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BofA Offers Help to Homeowners Underwater

Real Estate Home Blog — Mon, 05 Apr 2010 10:10:09 +0000

With hopes of encouraging more participation from homeowners in programs of modification, the Bank of America now has a brand new approach on modifying loans that are extremely underwater.
First, it looked at principal forgiveness when modifying adjustable-rate and subprime mortgages that qualified for the NHRP. These also had to meet the most basic qualifications of the Home Affordable Modification Program.

This approach focuses on mortgages that are extremely underwater and have high delinquency rates, most of all Pay-Option ARMs and subprime loans.

The Bank of America has seen a lot of homeowners that owe a lot more on mortgages than on what their homes are actually worth but are reluctant to accept solutions that focus merely on the payment without balance reductions from their loans.
When it comes to these mortgage modifications, the Bank of America is going to take principal reduction into consideration to reach reasonable payments that are equal to around 31% of the household income. If it is a necessity to get extra savings to reach that target of payment, a reduction of interest rates will also be taken into consideration.
Under this new approach, the qualified homeowners will get an offer of interest-free principal forbearance, which can become forgiven principal – a result of up to 30% in loan principal balance reduction.

For the initial three years, the forgiveness installments will be set to a level of 20%. In the last two years, this amount will rely on the property’s updated value to make sure that the LTV won’t go below 100% because of principal forgiveness.
Earned principal forgiveness can help homeowners

Aside from this new approach, the Bank of America has also started to provide two other sustainable and reasonable payment solutions when it comes to certain Pay-Option ARMs.
If negative amortization is the case, they will think about offering up HAMP modification to get rid of negative amortization and to forgive some of the amounts for principal reductions. If pending Pay-Option ARM recasts appear to increase the monthly payments of a customer, however, a preemptive modification which gets rid of negative mortgage amortization and changes it to a completely amortizing market rate loan might be taken into consideration.
The latest NHRP components will come about next month and they are expected to offer up improved solutions to principal reduction to around 45,000 customers that qualify for the HAMP modification. This would result in around a total of $3 billion of reduced principal.

Brand New Rules in Favor of Flipping

Real Estate Home Blog — Fri, 12 Mar 2010 12:29:49 +0000

Residential real estate never used to like the term “flipping”, but things have changed since then. The latest changes in policies actually encourage flipping in order to sell more foreclosed homes, which are already horribly damaged – something that area realtors are also in favor of. There are hopes of this helping today’s struggling home market.

Back in the days when there was a boom in real estate and home values had risen, flippers could buy homes to sell them for a profit without increasing the value of the homes in any way. To stop this practice from going on, the rules were changed to forbid property flipping on properties financed with FHA-insured mortgages.

Because most mortgage activities today involve the FHA, some people are worried about the efforts made to stabilize neighborhoods hit by foreclosure, thinking that things will merely get worse because of the ban. This greatly involves the people who try to stabilize the neighborhood by buying and rehabilitating foreclosed homes and selling them to families with average income.

Many foreclosed homes exist today that are in extremely bad shape. Letting investors buy these properties, fix them up and sell them would be a great option since many people wish to buy houses but simply do not have enough money or knowledge to fix them up.

Banning flipping may not be the proper solution for the crisis of foreclosure, but it is definitely heading in the proper direction. This waiver even comes with a lot of safeguards to avoid inflated pricing. For example, if the home price is 20% higher than the last sale, sellers have to justify their price increase somehow.

However, some market variables may still prevent this waiver from effecting the locality too much. See, potential buyers are not aplenty anymore as the world seems to be running out of entry-level and first-time buyers. Plus, the neighborhood needs to be looked at, too. The fixed-up home might be night, but a neighborhood still filled with foreclosures will not make sales happen.

FHA financing is in high demand now, so the waiver will definitely benefit certain neighborhoods. What they need to do is get an owner for a home and improve the overall neighborhood while stabilizing the values and moving them higher.

The goal of the waiver is to help in selling properties that may otherwise stay empty for longer while ensuring that none of the buyers get duped in any way at the same time. The FHA even guarantees loans after homes are bought, the loans of which are then sold to Fannie Mae.

