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Unemployed ??!, you might not qualify for a Loan Modification!

According to recent article by www.loanofficer.com, well , it shouln’t really come as much of a surprise for millions of people who follow the housing industry, or current events for that matter, but the foreclosure rate continues to climb in the United States, despite all of the efforts of the HAMP stimulus project and other efforts set forth by the federal government. Residential foreclosures, on a month-to-month scale, have continued to climb steadily throughout last year and into this year, with July 2010 numbers closing in on 12% foreclosure rates

New regulations limit modifications for unemployed workers

When the government’s HAMP program was unveiled, it was advertised as the savior of the housing crisis, a plan that would keep millions of people in their homes and heading off a dire situation throughout the housing market. The cost to the average taxpayer has been in the hundreds of billions of dollars and while it seems as though a limited number of people have been helped by it, especially through home loan modifications, that assistance could be running dry.

Not for a lack of funds, mind you, but because new regulations are being set in place for the unemployed. Fannie Mae backed mortgages are no longer eligible to use unemployment benefits as a source of income, as had been accepted in the past. During the first year and more of the HAMP program, people who had lost their jobs were allowed to use their unemployment benefits as counting toward their income.

Yet unemployment benefits are not permanent and are now no longer accepted when applying for a home loan modification

Common sense at work

When people lose their jobs, it is a frightening time, especially when they have a mortgage to keep up with. Coupled with the massive drop in real estate values across the country and the adjusting interest rates that befell millions of homeowners, it would seem like a logical step to try and help these people out in any way that you could. Loan modifications were the silver bullet from the government.

But even on the surface, accepting unemployment benefits to count as income when refinancing or modifying a loan seems to be fraught with peril. Perhaps few people could foresee the unemployment crisis extend as long as it has and that millions of people would exhaust the unemployment benefits, even when they were extended. Yet how many homeowners who were granted loan modifications based on these factors managed to find work?

How many tried? These are questions for another time and another discussion. They are, however, legitimate at their core. When an individual is falling behind on their mortgage payments because he or she lost their job, then the money that the government is spending to help them modify their loan, guaranteeing lenders money in case of default, or picking up the tab for mortgage values that dropped significantly below the original loan’s value, is money that is acting only as a mild bandage.

It’s hope that the person receiving the modification will manage to find work and keep up with their current restructured loan terms. It seems that with the new regulations in place, that the hope didn’t live up to its expectations, which may be (and likely is) contributing to the continuous rise in foreclosure rates from month to month.

Private banks are doing more to help homeowners than the government

For all of the talk about greedy banks and how the government is looking out for the innocent citizen victim, it is strikingly amazing to learn that there are more privately backed loan modifications during the past two years than there were modifications backed by the government. Banks are in the business of making money. The government is not.

When banks are facing a foreclosure crisis, it stands to reason that they would be more willing to find common ground with their clients and work to modify the terms of the loan to avoid foreclosure. For most lenders, it’s a win-win situation, as opposed to a lose-lose.

It will be interesting to see what lies ahead for the housing industry now that unemployment benefits will no longer count toward modification. Now , CALHFA still has their program to help unemployed homeowners. If you want more information, you can visit their website at http://keepyourhome.calhfa.ca.gov/

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Why you should pay-off your home

Growing up, my parents and grandparent taught me that debt was something you wanted to live without.  I can still  recall my parents telling me ,”Ana,  make sure you buy a house because it’s the American Dream , but make sure you pay it off as soon as possible.'”  As a mortgage consultant, I was taught the opposite. The idea of  paying off your mortgage  was simply a dumb thing to do. The concept has always been that as homeowners, the tax benefit is the most important thing to have.

Now as the years progressed, I realize that my parents where right all along. I recently came across a great article that explains  why you should pay-off your home. The article was written by Dave Ramsey. Dave Ramsey is one of my favorite financial advisors and author.

According to him there are three reasons why you should pay off your home that people rail against.

  1. The first is that paying off the house lowers risk, because you won’t be foreclosed on if your house is paid off. It gives you great security.
  2. The second reason people say not to pay it off is because they say you can make money by borrowing money at a low interest rate on your house and investing it in the stock market. But by the time you adjust for risk and taxes, you don’t come out ahead. I would never borrow on my home to invest.
  3. The third reason that people say not to pay off your home is that you’ll lose your tax deduction. If you have a $200,000 loan at 5% interest, you’d pay about $10,000 a year in interest, which would give you a $10,000 deduction. If you make $70,000 a year, that deduction is saving you $2,500 in taxes if you’re in a 25% tax bracket. You are sending Countrywide Mortgage $10,000 to keep from sending the government $2,500. That’s stupid. You are better off being debt-free and giving your church $10,000. You’ll save on taxes and do some good with the money.

I could not have said better myself!!

