Reno Sparks Real Estate Today

Update On Home Affordable Modification Program HAMP

Below is an update to the Home Affordable Modification Program, better known as HAMP. One of the interesting additions is the eligibility of investor owned homes.  Also write downs (reductions in loan amounts) are given a bigger priority. 

All of this sounds really good but the problem is this is a volantary program. Lenders don't have to comply. There is a lot of money in servicing loans, processing foreclosures, and related services.  

The Obama administration has announced changes to its flagship foreclosure prevention initiative – the Home Affordable Modification Program (HAMP). Among the changes, borrowers who are struggling because of debt beyond their mortgage will be eligible for a secondary evaluation with more flexible debt-to-income criteria, and eligibility will be extended to investor-owned homes that are used as rental properties. The administration is also giving principal reductions a bigger role within the program, tripling incentives for investors that agree to write down an underwater borrower’s principal balance and offering these same incentives to the nation’s two biggest mortgage investors – Fannie Mae and Freddie Mac.

Stay tuned.........

Relief For Underwater Homeowners Current On Payments

First off the program only applies to borrowers whose loans are held by Fannie Mae and Freddie Mac. The good news is Fannie and Freddie hold a huge number of loans in the Reno Sparks area.  You can look up Fannie Loans here http://www.fanniemae.com/loanlookup/ and Freddie Loans here www.freddiemac.com/mymortgage The loans must have been sold to one of the two corporations prior to April 1, 2009. After that, though, the rules have been relaxed considerably.

The old HARP was limited to borrowers whose homes were worth no less than 125% of what they owe on their mortgages. Now, beginning Dec. 1, that restriction has been removed, so there is no ceiling whatsoever, at least for loans with traditional 30-year fixed-rate mortgages and even less common 15-year fixed loans.

For everyone else, there are still ceilings on the loan-to-value ratio. For fixed-rate loans with a term greater than 30 years, the maximum LTV is 105%. Ditto for adjustable-rate mortgages with initial fixed-rate periods of five or more years or ARMs with terms longer than 30 years.

 

Beyond that, you can’t have been late with your house payment at any time during the previous six months and late no more than once in the previous seven to 12 months. Also, to be eligible, borrowers must benefit in the form of lower monthly mortgage payments or a more “stable” loan product, such as moving from an adjustable-rate mortgage to one with fixed payments. But if your payment increases by more than 20%, you must re-qualify for the new loan under the following rules: You must have a credit score of at least 620 and your debt-to-income ratio cannot exceed 45%. Also, lenders are required to verify your income and assets.

Another important change: The standard waiting period has been removed for borrowers who declared bankruptcy or have a foreclosure blotting their credit records.

Zillow.com has a great HARP eligibility tool you might want to check out. You can try it here http://www.zillow.com/mortgage-calculator/harp-eligibility/

 

 

Underwater Homeowners May Get Relief With New Harp

A little more than a week ago, President Obama announced an expansion of the HARP (Home Affordable Refinance Program) which would eliminate the current maximum LTV of 125%. This means you could be up to 25% upside down on your mortgage.  The program is being looked at as a way to reward those homeowners who have been good payers of their mortgages but, because of declining home values, they could not take advantage of today’s lower interest rates.

While the actual details on the program will not be released until next month, here’s some of the details being talked about.

• It will only pertain to loans currently being serviced by Fannie Mae or Freddie Mac
• Because of the removal of the LTV cap, appraisals may not be required
• With the only qualifying criteria announced being that the last six payments be on time, it is possible that income documentation may be streamlined and credit scores might be more forgiving
• Fees allegedly will be reduced
• Incentives may be offered to people who shorten their repayment time
• It also sounds that the banks may be given some incentive by not holding them liable for the underwater portion of the new loan (a major incentive for sure).

The government is already on the hook for these loans thru Freddie and Fannie. By lowering the payments (by offering lower rates), they will likely help these loans to continue to perform and make it less likely for the underwater homeowner to walk away.

This is great news for the Reno Sparks area where estimated show nearly 60% of mortgage are "under water."

Stay tuned; as soon as more concrete details become available we will pass them on. 

 

New Freddie Loan Mod Program Coming In Oct.

Financially distressed homeowners with Freddie Mac mortgages will have a new option for loan modifications beginning next month.

The new option, called a Standard Modification, is designed for borrowers who are ineligible for a Home Affordable Modification Program (HAMP) loan modification or have previously defaulted on a HAMP or other loan mod. For those who are approved, the program reduces a borrower's mortgage principle and monthly payment by at least 10 percent each, thereby making the payments more affordable.

