Tuesday, January 22, 2013

New Fannie Mae and Freddie Mac Short Sale Guidelines

Fannie Mae and Freddie Mac announced changes to their servicing requirements for short sales. Yipee!! This is not going to be good news….dontch ya just know it?? Please be aware of the following key changes for all parties involved in a short sale. These changes apply to all Fannie Mae and Freddie Mac short sales, with an offer and without an offer. Title Transfer requirement change: The buyer is prohibited from selling the property for any sales price for a period of 30 days from the date of the deed. After a 30 day period, and until 90 days from the date of the deed, the buyer is further prohibited from selling the property for a sales price greater than 120% of the short sale price. Note: The above restrictions will run with the land and are not personal to the grantee. Below is an example on how to calculate the 120%: Purchase Price is $100,000.00 120% of the purchase price would be $100,000.00 X 1.2 = $120,000.00 Relocation Assistance: The borrower may be entitled to an incentive payment of $3,000 from Fannie Mae / Freddie Mac to assist with relocation expenses following successful completion of a short sale unless: The borrower is required to contribute funds or execute a promissory note. The borrower has Permanent Change of Station (PCS) orders and receives a Dislocation Allowance (DLA) or other government relocation assistance. The servicer has knowledge that the borrower is receiving relocation assistance from another source other than the servicer. Note: If the borrower receives relocation assistance from a source other than Fannie Mae / Freddie Mac or the Servicer, the difference in the relocation assistance amount up to the $3,000 incentive maximum may be provided. If the borrower will receive relocation assistance from a source other than Fannie Mae / Freddie Mac or the Servicer and the amount is equal to or greater than $3,000, no relocation incentive will be provided. More shenanagins from the government…in trying to fix the economy and real estate, they are making it worse. Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Wednesday, January 16, 2013

Bank Of America to Transfer More Servicing

Fannie Mae and Bank of America (BOA) recently announced an $11.6 billion settlement to a long-standing dispute Monday. Fannie Mae, is a government-sponsored enterprise that buys mortgages and bundles them and then turns them into securities. It has been legally pressuring BOA to buy back a significant amount of non-performing loans issued between Jan. 1, 2000 and Dec. 31, 2008. The allegation is that these loans were poorly underwritten. The bulk of those mortgages came from Countrywide Mortgage, which was acquired by BOA in 2008. As part of the settlement, BOA agreed to pay $1.3 billion to Fannie Mae to atone for alleged poor servicing on mortgages for Fannie Mae by delaying contacts with delinquent borrowers or failing to process foreclosures properly. While the settlement is aimed at compensating Fannie Mae, there are implications for many BOA mortgage customers. In coming months, they will be notified that someone else will service their mortgages. BOA, which has been pulling back from several areas of mortgage lending, got approval from Fannie Mae to transfer certain mortgage servicing rights to two firms, Nationstar Mortgage of Lewisville, Texas, and Green Tree, part of Walter Investment Management Corp . Nationstar Mortgage, which specializes in mortgage servicing, agreed to acquire $215 billion in servicing rights from Bank of America for about $1.3 billion. Executives of Nationstar, whose shares trade on the New York Stock Exchange, said in a conference call Monday they expect to take over the massive pile of mortgage servicing rights in a series of steps over the next nine months. In the meantime, BOA will continue to handle them. Specialty servicers like Nationstar focus on customer outreach to try to reduce losses. But changing mortgage servicers can often be a challenging experience for bank customers.
Both Bank of America and Nationstar promised a smooth transition. Yeh, right!!! “Servicing of accounts acquired will be transferred throughout the year in a manner that will ensure a smooth transition for our customers,” Nationstar told The Miami Herald in a statement. Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Monday, January 14, 2013

What is Fueling Housing Recovery??