What other reasons do you have for paying off your home? Please post your ideas!

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If you had a Countrywide Loan, Read this Now!!

I came across some vital information posted by CAMB(California Association of Mortgage Bankers), and it pertains  to anyone who had a Countrywide mortgage.

Apparently, California is among eleven states that are part of a lawsuit settlement that requires Countrywide Financial to  help  modify home loans of borrowers who are having trouble keeping up with their mortgage payments, according to an Associated Press story.  The plan calls for Countrywide to reduce interest rates  in some cases and lower the principal that is due in other cases. If you are a Countrywide borrower, Eve Mitchell , a real estate reporter,would like to talk with you for a story.  Please call her at  925-952-2690 or email at emitchell@bayareanewsgroup.com.

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My relatives are loosing their home, can I buy it to help them????

My relatives are loosing their home, can I buy It to help them out ???? If I had a dollar for everytime that this questions is asked, I probably would be retiring by now.  Before I answer this question, let me explain a couple of things about buying a property.  When you buy a property the transaction is considered a ARM-LENGHT TRANSACTION or a NON-ARMS LENGHT TRANSACTION. But what does all that mam-bu jumbo really means!! …..Well this is what Fannie Mae guidelines tell us: 

An Arm-Length Transaction is a transaction in which the parties involved  are entirely independent of each other and have no reason for collusion.  In other words, the parties involve are not related.  

 Non-Arms Length Transaction is the opposite. If a direct relationship exists between any of the parties to the transaction including, but not limited to, borrower, lender, broker, appraiser or builder, the transaction is considered Non-Arms Length.  Now, a Non-Arms Length Transactions are permitted subject to compliance with the following: 

  • The borrower’s minimum investment requirement is satisfied using his or her own funds;
  • A landlord sells a home utilizing a Lease with Option to Purchase Agreement;
  • A transaction between individuals with an Established Relationship, defined as follows:
  • Immediate Family:
    •  Parents
    •  Siblings
    •  Children
    •  Spouse
    •  Grandparents
    •  Aunts
    •  Uncles
    •  Domestic Partner;
    •  Fiancee or Fiance

 A Non-Arms length Transaction is intended NOT to bail out a family member or current owner from an existing delinquent mortgage. Borrowers who wish to purchase or refinance property, currently or recently owned by an individual with whom an Established Relationship exists, are subject to compliance with the following requirement: 

  •  Purchase: Title Commitment may not evidence foreclosure proceedings or Notice of Default. 
  • Refinance: If borrower has been on title less than six months from the date of  application, payoff demand from the purchase transaction must reflect the mortgage was current at the time the borrower purchased the property.
  • In purchase transactions where the seller is a Corporation, Partnership or any other business entity, satisfactory verification must ensure the borrower is not an owner of the business entity selling the subject property

So now that  you know the above information, you can make an educated decision. You CAN buy a relative house but if he or she is delinquent on their mortgage,  it will be challenging to convince a lender that you are NOT trying to safe the home for your relative. I hoped the above information helped answer this question.

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Okay the Sky is falling… Again! or Is It????

Wonderful article posted by http://oscarcervantesblog.com/ . I wanted to share it will all of you….Enjoy!!!

So according to the news, newspapers and your friend’s cousin’s friend’s aunt  from his  father’s side the  news is grim, the sky is falling and NEW HOME sales have decreased . And we all need to start building bomb shelters ‘cuz armageddon is coming!!

Hey, even a recent article from CNNMONEY.com said that “New home sales unexpectedly fell in July to the lowest level on record as the housing market continued to suffer from the end of the homebuyer tax credit boost. New home sales dropped 12.4% to a seasonally adjusted annual rate of 276,000 last month, down from a downwardly revised 315,000 in June, the Commerce Department reported Wednesday. Sales year-over-year fell 32.4%.”

Now the key words is NEW HOME , and there is no surprise, there, if you take in consideration that you can buy a repo, or short sale for at 15-20% discount. Recently, I took a client to see homes. Since he wanted to see new , repo and short sale homes available,  I started showing him the NEW HOMES  in the area that he wanted to live in. The new model homes were perfectly decorated. The yard was beautifully done, every piece of furniture was strategically placed and the house even had a fragrant smell of lavender. The builder was so nice to include cheap stainless steel appliances if you bought his nicely decorated house. It was a beautiful  home with a ticket price $480,000 (without up grades of course). All up grades that made the house awesome were extras. The granite counter tops, the travertine floors, the colored cement patio, plantation shutters and the stunning custom crown molding was not included.

