Once upon a time, there was a difference between an FHA appraisal compared to a Conventional appraisal.  For many years, real estate professionals, investors and motivated buyers avoided an FHA loan out of the fear that the appraisal, known for it’s vigorous inspection of the condition of the property, would complicate the transaction and therefore opening preference to a contract offer involving a conventional loan program versus accepting an offer with an FHA loan. 

To say it bluntly:  That was then, this is NOW!  In today’s lending industry, there is no difference between a conventional appraisal when compared to an FHA appraisal.  It is an industry wide fallacy that has corrupted the minds of real estate professionals and consumers alike.  

The reasons are simple!  

Large banks, known as investors, no longer look at Mortgage Backed Securities (MBS) as a free for all and infinite investment with endless opportunities.  Most investors are now wanting their MBS portfolios to have substance and strength when buying these loans from companies like Academy Mortgage, who which I work for. 

Let me make it simple.  If you were an investor, what bundle of loans would you buy? 

• A) 7 Properties consisting of 3,000 sq ft structures with 3 of them having mold detected and the other 4 perfectly fine, totaling an amount of $3MM
• B) 8 properties consisting of 2,500 sq ft homes with 2 of them having roof problems, 2 of them with termites, totaling an amount of $2.7MM
• C) 5 Properties consisting of 2,800 sq ft homes that possess no structural damage or deficiencies, totaling an amount of $2MM

It is quite obvious that you would put your money on the properties that provide the least liability (Option C), since it is likely to provide you with less headaches and thus provide you with a likely stronger rate of return on your investment. 

Get it?  Now I know what some of you might say.  Some of this is indeed totally dependent on the lender, the underwriter and what investor we as a mortgage company may sell our loans to.  

For instance, if a property has termites and the appraisal does not call on the fact that Termites exist, the underwriter will have no reason to request a Termite Report.   There are some lenders that warrant a Termite report on all of their loans regardless of type.  Then again some lenders may only be concerned with any issues that are only reported to be a concern on the appraisal.  In other words, if the appraisal doesn’t state any issues, then the file gets approved without any further inquiry as to the condition of the property.  What it comes down is that each specific lender and their investors have different but similar ways of looking at the appraisal.  That is probably the only difference that I could find between a Conventional and FHA appraisal.

Many homebuyers have encountered the typical experience when dealing with a title company.   After driving around for days and putting in countless offers, they get an offer accepted to only have the listing agent tell them and their agent that they have no choice in who they can use in regards to their title insurance and escrow company. 

Once you sign the contract you are told to open escrow by depositing an agreed amount known as an Earnest Money Deposit.  This company happens to be on the other side of town or sometimes out of state.  It is rare that someone will get an title insurance and escrow company that is close by.  Call it Murphy’s Law! 

Here comes the fun part!  You call and you get an endless stream of voicemail boxes and no human person answering your call to find out the best way for you to get to their location.  You try everything and finally get the receptionist on the phone who tells you the escrow officer is on vacation.  She goes on to tell you nothing at all other than you can leave a message.  You call your agent, who then calls the listing agent, who then tells you to keep trying to reach someone and then everyone sends emails expressing their frustration over the matter.  Now you get a response telling you that the escrow officer handling your file is in another office and will be back next Monday. 

Imagine the bad taste that leaves in your mouth, especially since you were forced to deal with these imbeciles?  Welcome to the world of REO affiliate agreements!

We the good news is this. Fannie Mae has finally decided that it would be best to allow a buyer to choose (which is your right in the first place) their own title and escrow company. 

Fannie Mae has changed their sales addendum for REO properties, allowing the buyer to now choose their own title & escrow company.  

When you see the addendum to the contract, review Section 2B, page 1, line 4.  Look for “The closing shall be held at a place so designated and approved by the Purchaser“. The truth is you have always had the right, per RESPA requirements, to choose your title and escrow company.  Thanks to some common sense, the new addendum change, it now reinforces that right.

Save yourself some grief and headaches and ask around for a dependable title insurance and escrow company that answers the phones and doesn’t try to pass on the buck to the girl that just took off on vacation.  In a world where customer service is synonymous with toilet, it is lousy to have your home buying experience be affected by a simple yet important aspect of the real estate transaction.

