Short Sales: How They Work

Lets assume you know you cannot keep your house. There is simply no choice but to sell or foreclose. Foreclosure is one of those events that ruins credit and any opportunity to purchase again during better times. Now lets assume there is no doubt in your mind that you can get enough in a sale to cover your loan.

You should approach your lender with your case and hope they will agree that this you may have to foreclose and that the market price today will not cover the loan. You will get less for your house than you owe. Following is a short list of the general procedures involved in a short sale. Keep in mind, there is no standardization, each lender will have their own process and demands and no doubt, there own forms designed to create more havoc with your life than necessary.

• Hurrah! You get an Offer; Of course its below market and below the loan amount but at least you are out from under and probably feeling relieved.
• Purchase Agreement: A signed purchase agreement is the first step in the sales process. Generally, you cannot pull any money out of a short sale. The only hitch so far is that often refuse to pay a real estate commission, they often want to negotiate with the buyer themselves.
  
• Approach the Lender: with the offer. Its best to have most of this done before the listing process but most lenders will require the following form you as the owner.

a. Hardship letter: You must really be destitute or close. The lender will not forgive any debt otherwise. This letter must show clear proof that you cannot continue to make house payments or pay the loan in full.
b. Release Letter: Giving the lender the authorization to release information so that the purchaser can negotiate directly with the lender.
c. Financial statements: a list of your assets and liabilities, tax returns, bank statements, proving you could not continue to pay the mortgage
d. A copy of the listing agreement: Basically, they want to see proof that the house is really on the market and that there is a bona fide buyer in the wings.
e. Attachments: All other debts related to the home, such as second mortgages, property taxes due or liens attached

6. The Appraisal: The lender will do this

The full article is on line at yourpropertypath.com

Thanks for Reading

Howard bell

www.yourpropertypath.com

More Help for Foreclosure Folks

Whats Are the Markets Up To Now

Freddie Mac's Primary Mortgage Market Survey reported that the 30-year fixed-rate mortgage (FRM) averaged 6.33 with 0.5 point which was six basis points lower than both the previous week and the average rate for the same time period in 2006.

The 15-year FRM averaged 5.99 percent with 0.6 point compared to the previous week when it averaged 6.08 percent also with 0.6 point. One year ago the average rate was 6.10 percent.

Teaser rate mortgages are now resetting and can add as much as $10,000 yearly to the mortgage payment. These teaser rates are generally good for 2- 5 years. What that means is increasing payments for many homeowners for quite a while to come. Expect more supply and foreclosures as people find it difficult or senseless to carry higher payments when their property is clearly not worth what it was. Today one in every 200 homes is being foreclosed nationwide On Balance, lower rates will not trump increasing supply....here's some help

Help is Here

If you are facing a foreclosure you should consider some of the following sites:

HUD Housing Counsels by State
HUD sponsors housing counseling agencies throughout the country that can provide advice on buying a home, renting, defaults, foreclosures, credit issues, and reverse mortgages.

Neighborhood Housing Services of America
NHSA is a lending resource in support of the work of over 240 community development organizations. NHSA gives these organizations access to affordable loan products and services

Hope for Homeowners
Free help and materials to help homeowners understand and prevent the foreclosure process.

National Consumer Resource Center
They offer a wide variety of resources and referrals to households seeking financial advice. he 888-995-HOPE hotline has a single mission: to help more homeowners avoid foreclosure.

The National Consumer Law Center
A very good book on how to survive consumer debt ($20)
Stephen Brobeck, Executive Director, Consumer Federation of America says it is "The best book available for consumers in financial trouble, written by the resource center with the greatest expertise about how consumers can respond to debt collection, foreclosure, evictions and utility shut offs.

Thanks for Reading
Howard Bell
www.yourpropertypath.com

Arm's Resets Threaten Home Owners-Help is Here

The problem is that many home owners that got into their property with teaser rates are now facing large monthly increase as the ARM mortgage rates reset to market rates. The Govet has begun its program for those who have good credit and were timely with mortgage payments, but now cannot make the new higher monthly.

According to the HUID site "HUD's Federal Housing Administration (FHA) will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing."

To qualify: eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
2. Interest rates must have or will reset between June 2005 and December 2008;
3. Three percent cash or equity in the home;
4. A sustained history of employment; and
5. Sufficient income to make the mortgage payment.

For more information: Call 1-800-CALL-FHA or visit FHA or HUD. For a list of your local homeownership center or a HUD-approved housing counseling center.

Thanks for Reading
Howard Bell
Your Property Path

Rates Drop a Half Point: Who Will it Help

The Federal Reserve slashed the federal funds rate, by one-half a percentage point to 4.75 percent. The Fed Funds rate is the rate that banks charge banks for overnight loans to keep their loan ratios intact. A half point move is a big reduction and it indicates the Fed is taking the mortgage mess and the credit problems its created very seriously. This is a welcome move that will help the overall economy remain buoyant in the face of a real estate recession. It will help owners and borrowers quite a bit.

Lets take a look at who benefits. All loans tied to short term indexes will feel almost immediate relief:

Credit Card Holders: The rate reduction should show up on your next statement, reducing rates considerably

Variable Home Equity Lines of Credit: These rates are tied to short term rates and will see immediate reductions

Mortgages

Variable Mortgages/ARMs: The ARMs that are resetting now will not go up quite as much due to the recent reduction, but the increase may not be significant enough to everyone facing steep monthly increases.