After seeing the NEW HOMES, he got to see some bank repo homes. The first house had no furniture, no lavender smell, yard was dead  and the walls had this orange green color everywhere. But low and behold, granite counter tops, the travertine floors, the colored cement patio with cover, plantation shutters and the stunning custom crown molding everything was part of the package because the previous owner paid for it!!! Oh, and did I mention the incredible pool? Over $70,000 in upgrades and more was part of this house. Oh, and the price you ask? $430,000.   A $50,000 reduction if you can get pass the dead grass and the orange green color walls….

What the news, newspapers and cousin’s friend’s aunt  from his father’s side fails to understand is that you are willing to water the grass, paint the walls and even replace carpet if you are saving $40k, 50k and sometimes even $100k on the price of your new home. At least, new to you, right? But in my opinion and those who have been submitting offers, new home sales dropping are the least of our concerns. If you’ve talked to anybody that is trying to buy a house these days, especially in Southern California, they will tell you that the competition is fierce and there are more buyers than homes!! Their frustration continues to be the many offers they find  that they have to compete against to get the house they want.

I wonder if builders are getting a clue and realizing that if they want to sell their over priced new homes, they need to start being less greedy and realize that if they want the NEW HOMES SOLD, they need to start including all the up-grades that are so attractive because you are not afraid of getting your hands dirty as long as you are saving. Wouldn’t it be nice to buy one of those new houses and actually move into a model home? Hey, there’s an idea!

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Want a Move-up Home ??… Well use FHA !!!

There is a misconception that FHA is exclusively for First-time homebuyers. In reality, an FHA loan can be use for your move-up  home as well, let me explain. Let’s say that your primary residence is a 3 bedroom/2 bath home, your family has grown and you want to buy a larger home.

FHA could be the perfect mortgage option for you. You get a fixed rate, come up with a FHA’s low down payment of 3.5% and you can even finance repairs(this is another topic). Now before you jump up and down, there are a couple of thing you need to make sure you have in place, according to FHA Underwritting Guideline Hanbook 4155.1

  1. The new house needs to be a move-up home. For example, I recently helped a client that had a 3 bedroom 2 bath, 1200 sqft home and her family had grown. The new house was 3,500 sqft and 5 bedrooms 3 bath home. She got FHA financing.
  2. You need to provide evidence that your current home will be rented. What kind of evidence you asked??? Well, you will need to provide  rental or lease  agreement, security deposit check and show proof that the check was deposited into your bank account(You can take care of all that once you are in escrow).
  3. You need to have 25% equity in your current home (primary residence). In other words, if  you owe 100,000 on your current home and it is worth 125,000 or up, then you meet the 25% equity requirenment. Once you are in escrow, the lender will order an appraisal for your curent home.

If you don’t have 25% equity, then the current  mortgage payment and the new mortgage payment  will be used to qualify.  So your current full mortage payment is $1,350, the new mortgage payment is $2,400 and $400 in credit debt.  The debt being use  to qualify will be $1,350+$2,400+$400= $4,150. FHA might also asked you to have 6 months of your current mortgage payment saved. This could be done through regular savings or 401k earnings.

It is very important that you pay close attention to the above information because knowing the facts will save you thousand of dollars and prepareyou to buy your move-up home.

If you have  questions or a scenario, give me a call at 951-538-7435

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Helping California families struggling to pay their mortgages

For 35 years, the California Housing Finance Agency (CalHFA) has supported the needs of renters and first-time homebuyers by providing financing and programs that create safe, decent and affordable housing opportunities for low and moderate income Californians. They recently announced  that the U.S. Treasury Department has approved CalHFA’s plan to use nearly $700 million in federal funding to help California families struggling to pay their mortgages.

The Keep Your Home programs are focused on assisting low and moderate income families stay in their homes, when possible, and leveraging additional contributions from lenders and mortgage servicers.
Primary objectives for the Keep Your Home Programs include:

  • Preserving homeownership for low and moderate income homeowners in California by reducing the number of delinquencies and preventing avoidable foreclosures
  • Assisting in the stabilization of California communities

Each of the Keep Your Home programs is designed to address one or more aspects of the current housing crisis by doing the following:

  • Helping low and moderate income homeowners retain their homes if they either have suffered a financial hardship such as unemployment, have experienced a change in household circumstance such as death, illness or disability, or are subject to a recent or upcoming increase in their monthly mortgage payment and are at risk of default because of this economic hardship when coupled with a severe decline in their home’s value.
  • Creating a simple, effective way to get federal funds to assist low and moderate income homeowners who meet one or all of the objective criteria described above. Speed of delivery will be balanced with fulfillment of the specific program’s mission and purpose.
  • Creating programs that have an immediate, direct economic and social impact on low and moderate income homeowners and their neighborhoods.

If you want more information visit the http://keepyourhome.calhfa.ca.gov/index.htm

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New FHA Refinance Program To The Rescue!!!!

