I recently had some clients that were nearing the end of their redemption period. They had received an offer at the last minute and wanted to ask their lender to extend the redemption period. We were prepared for the unlikelihood that this could happen, but still submitted the offer on the off chance their bank would do something to make it work out for the sellers.
Unfortunately, my sellers were unable to get their redemption period extended. After speaking with the foreclosure attorney, I found that the lender could do nothing to extend the redemption period in order for this to work for the sellers. However, if the sellers wanted to extend there is another trick that may have worked. The trick would be that of the sellers filling bankruptcy. If the sellers were to file bankruptcy, the redemption period could be extended another 60 days from the date they filled. My sellers had no intentions of filling bankruptcy at the time and therefore this 'trick' wasn't truly an option.
I just wanted to share this scenario, in the event you or someone you know might be in a situation where an offer comes late in the redemption period. If you have questions on redemption periods, click here or feel free to give me a call or send an email.
Monday, October 10, 2011
Thursday, September 29, 2011
New rules for FHA Loss Mitigation Options
Recently, FHA announced some changes to their Loss Mitigation procedures when mortgagors participate in loan modifications and partial claims. These new rules will take effect October 1st and require a servicer to comply with their new guidelines.
The most important detail of this change revolves around the trial payments. FHA is going to require borrowers to participate in a trial payment plan, lasting at least 3 months, before they will modify the loan permanently. This is typical of most modifications being offered to buyers, but setting guidelines for the servicers means the borrowers will know what to expect ahead of agreeing to the trial modification and in turn the permanent modification. The permanent modification rate must be determined when a servicer approves the trial modification payments for the homeowners.
Another rule helpful for homeowners is that the servicers for FHA can not charge more on the final modification payment than that of the trial period payment. The trial period is set to ensure a borrower is successful in making consistent, timely payments at a reduced rate. Regulating the trial payment will help homeowners that can make their mortgage payments timely, in that there won't be a big surprise on what the permanent payment will be once the trial period is over. Often, the modifications offered to mortgagors today end up having two different payments for a homeowner. The homeowners rarely are given the amount of the permanent modification payment until the trial period is over. For FHA's partial claim process, the trial modification payment must be the same as the future monthly payment. To referesh your memory on FHA's partial claim process, see my previous blog on June 20th of this year.
With FHA's new guidelines on their modifications, a homeowner knows upfront what the payments will look like and can decide with better knowledge on whether the modification will help them keep their home because they will be able to successfully make their payments on time. Click here to learn more details about FHA's guidelines that will take effect October 1 and let me know if you have additional questions on this topic or any other real estate concern you might have.
The most important detail of this change revolves around the trial payments. FHA is going to require borrowers to participate in a trial payment plan, lasting at least 3 months, before they will modify the loan permanently. This is typical of most modifications being offered to buyers, but setting guidelines for the servicers means the borrowers will know what to expect ahead of agreeing to the trial modification and in turn the permanent modification. The permanent modification rate must be determined when a servicer approves the trial modification payments for the homeowners.
Another rule helpful for homeowners is that the servicers for FHA can not charge more on the final modification payment than that of the trial period payment. The trial period is set to ensure a borrower is successful in making consistent, timely payments at a reduced rate. Regulating the trial payment will help homeowners that can make their mortgage payments timely, in that there won't be a big surprise on what the permanent payment will be once the trial period is over. Often, the modifications offered to mortgagors today end up having two different payments for a homeowner. The homeowners rarely are given the amount of the permanent modification payment until the trial period is over. For FHA's partial claim process, the trial modification payment must be the same as the future monthly payment. To referesh your memory on FHA's partial claim process, see my previous blog on June 20th of this year.
With FHA's new guidelines on their modifications, a homeowner knows upfront what the payments will look like and can decide with better knowledge on whether the modification will help them keep their home because they will be able to successfully make their payments on time. Click here to learn more details about FHA's guidelines that will take effect October 1 and let me know if you have additional questions on this topic or any other real estate concern you might have.
Tuesday, August 16, 2011
Buyers Backing out of Condo/Townhome Purchases
I recently had a buyer of my condo listing in St Louis Park cancel their offer on the property. My seller and I were both rather disappointed and left feeling glum about the news, however, I felt this would be a good opportunity to discuss the different times a buyer can back out of purchase agreement and still retain their earnest money.
