Real Estate Experts of Florida

Lenders can tap bank account for mortgage

John, Susan & Karen — Tue, 29 Mar 2011 00:07:43 GMT

It doesn't happen often, but lenders technically can tap deposit accounts to make up loan payments.

Borrowers who've missed a mortgage loan payment to a bank or credit union where they also have a checking or savings account might want to move their money. The right is rarely exercised, but these institutions technically can tap those accounts to get late payments and more, according to Jeffrey A. Schreiber of The Schreiber Law Firm in Marion, Ind.

Compare mortgage rates
Bankrate can help you find the best mortgage rates in your area.

"You may want to think twice, if you get into financial problems, about keeping your money in the same bank that you owe money to on any kind of loan," Schreiber says.

The bank's right to use a borrower's deposit account to make up past-due payments is known as the "right of offset," Schreiber says.

A similar right may be tucked into mortgage loan documents or deposit-account papers signed by the borrower, explains Shari Olefson, an attorney with Fowler White Boggs in Fort Lauderdale, Fla., and author of "Foreclosure Nation," a book about the U.S. foreclosure crisis.
Offset right rarely used

Even with the right, banks don't often exercise the offset against homeowners. Here are some reasons that's the case.

* If the borrower doesn't have a deposit account at the bank that owns the loan, that bank must get a court order to locate accounts at other institutions, Olefson says. That may be not be worth the effort, since the legal fees to track down and retrieve the funds could total more than what the defaulted homeowner has in his or her accounts.
* Lenders sell most mortgages to investors. Those secondary-market transactions transfer the interest in the loan but not the right of offset. In practical terms, this disconnect means a homeowner whose mortgage loan has been sold to Fannie Mae or Freddie Mac probably doesn't need to be concerned that the lender might tap a deposit account to recoup missed payments. However, the same cannot be said for homeowners who have a nonconforming loan that's still on the lender's books.

"Those who have been advanced money based upon nonconforming loans where the bank still is servicing and has possession of that note must be aware of it. But most mortgages are sold on the secondary market, so that's really not an issue," Schreiber says.

A bank may be quicker to offset when a loan involves a commercial property or expensive home, Olefson says. High-net-worth individuals also may face a greater risk since they're more likely to do all their banking through one institution that offers special services to such customers. In some cases, such borrowers are required to keep a large deposit account at the institution as a condition of a loan.

"They underwrite outside of the normal boxes, but they want to hedge their risk by having the borrower keep (his) deposit account there," Olefson says.

Loan servicers generally aren't in contact with local bank branches. This departmentalization means the servicer probably doesn't have access to the borrower's banking information or to the process in place to exercise the right of offset.

Ties may be closer at smaller banks and credit unions, which, Schreiber says, tend to be more aggressive about tapping deposit accounts to make up missed mortgage loan payments.

"Credit unions are famous for setting off accounts. They're much more aware of how much money is in the accounts because they're smaller and there's a more intimate relationship," he says.

Lenders may be reluctant to exercise the right of offset due to customer service and reputation considerations, says Nessa Feddis, vice president and senior counsel at the American Bankers Association, an industry group in Washington, D.C.

"It's not a customer-friendly thing," Feddis says. "In a lot of cases, they want to give the customer a chance at paying on their own."

If a lender opts to use a right of offset, the amount normally won't be limited to missed loan payments. Late fees, penalties, default interest and, if the loan is accelerated, the entire outstanding balance could be claimed from the borrower's accounts. Essentially, any money in a personal account is fair game, though certain types of business or retirement accounts may be off-limits. In addition, state laws also may govern some rights of offset.

Read more: Lenders can tap bank account for mortgage http://www.bankrate.com/finance/mortgages/lenders-can-tap-bank-account-for-mortgage-1.aspx#ixzz1HuabLfIZ

Why an lower investor offer on a short sale is better than a retail offer?