Short Sale And Home Loan Modification Assistance: Help is on the way, starting on April 5th

November 30, 2009, the Treasury Department released the guidelines and forms for its Home Affordable Foreclosure Alternatives Program also known as HAFA.  HAFA’s intention, based on qualifying factors,  is to make it easier for homeowners, who do not qualify for a Home Loan Modification, to have the alternative of selling their home as a “Short Sale”.  This will dramatically speed up the often long and drawn out process of having the lender approve the owner for a short sale.  By streamlining the process, HAFA will help to stabilize inventory levels and also home prices.  How so?  There is an easy answer.  The cost/loss of quickly approving a short sale out weighs the cost and markdown of price of placing a home into a foreclosure.  Consumers, the banks and the real estate market will win.  HAFA works by providing monetary incentives connected with a short sale or a deed-in-lieu of foreclosure (DIL) in order to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA. 

In other words, if a client fails to qualify for a home loan modification the bank/ lender will counter the loan modification applicant with an approved Short Sale Agreement with a predetermined price based on the market value.  This allows the client to go to market immediately allowing for a motivated buyer to purchase the property quickly without further eroding home values.A list of servicers participating in HAMP is available at MakingHomeAffordable.gov.  HAFA applies to loans not owned or guaranteed by Fannie Mae or Freddie Mac, which will issue their own versions of HAFA in coming weeks.

HAFA is a complex program, with 43 pages of guidelines and forms (HAFA Program Guidelines).   The program is designed to simplify and streamline the  process of short sales and deeds-in-lieu of foreclosure by identifying homeowners who can no longer afford their home and/or who have experienced a loss of income or employment. 

HAFA:

• The program works hand in hand with HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
• Prohibits the servicers from requiring a reduction in the real estate commission agreed upon in the listing agreement (up to 6 percent).
• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
• Uses standard processes, documents, and timeframes/deadlines.
• Provides financial incentives: $1,500 for borrower relocation assistance; $1,000 for servicers to cover administrative and processing costs; and up to $1,000 for investors for allowing a total of up to $3,000 in short sale proceeds to be distributed to subordinate lien holders (on a one-for-three matching basis).
• Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

The program is effective on April 5, 2010, but servicers may implement it before then if they meet certain requirements. The program is set to expire on December 31, 2012.

$8000 & $6500 Tax Credit for Homebuyers

If you are like many Americans thinking about buying a home and would like to learn more about the $8,000 & $6500 Tax Credit and have questions, you will find this post useful.  You are not alone but your time is running out.  April 25, 2010 is approaching and contrary to some people’s belief, the tax credit is not going to be extended again.  The Feds have signaled that the stimulus is working and there is no more need for an extension of the $8000 & $6500 tax credit, for many reasons that will distract us from the following information.

So what are the details to $8,000 First-time Home Buyer Tax Credit Expansion?

• The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The tax credit applies only to homes priced at $800,000 or less.
• The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
• For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
• For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit Details

• To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
• The tax credit applies only to homes priced at $800,000 or less.
• The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
• Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

For a long time, longer than I care to remember, FICO Scores aka credit scores have been an super secret formula where only the credit reporting bureaus (Experian, Transunion, Equifax) knew how they worked.  This, of course, is because they are the ones who created the system.  For too long, we all wondered how to improve our credit scores while mortgage professionals tripped over themselves trying to provide a homebuyer a logical answer.    However, it still remains a complex formula based on factors that we likely will never know how they actually work. 

Getting and maintaining good credit isn’t rocket science, we just need to pay our bills on time, keep our balances low and sparingly take on new debt.

Bankruptcy

FICO’s information demonstrates that a bankruptcy tends to do the most damage to a person’s scores.  I can damage scores up to 240 points.

Credit Card/ Revolving Debt

Those with good or excellent credit – aka Prime Borrowers – put their scores at risk with a simple mistake. For example, someone with an average score of 680 who might make a payment 30 days late can experience a 60 to 80 point drop in their score.  However, someone with an excellent score of 780 – that same late payment can plummet their score by 90 to 100 points.