I had an interesting conversation with an Investor from Russia today. He read two of my recent blogs about a housing recovery. He commented that lending is tight in the USA yet the sale of homes and the prices of homes are both increasing. It did not make sense to him. I have been a partner in two Venture Capital firms and two private equity firms. These types of firms have been buying real estate for many years. It occurred to me that these types of firms were at least partially fueling the current housing recovery. So, I did some research and I was astounded. The National Association of Realtors (NAR) expects average existing home prices in 2013 to be around $185,800, with an increase to $193,600 by the end of 2014. (Source: National Association of Realtors, January 2013.) It appears that what is fueling the recovery in the U.S. housing market and home prices is something that’s never happened in our history. It’s not individuals buying houses that are moving prices and demand higher; it is the institutions. The Blackstone Group L.P. (NYSE/BX) bought $2.5 billion worth of U.S. homes—that’s 16,000 units in total so far, with cash! In October of 2012, the company owned $1.5 billion worth of homes and was spending $100 million a week to purchase more! Other companies like the Colony Capital LLC and Waypoint Homes are taking similar courses of action as the home prices increase. Colony Capital has already purchased 5,500 homes since April of 2012 and expects its investments to increase to $1.5 billion by the end of this year. Waypoint Homes has bought 2,500 home and plans to have a total of 10,000 homes by the end of 2013. Institutions are pouring big money into buying individual homes and fixing them up, and then turning around and renting them. And more and more companies are entering this new “game.” As an example, Silver Bay Realty Trust Corp. (NYSE/SBY) raised $245 million in an initial public offering (IPO), and it plans to get involved in the markets for single-family homes. This is clearly a good situation at first glance since the infusion of cash into the markets has helped fuel recovery. However, there is a downside to this. As soon as institutional investors can get better returns for their money elsewhere, they will be out of housing and moving on to the next thing. Home prices increasing may have been great for speculators and investors, but not for the economy. Paddy Deighan J.D. Ph.D http://www.homesavers.pro \

Sunday, January 13, 2013

There has Been NO Better Time than NOW to Seek Loan Modification

Everything in real estate seems to be cyclical. Housing markets go up and down; interest rates go up and down and so on. The real challenge is knowing when a market will change. Loan modifications all but disappeared in the Summer of 2010 because servicers were not processing and owners of notes were not modifying them. In February of 2012, the well-publicized “Attorney General” lawsuit against major lenders and servicers was settled. The settlement took full effect in July of 2012 and as a result, loan modifications are back. For one thing, you no longer have to be behind on your obligation. Owners who are current and who otherwise qualify for modification can receive relief. Another positive aspect of this wave of modification is that banks are required to modify the principle balance down to a point of neutral equity (reduce the principle balance down to the market value). The banks DO receive financial incentive to do this. They are doing this to receive money from the government and to satisfy charges of fraud and abuse. The banks will behave as long as the attorney generals of 49 states are watching them and so long as the pool of funds is available for them. Last week, there was another settlement of additional charges brought by the government against the same lenders and servicers. This placed another $10 billion at the disposal of the lenders and servicers if they modify loans. There has been no better time to modify loans. The guidelines to receive modification have not changed much but the motivation of the lenders has never been higher. However, this wave of modification will not last forever. It has been very cyclical and it is likely that another period of modification resistance will return. It makes sense to seek modification NOW and not to wait. If you or your clients have mentioned a modification, it makes sense to get started now as the process does take time (I typically quote 4-8 months). Paddy Deighan, J.D. Ph.D http://www.homesavsers.pro

