According to the IRS, your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012 - see 10 facts about debt forgiveness at the IRS website.
The MFDRA is effective for mortgage debt canceled between 2007 and 2012. Forgiven debt does not qualify as income if the mortgage was to purchase, repair or build on the borrower's primary residence. The forgiven debt must have been part of a mortgage restructuring or cancellation of debt following a foreclosure. Individuals are limited in this time period to $2 million of exemption and married couples filing separately are limited to $1 million each. The forgiven debt and the reason for exemption must still be filed on tax returns.
Forgiven debt qualifying as income for the IRS includes short sales on real estate. Bank foreclosures on real property may also qualify if the property later sells for less than the amount owed on the loan.
See IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments for more information regarding the income tax treatment of forgiven debt.
The MFDRA is effective for mortgage debt canceled between 2007 and 2012. Forgiven debt does not qualify as income if the mortgage was to purchase, repair or build on the borrower's primary residence. The forgiven debt must have been part of a mortgage restructuring or cancellation of debt following a foreclosure. Individuals are limited in this time period to $2 million of exemption and married couples filing separately are limited to $1 million each. The forgiven debt and the reason for exemption must still be filed on tax returns.
Forgiven debt qualifying as income for the IRS includes short sales on real estate. Bank foreclosures on real property may also qualify if the property later sells for less than the amount owed on the loan.
See IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments for more information regarding the income tax treatment of forgiven debt.
Wednesday, August 11, 2010
Property developer "gotcha's" - Have you read your HOA CCRs lately?
Does your HOA have them?
A little thing like a "capital recovery fee" is planted in the covenant homebuyers agree with upon acquiring a property in a subdivision with homeowner's association CCRs.
These fees are established by clauses in subdivision covenants that require sellers to pay a percentage (often 1%) to the original developer every time the property changes hands for a certain length of time (often 99 years).
Does your state outlaw them? If not, have you written your State Rep or Senator?
Source: WSJ, 7-31/8-1-2010, page A3 (Home Resale Fees under Attack).
A little thing like a "capital recovery fee" is planted in the covenant homebuyers agree with upon acquiring a property in a subdivision with homeowner's association CCRs.
These fees are established by clauses in subdivision covenants that require sellers to pay a percentage (often 1%) to the original developer every time the property changes hands for a certain length of time (often 99 years).
Does your state outlaw them? If not, have you written your State Rep or Senator?
Source: WSJ, 7-31/8-1-2010, page A3 (Home Resale Fees under Attack).
Tuesday, August 10, 2010
Pardon me...but what does your sheetrock smell like?
Chinese Drywall Cases are being settled in some of the states and perhaps more are to come.
Millions of tons of Chinese drywall, or gypsum board, were imported into the U.S. from about 2004 through 2007 when a shortage developed after record hurricane seasons at the height of the building boom. Judge awarded $2.6 million in settlement of one case.
According to another WSJ article on 8-10-2010, Lowes reached a $2.2 million settlement agreement with a multi-state (Georgia, Florida, Louisiana, and Arizona) settlement for defective Chinese drywall (even though Lowe claimed not due to laws or drywall was determined defective)...The settlement is supposed to begin within the net 30 days and all claims settled within 6 months (180 days) from the start date.
10-19-2010 Update: 10-15-2010 WSJ - A5 - A New Orleans Federal Judge adjudicated a settlement in this case that may be applied in about 40 states that now have related litigation. Knauf Pkasterboard Tianjin (KPT) agreed to replace all their drywall, all electrical wiring, gas tubing and appliances in about 300 homes in four states over the next several months at an estimated cost of $40-80 per square foot. Note: German based Knauf Gips KG is also involved.
Millions of tons of Chinese drywall, or gypsum board, were imported into the U.S. from about 2004 through 2007 when a shortage developed after record hurricane seasons at the height of the building boom. Judge awarded $2.6 million in settlement of one case.
According to another WSJ article on 8-10-2010, Lowes reached a $2.2 million settlement agreement with a multi-state (Georgia, Florida, Louisiana, and Arizona) settlement for defective Chinese drywall (even though Lowe claimed not due to laws or drywall was determined defective)...The settlement is supposed to begin within the net 30 days and all claims settled within 6 months (180 days) from the start date.