John, Susan & Karen — Thu, 09 Dec 2010 21:43:55 GMT

There are posts on active rain dealing with the issue of working with Real Estate Investors on properties listed as short sale. While there is a lot of bad publicity, and it is warranted, there are also investors who are legitimate.

This post is to explain how a good investor gets involved in a short sale and can help the seller and the agent with the short sale.

The attempt to sell short sales directly from default sellers to end-user buyers has failed miserably. But please don’t blame the real estate agents. It’s not their fault. Selling a short sale directly from default seller to end user buyer has largely failed in the hands of real estate agents because a house that requires a short sale is not a retail ready product that an agent can sell.

Assume that the agent has all the knowledge and expertise necessary to successfully negotiate the short sale. The inefficiencies and complexities of short sales imposed by lenders preclude even the most talented agents from successfully facilitating transactions from a default seller directly to a retail end-user buyer.

Recent reports state that the number of short sales actually approved by banks represent less than 1% of all homes at risk of foreclosure. Data from the Office of the Comptroller of Currency shows that only 40,000 short sales were completed in the first half of 2009, the latest period available. Further, only an estimated 8 to 12% of all homeowners who request short sales accomplish a completed sale.

So if Short Sale are so good for banks, sellers, and the economy, and so many real estate agents are certified default specialists, and so many short sales have been attempted, why are so few completed successfully.

Real estate agents (even if well trained) are generally doomed to fail with short sales because the complexities of navigating a successful short sale are beyond the acceptable tolerance levels of their retail buyers.

Short Selling lenders (even when a property is listed by a skilled and experienced real estate agent) do not meet the expectations of the retail end-user buyers market. The reasonable expectations that a retail buyer has of a seller are:

* Getting a response to an offer within a reasonable time frame of a couple of days

* Being able to agree to a closing date 30 to 45 days after contract

* Being willing to undertake repairs and respond to or renegotiate after inspections * Bring a listing agent and a selling agent their full commissions

* Delivering clear and marketable title and clearing up all liens and encumbrances, and * Delivering the premises in broom-clean, move-in condition.

This is what a retail buyer expects and yet these are the very things that banks do not or cannot do in the short sale approval process. Until such time as lenders and sellers can meet the expectations of the retail market, retail end-users will continue to pass on short sale opportunities.

The short sale approval process is so lengthy, frustrating and complicated that the retail buyer market largely ignores any property listed as “Short Sale Requires Bank Approval” (ask any active buyer’s agent). Here’s what actually is happening on the street in today’s market. A good buyer who can get a mortgage (a very special person in today’s mortgage market) is steered away from any property listed “Short Sale Requires Bank Approval” because their buyer’s agent knows that it will be several months before she has any chance of seeing a commission check.

Even if you take the real estate commission motivation out of the mix, the normal retail homebuyer is not interested in sitting around and waiting even 2 or 3 months to get approval on a contract. The retail buyer has a shelf life of no more than 45 days between the time they are “ready to buy” and the time they expect to close.

The sentiment was recently expressed to me by a prominent buyer’s agent:
“I try not to mess with Short Sales. I tried it twice and here’s what happened: I had good buyers who liked the houses, but it took months for the bank to respond and when they did they kept asking for more money. My client agreed, and then we had a problem with the second mortgages…it went on and on and finally, my clients gave up and went and found another house where they didn’t have to mess with the short sale. Since then, I just don’t want to mess with short sales.”

With a year and a half of short sale experience under it’s belt, the retail end-user market knows that a property that is listed “Short Sale - Requires Bank Approval” is a long and frustrating journey away from ever being a property they could actually buy. Therefore, that property will sit on the market, lonely, rotting away while its value erodes.

Waiting for a retail offer with a product that is not retail ready is a recipe for failure. The agent drops the price, drops the price, drops the price until the value of that house is destroyed – hurting home values and damaging the neighborhood. Real estate agents are transaction facilitators. They may be brilliant in their knowledge of contracts, law, and markets. However, without a buyer – there is little value even the most competent real estate agent can bring. And most retail buyers do not have the patience to purchase a property listed “Short Sale - Bank Approval Required”. Therefore, short sales are usually not successful when attempting to sell directly from a default seller to a retail end user buyer.