Saturday, January 12, 2013

Further Evidence of a Housing Recovery

Last week, I wrote a blog about the housing recovery and I cited expert opinion that indicates that we are in fact in a recovery. The blog entry was very well received. Of course there are negative fundamentals that detract from the positive news (such as shadow inventory, unemployment and lending guidelines). However, despite negative aspects on many market fronts in the wake of the fiscal cliff “resolution” (or lack thereof), the housing market recovery seems to be strong. In fact, the number of “improving markets” as identified by the National Association of Home Builders (NAHB) rose sharply this month to 242, up by 47 over December 2012. 47 new markets met the requirements of solid relative growth, employment improvement, housing permit application volume, and home price improvement to be added to the list. Only six markets fell off the list this month. “We created the improving markets list…to spotlight individual metros where – contrary to the national headlines – housing markets were on the mend,” said NAHB chairman Barry Rutenberg. “Today,” he observed, “242 out of 361 metros nationwide appear on that list. The story is no longer about exceptions to the rule but about the growing breadth of the housing recovery.” Rutenberg threw in a dig about “overly strict mortgage requirements hold[ing] back the pace of improvement,” but the NAHB’s tone is definitely one of optimism for 2013. So now we have further evidence of a strong housing recovery for 2013. Probably the strongest evidence of a housing recovery and rising prices is that I plan on buying a home in 2013!!! Of course the market goes up when I decide to buy another home!!! LOL All we need now is loosening of credit and the recovery will really take hold. It is also important to note that no market goes straight up and no market goes straight down so there will always be some variations and deviations. Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Friday, January 11, 2013

New Definitions of a "Qualified Mortgage"

The Consumer Finance Protection Bureau (CFPB) is attempting to redefine who is able to qualify for a mortgage. The CFPB is redefining the term “qualified mortgage” (QM). Lenders will technically have the option of making “unqualified” mortgages to borrowers who do not appear to have the resources or inclination to repay those loans. However, if the loans subsequently go into default, the lender would be open to lawsuits from federal agencies, mortgage insurance companies, and even the borrowers themselves. As a result, lenders are unlikely to make loans that do not comply with QM guidelines . So why are they called “guidelines” if there is a HUGE hammer behind them!!! LOL The guidelines will be much stricter than they have been in the past. Many homeowners and consumer advocate groups actually protested the redefinition of the term out of fear that changing the rules of lending could “effectively close off homeownership to millions of Americans and derail the real estate recovery”. Ultimately, the CFPB decided that it was more important to get lending policies under control. They promulgated a series of regulations that the CFPB believes will help lenders identify borrowers and lending parameters that will work for everyone. A QM now requires the following: 1. That lenders must obtain and verify an applicant’s financial information, including employment status, income, debts, assets, and credit history; 2. The potential borrower must have enough income and/or assets to repay the loans; and 3. “Teaser rates” may no longer be used to hide the “true cost” of a mortgage. This seems relatively simple and straightforward, but in reality the ruling and regulations are not complete nor are they simple. Once the information is disseminated and verified, a myriad other factors must be addressed and the CFPB is not done drafting its new rules. The American Bankers Association (ABA) president Frank Keating warned in response to the new QM guidelines that the CFPB will ultimately “transform our lending practices and could restrict access to credit.” Yippee, more government solutions that are worse than the problem they are trying to resolve!!
Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Sunday, January 6, 2013

New California Law Protects Tenants in Foreclosure Homes

The annals of real estate are replete with stories about people renting homes, and paying their lease responsibly. Then they receive a notice that they being thrown out on the street because a landlord has been keeping the rent money and not paying their mortgage. However, under a new California law, that foreclosure cannot be a surprise to the family of tenants because property managers and landlords in California must now disclose in writing, any notices of default recorded against a property. New California law. Supporters of the bill believe that this will help tenants make more informed decisions about where to live and how long to live there. Of course opponents of the legislation say that these disclosures will actually hasten foreclosure since tenants will likely steer clear of properties with a default history. California has some of the most proactive renters’ rights laws and regulations in the country, so this new bill likely comes as little surprise to those already living on the west coast. Landlords already must take existing tenants with the purchases of new property, and most tenants have the right to carry out their leases even if the property changes hands or have 90 days (or more) in which to vacate. The entire written disclosure must be written in a specific manner, as follows: “The foreclosure process has begun on this property, and this property may be sold at foreclosure. If you rent this property, and a foreclosure sale occurs, the sale may affect your right to continue to live in this property in the future. Your tenancy may continue after the sale. The new owner must honor the lease unless the new owner will occupy the property as a primary residence, or in other limited circumstances. Also, in some cases and in some cities with a ‘just cause for eviction’ law, you may not have to move at all. In order for the new owner to evict you, the new owner must provide you with at least 90 days’ written eviction notice in most cases.” Disclosure Story. Padraic Deighan J.D. Ph.D http://www.homesavers.pro
Paddy Deighan J.D. Ph.D

