Speeding up the Process

Fannie Mae has made an announcement regarding all loans held in their portfolio. The program is set to take place August 1st, 2010. It is called the Fannie Mae’s Home Affordable Foreclosure Alternatives Program or HAFA for short. HAFA is part of HAMP or Home Affordable Modification Program and provides financial incentives to servicers and borrowers who utilize a short sale or a deed-in-lieu of foreclosure to avoid a foreclosure on an eligible loan under HAMP.

Guidelines Must be Implemented

All servicers must implement Fannie Mae’s HAFA for all conventional mortgage loans that are held in Fannie Mae’s portfolio. Servicers are encouraged to offer HAFA for eligible mortgage loans that are part of a regular servicing option MBS pool or part of a shared-risk special servicing option MBS pool for which the servicer’s shared risk liability has not expired. If a servicer decides to use HAFA for such mortgage loans, the servicer must follow the Treasury’s HAFA Program, obtain any necessary third-party approvals, and comply with the reporting requirements of this Announcement. Fannie Mae is not responsible for any losses or expenses the servicer incurs and will not pay borrower or servicer incentive fees for those mortgage loans which are not considered Fannie Mae HAFA mortgage loans.

August 1st is the Deadline

Servicers are encouraged to adapt their processes to implement these Fannie Mae HAFA policies and procedures immediately; however, servicers are required to implement these policies and procedures no later than August 1, 2010, for borrowers who become eligible for HAFA on or after that date.

Hopefully this new policy will speed up the process of short sales and foreclosures. Many buyer’s have walked away from deals due to the lengthy and frustrating process.

We would like to thank Dan DeChiaro for kindly sharing today’s photo via the Creative Commons License.

June 1, 2010
As of today, Fannie Mae will now be requiring all loan applicants to run a second credit report right before closing on a real estate transaction. Not only will the credit report be required with the original loan application, at closing Fannie Mae will now require a second report to be generated. If the credit score is one point lower than the original score the loan will not be funded.  The loan will then go back to underwriting for further scrutiny. This is serious business for those purchasing a new home and are planning on moving in with new furniture. With this new policy it would be wise not to use any form of credit. For example, do not head out to Costco and run up a large bill and put it on your credit card prior to closing. A larger charge on a credit card can drop your credit score.

13 April 2010
The First Time Homebuyer Tax Credit has been extended from some. For those that are part of the Armed Forces, Us Foreign Services, and Intelligence Community that have served outside the United States for over 90-days have a one-year extension. With that said the extension is good for one calendar year. The person needs to be under contract by April 30th, 2011 and closed on the transaction by June 30, 2011. This is great news for those in the armed forces that have given their time to defend our country. Further information can be found at www.IRS.gov.

Short Sales Do Not Mean Quick Sales

Many people interested in purchasing in today’s real estate market are looking to cash on the “Deal of the Century.” Who can blame them when the national media is stating the property values have declined by 10% from last year to this year and still declining? Not only that, there is a record number of foreclosures and short sales saturating the market. There are many deals to be had out there but caveat emptor, meaning…buyer beware.

Not only should the buyer beware, the buyer needs to be more savvy in today’s market than ever. Many buyers are going after short sales thinking they will get a great deal quickly. These types of buyers could not be more mistaken. Let me take a quick moment to give you the short version on what a short sale is.

Short Sale Does Not Mean Quick Sale

A short sale means that the bank is going to come up short on what is owed to them. Let’s say that USA Bank gave a mortgage out on a property for $200,000. The mortgagor then took out a home equity line of credit to make certain repairs on the property. Next, the mortgagor lost their job and could no longer make either payment to the bank or the equity line of credit. Not only that, the property is no longer worth $200,000. The property owner is now in what is called a short sale situation. The property owner needs to obtain permission from the bank as well as the secondary lien holder to agree to accept less than the $200,000 that is owed on the property. Not only that, if they had work done on the property there may be mechanics liens on the property as well. All parties have to agree to take less in order for a short sale to be possible.

This is the reason why it takes so long to obtain a short sale approval. All parties need to agree and many do not want to accept less. With that said, short sales should really be called 6 to 9-month sales. Not only that, just because it is a short sale does not mean it is going to be a “deal.” The property will be listed at market value. Many listings that are not short sales are currently listed at market value with ready, willing and able sellers. In my opinion, this is where the “deal” is. Especially if time is of the essence.

We would like to thank Sirscooter for kindly sharing today?s photo via the Creative Commons License.

Appraiser's May Suffer Further Job Loss

Starting April 5th, 2010 the government is going to start the Home Affordalbe Foreclosure Alternative program, or HAFA for short. HAFA was created in 2009 with a goal of working with home owners to make their mortgage payments more affordable to avoid home foreclosures.

