Archive for the ‘California help for homeowners’ Category
Friday, July 6th, 2012
Housing Affordability is Up: The National Association of Realtors has reported that housing affordability is at it’s highest level since the 1970s, when such record-keeping started. The Housing Affordability Index measures the relationship between median home price, median family income, and average mortgage interest rates. As the index climbs higher, household purchasing power grows. An index of 100 is the place at which a household with median income is able to qualify for a purchase of a median-priced home; the index in January scored 206. Great news for buyers.
Vacation and Investor Purchases Grow: Rising to the highest level since 2005, vacation home and investor purchases are heating up the market. The National Association of Realtors (NAR) reports that investment purchases rose over 64% last year from 2010 levels. Vacation home purchases rose 7% from 2010. I have definitely felt this to be true, as the majority of my sales in 2011 and again this year have been to investors and those purchasing second/third homes – it’s a great time to negotiate for these buyers.
Fixed Mortgage Rates Keep Falling: Fixed rates have continued to drop, according to a Freddie Mac survey, with a fall again this week for 30 year fixed rates, to 3.62% (compared to 4.60% this time last year). Similarly, 15 year fixed rates and 1 year ARMs also dropped. For more details click here.
California Homeowner Bill of Rights Closer to Approval: The California Homeowner Bill of Rights -which actually encompass two bills – passed by the State Assembly and Senate on Monday, and now go to the Governor for final approval.
The bills will address two main issues: (1) protection from foreclosure of homes while homeowners are working with their lenders on modifications (allowing them to stay in their homes), and (2) establishing a single point of contact with lenders for homeowners in their communications (so they are not passed around to numerous people while trying to work out their modifications – an act that would have a big impact on getting these modifications approved).
The bills will also prevent robo-signing by imposing fines on the lenders for filing any unverified documents, and will allow homeowners to sue before a foreclosure. Lenders of course have been fighting these laws and are against passage. The laws are expected to be passed and would take effect January 1.
California Officials to Use Eminent Domain to Help Restructure Underwater Mortgages: Eminent domain, the process by which the state can take your property for public use, is being considered in a new light in an attempt to help underwater borrowers. The plan would allow seizure of underwater mortgages at a low price, based on fair market value, and would then refinance them (to the homeowner) at a slightly higher amount. The venture capital firm that is financing the seizures would make a profit on the new mortgages, and homeowners would be allowed to participate if they were current on their mortgages. Homeowners would stay in their homes and have new mortgages based on current market values. It will be interesting to follow the path of this clever but controversial plan.
Photo courtesy of Dreamstime
Tuesday, November 29th, 2011
Short sales are a big part of our real estate reality, and they are not going anywhere anytime soon. Although the relief of getting out of a mortgage that can no longer be maintained is usually a blessing for sellers, there is also an added benefit in some cases, of getting a check from the bank at closing.
There are several current programs that offer to pay sellers at the close of escrow on a short sale:
HAFA. The Home Affordable Foreclosure Alternatives program (HAFA) gives qualified sellers up to $3000 at closing. This program applies to both short sales and deeds in lieu of foreclosure. Click here for more information on HAFA and to see the requirements.
Transition Assistance Program (TAP). This is a Calfornia program that nets qualified state homeowners up to $5000 at completion of a short sale or deed in lieu of foreclosure. Click here to check eligibility and get information.
Bank of America Cooperative Short Sale Program. This program is available to any B of A loan holders who are doing a short sale, and provides up to $2500 to those who qualify. The difference between this program and HAFA is that B of A preapproves the home for short sale, including the list price (which could be an issue). A 4 month time frame is given in which the agent must sell the home, and at the end of that time if the home has not sold B of A will issue an automatic deed in lieu of foreclosure (which could be a problem). Speak with your agent if you are not sure about how this program compares to HAFA, as the market time restrictions could be an issue. Contact B of A to get more information on the program.
Chase and Citi Short Sale Programs. Both of these lenders have initiated aggressive programs that pay up to $20,000-35,000. But don’t get too excited just yet…in order to partake of this program you need to receive a letter from one of these banks. This program is not owner-initiated. The banks find those homeowners whom they feel meet standards to successfully qualify. I know of one case here in La Jolla where a homeowner did receive such a letter.
Other bank programs. Some other banks are jumping on the bandwagon and offering their own short sale versions. Wachovia Bank sends letters to sellers asking them to participate in short sales, with a financial incentive at closing (between $3000-5000). Other banks have their own programs and more are sure to follow.
Many lenders are creating their own programs to bypass the HAFA program, as it limits the liability of the banks to collect money. With their own programs, controlling many of the terms of the short sale (like price and time frames), but if you are going to use any bank programs you need to understand these programs. Your agent needs to explain the differences between the bank program and HAFA, so that you can make an informed decision as to which one to choose. As I always say, knowledge is power.
