As a result of a recent $25 billion settlement agreement with the U.S. Department of Justice and the state attorneys general (allegations of abuses over the handling of foreclosures) Bank of America committed $11 billion toward a mortgage principal reduction program aimed at approximately 200,000 delinquent mortgage holders.

B of A has dabbled in a trial modification program since March, 2012 which included some 5,000 owners. They claim the program delivered a collective $700 million in savings for their borrowers.

There is currently an estimated 5.6 million U.S. loans that are delinquent or in the process of foreclosure of which 1 million of those are serviced by Bank of America. The balance are loans owned by Fannie Mae and Freddie Mac.

B of A says it has begun to send out 200,000 certified letters to potential candidates for this program and they estimate it will complete the staggered priority mailings by the end of the third quarter of this year.

Bank of America has suspended any foreclosure actions against these borrowers until the process of qualifying the 200,000 is complete.

Executives say borrowers receiving the letters are eligible for the modification, but they still have to prove they qualify. If the buyer qualifies, Bank of America will bring the monthly mortgage payment to 25% of the borrower’s gross income. In some cases this could mean principle forgiveness well over $100,000 because there is no limit to the amount of the mortgage. A successful modification could result in a 35% reduction in savings on their monthly mortgage payment.

The eligible candidates were determined after the bank performs a net present value test on each loan. This was done to determine if the principle reduction modification would net Bank of America or the investor who owns the loan more than foreclosing on the home.

Ron Sturzenegger a Bank of America executive says “If you can afford to make your monthly payment and are choosing not to, you will not get this principal modification”.

B of A spokeswoman Jumana Bauwens outlined the following criteria as primary qualification for this program.

• The program extends only to homeowners whose loan is held by Bank of America or an investor who has agreed to participate (excludes Fannie Mae, Freddie Mac or FHA-backed loans.
• The homeowners must owe more than the property is currently worth (underwater).
• The borrower must have been at least 60 days delinquent on payments AS OF JANUARY 31 OF THIS YEAR.
• Their combined monthly payment including insurance, taxes association fees along with principal and interest, must total more than 25% of their gross household income.

After qualifying, the homeowners have to make three on-time payments to make the reductions permanent.

It is important to note that according to FICO spokesman Anthony Sprauve that “There is no published direction on how to report principal reduction under the DOJ agreement at present”. In other words it is unclear whether the principle reductions will affect homeowners’ credit scores. B of A spokeswoman Bauwens further adds that it’s possible credit scores may be affected.

Remember the “Roaring 90’s”….. Those days when you could list your house on Friday and on Saturday people would be parked in your driveway writing offers and good faith checks on the hood of their cars? Multiple offers were the norm and offered sellers a generous selection of offers from which to choose.

Believe it or not we are experiencing a trend toward multiple offers even in this still difficult market and there is evidence that this trend will continue as buyers compete in a market with limited inventory.

What are the fundamentals driving this “Multiple Offer” revival?

• We are currently experiencing a shortage of inventory. Inventories are down 30% over this time last year. Banks are slower to process and release their inventory of bank owned properties and the building industry continues to search for solid economic signals that would incent them to invest in new building projects once again.
• Interest rates continue at historically low rates and it would appear that they will hold for the near future.
• There are continuing signs that the over-all housing market may have reached its bottom or near bottom and that this is the strategic time to jump in to maximize future appreciation. The latest data from Zillow points to stabilized pricing in almost every major housing market.
• Renters are starting to realize that they can afford a mortgage that is less than their current rent. This will continue as the cost of renting rises as landlords realize they can raise rents to the current market “pain threshold”. The flip side of this is that this represents an opportunity for those who want to invest in rental property to optimize their cash flow income with little risk.
• Successful sellers are pricing their homes at fair, realistic and competitive levels as opposed to pricing that reflected emotional attachment to unrealistic historical home values (Which resulted in “months on the market” and repeated price reductions).

Based on this current shift and what appears to be a continuing shortage of inventory, how do serious buyers improve their odds of success in this increasingly competitive “multiple offer” environment?