The Answer: “Short Sale Approved” is Ready for Retail

Retail buyers, however, will flock like starved vultures to any listing that appears to be a real opportunity for a real discount. Every buyer wants “their piece of the foreclosure market” and retail buyers too want to feel as if they are getting a great deal. While retail buyers generally will not look at a property listed “Short Sale - Bank Approval Required”, simply by changing that listing to “Short Sale Approved - Ready to Close – Bring All Offers” will open the floodgates of offers on that listing and produce multiple buyers each vying for their piece of the foreclosure crisis opportunity.

However, an agent cannot simply “switch” the notes in the computer unless they are true statements. The listing notes cannot simply be switched until someone has gone through the approval process AND fixed everything else necessary to deliver clean and marketable title. A property is not retail ready until. . . it is actually ready for retail.

Here is where the real estate investor, the speculator, the much maligned “flipper” is actually the hero who provides the missing solution to the problem of the market, the real estate agent, and even the lender.

For real estate agents who understand the value they can bring to their clients by working with rather than against real estate investors, there is great opportunity.

The Solution: The Real Estate Investor

Short sales are being done successfully, legally and with full disclosure to all parties all over the country by sophisticated real estate agents and investors working together. They recognize that the best buyer for a default seller who has listed the property with a real estate agent is a wholesale real estate investor skilled at navigating the complexities of the short sale process and who has the patience to bridge the gap between short sale reality and retail expectations.

Listing agents should recognize that a wholesale real estate investor can do what the retail market cannot and will not do. The wholesale real estate investor is prepared to:

* wait 2, 4, 6 or however many months are necessary to go through the process because he is not moving into the property;

*address subordinate liens,

* address homeowner association bills, water bills, back taxes, mechanics liens

* undertake any other non-physical repairs that must be done in order to get the house ready for the retail market, and

* if there are physical repairs, the investor can do those as well.

When the bank finally gets around to approving the short sale, the investor can be ready to close quickly. After obtaining bank approval and fixing any other non-physical repairs, the property can then be advertised to the retail market “Short Sale Approved - Ready to Close” and sold at its best retail price.

Maintain Higher Property Values

Many real estate agents will express a concern about accepting a lower investor offer for fear of hurting property values in the neighborhood. Their fear is misplaced. To the contrary, working with a real estate investor actually helps protect property values and keep them higher than if the real estate agent went directly to the retail market and tried to sell to a retail end-user.

Here’s what happens when a real estate agent does not work with a real estate investor and tries to sell directly to a retail end user. The “potential short sale” listing that cannot meet the expectations of the retail market scares away the “good buyers” – people with loans who can close. The listing sits on the market and the agents starts “chasing the market down” – lowing the price, lowering the price until it attracts a buyer in a lower tier price range. Each time the agent lowers the price in the listing service, the value of that house drops because it will not sell for more than what it was listing for.

The price having been dropped, buyers from a lower price range are attracted. Eventually, the price gets low enough that a retail end user makes an offer. The agent submits to the lender. Three months later even if the short sale offer is accepted by the bank, the retail buyer has given up in frustration and moved on. The agent now puts the house on the market as “short sale approved ready to close” and gets an offer quickly at the low short sale approved price.

Assuming everything else works out (which is a big assumption) the house closes at the low price. Housing values in that community now have a new retail comparable value at the low short sale amount. Home values are hurt by the agent’s short sale strategy.

Now let’s take it through with the investor involved. The short sale is approved at a low price for the investor, but unlike a retail end-user buyer, the investor immediately turns around and sells it at a higher price. The house can attract a higher price now because it is listed “short sale approved ready to close”. Buyers are eager to get their “piece of the foreclosure market” and come out of the woodwork to buy the house.

A new comparable value is set for the neighborhood which may be considerably higher than the comparable that would be set without the investor.