Thursday, November 10th, 2011
Keep Your Home California, a state program that was designed to help homeowners avoid foreclosure, has broadened criteria and may now help you keep your home. The program, which debuted just over a year ago with four ways to help distressed homeowners, will now offer mortgage relief to more state residents.
The original program offered help via payment subsidies, mortgage reinstatements, negative equity reductions and financial assistance to those who must move (cannot afford to stay). Last Spring the program announced it was expanding to include home equity lines of credit, or for those took equity out from a refinance. The program has helped close to 8,000 moderate and low income homeowners who were heading toward loan default.
The new changes include the following:
- Allowing cash-out borrowers to be assisted under all four aspects of the program (this part of the program was proposed last Spring)
- Allowing multiple property borrowers to apply to the program. Those with second homes or those who are on title to another home will not be excluded from the program any longer.
- Extending the mortgage aid for unemployed borrowers to nine months instead of the original six. As defined under the original guidelines, borrowers receiving unemployment benefits are eligible to receive up to $3000 in aid per month.
- Increased reinstatement amount. Under the original program, if you missed one or more mortgage payment you could be eligible to obtain up to $15,000 or 50% of the delinquent amount, whichever is less, in order to reinstate your mortgage and avoid foreclosure. That amount has now been increased to $20,000.
There are still restrictions and qualifications to participate in this program. For more information and to find out if you qualify, visit http://www.keepyourhomecalifornia.org/ or call (888) 954-5337.
Monday, October 10th, 2011
Cash for keys programs – where the banks pay money to the homeowners if they walk away from their homes and leave them in good condition – have been common in the foreclosure arena for some time. Now the banks want to apply this principle to the short sale industry. I have been hearing tidbits about this for about a month now, but a weekend article in the San Diego Union Tribune confirms that this is now official.
Major lenders, like Chase, Wells Fargo, Bank of America and others, have apparently begun offering cash to distressed borrowers in order to get them to agree to short sale their homes – up to $35,000 in some cases. Before you get all excited and pick up the phone to call your lender, you need to be aware of how this process works. As with any bank program, the bank controls the process, and you cannot simply call and opt into the program. Apparently the bank reviews distressed situations and contacts the homeowner. The money is paid at the close of escrow of the short sale.
How this system makes sense at all to the banks, who choose the lucky homeowners, is baffling. I find it hard to believe, as I am in the middle of a battle right now with one of these big lenders, just to get them to accept a buyer’s offer on my short sale listing that is perfectly in line with the comparables. But of course, some bank decisions remain and will always remain a big mystery.
My hope is that these lenders are finally realizing that it is up to them to fix the housing crisis, and that they need to get rid of all their distressed inventory to do so. Maybe some angel descended down and landed on the shoulders of the bank CEOs. Ah, but I know better: with the banks, it is all about how much they can make. They must be finally realizing that foreclosure costs them too much money, so giving away a few thousand dollars and blessing more short sales will save them in the long run. Banks don’t do anything because they care about people.
It will be interesting to watch this one, to see how many people actually get “chosen” to be involved with these programs. If you are one, please let me know. I will protect your privacy, but would love to know how the process goes, and whether it is as smooth as the banks say it will be. The proof will be in the pudding, so I am looking forward to seeing how many homeowners are truly helped by this latest lender brainstorm, and truly hope it helps.
Thursday, September 29th, 2011
With the economy in turmoil and people scared to make big purchases, the real estate business is undoubtedly challenged. In difficult times some people panic, and I see that happening amongst distressed borrowers, yet there is a process to the situation that you need to follow in order to have a chance to save your home and your credit. I have blogged on this topic before and it is worth repeating.
If you are in a distressed situation you need to approach it methodically, even if you don’t believe that there are options. Foreclosure should be the last resort. Here are some steps you can take to try and avoid it:
1. Contact your lender. I know this sounds horrible, but you need to start somewhere. Some lenders, like Bank of America, actually have been stepping up to help people avoid foreclosure. You need to have all pertinent information ready when you call – your loan number, employment information, bank statements, etc. You want to see if you can qualify for a loan modification. This will take some time, but you need to get the ball rolling sooner rather than later, as soon as you discover you are unable to pay your mortgage or if you have a change of circumstance.
2. Contact a counselor if your bank cannot help you. There is a wonderful free counseling organization called HopeNow that can help you evaluate your situation and see what options may be out there for you to peruse. You can reach them at 888-995-HOPE. You can find them on the web at http://www.HopeNow.com.
3. Investigate ALL other possible options. If you are in the military, there are options that may be available to you. You may be able to qualify for a deed in lieu of foreclosure, refinancing, postponement, or a reverse mortgage if you are older and have equity in your home. There are stalling tactics you may be able to use while you find a way to get yourself on track. There are government programs that may help you if you are unemployed. Investigate all options, but do not feel overwhelmed. If you speak with your lender or a counselor you can whittle down the available options.