10-19-2010 Update: 10-15-2010 WSJ - A5 - A New Orleans Federal Judge adjudicated a settlement in this case that may be applied in about 40 states that now have related litigation. Knauf Pkasterboard Tianjin (KPT) agreed to replace all their drywall, all electrical wiring, gas tubing and appliances in about 300 homes in four states over the next several months at an estimated cost of $40-80 per square foot. Note: German based Knauf Gips KG is also involved.
Monday, August 9, 2010
Flood maps for homes and businesses - who's in charge?
Update 2-20-2012: FEMA encourages citizens around Upper Chattahoochee River area (i.e., metro Atlanta) to check out their flood possibilities using this website of preliminary flood maps: http://www.GeorgiaDFIRM.com
Source: http://7thspace.com/headlines/402869/fema_fema_encourages_upper_chattahoochee_river_region_residents_to_resolve_to_be_ready_and_learn_about_flood_risks.html
According to the 8-9-2010 MDJ, the Cobb County Water System entered into an agreement with the Georgia Environmental Protection Department to produce an updated flood plain map for Cobb County. Even though the article said the “partnership will cost the county any money”, but someone will bare the cost - will it cost us more in water bills and eventually federal, state and local funds?
Also, where is FEMA in this process? - Are they in the loop when drawing Flood Maps? How will the local County flood maps be used? Will FEMA adopt them? Will they be used by insurers and mortgage lenders (who only use Federal Flood maps), or apply to Federal funding if floods occur?
FEMA may need to get involved after a while and hopefully the final maps can be quickly approved, easily uploaded and integrated into the Federal Flood Maps, but will that be another level of bureaucracy...
So in the end, FEMA, GEMA, GEPD and CCWS (and others?) will all get involved. I don’t object to the need for the maps (since if you ask everyone, they can’t tell you – via a map - what areas of Austell and Powder Springs were flooded in September 2009----which helps a prospective homeowner be aware of past floods), but who should be in charge and at what will be the final cost to you and me?
Source: http://7thspace.com/headlines/402869/fema_fema_encourages_upper_chattahoochee_river_region_residents_to_resolve_to_be_ready_and_learn_about_flood_risks.html
According to the 8-9-2010 MDJ, the Cobb County Water System entered into an agreement with the Georgia Environmental Protection Department to produce an updated flood plain map for Cobb County. Even though the article said the “partnership will cost the county any money”, but someone will bare the cost - will it cost us more in water bills and eventually federal, state and local funds?
Also, where is FEMA in this process? - Are they in the loop when drawing Flood Maps? How will the local County flood maps be used? Will FEMA adopt them? Will they be used by insurers and mortgage lenders (who only use Federal Flood maps), or apply to Federal funding if floods occur?
FEMA may need to get involved after a while and hopefully the final maps can be quickly approved, easily uploaded and integrated into the Federal Flood Maps, but will that be another level of bureaucracy...
So in the end, FEMA, GEMA, GEPD and CCWS (and others?) will all get involved. I don’t object to the need for the maps (since if you ask everyone, they can’t tell you – via a map - what areas of Austell and Powder Springs were flooded in September 2009----which helps a prospective homeowner be aware of past floods), but who should be in charge and at what will be the final cost to you and me?
Friday, August 6, 2010
Thursday, August 5, 2010
Home Valuation Code of Conduct (HVCC) - Blessing or Curse?
Ok boys and girls - what's the answer?
Yep - you got it - it all depends....on who you ask.
Mortgage brokers, appraisers, and real estate agents are against the HVCC.
Mortgage lenders and appraisal warehousing companies are for it.
Why? Money, of course!
The HVCC establishes a middle-man (i.e., warehouse appraisal companies) which essentially receives the appraisal order from a lender, keeps a portion of the appraisal charge, and then hires the appraiser (for less than they used to receive) to perform the appraisal. It was established as a response to mortgage fraud during the past decade. There was a certain degree of collusion between mortgage brokers and appraisers to "make the appraisal work" for the sales price regardless of value just so the deal could close. Mortgage brokers and real estate agents only get paid when properties close.