To qualify, homeowners must be at least 60 days past due on their mortgage, that is, having missed at least two monthly payments. Those who are not at least 60 days past due can qualify by proving they are in imminent danger of default, through demonstrating an eligible hardship and providing verification of income.

Mortgages that are modified will have their interest rates set to 5 percent and the amortization period (time required to pay off the mortgage) extended to 40 years from the time of the modification. Lenders approving such modification will receive cash incentives of up to $1,600 per homeowner approved.

Borrowers approved for the program must undergo a three-month trial period during which they must keep up with their new payment schedule before the loan modification is finalized and made permanent, similar to HAMP. Lenders will have incentives to encourage them to finalize borrower's status within two months of the end of the trial period.

Lenders may begin trial modifications for approved homeowners under the program as soon as Oct. 1, 2011. As of Jan. 1, 2011, all borrowers seeking a loan modification of any type on a Freddie Mac-supported mortgage must be evaluated for eligibility under the program.

The new Standard Modification replaces an existing type of Freddie Mac loan modification called a Debt Coverage Ratio, which now is being referred to as a Classic Modification. The government's HAMP loan modification will continue to be available as well.

More info. here.

http://community.nasdaq.com/News/2011-09/freddie-offers-new-loan-mod-option.aspx?storyid=94347

 

More Homeowners Choosing Short Sales Over Foreclosure

With the number of foreclosures on the market at record highs, many troubled homeowners are looking for other options to avoid the damage to their credit and to simply get out from underneath their home loan as soon as possible. They often have a better chance of qualifying for a new mortgage soon after completing a short sale than if they were to go through a foreclosure. In most cases a Bank prefers an owner to do a short sale because it saves them from the expensive cost of a foreclosure.

As a result, there are more homeowners who are avoiding foreclosure by going through a short sale. Last year, short sales accounted for about 10% of the number of homes on the market nationwide. That figure has increased by 2% and short sales now account for about 12% of the homes on the market. In some states –such as Georgia, Michigan, Nevada, California and Colorado - short sales have become still more prevalent.

In California, for example, short sales accounted for about 25% of homes sold in the second quarter of 2011, a 7% increase year-over-year. In Colorado, they accounted for 17% of homes sold (also a 7% increase year over year). Bank of America expects to complete at least 100,000 short sales this year, which is twice as many as it completed in 2009. A Well Fargo senior vice president claims that short sales have increased recently because there are notas many bank-owned homes on the market in some areas, leaving eager buyers to actively seek out short sales.

 

Remember When? Interest rates rise for the first time in 5 weeks.

You ever look in the past and say “remember when?” Remember when you could buy a gallon of gas for $1?  Remember when you could buy a movie ticket for $4?  Remember when a silver dollar was actually a silver dollar? Remember when you could buy a new car for $7000 or $8000?  I remember when I first got into real estate 15 plus years ago, interest rates were around 9%. Single digit interest rates were big news and a “big deal.”

Well I am telling you now; we are in the middle of one of those “remember when” times in the real estate market. Mortgage interest rates ticked up for the first time in five weeks this week. While no one knows exactly what the government and the bonds markets are going to do, rest assured interest rates are bottoming out. Rates have been held artificially low for a long time and at some point in the very near future they will correct.  I don’t believe rates will skyrocket over night, but they will head north a little at a time. 

A few years from now we will be looking back at 2010 saying "remember when you could get a 30yr. mortgage for 4%?" If you are playing the waiting game trying time the market to get the lowest rate, I wouldn't wait much longer. 

Buy a Reno or Sparks Condo For Less Than A Car?

Hard to believe but you can buy condos in the Reno Sparks area for less than many cars or SUV’s. In addition, you can get good financing and tax benefits you don’t get with cars. Many of these condos are in great neighborhoods and in great move in condition.

Did a quick search and here is an example.

East Sparks – 2bedroom, 1.5 bath, 998 square feet with a carport.

Sold for $219,500 in 2005.

List price- $49,000.

Here are some rough payment numbers.

Down payment 5% - about $2500

Interest rate 4.75% fixed for 30years.

Payment $242.57 !

Taxes about $850 per year

Condo association payment $150 per month, includes exterior insurance, grounds maintenance, sewer, and garbage.

Total payment including principle, interest, taxes, and association dues about $466.  

Units in this complex are renting for around $650 - $750. This means you can buy and have payments $200-$300 less than you would have to pay for rent.

From an investment perspective, you would make about $200-$300 per month in positive cash flow. Down payment and interest rates will be slightly higher but you get the point.

If you are looking to buy a car, buy the condo instead. Use the cash flow to pay for the car. The car will be paid off in 4-5-6 years, but the condo will continue to pay you well beyond.  