Thursday, January 3, 2013

More Predictions of a Full Housing recovery

There is independent data that suggests that the housing recovery is in well underway. Veros Real Estate Solutions (VRES) is a real estate data firm and it recently announced its recent analyses of the twelve month period ending December 1, 2012 as well as its forecast for the 12-month period ending December 1, 2013. VRES indicates that “the national real estate market has hit bottom and is now in a full recovery”.Veros Real estate report The analysis and forecast factor in 975 counties, 335 metro areas, and 13,586 zip codes. The statistics are updated on a quarterly basis. Veros predicts that the nation’s top 100 metro areas can “expect 1.2 percent appreciation over the next 12 months.” Zillow recently mirrored the same conclusion as VRES. Perhaps this is a start of a Happy New Year for all of those in the real estate profession. Zillow actually went so far as to predict that home prices would increase by 3.1 percent in 2013 and reported that overall, 2012 prices would end with a 4.6 percent gain.Zillow Report The numbers were apparently based upon a survey of 105 “economists and industry experts.” The chief economist of Zillow reported that “an organic recovery in the housing market really took hold in the latter half of 2012” and predicted that the market is “well-positioned for continued growth, albeit slightly slower, in 2013 and beyond.” There certainly is a lot of optimism in the real estate industry as we enter 2013. Forecasts of recovery together with some favorable legislation and court rulings may signify a positive 2013 and beyond for a lot of us. If lending can loosen up or non-conventional funding can make some gains in 2013, this could be a really good market for the industry. I view real estate as a three-legged stool: buyers, seller and funding. It appears that we have at least two of the legs of the stool!!! Happy New Year…a healthy and Happy New year to everyone. Paddy Deighan J.D. Ph.D http://www.homesavers.pro

Tuesday, January 1, 2013

Mortgage Forgiveness Debt Relief Act EXTENDED

Looks like many distressed home owners received a late Christmas present and another reason to celebrate New Years’ day!! The Mortgage Forgiveness Debt Relief Act of 2007 (MFDRA) expired in New Years’ day. However there was a little known aspect of the “American Taxpayer Relief Act of 2012’’ (ATRA) that included an extension of the MFDRA!! As I write this, the House of Representatives passed the ATRA and now it goes to President Obama for his signature. There were many provisions in the ATRA that received a lot of coverage – including the farm aid portion that will keep milk prices lower (doesn’t affect me since I drink almond milk-LOL)!! However, the extension of President Bush’s MFDRA will provide relief from a tremendous burden facing distressed home owners. In fact, on Monday, I had a failed closing on a multi-million dollar property that had significant ramifications to the seller if the settlement was not completed before the end of the year. A last minute problem caused a delay in settlement that appeared to be catastrophic for the sellers since it now appeared that there would be a tax ramification. The Mortgage Forgiveness Debt Relief Act extension will enable many sellers to breathe a little easier and perhaps it will help the housing market as well. I have another short sale that will be able to be completed now because the sellers were going to breach a contract if the close of escrow was not completed before the end of the year because they did not want to face the tax consequences. They were willing to face a lawsuit over failure to close rather than pay the taxes but now that is not an issue. I know that the National Association of Realtors fought hard for this and their efforts should be appreciated by everyone affected by this. In the grand scheme of things, I am surprised that anyone thought to include this in last minute bills presented by the Senate, but fortunately the MFDRA was extended and there is already reason the cheer in 2013!! Paddy Deighan J.D. Ph.D http://www.homesavers.pro