Since established in May 2009, the HVCC has resulted in several appraisals (anywhere from 20-40% or more) not meeting sales price and therefore killing deals. Result: No income.
Mortgage lenders own stakes in these warehousing companies and thereby benefit from the recent surge in business. Stop the HVCC and - no income.
Oh, and some lenders are currently objecting to proposals in the financial regulation overhaul bill regarding the disclosure of how much of the appraisal cost goes to the warehouse company.
Source: WSJ article 6-18-2010, Page A6.
Bottom Line: It's not a perfect system - yet. This has made me more aware of the variance in appraisals between appraisers and how an appraiser who knows the local community has a better grasp on its direction, but still needs to follow specific objective and subjective guidelines. Since there is subjective influence, there will be variation between appraisals. But I favor the choice of an appraiser through warehousing that is located within a 10-15 mile radius of the property because they will have more awareness of what's happening closer to their home than to go 25 miles away and spot check a community they do not know.
I also favor the concept to remove the influence of the appraiser from the lender's control, but who should have a financial interest in the appraisal warehouse company? I don't believe these companies should be owned by the very people who have direct benefit over it control - lenders.
Update 8-5-2010: H.R. 4173, the Wall Street Reform and Consumer Protection Act effectively enables the termination of the HVCC in November 2010. That's both good and bad news depending on the future legitimacy/quality of appraisals and relationship between lender/appraiser. Let's hope that there is an arms-length transaction, appraiser is fair and knowledgeable of local market, and appraiser gets more of the appraisal fee for starters...
Update 12-18-2010: It appears that the Dodd-Frank Financial Reform Bill caused the Federal Reserve to implement new Appraiser Rules - We will see if the industry is better off or worse than HVCC was - http://realtytimes.com/rtpages/20101118_wallstreet.htm
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Yep - you got it - it all depends....on who you ask.
Mortgage brokers, appraisers, and real estate agents are against the HVCC.
Mortgage lenders and appraisal warehousing companies are for it.
Why? Money, of course!
The HVCC establishes a middle-man (i.e., warehouse appraisal companies) which essentially receives the appraisal order from a lender, keeps a portion of the appraisal charge, and then hires the appraiser (for less than they used to receive) to perform the appraisal. It was established as a response to mortgage fraud during the past decade. There was a certain degree of collusion between mortgage brokers and appraisers to "make the appraisal work" for the sales price regardless of value just so the deal could close. Mortgage brokers and real estate agents only get paid when properties close.
Since established in May 2009, the HVCC has resulted in several appraisals (anywhere from 20-40% or more) not meeting sales price and therefore killing deals. Result: No income.
Mortgage lenders own stakes in these warehousing companies and thereby benefit from the recent surge in business. Stop the HVCC and - no income.
Oh, and some lenders are currently objecting to proposals in the financial regulation overhaul bill regarding the disclosure of how much of the appraisal cost goes to the warehouse company.
Source: WSJ article 6-18-2010, Page A6.
Bottom Line: It's not a perfect system - yet. This has made me more aware of the variance in appraisals between appraisers and how an appraiser who knows the local community has a better grasp on its direction, but still needs to follow specific objective and subjective guidelines. Since there is subjective influence, there will be variation between appraisals. But I favor the choice of an appraiser through warehousing that is located within a 10-15 mile radius of the property because they will have more awareness of what's happening closer to their home than to go 25 miles away and spot check a community they do not know.
I also favor the concept to remove the influence of the appraiser from the lender's control, but who should have a financial interest in the appraisal warehouse company? I don't believe these companies should be owned by the very people who have direct benefit over it control - lenders.
Update 8-5-2010: H.R. 4173, the Wall Street Reform and Consumer Protection Act effectively enables the termination of the HVCC in November 2010. That's both good and bad news depending on the future legitimacy/quality of appraisals and relationship between lender/appraiser. Let's hope that there is an arms-length transaction, appraiser is fair and knowledgeable of local market, and appraiser gets more of the appraisal fee for starters...