The Legitimacy of the Flip Profit

The difference between what the lender could get from the wholesale market and what the investor can command after restoring the property to the retail market is a well earned profit spread to the investor whose efforts enabled the listing to change from “Short Sale - Bank Approval Required” to “Short Sale Approved – Bring All Offers” because that change in the listing itself changes the demand and interest in the property in the eyes of the market.

Sophisticated listing agents and sellers recognize the value brought by the investor in undertaking “non-physical repairs”. A house may be unattractive to the marketplace because the need for physical repairs - an outdated kitchen, faulty plumbing, or old carpeting for example.

A house may also be unattractive to the retail marketplace because of the need for non-physical repairs as well. The inability of a seller to deliver clear and marketable title absent extensive time and effort to procure the lender’s short sale approval is a non-physical blemish that must be repaired before the property is ready to command the pricing of the retail market.

The party who undertakes and completes these “non-physical repairs” creates value the same way a wholesaler who updates a kitchen, fixes pipes or replaces carpeting also creates value.

It is the same value created by the middleman who delivers vegetables from a farm to a grocery store or a car dealer who earns a spread after buying a car wholesale from a trade-in and selling it later to a retail buyer.

By selling to a real estate investor, the comparable values for property in a market are improved. Even when the wholesale investor purchases the property at a steep off-retail price, the sole reason for the investor’s involvement is to flip the property quickly for a profit. By selling quickly for a higher retail price, property values are quickly returned to the retail market and pricing and the comparable sales values set by the retail sale are immediately returned to the higher retail values.

This ultimately serves the neighborhood, community and housing market far better than had the property taken a long slow journey towards foreclosure and ended up as a vacant REO listing.

Profit spreads between wholesale purchases and retail sales are not fraudulent nor are they unearned when the wholesaler is responsible for bridging the gap between the wholesale and retail markets.

"Property flips are not inherently illegal and not all transactions involving a rapid purchase and resale are improper. Legitimate property flips are acceptable transactions . . . . Some indications of property flip transactions that may be legitimate include . . . sales of properties that the property seller acquired at below market value after purchasing as a result of a . . . short sale . . . where any increase in the sales price over the property seller's acquisition cost can be clearly shown to be a result of the difference (if any) in the market's reaction to distress sales and typical arms-length market sales." Best Practices for Loans Involving Possible Property Flips. Freddie Mac Guidelines

Successful short sales do not attempt to cut out the middleman, but rather recognize the crucial role he plays. A middleman brings the carrot from the farm to the grocery and we all recognize that important role. Very few of us choose to travel directly to the farm to pluck our own carrots so as to secure a lower wholesale price on carrots. We recognize the value in delivering that carrot to the retail market even though nothing has actually been done to the actual carrot from the time it’s plucked from the ground until the time it hits the local store – it’s the same “unrepaired and unimproved carrot”.

Listing agents and their seller who truly understand how to best get their client’s house sold with a short sale recognize that the retail buyer is not prepared to do what it takes to get a wholesale price and the short selling lender is not willing or able to what the retail market demands and therefore recognize the value that the middleman brings to the transactions – buying at wholesale and selling at retail. These sophisticated agents embrace the middleman investor.

The current crop of investors, analysts say, are playing a crucial role in reviving the housing market . . . Somebody’s got to clean up those messes, and that’s what the good flippers do, observers say. They might try to sell right away or rent the houses for a while. Either way, it’s good for the whole neighborhood . . . “They’re vital,” [says a housing consulting firm] of the good flippers. “I can’t think of a conceivable way that we could turn the market around without them.” Bulletin 2009-24. Collins, Thomas R. Home Flippers Are Back in Florida. A Good Sign?

An offer from a well trained real estate investor supported by professional negotiators has a far greater likelihood of success than a retail offer from an end user buyer. The retail market largely ignores properties listed as “Potential Short Sale – Subject to Bank Approval” and those buyers who do pursue these listing usually lose interest or find another property during the time it takes to get the short sale approved.

