Redding Real Estate Blog – Page 424

Hope for Homeowners: FHA to Provide Additional Mortgage Assistance to Struggling Homeowners.

October 15, 2008 By

The President has signed into law legislation that will allow HUD’s Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA’s existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program will be implemented on October 1, 2008.

Hope for Homeowners maintains FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. FHA only allows owner-occupants to be eligible for FHA-insured mortgages. Borrowers must also meet the following eligibility criteria:

Their mortgage must have originated on or before January 1, 2008;
Their mortgage debt-to-income must be at least 31 percent;
They cannot afford their current loan;
They did not intentionally miss mortgage payments; and
They do not own second homes.

Features of FHA-insured loans under the new program include:

30-year, fixed rate mortgage;
Maximum 90 percent loan-to-value ratio;
No prepayment penalties;
$550,440 maximum mortgage amount;
Extinguishment of any subordinate liens; and
New home appraisals from FHA-approved appraisers.

HUD, Treasury, FDIC and the Federal Reserve will form the Congressionally-mandated Board of Directors and work together to establish additional program standards.

Voluntary Lender Participation

FHA will continue to offer lenders an alternative to foreclosing on borrowers. Similar to FHASecure’s recent expansion, lenders will be encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property. In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure.

Market Stability and Liquidity

By continuing to slow the rate of foreclosures, this program will support FHA’s existing effort to stabilize local housing markets. From September 2007 to June 2008, FHA has guaranteed more than $93 billion of mortgage capital.

Funding

FHA will insure up to $300 billion in new loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac.

Program Timeline

The program will last from October 1, 2008 through September 30, 2011. Since September 2007, FHASecure has helped more than 290,000 families obtain safer, more affordable mortgages. FHASecure is on pace to help 500,000 families by the end of the year.

More information at https://www.hud.gov/hopeforhomeowners/index.cfm

September Foreclosure Filings Drop 71% in Shasta County

October 4, 2008 By

Foreclosure filings in Shasta County dropped significantly compared to the previous month. There were only 59 Notices of Default filed compared the previous months number of 206.

When we compared this month last year we saw a 34% fewer filings. September 2007 there were 89 notices of default file and only 59 in September 2008.

This significant drop could be a result of lenders being more motivated to work with borrowers and resolving the loan delinquency before it gets to foreclosure. This could be a good sign however we are expecting next month’s number to be well above a hundred but below Augusts high of 206.

Deed-in-lieu of Foreclosure, How Does It Work?

September 20, 2008 By

A Deed-in-lieu of Foreclosure is basically giving the house back to the lender. In most cases this will only work if the borrower does not have a second loan on the property. The reason is, you can only give the property to one lien holder and the other lender would not agree to release the lien unless they were to receive some sort of compensation.

There are some advantages for both the lender and the borrower and well as some disadvantages. The benefits to the borrower are you can escape the public notoriety and embarrassment of a foreclosure. In most cases it will release you of the debt from your loan. The benefits to the lender are they get the house back quicker and cheaper than if they were to foreclose.

There are several considerations the lender will go through to determine whether or not they will be willing to take the property back. One is the value of your property. They are going to get an appraisal or a Broker Price Opinion (BPO) to determine the value of the property. If the lender feels that they can sell the home for what you owe then they will consider taking it back. However if the lender is feels the value of the property is less than what they can sell it for then they may ask the borrower to sign a promissory note. Typically there will be no interest on the note and the payments are very low.

Another consideration is how far in default the borrower is. If they have filed a notice of default and they are within 90 days of the scheduled sale date then they are less likely to take the house back. The deed-in-lieu process can take 4-6 weeks for them to approve, at this point they will have incurred legal fees to foreclose and they will be close enough to the sale date so they might as well sell it at auction.

The lender is also going to look at how many non performing loans & REO properties (real estate owned) they have on their books. If the lender is already overloaded with REO properties then they will be less likely to agree to take the property back. In cases like this the lender will encourage the borrower to sell the property either through a short sale or full payoff.

A deed-in-lieu foreclosure is still going to negatively affect the borrower’s credit, but it will be less damaging than a foreclosure, especially if they were not behind on their payments. It could also prevent any further collection attempts from the lender.