Real Estate Problems in California

Real Estate Home Blog — Fri, 12 Mar 2010 12:24:47 +0000

Norm Miller is CoStar Group’s vice president who hopes to start up a five-star and 100-point scale system by the end of the year which can be used for building comparisons in each market. With it, investors will then be able to find out whether one office building is as great as another building.

Right now, Miller is trying to quantify the various factors that could be affecting real estate rent values, testing them and discarding those that do not have any effects whatsoever. Here are some real estate observations that Miller has seen in San Diego.

Based on the bigger picture, San Diego seems to be a very supply-constrained market, which means that the price and rent increases and decreases here are quicker. This is why San Diego’s market is so volatile. Since it is supply-constrained, there is not a lot of oversupply within the sectors of commercial real estate as compared to bigger markets nationwide.

Plus, San Diego is in California, a business location that isn’t very competitive and looks as if it will get worse because of troubles in budget deficits. Because of this, people will have incredibly high tax burdens, possibly forcing them to move to other states that have lower taxes.

The best solution for mixed-use development and cheap housing would be to allow much more density when it comes to development. Unfortunately, this is difficult if people do not like living close to other people. Because of this, a lot of people from San Diego have already moved to purchase cheaper homes in Riverside County.

Another way to solve cheaper housing would be through lower impact fees. Unfortunately, San Diego charges big fees and subsidizes units of affordable housing, making prices skyrocket to insane levels. This is why people have become so dependent on San Diego’s system. Strangely enough, this fee system is based on the thought that growth needs to pay for itself. This was meant to be a smart thing, most of all since other cities cannot seem to keep up with their growth, but San Diego still could have done much better.

Retooling San Diego neighborhoods is still possible, but it will take a lot of time. For now, we simply have to deal with it.

The Realtors’ Outlook on Commercial Real Estate

Real Estate Home Blog — Wed, 10 Mar 2010 18:18:30 +0000

It does not seem like 2010 will be the recovery year of commercial real estate. In fact, vacancy rates look like they are about to rise, while rents look like they are about to drop.

Not a pinch of meaningful recovery seems to be expected before 2011 due to problems with consumer confidence, unemployment and various other conditions of the economy.

Due to the recession’s lingering impact from the last few years, vacancy rates are going to go even higher and a lot of owners of commercial properties might have to make some rent concessions.

The job market is expected to get better sometime this year, so there should be a rise in demand for warehouse and office space, but it will probably not happen before 2011.

The realtors analyze quarterly data, offering up forecasts for the four primary commercial sectors, as follows:

The office sector forecasts a rise in vacancy rates to 17.6 by the end of the year compared to last year’s 16.3%. On the other hand, yearly office rent looks to go down by 7.2%.

In the industrial market, the vacancy rates seem to rise by 14.9% by the end of the year compared to last year’s 13.9%. On the other hand, yearly industrial rent will probably go down by 9.6%.

Retail vacancy rates look to rise a little bit to 12.7% from its 12.4%, while regular retail rent might drop by 2.4%

In the market of apartment rental, vacancy rates will most probably go down to 6.6% compared to the previous 7.4%, while regular rent might drop by 3.4%.

Short Sale May Get Easier, Good for Everyone

Real Estate Home Blog — Tue, 09 Mar 2010 17:17:04 +0000

Do you remember last year being the year of foreclosures? Well, this year looks like it is about to become the year of short sales.

In Phoenix alone, the amount of finished short sales, in which lenders sold homes for a lower mortgage value, went up by 60% at the end of 2009. Last month, bank-owned home sales went down by 25% compared to a year before, as traditional sales went up by 9% and short sales went up by 16%.

Agents of real estate have complained for years about the trouble in pulling off short sales since tons of third parties could be involved – second and first mortgage holders and companies of mortgage insurance, for instance. Locking up short sale approvals could take months, though, and make possible buyers leave lower appraisals or deals to ruin the deal.

Unfortunately, this gets on agents’ nerves because such short sales allow banks to stay away from foreclosures and deal with property management on their own. This oftentimes ends in better prices compared to what the bank could receive if properties foreclosed.