Variables tied to short term increase such a ten year treasuries may see a help. Variable tied to the "LIBOR" or London Interbank rate will see little help. because it recently jumped sharply above the Fed funds rate because of the continuing credit crunch in the markets. "If Libor doesn't come down, there is no relief" for many mortgage borrowers, says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.

Fixed Rate Mortgages: New fixed rates will be slightly lower

Credit Cards: Almost immediate reductions in credit card interest rate charges.

The Fed hopes to help reduce the flood of foreclosures by helping lower the reset increases and to stimulate the economy by reducing the cost of credit. The next step is the consumers...they want us to spend and spend to help keep the housing recession from becoming a total economic slowdown. Although interest rates will be lower, the full extent of whether this will result in more home sales remains to be seen. Cheaper money will be offset by tighter credit rules and how that plays out is still an unknown.

Your Property Path

Section 8 Housing: A Reasonable Choice

HUD administers the section 8 Program; it is the federal government's major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. But the program is administered locally and not from the national level by public housing agencies (PHAs).

A housing subsidy is paid to the landlord directly by the PHA on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Under certain circumstances, if authorized by the PHA, a family may use its voucher to purchase a modest home.

Eligibility

In general, the family's income may not exceed 50% of the median income for the county or metropolitan area in which the family chooses to live. By law, a PHA must provide 75 percent of its voucher to applicants whose incomes do not exceed 30 percent of the area median income.

Section 8 families must:

1. Meet Govt. income guidelines

2. Pass a criminal background check

3. Have at least one family member who is a U.S. Citizen or has eligible Immigration status

Their are pros and cons to using section 8 applicants to help fill your vacancies. The main thing to understand is to dispel the myth that section 8 eligible applicants are criminal or something to be afraid of. Following is a bullet list of some of the reasons why and the complications that come along with a Government subsidized program of any kind....You have a relationship with a bureaucracy as well as your tenant.

Advantages:

* Owners get rent security

* Yearly inspections of the unit

* Fair market rental rates

* Strict renter responsibilities defined in the lease addendum

* On-time payments

* Tenants can be removed from the program for damages to the unit or failure to pay rent.

* Waiting list of tenants provides landlord with a stream of eligible renters

Disadvantages:

* Two Contracts: Your standard lease and a Govt contract with HUD.

* Govt is another party to the tenant landlord relationship

* Rules may be different: California Civil Code statue provides in pertinent part as follows: Where an owner terminates or fails to renew a contract or recorded agreement with a governmental agency that provides for rent limitations to a qualified tenant, the tenant or tenants who were the beneficiaries of the contract or recorded agreement shall be given at least 90 days' written notice of the effective date of the termination and shall not be obligated to pay more than the tenant's portion of the rent.

* Annual Govt inspections of the unit by Govt inspectors to assure quality housing

* Fair Market Rent is the cap the Govt imposes on what it will pay for your rental unit - you may feel you can get more for the unit

Howard Bell for Your Property Path

Existing Homes Sales: The Good, The Bad and the Ugly

The Good

Sales are increasing in Some Areas

According to Lawrence Yun the NAR senior economist, Home sales probably would be rising in the absence of the mortgage liquidity issues of the past two months. So if we hadnt had the bubble excesses of the sub prime meltdown we would see some increase in sales.

The NAR economist goes on to say: “The rise in sales and prices in the Northeast region on a fairly consistent basis in recent months is promising because this was the first region that underwent sales and price weakness after the boom. Now, it appears that it will be the first region to climb back, indicating that other regions could follow a similar path.”

Now we all know that NAR is the rosy picture, but still it is notable that the downtrend is not consistently gloomy and that there are bright spots....When trends are choppy and some areas are doing better and some of the reasons for the downturn are changing (mortgage money is now available), its is easier to see that its not all hell in a hand basket.

The Bad

According to Freddie Mac, The existing home median price was down only .06% in July 2007 relative to July 2006. Seems to me a livable drop....that would be about 7.2% annual annualized drop in price, nationally.

The Ugly

Housing Starts: NAR slashes forecasts for home sales and construction. Tighter credit conditions, results of the mortgage industries loose loan policy, will certainly put off any speedy recovery, according Lawrence Yun, senior economist for the real estate trade group. Housing starts are expected to fall 24% this year and an additional 8% next year to 1.26 million.

In summary,

1. Some areas appear to be in a partial recovery

2. Tight credit will slow this recovery at least into 2008

3. New homes seem to be suffering the most

4. As I mentioned in my last blog, the apartment sector is doing well due to increased rents

Thanks for Reading

Howard Bell for yourpropertypath.com

Finding Money: The Hunt for a Mortgage

There was a very good article on Marketwatch yesterday. It had to do with finding money for a buy or a refi today. I know a mortgage banker in San Francisco that has not had money for new home sales for almost ten days...I mean totally dry.

The author of this article pointed out two very interesting facts:
1. Shop the Credit Unions. They are flush with cash and did not participate in some of the easy lending practices of their bigger brothers. In order to have a credit union consider your business, you must belong to the group or industry they serve. They are considered non-profits because they provide loans and other services at lower rates than their commercial counterparts.
2. The authors, Gail Liberman and Alan Lavine point out that the best loan availability will come from "portfolio Lenders". These are institutions that keep most of the loans they originate rather than sell them in the primary market. Presumably, they are more prudent and have made stronger loans, since they are not so quick to repackage them and sell them off.

In your search for a new loan or a refi it helps to know the terms of the profession. Its much easier to be sure you are getting what you expect if you can read the contract.

Thanks for Reading

Howard Bell for Your Property Path