• Buyers who are serious and want to be able to get their offer viewed as competitive should always pre-qualify with their financial institution or have strong, liquid cash resources. Cash buyers or buyers with a strong cash content in their offer reduce the buyers risks and get their attention immediately. Remember, you may be competing against cash laden investors who want the property as much as you !
• Be prepared to make a strong and realistic offer that is most likely at or above the asking price.
• Sellers who have fairly priced their homes to prevailing market metrics are well aware of the trend in multiple bids and are not motivated to consider “low-ball” or sub market offers.
• Make sure you have a Realtor that does their homework on the current market value of the property in that micro-market and knows how to write an offer that will attract the attention of the seller and their agent. A professional and experienced agent will be able to show you that the home is or is not properly priced based on recent comparative market data in the neighborhood in question. Savvy agents will research the sales data and insure that the home and the data represent an “apples to apples” comparison scenario.

Watch a recent a recent video from the Wall Street Journal on this latest trend.

Good luck and let the bidding begin!

Properties in Placer County are being listed and bombarded with multiple offers in a matter of days. And I’m not just talking in the affordable price range of $200,000 or under.

Cases in point:

1. A house in Meadow Vista in the $600K range had two offers–one buyer was disappointed.
2. My listing in Ophir, that did not attract an offer in January until the listing price went below $500K.  I received 2 offers the first day after it was relisted at the bank’s countered price of $520,000 (first buyer had to cancel), with two other buyers who were late to the party.
3. Another listing of mine in Ophir received 5 offers the first week, and I receive calls about it almost every day.
4. I listed a house in Wheatland on Saturday morning and had a cash offer by Saturday afternoon.

So what’s going on? In a nutshell, inventory is severely low.

The old rule of Supply and Demand

In September of 2007, during the decline, we had 10 months of inventory! What do you think was happening to home prices? Bingo, they were sliding downward. Now the reverse is true.

The perfect storm.

Sellers, you have a window of opportunity. We have heard the tale of “shadow inventory,” the homes in default that will eventually be hitting the market as bank owned. We have been hearing this for a very long time. If you need to sell, and sell quick, there hasn’t been a better time in a long time, and we don’t know how long this window will stay open.

Upside-down?

If you are upside-down in your home, there are options for you too. As an agent specializing in helping homeowners sell their upside down homes through short sale in Auburn, CA, and Placer County, my team can get your home sold on you on your way to getting back into this great market sooner as opposed to later.

Contact me to learn more about selling your home.

As a Realtor who specializes in helping my clients through their short sales in Auburn, CA, I come across people every day who have misconceptions about them. One person’s bad experience with their attempt to purchase a short sale property takes on a life of its own. On the other hand, the predominance of short sale listings handled by experienced and diligent agents do actually close, and in a reasonable period of time. The key is to have a Realtor on your side who knows how to properly evaluate the short sale for its likelihood of closing before writing an offer.

When representing a buyer on a short sale, here are the questions I ask, and why:

1. How many loans are there against the property?

If there is one loan, the likelihood of approval is good. If there is a second loan with the same bank, there is still a good chance of approval. If the second loan with a different lender, they may ask for a substantial payoff, sometimes 30% of the unpaid balance. If they don’t receive it, they may not approve the short payoff which will keep the short sale from closing, forcing the first lender to foreclose.

2. Who are the banks?

Some banks are better than others for sure, and some lenders actually pay their borrowers to short sale!

3. Does the seller have a hardship (although this isn’t as important as it used to be)?

A financial hardship must exist, and can be anything from job loss, reduction in pay, divorce, illness, and even an adjustable mortgage that suddenly adjusts, increasing monthly payments beyond your ability to pay them.

4. Is the listing agent experienced in successfully closing short sales?

Does the listing agent know how to properly process a short sale? Have they priced the property according to market value? Are they using an experienced escrow company who can help facilitate the short sale? Are they on top of the transaction and updating your agent weekly?

5. What is the listing agent’s policy on submitting other offers?

Contractually, I make sure my client’s offer, if accepted by the seller, is the only one submitted to the bank. Otherwise they may be disappointed when another higher offer is submitted to the bank which knocks theirs out of contention.

6. Is the seller cooperating by submitting necessary financial and hardship paperwork?

A short sale requires that the seller provide extensive financial information, and then resubmit updated information throughout the process. If the seller is uncooperative, the short sale will drag on even longer, and may be rejected by the bank for seller non-performance. Ask your agent to be sure the seller is cooperating and is as committed to closing the transaction as you are.

7. Is the listing agent using a title company experienced in facilitating short sales?

Many title companies are now providing “enhanced” escrow services which includes assistance with short sale processing. When you have a title company involved that has extensive experience with various banks, the process is that much smoother.