There have been predictions that short sale upticks will occur because total sale shares could offer up unexpected home price lifts this 2010. We can only hope that this is true.

FHA Flipping Foreclosures

Real Estate Home Blog — Tue, 09 Mar 2010 17:01:06 +0000

It seems that the government is hitting three birds at once with a single far-reaching change in policy. The government wants to help the investors that fix foreclosures, communities troubled with a lot of foreclosed and bank-owned houses, as well as homebuyers with low down payments all at the same time.

Starting this month, the rules have changed and looks to score at the goal. For years now, the FHA’s strict prohibition of not insuring house mortgages if sellers have owned it for not more than 90 days has been around – a response to frauds in house inflations.

This rule has been around for almost ten years now but is now being suspended for 2010. Lenders will once again be offered up mortgage insurance by the FHA for several purchases where sellers close on properties not more than 90 days earlier.

The overall goal of this would be to improve renovated house sales to buyers since, with skyrocketing foreclosure levels, a lot of communities are now face-to-face with too many bank-owned properties lying around unsold and in bad repair.

By getting rid of this 90-day rule, there are now higher chances of private investors bidding on such houses and fixing them up to sell to buyers who can now get early access to financing with the FHA, which provides down payments of 3.5%.

Despite this policy revision, no floodgates are opened to renovations after foreclosure, but here are two primary limitations made to protect the FHA and the end buyers at the same time:

- Run-ups of prices have to stay fairly justifiable and modest from the acquisition of the investor to what the applicant pays. In general, there is a limit of 20%.

- No interest conflicts or game-playing among realty agents, buyers or sellers involved within the deal.

If the price ends up going over 20%, the FHA would expect lenders to have more documentation regarding renovation expenses that investors make to justify the huge increases in price. Lenders also have to order independent inspections of property, so that buyers understand the improvements and the physical condition of the house.

Should Bankers Worry about Commercial Real Estate?

Real Estate Home Blog — Fri, 26 Feb 2010 17:09:51 +0000

Alarm bells are starting to sound in the industry of banking due to today’s commercial real estate meltdown. Signs seem to show that banks are going to get hit, but there is quite a difference between the foreclosures of several homes and those of offices, shopping centers and hotels with steeper prices.

Belly-ups that occur within more expensive properties also make the pain worse for the people who hold their debts. Because of this, the financial industry is predicting waves of bank failures within the next few years.

Since community banks are more exposed to loans of commercial real estate, a lot of them tend to keep these loans instead of selling them over to investors.

Last week, the Exchange Building on Madison Avenue fell into foreclosure and 20 banks have already gone bust, as if to prove how bad the problem is getting. More banks are expected to join that amount due to commercial real estate.

Considering the market of commercial real estate and its economics, it would seem like some negative impact therein should be going forward. The debt holders will need to renew loans which support their debts and by doing so, their values will most likely deteriorate.

By the year 2014, a trillion loans of commercial real estate are said to mature and half of them will be higher compared to their properties’ value. Even those borrowers who have profitable properties might not get to refinance their loans due to underwriting standards, higher demands for extra investments and limited credit.

It seems that the way this economic rebound is unfolding, most of all when jobs are involved, is connected to the resolve of the question involving commercial real estate. The uncertainty that comes with its future definitely needs to be cleared.

In Shelby County, the activity of commercial real estate at the beginning of the year showed some signs of quickening. 57 commercial sales were registered here last month, higher by 8% compared to last year, while the overall dollar volume went up by 55%.

All about Short Sales

Real Estate Home Blog — Fri, 26 Feb 2010 16:58:10 +0000

Real estate short sales are getting to be extremely common in Dublin, California. In fact, out of 255 pending or active homes in Dublin, 133 of them happen to be short sales. In a nutshell, if your home was purchased between 2003 and 2008, your loan debts are probably much more compared to your actual home’s worth. And, if you keep living there while paying the mortgage, your overall credit rating will probably not get a significant impact if your loan is “upside down”.