4. Short sale. When there is no other option a short sale is better than going through foreclosure. You need to speak with an experienced agent if you are considering this option. Make sure you understand all tax and credit consequences – speak with your accountant or an attorney. Many lenders will bless short sales, and it is a good idea to work with someone experienced because they can try to get lender approval at the get-go. Some lenders are even evaluating homes now and telling the homeowners what price they will accept on the short sale BEFORE the home is listed. You may also qualify for programs like HAFA (Home Affordable Foreclosure Alternatives Program), which allows you to collect up to $3000 from your lender toward moving expenses.
It is important to understand the foreclosure laws in your state and the consequences they carry. If you are having difficulties with your mortgage please do not just give up – you need to try and find a solution before succumbing to foreclosure. Do not walk away from your home either, as that is a voluntary foreclosure. If you spend a little time you may find a solution that lets you avoid foreclosure, so hang in there.
If there are any distressed property issues you would like to see addressed in this blog, please let me know in the comment section below. If you do not see the comment section, simply click on the title to this blog and then scroll back down.
Tuesday, July 19th, 2011
Governor Brown just signed a new law relating to short sales that will protect California homeowners. Senate Bill 458 prevents first and secondary lien holders from being allowed to pursue homeowners for deficiency amounts after short sales. This is great news for homeowners who need to short sell their properties.
The old law prevented primary lien holders from coming after borrowers upon the close of short sale escrow for deficiencies (the difference between the amount the property sold for and the amount owed to the lender), but it did not include subsequent lien holders. If a borrower had two mortgages on the property (many have a second mortgage or line of credit), the short sale could close and the borrower could later be subject to collection efforts from the subsequent lien holder. That is no longer the case, and the law is effective immediately.
The new law should make the short sale process a bit easier and less risky for homeowners, likely leading to more short sales in lieu of foreclosures and bankruptcies.
Tuesday, July 5th, 2011
Recently I heard of a desperate homeowner who was told to file bankruptcy in order to prevent foreclosure. But will this really work?
Foreclosure postponement reasons are outlined in the California Civil Code (section 2924 g (c) (2)), and can include mutual agreement, operation of law (such as charges of fraud against the lender), discretion of a trustee, request of a beneficiary and bankruptcy.
Many believe that filing for bankruptcy actually stops foreclosure, but the truth is that it merely puts a stay on all debt collection actions, for up to one year. This means that actions such as foreclosure cannot proceed until the debt is resolved by the homeowner, or until the lender obtains permission from the court to continue with the sale of the property.
If a homeowner can work out a plan to pay debt owed to the lender on the home than bankruptcy could be a good option. It gives the homeowner time to restructure obligations and devise a plan for paying them. In such a case a postponement could be beneficial. But if you are trying to find a way to stop foreclosure, bankruptcy is not such an option.
My advice is to speak with a bankruptcy attorney to see if this is a viable option for you. You need to understand all of the consequences of a bankruptcy, as well as your state laws, and you need to explore other options as well before filing. I also advise speaking with your accountant to see if there are other ways to structure your obligations.
Saturday, May 28th, 2011
More Homeowners Refinancing into Shorter-Term Mortgages. A new study recently revealed that many homeowners are refinancing into shorter term loans. The advantage is that the mortgage will be paid off in a short time, which is appealing to those who face retirement in the next 10-15 years. Some rates are as low as 2.99 or 3%, with 7-10 year terms. The trick of course is that you must have equity in your home to be able to qualify for a refi, and then must be able to afford the higher payments. This trend shows that home ownership is still very much desired, which is a good sign.
Home Insurance Premiums are on the Rise. While home prices are falling across the U.S. those who plan to buy need to be aware that home insurance is on the rise. Some of the largest insurance companies have indicated they have or will be raising rates. This is partly due to the slew of natural disasters our country has experienced recently, such as the hurricanes and tornadoes in the mid-western states, floods in the south, and earthquakes/tsunami in Japan and elsewhere. Different areas will experience different increases, depending on risk factors.
Great Opportunities Abound for Buyers/Investors. Housing prices have dropped slightly and will likely continue to do so, due in part to the large distressed property inventory that will continue to grow for at least a year or two. Mortgage rates are still low and buyers can get a LOT more for their money right now, so it is a great time to take advantage before mortgage rates do rise.
Mortgage Delinquencies Increasing/Foreclosures Down. Although the number of new foreclosures went down in the last quarter, the number of homeowners who are delinquent in paying their mortgages increased slightly. This is an indicator that there will be a new wave of foreclosures and short sales to come, and that prices will continue to decrease until that inventory is cleared out. Great news for buyers, not such great news for sellers (unless they have equity in their homes). Foreclosures comprised 45% of home sales in California in the first quarter.