Therefore, chasing the retail market directly increases the chance that a short sale will fail and that the seller will lose the property to foreclosure.

On the other hand, an offer from a well trained real estate investor who specializes in short sales dramatically increases the chance of success with the short sale for the seller and the listing agent. The investor can maneuver the intricacies of the short sale process, wait as long as is necessary, and close the gap between the realities of the short sale and the expectations of the retail market.

About the Author Ben Pargman is an attorney, author, real estate investor, national speaker and teacher on investment opportunities involving pre-foreclosure lender workouts known as short zales. His peers suggest he and his company have negotiated more successful short sale transactions than anyone in the country, and recognize him as the nation’s leading authority on short sales and the investment opportunities they present.
Mr. Pargman practiced Real Estate and Commercial Lending at a top Atlanta law firm for several years where he represented national lending institutions. Mr. Pargman is the founder and CEO of The Short Sale Service, Inc. a national service provider of residential real estate lender work-out negotiations headquartered in Atlanta, Georgia.

In addition to being a highly in demand teacher for the real estate education community, he has spoken for and chaired continuing education programs for the Institute of Continuing Legal Education in Georgia and Lorman Education Services.

Just like in any profession you have good, bad and the ugly. The good investor will work with an agent and fully disclose with all parties.

Neighborhood Stabilization Program Funds $1 Billion to States

John, Susan & Karen — Tue, 14 Sep 2010 00:53:10 GMT

Last week, U.S. Housing and Urban Development Secretary Shaun Donovan awarded an additional $1 billion in funding to all states along with a number of counties and local communities suffering from decreasing home values and the resulting blight caused by foreclosed abandoned homes. HUD’s Neighborhood Stabilization Program (NSP) will support local efforts to reverse the effects these foreclosed properties have on their surrounding neighborhoods. Funds will be used to purchase foreclosed homes at a discount and to rehabilitate or redevelop them in order to respond to rising foreclosures and falling home values.

Funds will be targeted to buy and renovate or demolish foreclosed homes, Funds can also be used to offer downpayment and closing cost assistance to low- to moderate-income homebuyers.

Dodd-Frank Wall Street Reform and Consumer Protection Act includes a $1 billion Emergency Homeowners Loan Program to be administered by HUD. This loan program will provide up to 24 months in mortgage assistance to homeowners who are at risk of foreclosure and have experienced a substantial reduction in income due to involuntary unemployment, underemployment, or a medical condition.

$208,437,144 in funding was awarded to Florida communities struggling to reverse the effects of the foreclosure crisis:

Sarasota – $1,037,697 and Sarasota County – $3,949,541

Manatee County – $3,321,893

Collier County – $3,884,165

Hillsborough County – $8,083,062

Tampa – $4,691,857

Details of the programs included in this act will be available in the coming weeks as the programs are launched. Visit: RealEstateExpertsFlorida for updates about the coming programs.

Mortgage rates hit low of 4.54 percent

John, Susan & Karen — Wed, 04 Aug 2010 16:02:45 GMT

For those who can qualify for a loan, this is the most affordable mortgage rates in decades.

Freddie Mac reported Thursday, that the opportunity to buy a home or refinance at this time is lost because of the tough economy and tight credit standards. However, for those who have secure jobs, superior credit and strong finances could do even better than the 4.54 average rates.

This is the lowest rate since Freddie began tracking rates in 1971. It also marks the fifth time in six weeks that the mortgage company has reported hitting a new average low.

Yet, you can get even lower if the borrower pays more than 20 percent down payment and or have the proper credit.

“Scores matter,” said Ritch Workman, co-owner of Workman Mortgage in Melbourne, Fla. He can offer a rate of 3.375 percent on a $200,000 Freddie Mac loan. The caveat: The borrower must put down 20 percent, have a credit score of 800 and pay $1,400 in add-on fees.