Because of this, things could get hard for you if you wish to sell your home. Whenever the market’s home value is lower than your actual loan balance along with the incurred sale expenses, you could avoid credit rating damage, if you pay for the difference on your own, but the truth is: the majority of sellers will not have money for this; so, if you need to sell, a short sale might be required.

A short sale refers to an agreement that, if the home is sold, the lender is going to accept the amount that the home sold for in place of the loan’s full payment. This will damage your credit, but it will not be as bad as the damage that foreclosures could do.

Now, why would a lender agree to such a thing, you might ask. Well, foreclosures cost a lot of money and take a lot of time to process. And, although the lenders could eventually get judgments against the deficiency of the borrower, getting that money back could prove to be a daunting task. Because of this, a short sale would be a much more cost-effective choice. Naturally, lenders will need proof of the borrower’s inability to pay off the mortgage, though, and the borrower will also have to prove that he is in real trouble due to things like loss of income and health expenses that resulted in the ability to pay. To prove this, copies of bank statements, income tax statements, bills, pay stubs, proof of income, and mortgage statements will need to be shown.

Does a short sale appear to be the ideal option for you? If so, you need to get in touch with professional agents of real estate as soon as you can. A short sale could take several months to process due to lost faxes, lender indecision and dead ends. Therefore, by getting in touch with an experienced realtor, this uncertain and long process could become much more manageable as the agent can take care of home listing and working to get the best offer possible. Once there is an accepted offer, your agent of real estate will negotiate for you and attempt to get your lender to accept the proceeds of the short sale in place of the loan payment. Be careful of scams, though. Do not shell out any money upfront, no matter what, and do not sign things you do not fully understand. Legal realtors should only get paid after a short sale has been completed. Remember that.

15 Mortgage Companies Subpoenaed by HUD

Real Estate Home Blog — Fri, 05 Feb 2010 07:58:36 +0000

The HUD says that it is currently taking a much closer look at several mortgage companies in order to find out why there have been so many problems when it comes to mortgages insured by the FHA.

There are 15 companies in total, all of which were given subpoenas recently and demanded data and documents related to loans that have failed and which have ended in claims that were paid out by the FHA’s fund of mortgage insurance.

The objective of this entire initiative would be to find out why a high claims and defaults rate exists within these companies and if some sort of wrongdoing may have anything to do with it. Accusations aren’t made yet as no proof of them exists at the moment, but aggressive pursuits are being done for any fraud indications.

Every loan listed will get checked thoroughly for any reasons behind their failures. After finding out the causes, it will be decided whether more remedial actions or reviews would be needed.

The initiative also hopes to aid in improving risk management of fraud in the near and distant future.

IRS Releases Form for Home Buyer Tax Credit

Real Estate Home Blog — Mon, 01 Feb 2010 17:12:46 +0000

The IRS has recently released a form, which eligible homebuyers have to claim in order to get the first-time credit of homebuyers this tax season. They have also announced tax returns processing and brand new requirements in documentation to deter any fraud that may be related to first-time credit of homebuyers.

This brand new form follows major changes that were made a few months back, which extended credit to a wider array of home purchasers while adding new requirements of documentation to avoid fraud and making sure that taxpayers properly get credit at the same time.

Now, eligible homebuyers can begin to file tax returns from 2009 while taxpayers who want to claim the credit of homebuyers need to file paper tax returns due to the extra requirements in documentation.

2009 tax return processing is expected to begin mid-February after completing the testing and updating of systems to meet brand new law requirements. These updates will let the IRS put important system checks into place in order to avoid any fraud related to credit from homebuyers. Several early taxpayers who want this credit might need to wait several more weeks before getting tax refunds, though.

Aside from filling out the required form, every eligible homebuyer needs to add one document from the following to get credit:

- A settlement statement copy that shows every party’s signature and name, sales price, purchase date, and property address.

- A copy of an executed contract of retail sales that shows every party’s signature and name, property address, purchase date and purchase price.

- An occupancy certificate copy that shows the owner’s property address, name and certificate date.

Plus, long-term residents of a home can claim this credit if they choose to buy a brand new main residence. In order to qualify, however, every eligible taxpayer needs proof of having lived within older homes for five consecutive years. Also take note that the IRS has become stricter with compliance checks now.