There are several contingencies a buyer can add to their purchase agreement offer on a property and when those issues fall apart, they can cancel their offer with no penalty to a buyer. These contingencies include the ability to obtain financing, an inspection of the property, the sale of another property and even that of reviewing the Home Owner Association documents. Most of the contingencies are fairly self explanatory in that a buyer can cancel their purchase agreement with minimal details in regards to the reason and a seller will be appeased enough to hand the earnest money back to the buyer. For example, when a buyer's offer to purchase is contingent on the ability to finance the purchase and finds out along the road of closing that said buyer can no longer obtain financing; the seller isn't left speculating the exact reasons why. The buyer provides their loan denial letter to the seller, all sign off on the cancellation and the seller moves on to find another buyer. During inspection contingencies, a buyer can back out of the purchase agreement after their inspection has been completed, so long as it's within the timelines stated on their contingency form. If subject to the sale of another property and the deal falls through, submitting applicable paperwork to the listing agent could be sufficient enough for a seller to release the earnest money funds.
When a buyer cancels during the Home Owner Association document reviewing period, this can easily lead to speculation on the true reasons for the buyer to cancel. Buyers know there's an association on a property when they look at it, as they've already discussed each particular association for each complex prior to or at the showing of the home with their agent. They also have some knowledge on what the association charges per month and whether or not pets are allowed. Most buyers want to know this info before making an offer so they don't jump into a home if they don't these paticluar details on the home and complex. Every once in a while, a seller has a copy of the Rules & Regulations along with other pertinent info about the association to pass along to a buyer to review before making an offer. If the association's financing is not in order or up to a buyer's lenders standards, a buyer can cancel their offer using this 10 day right of rescission period. They can also cancel if they don't like the associations rules for renting out a unit/townhome.
What seems to get the sellers concerned or left confused is when a buyer is well aware of an associations practices, rules and regulations and uses this contingency as an excuse for other reasons the buyer does not wish to disclose (often personal). As there's little a seller can do to change a buyer's mind, we are left with the feeling that it just wasn't the right buyer for the home. That can be tough to accept and move on, for any person during these tough economic times.
If you have questions about buyer cancellations, do not hesitate to give me a call at 651-203-1769 or write me a note at liz@liznovotny.com.
There are several contingencies a buyer can add to their purchase agreement offer on a property and when those issues fall apart, they can cancel their offer with no penalty to a buyer. These contingencies include the ability to obtain financing, an inspection of the property, the sale of another property and even that of reviewing the Home Owner Association documents. Most of the contingencies are fairly self explanatory in that a buyer can cancel their purchase agreement with minimal details in regards to the reason and a seller will be appeased enough to hand the earnest money back to the buyer. For example, when a buyer's offer to purchase is contingent on the ability to finance the purchase and finds out along the road of closing that said buyer can no longer obtain financing; the seller isn't left speculating the exact reasons why. The buyer provides their loan denial letter to the seller, all sign off on the cancellation and the seller moves on to find another buyer. During inspection contingencies, a buyer can back out of the purchase agreement after their inspection has been completed, so long as it's within the timelines stated on their contingency form. If subject to the sale of another property and the deal falls through, submitting applicable paperwork to the listing agent could be sufficient enough for a seller to release the earnest money funds.
When a buyer cancels during the Home Owner Association document reviewing period, this can easily lead to speculation on the true reasons for the buyer to cancel. Buyers know there's an association on a property when they look at it, as they've already discussed each particular association for each complex prior to or at the showing of the home with their agent. They also have some knowledge on what the association charges per month and whether or not pets are allowed. Most buyers want to know this info before making an offer so they don't jump into a home if they don't these paticluar details on the home and complex. Every once in a while, a seller has a copy of the Rules & Regulations along with other pertinent info about the association to pass along to a buyer to review before making an offer. If the association's financing is not in order or up to a buyer's lenders standards, a buyer can cancel their offer using this 10 day right of rescission period. They can also cancel if they don't like the associations rules for renting out a unit/townhome.
What seems to get the sellers concerned or left confused is when a buyer is well aware of an associations practices, rules and regulations and uses this contingency as an excuse for other reasons the buyer does not wish to disclose (often personal). As there's little a seller can do to change a buyer's mind, we are left with the feeling that it just wasn't the right buyer for the home. That can be tough to accept and move on, for any person during these tough economic times.
If you have questions about buyer cancellations, do not hesitate to give me a call at 651-203-1769 or write me a note at liz@liznovotny.com.
Wednesday, July 13, 2011
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.
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.
Monday, June 20, 2011
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.
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.
Wednesday, May 18, 2011
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
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
Wednesday, May 4, 2011
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.
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.
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