California is Expanding Foreclosure Investigations. The state of California has been expanding probes into loan servicers and applying pressure. The Attorney General is looking into robo-signing claims in an attempt to enforce restitution and prevent bad lending practices from happening in the future. A mortgage fraud task force has been comprised of 25 individuals will be targeting 3 specific areas: corporate fraud, fraudulent lending practices, and scams aimed at troubled homeowners facing foreclosures. Other states, such as Illinois and New York, are also expanding investigatory procedures.
Monday, May 16th, 2011
I read an alarming statistic today that “walking away” from one’s mortgage, an option to foreclosure that was popular in 2008, is now no longer viewed as morally reprehensible. In fact, a Fannie Mae survey of underwater homeowners (those with negative equity) found that 27% of them consider walking away – which today is called a strategic default – as a viable option to foreclosure.
Back in 2008 when I wrote my book, “Mortgage Walkaway Options,” the key focus was on options to foreclosure, with walking away as a last resort. My co-author and I urged homeowners to get educated and learn about other possible options before they walked away. At that time companies promising a bright future to homeowners who paid a fee to walk away were gaining deep pockets. They did not tell troubled borrowers that walking away was actually an intentional foreclosure, and many unknowing borrowers ended up with a foreclosure on their credit record when they may have been able to salvage it.
Most homeowners used to feel walking away was morally reprehensible, irresponsible. But even though strategic defaults have gone down the new study shows that this may no longer be the case. It is worrisome for several reasons, but what effect might it have on the housing market and on your property values?
The housing market will not come into a complete recovery until we clear out all the distressed property. If homeowners start walking away in large numbers this will take even longer. Obviously this will effect property values for a longer period of time.
More importantly, we need to find alternative ways to help struggling homeowners. People should not feel it is ok to turn their backs on an obligation to which they have committed. States are doing their part to help, organizations are fighting to get government help. We all need to seek the assistance available and try to find other ways to stay in our homes before resorting to walking away.
Monday, April 18th, 2011
In what I personally think is a big mistake, Congress announced that it is eliminating $88 million in funds for housing counseling programs. These are the programs that allow struggling homeowners and others with questions to call in and get counseling advice. It is often the first step in pre-foreclosure, or even in avoiding foreclosure altogether.
One of my favorite counseling hotlines, HopeNow, stated that it is not being shut down, but will be effected by the cuts. I have referred people to HopeNow for years. It is approved by the Department of Housing and Urban Development (HUD) and the people who work the phone lines actually know what they are talking about. The biggest complaint I have heard is that sometimes one has to hold for help for some time, but the advice is real and they really do go over specific situations and crunch numbers with callers.
Why would the government want to cut these programs? Well, I think that the government is busy trying to come up with ways to prevent foreclosures and help the housing mess by implementing new programs (of course, we have not seen these as of yet, but the most promising seem to be on the way, stemming from the robo-signing lender punishment saga). At the same time they are trying to trim our exorbitant budget, so these goals may conflict.
Many states are creating their own programs to cover the slack the federal programs have left behind after being canceled, but there are only a handful that have such programs in operation already.
So what is a troubled homeowner to do now? Some federal programs have been eliminated, not all states have yet implemented programs to help, and the mandated lender reforms (currently in the works as punishment for the robo-signing scandal) are not yet finalized. People need to know their options.
Basically there are three options, and some of them have multiple sub-options:
1. Stay in your home. To do so you may need to look into a loan modification, change of job, or a complete reevaluation of your finances so that you can eliminate or lower other expenses. You may need to get creative, consider getting a second job, renting a room or putting your young children to work (just a hint of black humor/sarcasm–of course I don’t recommend this).
2. Sell your home. If you cannot make number one work and you need to sell it will either be a traditional sale or a short sale. Either way, make sure to work with a Realtor who is experienced in your area, and if you are doing a short sale make sure that person is experienced in this regard. You also should look into the HAFA program if you are considering a short sale–at least you can get money to help with moving expenses (up to $3000–see previous posts. To find them go to the categories list to the right of my blog and click on short sales).
3. Foreclosure. This is the last resort, or course. But many times there may be no other option if you are in over your head financially, have a job loss, illness, changed circumstances, divorce, etc. Just make sure you speak with your financial planner, attorney or accountant (or all 3, in my opinion) before doing so. You need to understand all options so you can make the right choice.
As we continue to see cuts to vital programs options may dwindle, at least for a while. I have discussed multiple times how I feel states will start to jump in to help residents with their own programs, much like California has done with Keep Your Home California. If you do not yet have a program in your state I would still advise contacting HopeNow or La Raza. Your lender may have counselors available to help you as well. But do not wait until it is too late. If you are not yet delinquent on your payments you need to start researching now. Best of luck.