8. Is the property priced reasonably, according to market value, so as to have a chance to be approved by the bank?

It’s bad enough when agents list overpriced properties, but even worse is when they list properties well under market value, creating a feeding frenzy of interested buyers. What these buyers don’t know is that the bank will conduct an independent evaluation of market value of the property and will expect an offer reasonably close to it.

9. Are there unpaid HOA dues, liens or PMI (private mortgage insurance) against the property?

Understand upfront if the seller is continuing to pay the HOA dues. The bank will likely not pay them, and the seller is usually not in a position to pay them off. In addition, if the preliminary title report shows any liens against the property, these must be extinguished prior to closing for your lender to agree to fund a loan. The PMI company can make or break a deal.

10. Finally, is your agent experienced representing BUYERS on short sales?

There is an art to thoroughly examining a short sale to be sure the the chance of approval is high. Be sure your agent is helping you by being sure you have the best possible chance of closing and moving into your new home.

]]> http://viewfromthefoothills.com/2012/04/02/short-sales-steps-you-can-take-to-make-sure-it-closes/feed/ 0 http://viewfromthefoothills.com/2012/04/02/short-sales-steps-you-can-take-to-make-sure-it-closes/ http://feedproxy.google.com/~r/viewfromthefoothills/~3/MAS487swN0c/ http://viewfromthefoothills.com/2012/02/24/stay-current-you-may-be-able-to-buy-a-home-immediately-after-short-sale/#comments Fri, 24 Feb 2012 16:24:17 +0000 Noel Crider http://viewfromthefoothills.com/?p=1199 Under the right circumstances, you don’t have to wait to buy your next home!

Recently I learned about a new loan program from my favorite lender, Roland Benson. He is with iMortgage, a direct lender, who has access to many loan programs that the big banks do not.

Through this particular program, you may be able to complete a short sale on your home and immediately move into your next home, avoiding the typical 3-year wait that most homeowners must endure.

There are some very specific requirements to qualify for this program:

1. Your present home is financed through a conventional loan.
2. You are current on your mortgage payments.
3. You are current on all other debt.
4. The NEW HOME must MAKE SENSE for your family (i.e., you are not selling just because you don’t want to keep your upside-down home), for example:
• The price is lower
• The payment is lower
• The home is closer to work
• There is an increase in room count
• Bottom line, it is the right decision for your family

To see if you might be a candidate for this program, contact me, or call Roland directly at (916) 768-1578.

Why you shouldn’t hold your breath for your bank to modify your loan.

For the past several months my Auburn CA Short Sale Team and I have been holding free community workshops for homeowners who are upside down in their homes and are unsure of their options. Our local attorney in Auburn, CA, Richard Hall, who specializes in this area of law, gives a great presentation which helps people understand what their options are.

A repeated theme is that our attendees tell us about the nightmare of their attempted loan modification, and include some or all of the following details:

1. It’s been 2 years and they still haven’t modified our loan.
2. They lost my paperwork over and over again.
3. I was assigned a new negotiator repeatedly.
4. One hand doesn’t know what the other hand is doing.
5. A notice of foreclosure sale was posted on my house!
6. My modified payment is higher than it was before I started the process.
7. They told me they wouldn’t work with me until I missed my mortgage payment.
8. And finally, “you don’t qualify.”

Do any of these scenarios sound familiar? Frustrating, right?

The reality is:

1. Approximately 1% of borrower-initiated loan modifications are ever granted.
2. Almost never is there a reduction of principle balance owed.
3. Even if your interest rate is modified, you will likely not be able to pay off your upside-down property in your lifetime.

The other thing that most consumers aren’t aware of is that the path to foreclosure keeps marching on. When the bank finally declines your loan modification, your options become very slim because time is about up.

There are more options than you might think, including the possibility to buy a new home, at today’s value, immediately after closing escrow on your short sale. Contact me to learn more.

The annual Better Homes and Gardens – Reliance Partners food drive kicked off last Saturday in Auburn, CA. Auburn CA Realtors with BHG took time off of selling homes for a few hours and manned a table in front of the local Dollar Tree, greeting shoppers and asking them to pick up an extra can to help fill the Salvation Army food bank. For the most part, shoppers were wonderfully generous and helped if they could. Others gave cash donations. All in all there were lots of smiles and it was a lot of fun!

We will be out again next Saturday, November 12th, from 8 – 4 at the Auburn Dollar Tree at 2136 Grass Valley Highway. In addition, Auburn Realtors will will be out walking their neighborhoods dropping off green collection bags with fliers attached asking for residents to donate food.

