Minimum Down Payment Change - Take ACTION Now!

Currently there is a rule being discussed by congress that will affect the amount a buyer is required to put down on a home purchase.  This down payment rule being discussed would require a lower loan to value of the buyer's home purchase to 80%, thus requiring one to put 20% down.  Today, a typical buyer using conventional financing would only need to bring 5% of the purchase price to closing. 
If this new rule gets put into law, this will not only affect a first time buyer but up all buyers financing home purchases.  Another example of a group of buyers soon to be effected would be that of the move up buyer.  This change could be crucial in today's market where home values have declined so much that the sellers that still have equity in their homes have become a small portion of the population.  These sellers who would normally turn into move up buyers after so long would need to wait much longer to move up than is typical due to the need to save more for the down payment. 
Since this change could affect our housing market considerably in a time where we are still trying get the numbers from slumping, I ask that you take a minute to contact your legislatures about your thoughts on the proposed change. 
Click here to start the process of fighting for home ownership and ensuring this 20% down rule does not get passed into law.  Thank you for your time today on this as we'll all see the benefits of keeping the down payments of home purchases to a minimum by ensuring the continued growth of the housing market. 

FHA Pre-foreclosure Options

I recently attended a breakfast meeting that brought in a Housing and Urban Development (HUD) counselor to discuss pre-foreclosure options for homeowners that are struggling to make their payments or have already missed a payment with an FHA loan.  I was aware of a few of their options but was surprised at how much HUD wants to keep homeowners in their homes with the other options available. 
The Federal Housing Administration (FHA) insured loans offers homeowners four options if you want to keep your home and two options if can't keep your home.  Both FHA and your lender will want to know the reason(s) you have or will be unable to make your mortgage payment and whether or not the situation is temporary.  Once you've had the discussion with your lender or HUD-approved housing counseling agency, you'll need to submit your financial information to the lender along with supplemental paperwork, depending on the type of request, to your lender for review. 

The options to stay in your home include a special forbearance, a mortgage modification, a partial claim or even a FHA-Home Affordable Modification Program option.  The partial claim option of FHA insured mortgages is what struck me as the most important and beneficial option for the financially distressed homeowners.  This partial claim is a 'one-time' loan from the insurance fund to bring your account current.  The loan is interest free and does not need to be repaid until you either pay off the first mortgage or sell your home.  The other three options are somewhat common of those offered by conventional lenders.

If your situation is permanent and you're unable to make any payments anymore, you can sell your home as a short sale or sign over the Deed in Lieu of foreclosure to your lender.   It's important to remember that any of the options mentioned above could have tax consequences involved once all is settled on your loan.  Your own situation of payment or not being able to repay will truly dictate which of the options are available to those that have an FHA insured mortgage.

As with any of the information I share, you are welcome to call or email additional questions as I'd be glad to share the knowledge so that you can choose the best path for your situation.

Mortgage delinquencies still in play

I just read an article on DSNews, the leading magazine that discusses the latest on the default servicing industry, that mortgage delinquency rates rose from the March. April's data shows that there are 6,388,000 mortgages that are at least 30 days late or in the foreclosure process. The article did not go into detail about the reasoning behind the increase in delinquent mortgages, but we can certainly speculate some reasons for this while looking around at our communities. 
While the unemployment rates seem to be on the slow track showing slight improvements in the job sector, there are many other indicators showing that our country is begining to dig it's way out of the rescession.  However, that does not mean that mortgage delinquencies immediately dissappear because there are small sign of improvement around the economy.  Take a look at your own community and neighborhood conversations to find what people are stresssed about.  People are still in distressed financial situations, still looking for jobs and trying to play catch up on their bills. 
Loan modifications are still playing a big roll for mortgagors and lenders alike.  I have taken some time out of my days to help a few clients with loan modifications as they've been given the run around by other non-profit and profit agencies alike.  These companies are dropping the ball somewhere, somehow on the mortgagors and their files sit at a stand still with the lenders because the follow up and persistence just isn't a priority while working the cases.  While helping these clients, I've discovered that most lenders require a homeowner to be behind on their payments by at least 30 days before they can even submit a modification request.  This is one contributor to the 6,388,000 delinquent home loans.
If you'd like to see more of the article, click here.  If you know of anyone that is in a distressed financial situation, please have them give me a call.  I've successfully negotiated loan modifications for Bank of America, GMAC and Wells Fargo, so if you know someone that is struggling to get this completed I can help in this areana as well.
Your friend in the business,
Liz Novotny
651-203-1769 or liz@liznovotny.com 

Who's negotiating my short sale?