Similar loan is also advertised by Susquehanna Bank, which has branches in Pennsylvania, New Jersey, Maryland and West Virginia. However, the demands credit scores 720 and add-on fees of $ 750.

There are times that the best rates are offered by community banks or credit unions. They hold mortgages on their books instead of selling them to investors, said Greg McBride, senior financial analyst at Bankrate.com. Mortgage Bankers at other times, major banks or at least offer the best deals.

Remember that prices vary significantly, even a day, such as air tickets is a tourist site. And the key to finding the best rate is to shop around online and in person.

In both cases, the borrowers have good contracts. The last time home interest rates were lower loan was made in 1950, when most mortgages lasted just 20 or 25 years.

15-year fixed interest rate financing a popular choice for refinancing, also the lowest during the accounting year 1991. That rate fell to 4 percent from 4.03 percent last week.

Mortgage interest rates have fallen since spring. Yields on U.S. Treasury bonds have dropped as jittery investors seek safer investments. Rates tend to track the yields on Treasury’s.

Low rates helped spark a little activity in the weak housing market. Applications to purchase homes rose 2 percent last week from the previous week, the Mortgage Bankers Association said Wednesday.

High unemployment, slow employment growth and tightening credit have been difficult for many to buy homes. Home sales received a boost this spring when the government offered tax breaks homebuying, but the appeal is faded because it ended in April.

Home sales fell 5.1 percent occupied in June home sales rose last month but the month was lower and the second summit came after sales fell in May refinancing activity has increased over last month that owners look for more affordable monthly payments. But many cannot access loans nor have no money to pay closing costs. And the rates have been low for so long that many have already refinanced. To calculate the national average, Freddie Mac mortgage rates collected from Monday to Wednesday each week from lenders around the country.

Offers a five-year mortgages at 3.76 percent average rate, while the 3.79 percent a week ago. Mortgage offers a one-year floating rate fell to an average of 3.64 percent from 3.70 percent. Prices do not include add-payments or credits. One point equals 1 percent of the loan amount. National payment mortgages Freddie Mac report, on average, 0.7 points for all loans.

Strategic Defaults Not Such a Great Idea – Fannie Mae Getting Tough

John, Susan & Karen — Tue, 29 Jun 2010 23:44:41 GMT

Homeowners who walk away from their homes and default on their mortgages even though they can afford to make payments without trying alternatives to foreclosure may find they are unable to get a Fannie Mae backed loan for 7 years.
Some homeowners in neighborhoods affected by high rates of distressed homes are opting to strategically “walk away” from their homes due to the falling values.

Freddie Mac already has a 5 year wait period in place but a spokesman says this government backed agency will take a closer look at their policy.

Walking away from a mortgage without a good faith attempt to re-finance, apply to the HAMP or HAFA programs or sell with a short sale is bad for the community, destabilizing home values and brings down community quality. It’s also bad for the the government as both companies have been taken over by the government since September 2008. The government controlled companies have so far cost the taxpayers $145 billion. And the financial health of both continues to decline. Falling stock prices for Fannie Mae and Freddie Mac have resulted in a value below $1 which is the minimum required to stay listed with the New York Stock Exchange. Do we foresee another bailout?

Fannie Mae recently made the headlines when they announced they would assist homeowners affected by the gulf oil spill by suspending or reducing mortgage payments for up to 90 days while the loan servicer evaluates the impact of the gulf crisis. This is all well and good but the enormous task of managing this process could follow suit with the already bogged down system for modifying under-water loans. Let’s hope servicers are prepared to handle the flood of requests for help.

Also this month, Fannie Mae announced the homeowners affected by drywall problems may qualify for up to 6 months of forbearance on mortgage payments.
Servicers will have to evaluate on a case-by-case basis and require an inspection.
This program falls under Fannie Mae's "Unusual Hardships" policy that goes into effect in July 2010.

