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FHA REFINANCE OPPORTUNITY

Do you have an FHA loan where the rate is higher than today’s market rates? Then there is good news for you! Rates are still very, very low and it’s not too late to take advantage of them. And if you happen to have an FHA loan, there is a program you need to know about.

 

It’s called the “FHA Streamline Refinance,” and it’s only for borrowers that already have an FHA loan. They are very fast and simple to do. You can lower your rate and your payment and it’s a pretty easy process. There is no credit check, no employment verification and not even an appraisal! On top of that, the rate that FHA charges for PMI (private mortgage insurance) went down recently. So not only could you get a lower interest rate, but lower PMI, too.

 

There are some qualifications, but they aren’t too cumbersome: You must be current on your existing loan, it must be at least 6 months from the date you bought the home, you can’t take cash out, and it must reduce your mortgage payment by at least 5%. There are fees associated with this process, but you can usually roll them into your loan.

 

One thing I like to point out whenever anyone considers a refi is the payoff period. Some people refi if it will save them anything per month, even $50. But keep in mind that if you’ve had your loan for 5 years, and then you refi, you now won’t pay it off for another 30 years. So you always have to weigh the savings NOW against having to make 5 more years of payments at the end (IF you are planning to keep the loan and home for 30 years, which very few people do nowadays!).

 

Buyers Have To Qualify

The sweeping Dodd-Frank legislation of 2010 is resulting in some new rule changes that are supposed to go into effect this year for certain lenders. Among them is a requirement that the lender HAS to verify that the borrower has the financial ability to repay the loan (gasp!). I know this sounds like a radical idea, and actually, it kind of is.

During the “go-go” years when the real estate bubble was forming, lenders were more concerned about making loans than making “good” loans. The more loans they could make, and the faster they could make them, the more they were rewarded. And on the flip-side, if they didn’t make enough loans, they were penalized and vilified publicly by politicians for” holding people back” from buying homes. They would verify almost NOTHING and let the borrower “state” what income they made. And when that wasn’t enough, they’d get “creative” with the loan by using adjustable-rates, interest-only payments, negative-amortization payments (where your balance goes UP each month), etc. and who cares if the borrower can’t afford the payments? The lender was just going to sell the loan to an investor on Wall Street, so they didn’t care if the borrower could pay or not. I’ve come across several people who got loans where the mortgage payment was as much as their monthly gross income

Well, all that has changed and now most lenders have to verify everything, and they can only make the loan if the borrower can indeed handle making the principal and interest payments. This means that even if you could find a lender that wanted to give you one of those “toxic” loans (interest-only ARM with neg-am), they would STILL have to calculate your debt ratio based on the plain-vanilla 30 year fixed-rate, principal-reducing payment. This is a good move for the long-term stability of our market, but it could put a cap on what buyers can buy if prices increase but income doesn’t rise to meet it and/or if interest rates rise.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Loan Mod Continued

Last week I talked about how some people think they shouldn’t even try a loan mod because they’ve heard that NO ONE is getting any principal reductions in their loan mod. I said there are two things to correct in that statement. The first one I covered last week, that there definitely ARE principal reductions happening in some loan mods. Not that often, but I AM seeing them happen.

The second thing I wanted to address is whether or not a loan mod is worth taking if they don’t drop your principal. Most people insist that they’ll only take a mod if their principal is dropped. I think that is faulty thinking to be so cut and dried about it. There are some instances where taking a mod where they only drop your rate can be worthwhile. Each person’s situation is different. The main thing I look at is whether you have to move anytime soon? If you don’t, and they drop your rate to the point where your payment becomes affordable, and it’s a fixed rate, principal-reducing loan with no balloon at the end, I would argue you need to consider seriously accepting that loan mod

But people argue with me that it makes no sense to keep paying on an upside-down home. To them, I respond as follows: If you owed $500,000 on a home worth $310,000, which loan mod would you accept? Option #1: Principal drops to $310,000, but they leave your rate at 6%. Option #2: Principal stays the same at $500,000, but they drop your rate to 2%. Most people would pick Option #1 and refuse Option #2. But the principal and interest payment on Option #1 is $10 HIGHER a month than Option #2! And keep in mind that BOTH of these loans get paid to $0 at the SAME TIME (I’m assuming both loans become 30 year loans again). So if you don’t HAVE to move, and the payment is affordable, and the only loan mod option your lender gives you is like Option #2, don’t be so quick to decline it.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Loan Mod Principal Reductions

I’ve heard clients tell me, “There is no sense in even trying for a loan mod because my buddy told me NO ONE is getting any principal reductions, so why try?” There are two things to correct here.