I was speaking with a newer friend recently about his experience selling his home as a short sale.  I was not the listing agent on this situation as this friend had already signed on to another realtor about the time that we were getting to know each other.  I wanted to hear about his experience, first to ensure that the process went smoothly and secondly to see how this agent negotiated with the bank in the event there was something I could learn. 
I found out rather quickly this agent ended up taking money out of my friend's pocket.  His agent hired an attorney to negotiate the short sale in lieu of taking the time to do this themselves.  Agents do this so they can continue focusing their time on the rest of their business instead of getting bogged down to a phone and computer while working with the bank.  While this is becoming more common place in the distressed market, I've yet to see an attorney get an offer negotiated faster or smoother than when the agent negotiates themselves.   The price of hiring an attorney to negotiate a short sale could get expensive, depending on the attorney doing the negotiating.  The attorney will either charge a flat fee or a percentage of the commission on the sale.  Most agents will deduct this fee out of their own commission, as they feel this is their price to pay.  However, this was unfortunately not the case in my friend's situation.  
My friend ended up paying the attorney's fees out of their own pocket!  As part of the listing agreement, they had agreed to pay the attorney's fees themselves instead of the agent deducting this from their commission.The sellers were to receive a small amount of relocation assistance at the closing table because they had an FHA loan and FHA allows for $1000 to the seller at closing.  Most loans do not allow funds to go to the seller, due to the fact that the lender is writing off the remaining balance.  While the sellers didn't have to come up with the money out of their own pocket before closing, they did lose out on money that was rightfully theirs at the closing table. 
I share this story with you to illustrate that how they were taken advantage of.  In this housing market, there are many realtors out there that will do what they can to keep as much commission in their pocket as possible.  If that means charging a seller a fee that should have come from themselves, they apparently see nothing wrong with this situation.  People in distressed situations should never have to pay to sell their house, even as a short sale.  I ask you to please keep this in mind when you hear about folks discussing short sales with you in the future.  Remind them that a realtor with INTEGRITY will never charge a distressed seller uncustomary fees to sell their home.   
Feel free to call or write with questions or comments on this situation, I'm always happy to help. 

Have we closed yet?

A situation that's becoming more common at the closing table is when a buyer signs closing paperwork but does not take possession of the home immediately after wards.  This is almost always due to the seller not signing off on the settlement pages by the time the buyer has.  While this particular situation happens more than often happens with bank owned properties, it can also happen with short sale properties from time to time.

For a buyer purchasing a bank owned property, generally the seller is residing in the state the property is located.  Reasons behind the seller delay in signing the documents in time can vary from property and in turn their situations. The results of the delay can be caused by: a title company not providing documents to the seller in a timely fashion, an investor taking longer than usual to review and sign off an adjustments of the costs listed on the HUD as well as needing supplemental parties to agree to the figures.  Very often in these situations a bank deliver the signed settlement pages by the end of business on the scheduled closing date or even the day after, thus leaving the buyer(s) without possession no more than 24 hours. 

For those buyers purchasing a short sale property, possession issues can also happen despite there being a live seller who does in fact reside in the state.  The source of the delay can be that of a seller's lender(s) having not approved the final settlement pages prior to the scheduled closing date.  Per the terms of a short sale approval letter; the title company, real estate agent and/or seller must obtain final approval on the HUD statement prior to delivering possession and allowing the funds to disperse to the lender that has been shorted.  A delay in the final sign off on the settlement pages can be a result of many things.  One being that the loss mitigation departments are truly understaffed due to the many short sale requests happening today and in turn those managing the files are sincerely unable to get to all requests they've received in any given day.  Another being that of needing additional party approvals, such as the mortgage insurance company, investor approval of the HUD statement.  Involving additional parties to the process always ends up time delays.  