Fannie Mae also has Fannie Mae Tenant-in-Place Rental Policy for renters affected by a foreclosure on a property they are renting. If qualified a renter may sign a month-to-month lease. This program is helping to stabilize neighborhoods affected by high foreclosure rates. Renters may also be eligible for financial assistance if they desire to relocate.

Fannie Mae’s Deed-for-Lease Program allows qualified borrowers (or their tenants) to execute a lease of up to 12 months in conjunction with their deed-in-lieu of foreclosure, allowing them to remain in their home as a renter. Borrowers interested in exploring this option should discuss it with their mortgage servicer. To qualify both the property and borrower (or tenant of the borrower) must meet certain general qualifications.

Consumer education is the focus of the information provided here and on the blog http://www.RealEstateExpertsFlorida.com. Visit for current and reliable information for consumers, sellers, and buyers and other real estate professional.

$8,000 Tax Credit Program May Be Extended

John, Susan & Karen — Tue, 15 Jun 2010 22:46:04 GMT

Senate Majority Leader, Harry Reid, wants to extend the time limit for homebuyers to qualify for the $8,000 tax credit to September 30th. Current terms required the buyer to complete a purchase by June 30th.

The $8,000 tax credit boosted sales this past Spring. First time homebuyers were limited to an $8,000 tax credit while current homeowners were limited to $6,500 tax credit.

The proposal is presented as an amendment to a bill that would extend jobless benefits through the end of November. The Senate is expected to take up the amendment next week. For current information about current market trends and homebuyer programs visit: www.RealEstateExpertsofFlorida.com

Technorati tags: http://www.realestateexpertsflorida.com

Mortgage Rates at a Near All-Time Low!

John, Susan & Karen — Tue, 15 Jun 2010 22:44:27 GMT

Rates on 30 year fixed mortgages fell to the lowest rate this year at $4.72%.

The average rate on a 15-year fixed-rate mortgage hit 4.17 %, the lowest on records dating back to August 1991.

This news has not stimulated the mortgage application rate. According to the Mortgage Bankers Association, the rate was down 35% from last month.

Mortgage rates are closely tied to the unemployment picture and the turbulent stock market. Capital shifted into US Bonds lowers Treasury debt which tends to result in lower mortgage rates.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.

It would be expected that an extension of the homebuyers tax credit would stimulate the market. Rates were expected to rise after the program ended this spring, but have fallen instead over the past two months.

Investors and Home Buyers Enticed Back to the Condo Market

John, Susan & Karen — Thu, 06 May 2010 19:04:15 GMT

Recent legislation and dramatic moves by Fannie Mae and Freddie Mac could help relieve the condo crisis and help failing condo associations.

Since 2006, the value of condos in parts of Florida has decreased by half. Investors and their tenants have walked away from units and stopped paying association dues. This has crippled associations and resulted in poor maintenance and repair schedules and decreased values further.

Until recent changes in lending restrictions by Fannie Mae and Freddie Mac to allow those wanting to own and occupy a condo, the low occupancy and high association fee delinquency rates all but squashed the chance for getting a loan for the purchase. Fannie Mae and Freddie Mac, set up by Congress to buy mortgages from private lenders, had imposed lending restrictions in failing complexes because they were afraid of being hit by large assessments for maintaining the buildings if approved borrowers defaulted on their loan. This limited purchases to cash buyers. And “buyer beware” as the dues and assessments were likely to climb higher with increasing numbers of investor units were leased to tenants with no real investment in making a condo complex a home with value added.

Now Fannie Mae has been giving lending approval to dozens of buildings after assessment to determine if the cash reserves are there or at least a plan is in place to raise that cash. Almost 100 complexes from Clearwater to Homestead have been given Fannie's special approval. Fannie Mae already has added 35,000 units in the Miami area to its approved lending list and assessments continue. This will allow owner occupants who are committed to paying the dues to maintain a successful condominium.

At the end of March, Freddie Mac began waiving its lending rules and has started backing mortgages on units in troubled complexes if the seller's loan is already owned or securitized by Freddie.

