Posts Tagged ‘fannie mae’

Buying After a Past Short Sale? You May Soon be Out of Luck

Friday, July 11th, 2014

If you are thinking of buying a home  with a conventional loan, and you had a short sale, deed-in-lieu of foreclosure or mortgage loan write-off less than 4 years ago, you better be aware of some changes that will take effect in August (yes, next month). What this may mean is that you have to get into contract within the next few weeks or may risk having to possibly wait another year or two to make a home purchase.house_question

Fannie Mae and Freddie Mac, the largest financers for the majority of loans in the U.S., announced earlier this week that they are extending guidelines for purchases after short sales, deeds-in-lieu or mortgage write offs. Starting August 16, 2014, a buyer with a past short sale (or the others) must have closed escrow on that sale 4 years before the date of purchase of a new home. The current rule is two years if the borrower is putting 20% down – see below). If there are extenuating circumstances (a death in the family or accident that affected the ability to pay the mortgage – divorce or job loss do not count as extenuating circumstances, and each lender may have different rules as to what does qualify so make sure to check), then the time period could be lessened to three years upon approval.

This rule, which has surprised many mortgage and real estate professionals, could create problems for those currently looking for homes in a market with low inventory. Note that the new purchase does not have to close by August 16, but the must be fully approved by that time. So long as you get into contract with a few weeks to spare for approval you should be fine.

Here is how the current seasoning requirements look:

  • 7 years with less than 10% down
  • 4 years with 10% – 19.99% down
  • 2 Years with 20%+ down

Here is how the new requirements will look:

  • 7 years with less than 10% down (no extenuating circumstances allowed for this program)
  • 4 years with 10% down or more (2 year seasoning requirement is allowed if we can document extenuating circumstances that caused the short sale. Taking advantage of a declining market is an unacceptable hardship. I’ve written more about this subject below.)

Personally I have clients who will be affected by this new change if they do not find a home very soon. I am surprised that such a rule would be instituted in the middle of the housing recovery, when there is little inventory and the market is turning from a seller’s market to a buyer’s market. I feel this is a very bad call and that it will have negative effects on the housing market.

If you are in the process of looking for a new home and had a short sale within the last 4 years, you need to discuss this with your mortgage professional and your real estate agent.

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Could Fannie Mae Actually Hurt the Real Estate Market?

Wednesday, February 13th, 2013

Is Fannie Mae hurting the real estate market? Those following the practices of this government lending giant know that as of late, Fannie has been accused by many in the industry of price fixing and falsely inflating the real estate market. What is going on, and how can this happen at this time, after the housing market is finally on the road to recovery?

The majority of lenders and those who guaranty loans seem to be cooperating recently with foreclosure avoidance, opting for the less painful option of short sales. They claim that not only do they want to ease the homeowners’ pain, but that they do not have a desire to own property, and would rather take a loss sooner than have to go through the foreclosure process – one which has a hefty price tag.

There is one exception to this rule, and real estate agents are baffled. Fannie Mae – a government agency, who along with it’s cousin Freddie Mac guarantees and purchases loans, and owns or controls about 31 million U.S. mortgages  – has been implementing some strategies lately that go against this notion, despite statements of intentions to help:

1. Price Fixing? One of the claims expressed most frequently as of late by real estate professionals is that Fannie is engaging in price fixing. Here’s how it works: instead of opting for short sales, it is choosing to proceed with foreclosures. Then, once the home is ready to list, it’s selected agents list the property for over comparative market value, under Fannie’s Homepath program. No appraisals are needed, as Fannie is the largest provider of mortgage credit. Buyers are jumping in and paying over market value for these properties, and are closing escrows.

Initially this looks like a win-win, as the buyers get their home and do not have to go through the appraisal process, and the area comps are raised with the closing of the property at a value  higher than any other recent sales, thus increasing comps for the next seller. Sounds good, right? Not so fast.

The downside of this tactic is that the buyers are literally moving into their new homes as UNDERWATER homeowners. Their homes have no equity – they own the most expensive property in the neighborhood because Fannie has falsely inflated the home values. Appraisers will not look solely to the most expensive home that sold, but will include it with the other comps…thus leading to the next problem:

As  a result, future sellers will not likely benefit from the most expensive neighborhood sales (for more on this click here.). Appraisers will include the most expensive sale in their analysis, but they will not focus solely on that one sale; thus the next home to sell, even in better condition and with more to offer, will be evaluated by appraisers based on the combination of recent sales. What seller in their right mind, who did not have to sell, would choose to do so in such a situation? This will keep homes off the market, sustaining  low inventory levels.