First, YES there are loan mods being done with principal reductions. I can verify this as FACT as I’ve reviewed many loan mods for free for people and I’ve seen the paperwork with my own eyes. Sometimes it’s very small, like $84 a month for every month you keep the loan current. Other times it appears to be a principal reduction, but it’s really still there lurking somewhere. Either as a balloon, or a silent lien on the property. Other times I’ve seen as much as $200,000 taken off the balance permanently. Yes, I said PERMANENTLY.

From the loan mods I’ve reviewed, those with principal reductions are still the minority. Maybe 10% of the loan mods I review include principal reductions. But that’s up from 0% from the mods I reviewed 3-4 years ago that had principal reductions, so it’s an improvement.

Each loan mod is different. It depends on your situation, who your servicer is, who the investor on the loan is, the balance of your loan, how far under-water you are, etc. But don’t believe blanket statements from people who claim to know about how ALL loan mods work. Have they really seen EVERY loan mod ever done? Contact me if you would like me to review your loan mod offer for free.

[Yes, I said there were TWO things to correct in the first line above. To be continued…]

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search theMLSfor free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

Free loan mod/short sale seminar

Updated for 2012. New loan mod/short sale laws and incentives will be discussed along
with the following topics:

  • Who is a good
    candidate for a loan modification vs. a short sale?
  • Can lenders
    pursue you after a short sale, foreclosure or loan modification?
  • Impact on your
    credit score and waiting period to buy another home.
  • Which lenders may
    pay you up to $30,000 to do a short sale.
  • Discussion of the
    “1099 issue” and the two big exceptions to it.
  • How the
    expiration of the Mortgage Forgiveness Act at the end of 2012 affects you.

June 12th at 6 pm or 7:30 pm or June 16th at 10 am or Noon. All will be the same
one-hour presentation including time for Q&A.

Presented by: Brian Sharp, Certified Distressed Property Expert.

««« MUST R.S.V.P. TO RESERVE A SEAT «««

Phone:
925.998.9712  Email:
Brian@SharpHomesOnline.com

 

HELP FOR UNDER-WATER INVESTORS

Hey, is that a pig I see flying by? Lots of news the last few weeks in regards to things that many people told me would NEVER happen. First it is HARPII letting people refinance their homes even if they are upside down. Then BofA announces they are going to be dropping hundreds of thousands of dollars off the principal for some lucky homeowners. And now, I’ve heard that investors that are under-water on their rental properties may be getting some help from the federal government. Investors may be able to get up to four loans modified starting in May under the new HAMP rules. The Treasury Department will be giving incentives to banks to lower interest rates, extend the terms, or even cut the principal balance. The investor must promise to rent the homes out if not rented already.

For a long time there has been intense resistance to help investors because many people believe investors helped drive the bubble up further than it should have. There is also the idea that the investors were taking a calculated risk in order to get a financial gain, so they should bear any of the downside risk. But those thoughts are now being overruled by other concerns. First there is the plight of innocent tenants getting evicted after the investor defaults, or the row after row of vacant homes dragging property values down. It’s to the point where now the government is thinking that vacant, blighted homes are a problem, no matter HOW they got to that point. They are thinking that cleaning up the mess will be good for everyone in the long run.

At the peak of the bubble, in some parts of California 30-40% of all home sales were investment purchases. Right now a little more than 20% of homes in foreclosure are to investors.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

TRY AGAIN, AND AGAIN…

You’ve probably heard that old saying, “If at first you don’t succeed, try, try again.” Well, that’s VERY true in real estate right now, especially if you are having trouble making your payments. There are a lot of programs out there to help distressed homeowners, and if you got turned down, my advice to you is to try again! I’ve had many people come to me that want to short sale their home because their lender turned them down for a loan mod. If it’s been more than a few months, I tell them to try again (if they truly want to keep their home). You never know what new program or new criteria your lender is using now.

This is also true for the government programs out there. For example, I’ve written about the Keep Your Home California program in this space several times before. First, I reported about the creation of the program and encouraged people to call and see if they qualify. I heard from many of you that you did call, but weren’t eligible for one reason or another, often because your lender wasn’t participating.

Well, good news! They’ve opened up their criteria, and more lenders are now participating. They are now allowing borrowers to apply that did “cash-out” refis, who own more than one property, or co-signed for someone else. They are also increasing the length of help for unemployed borrowers to 9 months instead of 6 and they’ll pay up to $20,000 in past-due payments, where the prior limit was $15,000.

For more info, Call 888-954-KEEP(5337) from 7 A.M. and 7 P.M. Mon-Friday, and 9 A.M. to 3 P.M. on Saturdays or their website at www.KeepYourHomeCalifornia.org.