For any of the reasons listed above the delay of passing on of the keys to the home after signing the closing paperwork can and usually is frustrating.  It's difficult to spend the time moving through a lengthy process, such as a home purchase, to then be cut short where the contract has not been completed as agreed upon at the closing table.  The most frustrating piece of this situation is how little a buyer and their agent can do to remedy the situation.  Phone calls and follow up notes are typically the best tools accessible to a buyer or their agent to ensure the final step has been completed.

To know if there are other efforts that can be effective in transferring possession of the property, please send me a note or give me call to discuss your situation.  Your friend in the business, Liz

Winterizations - Inconvenience or Necessary Evil?

Because our lovely state is at or below freezing temperatures for such a large portion of the year, banks and sellers with vacant homes will hire a plumber to winterize the property in an effort to preserve the plumbing during the cold temperatures.  Winterizing a property will include, but is not limited to; turning the main water valve off inside the home, blowing out all water pipes to clear them of any remaining water, pouring anti-freeze (or comparable solution) down all drains and toilets, disconnecting the water meter, draining the water heater, draining the boiler and last but not least, blowing out the sprinkler system lines when there is one in place.  Buyers will encounter more and more properties in this condition now through mid-Spring even.  

This can easily pose a delay in the inspection and/or appraisal process for both the buyer and seller.  The effects of the winterization almost always outweigh the hassle of getting the home prepped for these steps.  One of the best ways to keep the process moving smoothly through the specified time frames is to ensure the winterization/de-winterization is discussed in the purchase contract.  Be sure to let the listing agent know as soon as possible what day and time you'd like to inspect the home, giving at least two days notice or longer when possible.  Often times the seller and/or bank will hire a separate company take care of all preservation work and orders like this must be called in to the preservation company before a vendor can perform the work.  If there is a sprinkler system on the property, do check to ensure that part of the home was winterized at the same time as the rest of the plumbing.  If it was winterized properly, check with your inspector and appraiser on whether it's necessary to de-winterize the system in order for them to do their jobs properly.  

Once both the inspection and appraisal have been completed, the seller will more than likely require that the home be re-winterized after wards.  Again, this may seem like another 'hassle' to deal with once you've closed and are ready to move in or begin repairs.  However, the flip side to not having the property winterized after inspection can very easily lead to plumbing damages in the future and in turn make the home more costly to the buyer and seller in the long run. 

Let me know if you have questions on winterized homes and how best to proceed, feel free to drop me a line or give me a call.

Ready, Set, Close! Part 2

Many emotions surround closing day.  To ensure some of the anxious and stressful feelings are kept to a minimum, here are some things a seller will have on their list to ensure the last few weeks before the big day go over smoothly. 

Packing and cleaning the home are obvious items on a sellers checklist.  They will also need to close out the utilities with each of the city and area service providers as well as telephone, cable and internet.  A change of address form will need to be submitted to the post office.  It's best to turn it in about a week before closing so there's no delay in receiving your mail at your new address. 

The title company hired to complete the transaction will set up the payoff of a seller's mortgage(s).  The title company will also close out the escrow account where the insurance and property taxes may have been set aside each month.  Recording the paperwork signed is one of the most important jobs the title closer has.  If you sell your home as a short sale, make sure to read over the approval letter(s) ahead of time with your lawyer to ensure accuracy.  Checking in with these processes is a good way for a seller to help ease their mind on the progress of closing.    

Closing day will include a moment to hand keys over to the buyer and a good time to inform them of any special features of the property.  Bring your license and any questions you might have before the closing is finalized.  Leave any/all paperwork and pamphlets for the appliances, mechanicals, etc. at the property so the buyer can read through at their leisure.  This will shrink the list of things needed to bring to closing significantly.  Keep copies of your closing documents in a safe, dry place in the event they're needed for future reference. 

If you have any questions on closing or other real estate topics, please give me a call or send me an email.