2. Countering short sale offers at prices higher than comparable sold properties. Another tactic that is being used by Fannie when they DO agree to short sales, is to counter offers received higher than comparable sold properties. Again, this is crazy! These homes will not appraise, but still there are buyers willing – and doing it! – to pay cash over and above appraisal value in order to close escrow. Again, these new homeowners move into their homes in negative equity positions. This tactic also prices many homebuyers out of the market.

I’m not sure how to explain what is going on, but it scares me. Our market is healing right now, and if prices are falsely inflated and comparable sold properties ignored, we will see large market increases in short time periods. If you remember, this is what led to the last market crash. Please share your thoughts.

 

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Can New Short Sale Program Help YOU?

Friday, November 16th, 2012

Short sales have become part of the real estate landscape, and as one in four homeowners are underwater nationwide, they will likely continue to stay there for some time. Lenders have finally accepted this and have been trying to implement new programs to make them a better choice than foreclosures. For the most part, they are on the right track, but we are still seeing resistance and lots of snares in the road. The new Fannie Mae/Freddie Mac short sale program offers something big to struggling homeowners: the chance to short sale their homes even if they are current on their mortgage payments.

Normally, in order to short sale your home you have to be delinquent on your mortgage payments. Some lenders say they will consider short sales for those not yet delinquent, but the reality is that until you are late with your payments they don’t have the time to tango. Now, if your loan is securitized by Fannie or Freddie, you could be eligible for a short sale even if you are not delinquent, but can prove a hardship.

If you are in this situation you will need to contact your mortgage servicer and ask them to participate in the Fannie/Freddie non-delinquent short sale program. You will want to find a qualified area real estate agent who is experienced in selling short sales, and get your home listed on the market. Once you find a qualified buyer, you will present the contract to your servicer, along with proof of hardship (there is a packet of information you will have to provide – whether your servicer wants it up front or at the time you have an accepted offer will be up to the servicer).

Hardships: There are multiple kinds of hardship that could be acceptable. These may include job loss, injury or disability, major illness, job transfer (there are usually mileage requirements), pay cuts, divorce, and death of a borrower or wage earner, to name a few. If you think you have a hardship, contact your servicer to find out whether you qualify.

Caveats: There are a few things you want to watch out for if you are able to go through a short sale under this new program.

1. Credit implications: As with every short sale, you will need to be aware of potential credit hits. There is no lesser effect for these types of short sales, however, apparently it is in the works. Typically with a short sale you can expect your credit score to drop up to 150 points, but that really depends on where it was before you were approved for a short sale. I have seen some sellers take a big hit, and others barely see any negative effects. If you keep in mind the 150 number, that is most likely the worst case scenario. Hopefully soon there will be an exception with the credit bureaus for these types of short sales.

2. Second liens are another potential snake in the grass with the new program. First lienholders have agreed to pay only up to $6000 to second lienholders upon a successful short sale closing under the program. If you have a large outstanding second lien balance, there is a chance that lienholder may refuse to accept this sum (which is ridiculous, as they would likely get nothing if the home went to foreclosure, but such is the case). Make sure you know exactly how much you owe and what the second lienholder’s policy is – a savvy short sale agent/negotiator will know how to help in this regard.

3. Deficiency states: if you live in a deficiency state (where the state can go after you for the difference between the short sale price and what you owed on your mortgage), you need to beware. The lender may require a cash contribution to cover the difference on the loan balance, or possibly have you sign a promissory note. California is NOT a deficiency state, so selling your home via short sale requires NO contribution from the borrower, and there is no state tax liability on the sale.

As always, I recommend really understanding all the implications of a short sale before embarking on one. Make sure you hire an agent who really knows how to negotiate, as well as all the steps involved throughout the short sale process. If you are informed you will make the best decisions for you and your family. To find out whether your loan(s) is owned by Fannie Mae, visit https://www.knowyouroptions.com/loanlookup. For Freddie Mac loans, go to https://ww3.freddiemac.com/corporate/.

Images courtesy of Dreamstime.