FREE LOAN MOD VS. SHORT SALE ANALYSIS

Are you having trouble making your payments? Are you not sure if you should even try a
loan mod or just give up and try a short sale? Are you confused as to what they even look
at to decide if they approve a loan mod or short sale? (Here’s a hint: It’s NOT the same
things!) Are you ready to just throw in the towel and “walk away”?

I can help… Over the last few years I’ve met with hundreds of local homeowners who
had the exact same questions. I have developed a spreadsheet that will analyze your
mortgage situation and compare it to your income. The end result is a pretty good guess
as to whether your bank will approve a loan mod and/or a short sale. If you’ve already
received a loan mod offer from your bank, it will also help you determine if you should
accept it, or reject it as “unaffordable” for you. If you haven’t received a loan mod offer,
it will generate a target number for what IS an affordable payment for your situatoin.
It will also help you determine if your monthly cash flow will improve by becoming a
renter or not (the answer may surprise you!).

For a free, no-obligation analysis of your situation, call me at (925) 998.9712, or send
an email at Brian@SharpHomesOnline.com. I will give you a list of the info I need,
and then I can send the analysis back to you. If you have questions on the results, I’ll be
happy to discuss them with you, but there is no obligation on your part.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE
(6683). To search the MLS for free and view virtual tours of homes for sale, go to:
www.SharpHomesOnline.com. Sharp Realty

MORE CLARITY ON MODS

In the past, your lender could turn you down for a loan mod, and didn’t have to give you
a reason why. A recent new law will change that for some homeowners. If you applied
for a Home Affordable Modification Program (HAMP) loan mod and are turned down,
your lender must now send you a letter detailing why you were rejected. There are up to
33 “data points” that they can use to make their determination. Not all loans will covered
by this requirement, so it’s not guaranteed that you’ll get a letter.

The data points look at your home’s value, your debt ratio, income, etc. They will
provide the information for the items that lead to your denial. If you think the lender has
made a mistake in any of these figures, you have 30 days to appeal and provide them
what you believe is the correct information.

They will also look at something called the Net Present Value test (NPV). This can be a
complicated calculation, but the basic summary is the lender wants to know if they’ll lose
less money be allowing a loan mod, or should they go ahead and just foreclose? There
are 51 recommended input values for the NPV test, so it is fairly extensive. They look at
the cost of the modification vs. the cost of foreclosure and the chance that the homeowner
will default on the loan mod if it is approved. The bottom line is that if the NPV comes
out positive for the loan mod, the lender is supposed to offer a loan mod.

Since this is a fairly new development, I haven’t seen any of these letters in person yet. If
you happen to get one, I’d love to see it. I’ll be happy to review it with you to see if they
had your information correct and if you can appeal.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE
(6683). To search the MLS for free and view virtual tours of homes for sale, go to:
www.SharpHomesOnline.com. Sharp Realty

HOW TO CALCULATE DEBT RATIO

I’ve met with literally hundreds of distressed homeowners over the past few years. My #1 goal is to keep them in their home, if possible (and if it makes sense). The first thing I USED to ask them is if they can afford their payment. Many times they will shrug their shoulders and say, “Well, yeah, kind of.” I’ve found that most people have never really calculated their own debt ratio, so they really don’t know if they can afford it or not.
Your debt ratio is your housing expense divided by your monthly gross income. The government and most lenders use 31% as a guideline. 31% and below is considered “affordable.” Sounds simple enough, but let’s define what goes into that calculation. Your housing expense is your first mortgage payment, plus property taxes, homeowner’s insurance, plus any payments for mortgage insurance, HOA and then any 2nd or 3rd mortgages. (Do NOT include any house maintenance fees like utilities, landscaping, etc). Then for your gross income, put down all household income, and use the gross number (before taxes). If you are receiving tax-free income of some kind, then you have to “gross it up” so you are using the number as if you were paying taxes on it. For example, if you get $2,000, but no taxes are taken out, then divide by, say, .7 (we are adding back in what would have come out if taxes of 30% were being withheld). That would be $2,857.
Where this gets complicated is when you have an adjustable mortgage (ARM), negative-amortization, or interest-only loan (or any combination of these). For this situation I usually calculate several debt ratios. First, the debt ratio on your minimum payment, then what it would be after the ARM adjusts, and then I factor in making the payment a full-amortizing payment (one that reduces your principal balance each month). Or just call or email me and I can do this for you and email you back a printout.

If you have questions on this or any other real estate topic, call me at (925) 240-MOVE (6683). To search the MLS for free and view virtual tours of homes for sale, go to: www.SharpHomesOnline.com. Sharp Realty

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  • Sharp Realty
  • 320 Fairview Ave.
  • Brentwood CA 94513
  • P: 925.240.6683
  • F: 925.524.2302
  • E: info@SharpHomesOnline.com
  • DRE# 01858431