For other solutions to foreclosure download our Free ebook “Avoid Foreclosure” written by Bill Parsons & Josh Deknoblough.

Taxation Of Short Sales And Foreclosures

September 17, 2008 By

We receive lots of questions about tax liability of short sales and foreclosures. As real estate brokers we are not licensed to give advice on this topic however we can lead you to the information that may answer your questions.

On December 20, 2007 the Mortgage Forgiveness Debt Relief Act of 2007 was enacted. Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income. More information regarding the Mortgage Debt Relief Act can be found on the IRS website:

https://www.irs.gov/individuals/article/0,,id=179414,00.html

Or the California Association of Realtors has put together an FAQ regarding the taxation of Foreclosures, Deeds in Lieu of Foreclosure, and Short Sales. This is more detailed information and specific to California.

https://www.parsonsrealty.com/parsons_realty/taxes/car_faq.pdf

RealtyTrac Reports Highest Ever Foreclosure Numbers For August

September 13, 2008 By

RealtyTrac an online marketplace for foreclosure properties, today released its August 2008 U.S. Foreclosure Market Report™, which shows foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 303,879 U.S. properties during the month, a 12 percent increase from the previous month and a 27 percent increase from August 2007. The report also shows one in every 416 U.S. households received a foreclosure filing during the month.

“In August the total number of U.S. properties that received foreclosure filings as well as the national foreclosure rate were both the highest we’ve seen in any month since we began issuing our report in January 2005; however, the annual increase of 27 percent was actually substantially lower than in previous months this year, when it was hovering around 50 to 65 percent,” said James J. Saccacio, chief executive officer of RealtyTrac. “The lower annual percentage increase this month is due to a big spike in activity last August — particularly in default activity. Over the past few months we’ve seen annual increases in default activity and auction activity moderating, and that trend continued in August, with default activity up just 10 percent from a year ago and auction activity up 7 percent from a year ago.

“The increases in default and auction activity could be slowing down partly as the result of new legislation passed in several states that is designed to give homeowners in distress more time before foreclosure proceedings are initiated. In addition, some lenders are adopting loan servicing guidelines that encourage more pro-active approaches to helping homeowners avoid foreclosure. The question now is whether these measures will actually reduce foreclosures or simply cause a temporary lull in foreclosure activity.”

Nevada, California, Arizona post top state foreclosure rates

With one in every 91 households receiving a foreclosure filing in August, Nevada continued to document the nation’s highest state foreclosure rate for the 20th consecutive month. Foreclosure filings were reported on 11,706 Nevada properties, a 16 percent increase from the previous month and an 89 percent increase from August 2007.
California continued to document the nation’s second highest state foreclosure rate, with one in every 130 households receiving a foreclosure filing in August, and Arizona registered the third highest state foreclosure rate, with one in every 182 households receiving a foreclosure filing during the month.

Other states with foreclosure rates ranking among the top 10 were Florida, Michigan, Georgia, Ohio, Colorado, Illinois and Indiana. Michigan, Georgia, Ohio and Colorado all reported annual decreases in foreclosure activity.

California accounts for one-third of U.S. foreclosure activity

Foreclosure filings were reported on 101,724 California properties in August, one-third of the national total and the most of any state. The state’s foreclosure activity increased more than 40 percent from the previous month and more than 75 percent from August 2007.

RealtyTrac’s full report click here.

How Long Do I Have Once I Stop Making Payments?

September 9, 2008 By Chris Parsons

I get asked this question on a regular basis, and it depends on the lender and your situation. In most cases the lender will not start foreclosure proceedings until you are at least three months delinquent. There are specific steps your lender will have to take in order to foreclose. The first step is the lender records a Notice of Default. This starts the timeline and triggers a number of other steps in sequence. We’ve put together a California foreclosure timeline that explains each step and when it happens.

https://www.parsonsrealty.com/parsons_realty/timeline.pdf

If you are facing foreclosure and have questions about possible options please download our FREE e-book “Avoid Foreclosure”.

https://www.parsonsrealty.com/parsons_realty/avoid_foreclosure/avoid.html

You need to know all your options, so you can make the best decision for you.