Hi Folks-
The following is from the www.whitehouse.gov (aka The U.S. President's Website). Article is called "HELP FOR HOMEOWNERS" and outlines some options that the government is providing for homes in distress.
-Jerry
HELP FOR HOMEOWNERS
Wednesday, February 18th, 2009 at 9:36 am
The President’s strategy for economic recovery is a stool with several legs, as he’s said, and one of them is solving the foreclosure crisis.
"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," he said yesterday as he signed the American Recovery and Reinvestment Act into law.
Though communities across the country have been affected by the crisis, Arizona has been hit particularly hard -- in 2008, only two states had more foreclosures.
And President Obama is there today, in Phoenix, to unveil his "Homeowner Affordability and Stability Plan," which will help bring relief to homeowners and bring some order to the housing market.
The President will talk more about his plan a little later today. In the meantime, we’re sure you have a lot of questions, like, Am I eligible for assistance? Might I be able to modify my loan? When do I apply? We've put together an example sheet that will show you what options might be available to you, depending on the circumstances of your mortgage, as well as answers to some common questions (below).
Questions and Answers for Borrowers about the Homeowner Affordability and Stability Plan
Borrowers Who Are Current on Their Mortgage Are Asking:
* What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?
Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.
* I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
* How do I know if I am eligible?
Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.
* I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
* Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
* What are the interest rate and other terms of this refinance offer?
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
* Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
* How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?
To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.
* When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.
* What should I do in the meantime?
You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:
o information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources
o your most recent income tax return
o information about any second mortgage on the house
o payments on each of your credit cards if you are carrying balances from month to month, and
o payments on other loans such as student loans and car loans.
Borrowers Who Are at Risk of Foreclosure Are Asking:
* What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
* Do I need to be behind on my mortgage payments to be eligible for a modification?
No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
* How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?
In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.
* I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.
* I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.
* I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?
Only the first mortgage is eligible for a modification.
* I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?
The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.
* I heard the government was providing a financial incentive to borrowers. Is that true?
Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
* How much will a modification cost me?
There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
* Is my lender required to modify my loan?
No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.
* I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?
Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.
* How do I apply for a modification under the Homeowner Affordability and Stability Plan?
You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.
* What should I do in the meantime?
You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes
o information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources
o your most recent income tax return
o information about any second mortgage on the house
o payments on each of your credit cards if you are carrying balances from month to month, and
o payments on other loans such as student loans and car loans.
* My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility. We support this effort.
Jerry & Rachel Hsieh Real Estate Team - Keller Williams Realty in Los Angeles
IF YOU WANT THE LATEST INFORMATION ON THE LOCAL LOS ANGELES REAL ESTATE MARKET, FOLLOW THIS BLOG! FEEL FREE TO SEND OUR TEAM A REQUEST FOR ANY PROPERTY ON THE MARKET YOU'D LIKE TO VIEW BY CALLING US AT 310.623.1359. Our Cell: 424.242.8856 Email: jerryandrachel@newhomesLA.com DRE #: 01701809
Thursday, February 19, 2009
Tuesday, February 17, 2009
Probate Sales - What are the risks?
Hi everyone!
Hope all is well. Today, a new client of mine emailed me asking me about probate sales. Probate sales, specifically "court confirmation required" sales, have many differences compared to normal real estate sales, and different risks that you, as a buyer, should be aware of. Here was my response to her question about probates:
Hope all is well. Today, a new client of mine emailed me asking me about probate sales. Probate sales, specifically "court confirmation required" sales, have many differences compared to normal real estate sales, and different risks that you, as a buyer, should be aware of. Here was my response to her question about probates:
Probates
Probate sale is when the owner of property passes away and there are executors of the will who, with the help of an agent and lawyers, are selling the property.
There are 2 kinds of probate sales, “court confirmation required” and “no court confirmation required”. “No court confirmation required” is much less risky and much more like a normal sale. If it is no court confirmation required, I would not be against a first time buyer pursuing the property.
If it is “court confirmation required”, I would not advise a first time buyer pursue the property. A couple of reasons why I say this:
1) Court confirmation probates are best suited for all cash buyers, experienced investors. This is because the loan contingency will not affect them. There is no risk of them not being able to secure financing.
2) Court confirmation often require that many if not all contingencies (including loan) be removed prior to court date. Keep in mind, the court date may be scheduled at any time and can be months down the road. In that time, if something happens with your financing, or rates go up, etc, you cannot back out of the deal without losing your deposit.