Highlights of the Home Affordable Foreclosure Alternative Program Include:

• Not allowing the servicer to require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.
• Allowing the borrower to obtain a pre-approval for short sale conditions before their home is put on the market. Currently, servicers will not discuss acceptable terms until an purchase contract has been received.
• Prohibiting the servicer from requiring a reduction in the real estate commissions as a condition of the short sale approval. This is another step forward since short sales require a lot more effort and experience from real estate agents and is the type of transaction where they should be paid the most
• Using standard processes, documents, and timeframes (but see previous mention of servicers losing files so the timeframes don?t start)
• Providing financial incentives to borrowers and servicers. Borrowers will be entitled to a $1,500 relocation incentive if they meet the requirements of the program. Servicers and investors will each be eligible to receive up to $1,000 each paid by the US Department of Treasury
• Requiring the loan be reported to the credit bureaus as ?paid in full for less than the full balance?

Real Estate Agents Will Run the BPO’s

HAFA will be using real estate agents to run the comparable market analysis (CMA) on the home. Some banks also call these CMA’s “Broker Price Opinions” or BPO’s. Some may have issue with this. The main group that may have an issue would be the appraisers. Appraiser’s are properly trained, licensed and have an unbiased opinion when it comes to valuing a property. They have no chance of obtaining a listing or selling the property to a client. Therefore, they truly are a disinterested third party. BPO’s are completed by real estate agents in hopes of obtaining the listing. Thus . . . no longer a disinterested and unbiased third party.

More Job Loss for Appraiser’s

Not only has the Home Valuation Code of Conduct, (HVCC), hurt the appraisal business, now another program is set to remove the appraiser from the equation. Once again properties may be over- or under-valued. Not only that, this opens the door to short sale fraud.  Stay tuned, I will explain short sale fraud in a second post.

We would like to thank Paulfeeney for sharing today?s photo via the Creative Commons License.

23 March 2010
The Republican party recommended yesterday that Fannie Mae and Freddie Mac be phased out. In fact House Representative Barney Frank was referring to Fannie and Freddie and was quoted as saying, “We made a mistake. Partially public and partially private hybrids are not workable.” However, Federal Reserve Chief, Ben Bernanke is holding fast to the continued support of Government baking of the two companies.

22 March 2010
Mortgage analysts have estimated that mortgage investors and banks have held a total of 645,000 of foreclosed homes in their inventory for the month of January, 2010. This number up from 617,000 in December, 2009. It would appear that supply is rising again due to banks determining that many homeowners will not and do not qualify for home loan modifications. This will mean more foreclosures in the near future. The outlook for sales of foreclosed homes depends heavily on whether the economy continues to heal and manages to create enough jobs to boost demand for housing. It also depends on how many distressed borrowers can be rescued from foreclosure through loan modifications. Nearly eight million households, or 15% of those with mortgages, are behind on mortgage payments or in the foreclosure process.

15 March 2010
Foreclosures in Illinois increased 22% in February, 2010. The high foreclosure rate can be attributed to the high unemployment rate and declining home prices. With the declining market many people are finding themselves underwater in their homes. Meaning . . . they owe more on their home than their home is worth. Illinois unemployment report is 11.3% for the month of January, up from 11% from December 2009. With such a high foreclosure rate it is no surprise that foreclosures are on the rise as well. In order for properties is see appreciation in the market place, foreclosures and short sales need to be absorbed into the market first. Only then will the state and the country see appreciation in the real estate market.

Lucky for those that live in Illinois, the state had the lovely distinction of having 17,312 properties in foreclosure, which is the fourth-highest state nationwide. California ranked number one

9 March 2010

James Dimon, the CEO of JPMorgan Chase Bank was recently named in an arrest warrant in the city of Atalanta, GA for an illegal tire dump. The City of Atalanta issued the arrest warrant on February 23, 2010 for the illegal dump. The city tax records show that Chase Bank is responsible for the property located at 1462 Memorial Drive. What is Chase Bank doing owning a tire dump company in the first place? Nothing could help raise property values faster than an illegal tire dump. JPMorgan Chase is an investment banking firm investing in “interesting” properties.

1 March 2010
The two federally insured companies that purchase mortgage backed securities, Fannie Mae and Freddie Mac, have announced 2009 fourth quarter losses of approximately $15-Billion. The two companies are reportedly planning on asking the Federal Government for more bail out funds. While some might say… “let them go under,” think about this first. Fannie Mae and Freddie Mac make up 70% of the mortgage loans throughout the United States today. On average, this year,  there are about $53,000,000 in mortgages across the country. Fannie Mae and Freddie Mac hold about $31,000,000 of the $53,000,000, with only a 3% default rate. If the Federal Government allowed Fannie Mae and Freddie Mac to go under, the housing market would not only slow down, it would disappear, and the impact on the overall economy would be devastating. Alternative solutions should be considered, solutions that would offer gradual changes to the system, rather than economy-killing one-time events.