The above numbers are rough and for example purposes. If you would like more specific info on this unit, mortgage rates, or down payment amounts let me know. 

How Low Can They Go? - Mortgage Rates Set Record Low

A wise investor once told me, sell when everyone is buying and buy when everyone is selling. Excellent advice, especially in todays market. 

Rates at under 5%, and for an extended period of time, is something I thought I would never see. I remember when rates dipped below 9%, and people where excited. Then under 6%, now under 5%. If you factor in inflation at about 3-4% annually (which I believe is conservative for the next 3-5 years) money is almost free.   

The sad part of this story is that many people that could use the lower interest rates to refinance and lower their payments can't take advantage. Banks should offer mortgage customers a refinance option regardless of equity. It would be a proactive approach to save people money and increase their motivation to stay in their home. Not to mention it would offer some relief to people that are trying to do the right thing. 

Just some thoughts for whoever is listening. 

WASHINGTON (AP) -- Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments for home purchases and refinanced loans.

The average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week, mortgage company Freddie Mac said Thursday.

That's the lowest point since Freddie Mac began tracking rates in 1971. The previous record of 4.71 percent was set in December. Rates for 15-year and five-year mortgages also hit lows.

Mortgage rates have fallen over the past two months as nervous investors have shifted money into the safety of Treasury bonds. The demand for Treasurys has caused Treasury yields to fall. And mortgage rates tend to track the yields on long-term Treasurys.

Yet the falling rates have yet to spark a home-buying boom -- or energize the economy. New-home sales collapsed in May after homebuying tax credits expired. The economy also remains under pressure from high unemployment. And many people don't qualify under tightened lending rules.

"As long as prospective homebuyers are still concerned about their jobs and financial well-being, many will be reluctant to take the plunge, even though affordability has never been better," said Greg McBride, senior financial analyst with Bankrate.com.

Low rates throughout the economy also hurt one group of Americans: savers. Puny rates are especially hard on people living on fixed incomes who are earning next to nothing on their savings.

Lending activity remains sluggish. Mortgage application volume dipped 6 percent last week from a week earlier, according to the Mortgage Bankers Association. Refinancing activity fell 7 percent. And mortgage applications to buy homes slipped 1.2 percent.

More.....

New Resource For Distressed Reno/Sparks Homeowners.

If you or someone you know is having trouble making their mortgage payments, or owes more on their mortgage than their home is worth, check out Hope4Homeowners.

Hope4Homeowners is a new program/website launched by Assist-2-Sell in Reno. The website (www.Hope4Homeowners.com/Reno) is great resource for information about how to avoid foreclosure and learning about the various programs that are available to you.   

 

Get information about:

• Short Sales
• Loan Modification
• Deed-in-lieu of foreclosure
• Home Affordable Modification Program (HAMP)
• Home Affordable Foreclosure Alternatives (HAFA)
• Home Affordability and Stability Program (HASP)

And much more.

You can download a report outlining many of your options and the qualifications for the various programs.

Letting your home go into foreclosure is the worst thing you can do and should be a last resort. There are so many better alternatives available today.

 

Bank of America Announces Program To Reduce Loan Balances

Bank of America announced a program to offer homeowners who owe significantly more than their homes are worth the opportunity to have their loan balances reduced.  The program, set to roll out in May, would potentially help about 45,000 homeowners nationwide. With this program Bank of America is jumping into the debate about how to deal with the millions of homeowners whose mortgages are greater than the value of their homes and who have complicated efforts to prevent foreclosures. Bank of America’s plan is limited. Borrowers MUST have missed at least 2 payments and be severely underwater to qualify, owing 20 percent more than the market value of their home. It is also limited to borrowers with certain types of loans, including subprime mortgages or other loans with adjustable rates.  Bank of America expects to forgive about $3 billion in principal on loans as part of the program.

In my opinion, this program is a Pandora’s box. The biggest problem with loan modifications is the psychological effect of negative equity or being “upside down” has on a homeowner.   Tell an upside down homeowner, “we’ll lower your payment so you can stay in the house.” That’s great but I am still stuck in a home that is 20-40-60-100k or more upside down. Where is the motivation to service debt with negative equity, with no end in sight? This program does address this issue, to a certain extent.

Not sure how you explain this program to people that have been paying their payments on time and have been following all the “rules.” Meanwhile their equity has been evaporating or going negative. Maybe they would like to refinance their current mortgage to take advantage of the current historically low interest rates. At least they could lower their payment and hang on for the long term.  Nope, Can’t do it unless you have at least 20% equity.