3) Court confirmation probates often require your deposit to be 10% of purchase price. In standard contracts, good faith deposit is 3% max.
4) Court overbids: On the day of the court approval, people can come and overbid you. So if you have a really good deal, you may get overbid. If no one shows up to overbid you, then you may not have gotten that good of a deal.
With all that said, I have still had first time buyers who have done “court conf” probates, and we have been successful. However, if you are a first time buyer who is not big on RISK, I would advise you to make sure you understand the level of risk you are taking on prior to proceeding.
How do you find out if any property is “court confirmation” or “not court confirmation”? Easy, email me the property, and I’ll find out for you.
Wednesday, February 4, 2009
LA Median Price Change Chart (2008 v. 2007) - Neighborhood by Neighborhood
Hi everyone-
MLS just released this on Feb 1, 2009 to brokers and on the LA Times. Take a look at your neighborhood of interest and see what the median price is and the pattern change has been year over year.
LINK: LA Times/MLS Median Sales Chart - 2009
-Jerry
MLS just released this on Feb 1, 2009 to brokers and on the LA Times. Take a look at your neighborhood of interest and see what the median price is and the pattern change has been year over year.
LINK: LA Times/MLS Median Sales Chart - 2009
-Jerry
Thursday, January 29, 2009
Buying from a Bank vs. Buying from a Traditional Seller
In the past year, almost 75% of the homes and properties I've previewed on behalf of my clients have been bank-owned foreclosures. Of course, this is due to a major shift in the inventory given the current economic and housing crisis, but it probably also has a lot to do with the fact that my clients only want to see these foreclosures because they are priced so low. Because of this, many of my clients have also asked me for advice so they can understand what the "real, practical" differences are between buying from a regular seller as opposed to the bank. Here are my thoughts on this:
Before Offer
This is the period before the offer, when you're doing research or considering properties to write on. The main differences between foreclosure properties and regular properties during this time are that foreclosure properties are usually priced much lower than homes priced by sellers. This makes sense. Private sellers generally have the mentality of "let's get that one special buyer who will pay a premium for our property." Banks run more like an emotionless machine: "Let's price it at our bottom line, get multiple offers, and liquidate our inventory fast."
Forclosures on average generally are priced lower. However, it is important to also realize that, as with any capitalistic system, incentives (like, in this case, low pricing) creates stronger demand. With well priced foreclosures, you can almost always expect a bidding war, and if you want the property, you will probably have to make a best and final offer that needs to be over list price.
Foreclosure properties also tend to have more deferred maintenance. People who are maintaining and remodeling their homes generally don't stop paying their mortgages. It's usually people who can't afford to do any repairs that are. Therefore, homes that are owned by the bank are generally in worse shape, vacant, and dirty. As a buyer, you must have the imagination to vision past this.
Finally, foreclosure properties are usually always on lockbox.
During Offer Negotiation
This is the period from when you decide to put an offer on the property until you have an accepted offer. This period can be quite frustrating for buyers who are not familiar with how banks operate.
When you are buying a home from a private seller, they will generally do their best to work with you to create a win-win during the negotiations. They understand it is in their best interest to keep you, the buyer, in a good mood during negotations. Banks are much more impersonal.
Specifically, private sellers will usually counter with a clean written counter that addresses specifics. They will do so in a timely manner and you will likely get the sense that they are working in the spirit of compromise to make a deal. Banks are less concerned with keeping you in the deal as they are recovering their loss. They can counter however they want, and often times as a buyer, you will find the process much colder and almost as if they don't want to work with you. For instance, the bank may respond to your offer the following ways:
1) A Straight verbal rejection (If you submit a lowball offer to a bank, expect a straight verbal rejection)
2) A verbal counter
3) A counter for your best and final - no mention of them coming down on price
4) Bank counters to you at their full list price or almost full price - forcing you to either come up or walk away.
More often then not, the counter will be exclusively about price. And more often then not, they will just ask for your best and final.
The reason they only counter on price is because banks also have what we in the real estate industry know as a "boiler plate" addendum that you will need to sign as part of the acceptance that lays out THEIR terms. This addendum lays out all the terms of the contract for you, and supercedes any offer you may have put in previously. You can not adjust any of them, and they generally favor the bank heavily.
For instance, if you found a great property and offered $400,000 with a 17 day inspection contingency period, they could counter you back best and final. Say the list price was $450,000, and you told your agents you'll come up to $450,000: The bank would say, "OK. We have a deal. We'll send you the addendum with the price of $450,000. Just sign and we'll be in escrow." This means you have a deal, but in order to have the deal in writing, you must sign the banks addendum, which likely says inspection contingency shall be 7 days.