It Can Cost You Money

Just how badly a drop in your FICO score can hurt you financially is explained from studies made from the home mortgage, auto loan, and the credit card industries.  Studies were made based on hypothetical scenarios of a consumer who applies for a $200,000, 30 year mortgage and a $20,00 auto loan. The industry stressed that the FICO score isn’t the only factor in determining who gets credit and at what cost and rate (such as debt to income ratio, relationship with the lender, etc.), they were able to provide an idea of what a borrower who had the following credit scores could expect:

For a Consumer with a FICO Score of 780:

• Following a 30 day late, the consumer’s car loan rate would jump nearly 3 percent costing the borrower approximately $26 more each month.
• After a debt settlement, the consumer would pay as much as $109 more each month on a home mortgage.

For a Consumer with a FICO Score of 780:

• Following a 30 day late payment, the consumer would pay $41 more each month for a car.
• After a 30 day late payment, the consumer would pay as much as $95 more each month on a home mortgage.
• Following a debt settlement, the consumer would not qualify for a credit card

Of course, knowing the impact on a FICO score and actually avoiding these mistakes are two separate things. Amid rising unemployment and other daily financial struggles, paying bills and staying on-track financially becomes a much bigger challenge for many borrowers.

The fact you are here and noticed the word “Free” makes you suspicious as most of us have heard some nightmare stories of how people are charging desperate homeowners, thousands ($1,000’s) of dollars, hoping to stay in their home and thwart off the possibilities of foreclosure. Unfortunately, some of these modifcation companies do not deliver and keep the distressed homeowner with less money in their distressed pockets. There is hope and we are excited to offer our readers and their friends and families this information.

The good news! There is a HUD Sponsored “Not for Profit” Agency that dedicates their time and efforts to assisting homeowners on their loan modification for “FREE”.

Who, what, where and how?

NID-Housing Counseling Agency (NID-HCA), program is designed to offer the myriad of housing related issues to our clients, nationwide. The function of the agency is to provide housing related counseling to all persons/entities with housing needs, FREE OF CHARGE. The agency is staffed by a network of fully training counselors/real estate professionals with extensive multi-choice knowledge of the real estate industry, in general and within their areas, specifically. The agency also has an extensive referral system for all of your real estate related needs. Counseling is offered in the following ways to accommodate the client: Office location, telephone, e-mail, confidential fax on demand, and TDD (for the hearing impaired). Spanish and Cantonese counselors are available at each location. Counseling is strictly confidential. One-on-one and/or group counseling seminars are available. Counseling questions submitted by e-mail and fax are confidential and will only be accessible by the counselor. We offer counseling to consumers, as well as non-profits, public agencies and faith-based organizations in each of the following areas: .

Default/Foreclosure (loss mitigation)
The NID-HCA default/foreclosure-counseling program to date has a 95% success rate in avoiding client lose of property due to foreclosure (without the client filing a bankruptcy). NID-HCA works with your lender to negotiate the best terms available for all parties involved. NID-HCA will discuss extensively with the client issues such as, how to avoid foreclosure, options to foreclosure, communicating with your lender/service, renegotiating your loan terms, managing your debt and re-establishing your credit.

Delinquency/Default Counseling
We provide information and recommendations, allowing our clients to make appropriate decisions to settle their mortgage delinquency/default problems. In this process, we ensure that our clients understand all their options and that lenders/servicersadhere to industry-standard loss mitigation practices. NID-HCA continues to assist its clients until their problems are resolved. We also work to reduce loss mitigation costs to both our housing clients and mortgage lenders.

Predatory Lending Counseling
NID-HCA arms its clients with knowledge that enables them to negotiate fair loan terms and to protect themselves against potential predatory lenders. For clients who feel they have been victimized by predatory lending practices, our counselors help clients investigate the validity of their concerns, and when indicated, report unlawful conduct to the appropriate authorities.

CONTACT:

NID Housing Counseling Agency
668 North 44th Street
Phoenix, AZ 85008

Office: 602-685-1056
Fax: 602-685-1057

NIDHCA324@yahoo.com