Update 12-18-2010: It appears that the Dodd-Frank Financial Reform Bill caused the Federal Reserve to implement new Appraiser Rules - We will see if the industry is better off or worse than HVCC was - http://realtytimes.com/rtpages/20101118_wallstreet.htm
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.
Wednesday, August 4, 2010
Loss of home is effective homelessness - our prayers should be with each one
Some quick notes...according to Mortgage Daily News
A very negative result of all the turmoil in housing and financial meltdown - over a million individuals and families are temporarily or chronically homeless....for whatever reasons (employment, health, or significant lifestyle change) some of these people are in shelters or on the street...
There have been an estimated 1.24 million foreclosures in the last few years (currently about 4.5 million other homeowners are delinquent or in foreclosure)...existing and new homes, 3.99 million and 210,000 respectively (not sure if that's high/low/normal)....131.2 million housing units in the U.S. in the 2Q10 (112.2 million were occupied - of the occupied homes, about 2/3rds (or 75.1 million) of those units owner occupied and 37.1 million rented (vacancy rate for rental housing is at 10.6 percent of rental units). The number of vacant properties has increased by nearly 400,000 units to 18.9 million in the last year.
A very negative result of all the turmoil in housing and financial meltdown - over a million individuals and families are temporarily or chronically homeless....for whatever reasons (employment, health, or significant lifestyle change) some of these people are in shelters or on the street...
There have been an estimated 1.24 million foreclosures in the last few years (currently about 4.5 million other homeowners are delinquent or in foreclosure)...existing and new homes, 3.99 million and 210,000 respectively (not sure if that's high/low/normal)....131.2 million housing units in the U.S. in the 2Q10 (112.2 million were occupied - of the occupied homes, about 2/3rds (or 75.1 million) of those units owner occupied and 37.1 million rented (vacancy rate for rental housing is at 10.6 percent of rental units). The number of vacant properties has increased by nearly 400,000 units to 18.9 million in the last year.
Tuesday, August 3, 2010
FHA Penalizes Over 1,000 Lenders for Violating Regulatory Standards
Federal Housing Administration's Mortgagee Review Board (MRB) took action againt the 1,000 lenders believed to perform fraudulent or predatory lending practices.
Note: The artile also mentioned the MRB suspended 905 other companies for one year for failing to comply with the MRB's annual recertification requirements and assessed $3,500 fines against 147 lenders which had been out of compliance but had cured that situation.
Go to the Mortgage Daily News story which addresses the details.
Viist HUDs website here to see details of the specific actions taken againt each lender including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.
Sorry, but nobody was executed or thrown in prison...
Note: The artile also mentioned the MRB suspended 905 other companies for one year for failing to comply with the MRB's annual recertification requirements and assessed $3,500 fines against 147 lenders which had been out of compliance but had cured that situation.
Go to the Mortgage Daily News story which addresses the details.
Viist HUDs website here to see details of the specific actions taken againt each lender including reprimands, probations, suspensions, withdrawals of approval, and civil money penalties.
Sorry, but nobody was executed or thrown in prison...
Monday, August 2, 2010
When there's lots of cars---in your neighbor's yard---who ya' gonna call?
Cobb County residents - call Code Enforcement 770-528-2180.
"The code allows up to 3 of any combination of cars, boats, recreational vehicles on a hardened surface. In the R-30, R-20, R-15, R-12, RD, RA-4, RA-5 and RA-6 districts, only one vehicle, one boat and one recreational vehicle (or any combination of such totaling three) may be parked in the rear and side yard areas on a hardened surface."
Inability to meet any of these requirements constitutes a violation.
But remember; when the trailer's rockin' don't go knockin!
"The code allows up to 3 of any combination of cars, boats, recreational vehicles on a hardened surface. In the R-30, R-20, R-15, R-12, RD, RA-4, RA-5 and RA-6 districts, only one vehicle, one boat and one recreational vehicle (or any combination of such totaling three) may be parked in the rear and side yard areas on a hardened surface."
Inability to meet any of these requirements constitutes a violation.
But remember; when the trailer's rockin' don't go knockin!
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