With the boilerplate Addendum, be aware of the following common changes:
1) Shortening of contingency periods.
2) Changing contingency removal from active to passive.
3) Per Diem penalty if you are not able to close on time
4) Penalty if you change your financing down payment amounts (even if you are able to close).
5) They will not pay for Termite work or retrofitting work.
The boilerplate addendum is non-negotiable. If you try to cross anything out, the bank will pass on your offer. As California real estate agents, we are expert in C.A.R Forms primarily. Legal addendums drafted by banks are outside the realtors scope (with the exception of Realtors with law degrees). Therefore, with bank owned properties, for your protection, it is also advisable to have a lawyer who specializes in real estate law review the bank addendum prior to signing. Unfortunately, realtors are not qualified to advise on these documents.
During Escrow and Beyond
In a traditional sale with a tradional seller, escrow will generally be opened immediately with a standard escrow company. With a foreclosure, it may 7-10 days before escrow is opened. Furthermore, banks tend to opt for low-rent, high volume escrow companies. How does this effect you:
1) You will have trouble getting someone on the phone when you need assistance on loan docs, ordering homeowner's insurance, getting necessary disclosures like preliminary title report or a copy of the Natural Hazards disclosure.
2) They will not keep track of timeframes on your escrow to make sure things are happening according to schedule. It will be up to you and your agent to keep track of them.
3) You loan is dependent on a number of things happening on a timely manner from escrow's end. If this does not happen, you can expect the bank to charge you a hefty per diem (around $125 a day) upon closing.
Once you have an accepted offer, a traditional seller will fill out a number of disclosures that will reveal as much as that seller knows about the property. Banks are excused from having to fill these out because they have a limited knowledge of the property.
During escrow, most buyers will do inspections on the property. If there are hidden defects with the property (i.e. the sewerline is cracked, Chimney doesn't work), most buyers and sellers will work together to find a reasonable credit to address the issue.
With bank-sold foreclosures (and per the boilerplate addendum), you are buying the property "As-is". Keep in mind, this is important as foreclosure homes are usually in much worse shape than homes sold by traditional sellers.
All this said, it is possible to negotiate for repair credits from the bank if (a) you have a strong offer that they probably wont get again, and (b) you have a willingness to walk away. I cannot stress "(b)" enough. With foreclosures, the bank generally will be unwilling to give any type of credit, until they see you cancelling escrow. You must be willing to walk away if the credit for repairs is that important to you. Otherwise, just accept that you are buying the property as is.
One common misconception, is that bank-owned properties take longer to sell or have delayed escrows. I would say it is actually the contrary: Bank-owned properties are pushing for fast closes, and will penalize you if you cannot close within the standard 30-40 day time window.
The properties that do take a long time and have delays are "short sales": A situation that happens when a traditional seller is trying to sell their home, but requires the involvement of the bank because the home is worth less than the amount of debt that is owed on it.
Please feel free to comment or email me if you have further questions. Thanks!
-Jerry
Before Offer
This is the period before the offer, when you're doing research or considering properties to write on. The main differences between foreclosure properties and regular properties during this time are that foreclosure properties are usually priced much lower than homes priced by sellers. This makes sense. Private sellers generally have the mentality of "let's get that one special buyer who will pay a premium for our property." Banks run more like an emotionless machine: "Let's price it at our bottom line, get multiple offers, and liquidate our inventory fast."
Forclosures on average generally are priced lower. However, it is important to also realize that, as with any capitalistic system, incentives (like, in this case, low pricing) creates stronger demand. With well priced foreclosures, you can almost always expect a bidding war, and if you want the property, you will probably have to make a best and final offer that needs to be over list price.
Foreclosure properties also tend to have more deferred maintenance. People who are maintaining and remodeling their homes generally don't stop paying their mortgages. It's usually people who can't afford to do any repairs that are. Therefore, homes that are owned by the bank are generally in worse shape, vacant, and dirty. As a buyer, you must have the imagination to vision past this.
Finally, foreclosure properties are usually always on lockbox.
During Offer Negotiation
This is the period from when you decide to put an offer on the property until you have an accepted offer. This period can be quite frustrating for buyers who are not familiar with how banks operate.
When you are buying a home from a private seller, they will generally do their best to work with you to create a win-win during the negotiations. They understand it is in their best interest to keep you, the buyer, in a good mood during negotations. Banks are much more impersonal.