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Home Buyers: Getting Outbid by Investors?

Monday, August 13th, 2012

Many home buyers these days are feeling frustrated, due to lack of inventory, multiple offer situations and competition from investor buyers. In certain price ranges this is the norm, and buyers want to know how they can avoid these situations.

Well, if you are patient there is one program that may help you get the edge you need – elimination of investor buyers. Via a Fannie Mae program called First Look (under Fannie Mae’s HomePath), you can search for Fannie Mae properties that offer a “first look” to owner occupant buyers. For a period of time, usually 15 days (30 days in Nevada), only owner occupant buyers (including public entities and some non profit agencies) will be able to submit offers on these properties. The program is designed to encourage homeownership.

If you or your agent finds a property on the site you are able to submit your offer for the property online – Fannie Mae uses it’s own forms and not standard purchase contracts.

This program is a great way to beat out those investor buyers, but you have to keep checking with the site to see if there are any new listings; some areas have few or none, and some have many, so don’t give up!

For more details on the First Look Program click here.

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Weekly Real Estate News REcap 7/8/11

Friday, July 8th, 2011

Obama Administration Extends Foreclosure Programs for the Unemployed. Those who are unemployed and have an FHA loan will soon be given up to a year of forbearance on their payments, giving them time to find a new job before losing their homes. This announcement arose from the fact that many Americans are unemployed for more than three months, making the current forbearance period (4 months) unfair in giving the homeowner a chance to get caught up and not lose their homes. Missed payments, plus interest, will be added on to the back end of the loan. The new program will start August 1 and last for 2 years.

Loan Limit Changes are on the Horizon. Starting October 1, unless Congress decides to be realistic and  prevent the change, federal conforming loan limit maximums will change from $729,750 to $625,500.  In preparation for this some lenders, like Bank of America, have already stopped accepting applications for loans over the new limit. Those seeking higher loan amounts through Fannie, Freddie or the FHA will need to apply for non-conforming loans, which have higher interest rates. Many politicians, organizations and other industry-related entities have been hard at work to prevent these changes, which they believe (and I agree) will be bad news for the already-injured housing market, pushing a recovery further into the future. Let’s hope these changes are prevented.

San Diego County Property Assessment Values Rise. For the first time since 2008 county property values have risen, and albeit a small amount (0.51%), it is still positive news for San Diego’s housing market. The only cities that did not see assessed value increases were Carlsbad, Chula Vista and Imperial Beach. The average a homeowner will have to pay due to the increase is about $260.

Bill Calls for Merger of Fannie Mae and Freddie Mac. The struggle to do away with Fannie and Freddie continues, and the latest news comes from a California Republican, who wants to merge the two into a government-held corporation. Freddie, Fannie (who own or guarantee 56% of all home loans in the U.S.) and their cousin Ginnie Mae back the majority of mortgage loans on the market – if they were not around there would likely not be any mortgages available now. Debaters have been arguing on whether to keep them under government control or sell them and get the government completely out of the mortgage market. This new option throws another log in the fire. I am sure the debate about what to do with Fannie and Freddie will continue.

Government Still Toying with Idea of Mortgage Servicer Oversight. Again, the government is announcing that it plans to start regulating mortgage servicers. Citing the risk of consumer harm with the current system (you think?), the Consumer Financial Protection Bureau plans to put the choke collar on these firms. The power to impose these restrictions on non-bank servicers, who are not subject to federal banking regulations, was provided by last year’s Dodd-Frank Act. Details are still in the works so it will be interesting to see what transpires. If you are a buyer and are planning on applying for a loan, I highly suggest you speak with your mortgage professional right away.

Big Banks Modifying More Loans (but not in the way we hope). Big banks have been modifying, or attempting to modify, more loans. But the interesting part is that they have been doing so of their own volition – contacting those borrowers who are not yet late with payments, but who pose a risk of future default. While this seems like a great idea in theory, many borrowers who have tried to get modifications complain that it doesn’t help those who reach out to the lender for help – modifications that should be granted are not, while those that shouldn’t (not yet in default or borrower hasn’t contacted lender yet) are granted. It’s frustrating for people who are honestly trying to work out a plan to stay in their homes. I think the lenders need to address those who have stepped up and asked for help before contacting those who have not…a “deal with what is in front of you NOW, and worry about the future in the future” concept. What do you think?

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