If you would like to donate, please stop by the Dollar Tree in Auburn next Saturday, or contact Noel Crider at 530-305-8409 to see how you can help! Thank you!

I talk to people daily who express frustration about the fact that they must continue to make payments on a home that is significantly upside-down. They watch as their neighbors abandon properties, either due to hardship, or because they are simply sick of paying for a home that will possibly never be worth what it once was. Then they watch helplessly as new buyers come in and buy the abandoned home at a deep discount, further submarining their property value. 

So, why don’t they follow suit? For many, walking away from their responsibility is not something they can comfortably do.

What is an upside-down homeowner to do?

Many homeowners decide that the best strategy is to call their bank and try a loan modification. Unfortunately, the reality is that 96% of loan modifications fail. Typically, as a condition of being considered for a loan modification, they are told by their lender that they must miss payments, which causes havoc to their credit score. And in many cases where the modification is granted, the new payment ends up being higher due to the fact that the accumulation of missed payments is lopped onto the new loan balance.

You may be like these frustrated homeowners who don’t want to ruin their credit by defaulting on a loan. You may not qualify for a short sale. Or you may not feel right about walking away. However, you wish you could take advantage of the best buying market in decades.

Guess what? You may be able to!

What?! I can buy an investment property?

Quite possibly. I had lunch today with my favorite lender, Roland Benson, with iMortgage (916) 768-1578. He said that while most large banks will not fund this type of loan, iMortgage is a direct lender and does NOT impose extra restrictions. Because of this freedom, Roland’s company has success getting these loans funded and closed!

Here’s how it works:

1. Find a property you would like to buy. If you don’t have an agent, I can help you. Contact me.
2. Contact Roland Benson with iMortgage (916) 768-1578.
3. Most properties in this market can cover their own mortgages through rental income.
4. As long as your credit is intact (i.e., you have not missed payments by attempting a no-win loan modification), you are likely good to go.

Many people have no idea that this is an option. I sure didn’t until I talked to Roland today. Take advantage of this great market and go buy an investment property today!

Do not pay off bills

Your loan officer will advise you if it is necessary to pay off bills to help you qualify for a loan. They will also show you the best way to pay off bills to make sure we have the evidence we need to prove that the bills have been paid.

Do not move your money

It is best to leave your money right where it is until your loan is closed. Moving your money to a new bank or even into a new account can wreak havoc with the verification process.

Do not change jobs

Changing jobs before or during the loan process can create a real problem in qualifying for a loan, particularly if the job is in a different line of work or at a lower rate of pay. During the loan process, it can can also create time delays as the new job will need to be verified.

Do not make major purchases

Many borrowers make the mistake of buying a new car, some furniture or some other major purchase without realizing the impact it can have on their ability to buy a home. A large monthly payment can affect the amount of home you qualify for. During the loan process itself, doing so can actually make it extremely difficult to get your loan approved.

Here is an example:

“Joe” and “Jane” have owned their home for 10 years. They aren’t upside-down like many homeowners and they have never missed a payment. They decide it’s wise to take advantage of the improving interest rates, and so they contact their lender and receive loan modification with an interest rate reduction.

A year later they decide they have outgrown their home and start looking into purchasing a new home. According to Fannie Mae Guidelines, if a homeowner works with his or her lender to modify their loan with a lower interest rate, this Loan Modification is interpreted to be a “Significant Adverse Event,” and is then lumped in with and considered to be as derogatory as Foreclosure or Short Sale.

What does this mean?

Joe and Jane, though in good standing on their loan in every other way, will be turned down by the bulk of lenders based upon this little known fact, and will be forced to wait 3 full years before they can qualify for a loan.

It’s important to choose a lender who looks a little deeper.

According to Roland Benson with iMortgage, “Interest rate change should not be considered a significant adverse event.   However, lenders are declining borrowers because their credit (past or current mortgage) contains a clause stating “modified.”   Just like the hundreds of other pitfalls, borrowers get lumped into this category when they chose the wrong lender.”

It’s important to use a company that thinks outside-the-box, and who will will dig deeper and uncover that the “modified” loan was only a simple interest rate reduction (no late or missed payments) and approve an otherwise well qualified buyer. I have found that Roland Benson at iMortgage is one who truly cares and has success finding ways to help homebuyers who have been turned down by other lenders, and who also consistently closes on time.

Contact me for more information and to get you in touch with Roland Benson.

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