Okay, so starting September 07, 2010, a new refinance program comes in effect.  The program is designed to help  homeowners that make their mortgage payments on time ,but have no equity in their homes.  According to FHA ‘s  six page Mortgage Letter 2010-23, which updates lenders and mortgage brokers on FHA guidelines. Now since sometimes, these guidelines are written in a way that are too confusing , I have  added my interpretation in red letters. So here we go:

  • The homeowner must be in a negative equity position. In plain english. you must be upside down on your house.
  • The homeowner must be current on the existing mortgage to be refinanced. No late payments ALLOWED!
  • The homeowner must occupy the subject property (1-4 units) as their primary residence. It must be the property you live in.
  • The homeowner must qualify for the new loan under standard FHA underwriting requirements and possess a “FICO based” decision credit score greater than or equal to 500. According to this guideline, your FICO can be a minimum of 500. This guideline gets trickier since a lot of financial institutions will not accept FHA borrowers with FICO less then 620 regarless of FHA guidelines.
  • The existing loan to be refinanced must not be a FHA-insured loan. Okay so your current loan needs to be a conventional  or subprime loan.
  • The existing first lien holder must write off at least 10 percent of the unpaid principal. Your current lender needs to agree to lower the balance of your current loan by at least 10%.
  • The refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent. Let’s say that you owe $300,000 but your property is worth $150,000, so your new loan can not exceed $146,625.00, which sounds wonderful. Right?..remember your current lender has to voluntarily lower your balance. Hmmm!!! I don’t think your lender will like that very much.
  • Non-extinguished existing subordinate mortgages must be re-subordinated and the new loan may not have a combined loan-to-value ratio greater than 115 percent.  In other words, if you have a second loan, the second loan can not be added to the new FHA loan, but the combine total of the 1st and 2nd lien CANNOT EXCEED 115% of the current value.
  • FHA mortgagees are not permitted to make mortgage payments on behalf of the borrowers or otherwise bring the existing loan current to make it eligible for FHA insurance. Once again, your need to be current on your mortgage.
  • The existing loan to be refinanced may not have been brought current by the existing first lien holder, except through an acceptable permanent loan modification. So if your mortage has been currently modified, you don’t qualify for this program.

Now after reading the guidelines, it looks like FHA might be heading in the right direction! …Well not so fast!  We all need to remember that at the end of the day, the Lien Holder (current lender) is ONLY encouraged to participate. The Lien Holder has to agree to lower that mortgage balance and that might represent a challenge. Experience will tell us that banks are not willing to lose money. If  the current mortgage loan has to be current with no late payments reported, a Lien Holder might not see the need to lower a balance since the current mortage is in good standing and there is NO financial hardship.  

Now if you ask me, it never hurts to try……. so I will be calling my clients, friends and family to see if this program delivers what it promises!  

 
 
 

 

 
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Before you pay $$$ for a loan modification, read this now!

With unemployment at all time high and  people struggling to keep their homes, it is no surprise that people are continue  struggling with their mortgage payments. Now more than ever, knowledge is power, but knowledge is useless without ACTION!! FANNIE MAE  has created a website to help you know your options ,if you are struggling with your mortgage payment. So empower yourself, know your option and please share this website with anyone that  might need it. So check it out –http://knowyouroptions.com/

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How does a FHA loan looks at a non-purchasing spouse in CA

Many times, when I am consulting couples, an spouse might request NOT to be added in the loan because his or her credit is shot.  In response, I have to inform them that Ca is a community property state. In other words, even though the spouse will not be in the loan, FHA will  require to look at the spouse’s credit and consider his or her debt in order for you to qualify .

According  to FHA underwriting guideline manual 4155.1

  • The debts of nonpurchasing spouses must be included in the borrower’s qualifying ratios. If the borrower resides in a community property state (such as CA), or  property being insured is located in a community property state.
  • The non-purchasing spouse’s credit history is not considered a reason to deny credit. However, the non-purchasing spouse’s credit report that complies with the requirements of HUD 4155.1 4.C.2 must be provided in order to determine the total debt and qualifying ratio. For example, let say that your credit debt is $300.00 per month and your non-purchasing spouse’s debt is $900.00 per month. Under FHA guidelines, the total debt that will be consider is $ 1,200.00. This could mean the differnce between qualifying  for $100,000 or $300,000 house.

If you want to use FHA due to all the advantages that it offers such as low down payment, fixed rates and lower credit score requirements, but you do not want to add a spouse to the loan due to his or her credit issues, you need to consult a mortgage professional that knows FHA guidelines.  In this day and age, couples are being told that they qualify for an FHA loan but the ” individual doing the qualfication” does not known FHA guidelines.  A mistake, such as not knowing that FHA will require a non-purchasing spouse’s credit to be examined, can cost you thousands of dollars and leave you without the dream of owning a home.

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