Specifically, private sellers will usually counter with a clean written counter that addresses specifics. They will do so in a timely manner and you will likely get the sense that they are working in the spirit of compromise to make a deal. Banks are less concerned with keeping you in the deal as they are recovering their loss. They can counter however they want, and often times as a buyer, you will find the process much colder and almost as if they don't want to work with you. For instance, the bank may respond to your offer the following ways:
1) A Straight verbal rejection (If you submit a lowball offer to a bank, expect a straight verbal rejection)
2) A verbal counter
3) A counter for your best and final - no mention of them coming down on price
4) Bank counters to you at their full list price or almost full price - forcing you to either come up or walk away.
More often then not, the counter will be exclusively about price. And more often then not, they will just ask for your best and final.
The reason they only counter on price is because banks also have what we in the real estate industry know as a "boiler plate" addendum that you will need to sign as part of the acceptance that lays out THEIR terms. This addendum lays out all the terms of the contract for you, and supercedes any offer you may have put in previously. You can not adjust any of them, and they generally favor the bank heavily.
For instance, if you found a great property and offered $400,000 with a 17 day inspection contingency period, they could counter you back best and final. Say the list price was $450,000, and you told your agents you'll come up to $450,000: The bank would say, "OK. We have a deal. We'll send you the addendum with the price of $450,000. Just sign and we'll be in escrow." This means you have a deal, but in order to have the deal in writing, you must sign the banks addendum, which likely says inspection contingency shall be 7 days.
With the boilerplate Addendum, be aware of the following common changes:
1) Shortening of contingency periods.
2) Changing contingency removal from active to passive.
3) Per Diem penalty if you are not able to close on time
4) Penalty if you change your financing down payment amounts (even if you are able to close).
5) They will not pay for Termite work or retrofitting work.
The boilerplate addendum is non-negotiable. If you try to cross anything out, the bank will pass on your offer. As California real estate agents, we are expert in C.A.R Forms primarily. Legal addendums drafted by banks are outside the realtors scope (with the exception of Realtors with law degrees). Therefore, with bank owned properties, for your protection, it is also advisable to have a lawyer who specializes in real estate law review the bank addendum prior to signing. Unfortunately, realtors are not qualified to advise on these documents.
During Escrow and Beyond
In a traditional sale with a tradional seller, escrow will generally be opened immediately with a standard escrow company. With a foreclosure, it may 7-10 days before escrow is opened. Furthermore, banks tend to opt for low-rent, high volume escrow companies. How does this effect you:
1) You will have trouble getting someone on the phone when you need assistance on loan docs, ordering homeowner's insurance, getting necessary disclosures like preliminary title report or a copy of the Natural Hazards disclosure.
2) They will not keep track of timeframes on your escrow to make sure things are happening according to schedule. It will be up to you and your agent to keep track of them.
3) You loan is dependent on a number of things happening on a timely manner from escrow's end. If this does not happen, you can expect the bank to charge you a hefty per diem (around $125 a day) upon closing.
Once you have an accepted offer, a traditional seller will fill out a number of disclosures that will reveal as much as that seller knows about the property. Banks are excused from having to fill these out because they have a limited knowledge of the property.
During escrow, most buyers will do inspections on the property. If there are hidden defects with the property (i.e. the sewerline is cracked, Chimney doesn't work), most buyers and sellers will work together to find a reasonable credit to address the issue.
With bank-sold foreclosures (and per the boilerplate addendum), you are buying the property "As-is". Keep in mind, this is important as foreclosure homes are usually in much worse shape than homes sold by traditional sellers.
All this said, it is possible to negotiate for repair credits from the bank if (a) you have a strong offer that they probably wont get again, and (b) you have a willingness to walk away. I cannot stress "(b)" enough. With foreclosures, the bank generally will be unwilling to give any type of credit, until they see you cancelling escrow. You must be willing to walk away if the credit for repairs is that important to you. Otherwise, just accept that you are buying the property as is.
One common misconception, is that bank-owned properties take longer to sell or have delayed escrows. I would say it is actually the contrary: Bank-owned properties are pushing for fast closes, and will penalize you if you cannot close within the standard 30-40 day time window.
The properties that do take a long time and have delays are "short sales": A situation that happens when a traditional seller is trying to sell their home, but requires the involvement of the bank because the home is worth less than the amount of debt that is owed on it.
Please feel free to comment or email me if you have further questions. Thanks!
-Jerry
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