4,300 units are now listed for sale in Southwest Florida. Sales could also be revived by end of session reforms under SB1196 that encourages investors to purchase blocks of condo units. Along with easing requirements for things like "retro-fitting" fire sprinklers the 50 bills included requirements for lenders to pay more in Past-due assessments on foreclosed properties and will allow associations to divert tenant rents to pay for delinquent assessments owed by unit owners. The bill creates the “Distressed Condominium Relief Act” to address provisions governing insurance coverage, association record keeping requirements, and tenant obligations to the association.

There is also “bulk buyer” language addressing issues surrounding investor purchases. Investors may have walked away adding to the problem but as the pendulum swings back, investors will also be part of the solutions.

It sounds like some of the burden will be parsed out to all parties involved. If a bank forecloses or accepts a short sale the lender has been hard-pressed to pay much more that 6 months of dues to release a lien and in case of a foreclosure, the association lien will be foreclosed on as well as the owner. Now, perhaps along with some recovery of loan amounts the lender will pay the association some of the delinquent dues.

The SB 1196 provisions will also allow associations to divert tenant rents to pay for delinquent assessments owed by unit owners.

The bill does not require that the tenant pay any unpaid past monetary obligations of the unit owner thereby protecting the tenant from any unpaid past monetary owner obligations.

Senate 1196: Relating to Community Associations [CPSC]

Is available for public review at http://www.flsenate.gov. Follow current updates relating to real estate market changes at http://www.realestateexpertsflorida.com.

Susan Phelps, Investor, writer, & blogger

Short Sale Flips and Your Taxes

John, Susan & Karen — Fri, 23 Apr 2010 14:59:16 GMT

Different real estate investing strategies have radically different impacts on tax returns.

Those who buy and hold property for over one year benefit from qualifying the income from rentals as passive income. Depreciation and many maintenance expenses qualify as deductions against any rental income. When property held for a year or more is sold, the gains are taxed as long term capital gains at a tax rate of 15% (at least for now). Consult your tax advisor for current law and expected changes.

On the other hand, an Investor who is flipping property must report the sale as income and may also be required to pay FICA as a self-employed tax filer. FICA will be due up to the first $106,800 earned in fiscal year 2009-2010. Above that amount no more FICA is required. Check the recent tax changes to see if that will change for 2010.

The “dealer” designation comes into play when the intention of a real estate sale is to immediately resell the property and more than one house is sold in a year. You do not want to be designated by the IRS as a dealer. That is a lifelong designation that disallows capital gains treatment of real estate investments and precludes you from doing 1031 like kind exchanges (a tax deferral method used by investors to defer the tax on gains on real estate as long as it is immediately reinvested in a property of greater value). The best way to avoid being personally designated as a dealer is to do all of your transactions through an entity like an LLC or Sub S Corp. Your accountant can help you to choose the right entity. You should have one entity for all of your flips and at least one for your long term hold properties. Check with your accountant or tax attorney to see how to avoid being labeled as a dealer.

It is not uncommon for Short Sale Investors to be required to pay 38% to 55% of their total earnings in taxes because of Alternative Minimum Tax (AMT) add-ons for higher income-earners. Unless you have a sophisticated business entity/entities set up you will find Uncle Sam at the closing table every time.

To avoid any unfortunate surprises either readjust withholdings for FICA with each check you receive, or hold back the amount you or your accountant expect will be required in a special bank account so you will have it in hand come tax day. This “play it safe” strategy requires some discipline and guidance. Perhaps the best strategy is to hire a book keeper and set up operational procedures to make this an automatic process.

On the good side, your Short Sale career is bound to mean higher income than you had in the past. You will need to keep an eye on your tax planning so that you don’t get a surprise at tax time. Always consult your tax advisor for current tax law and the best way to maximize your earnings. Stay in a positive mindset and maybe even consider yourself fortunate that you need to pay more taxes as the years go by. That just means you have made more income.

Parts of this article are attributed to Bob Massey. Visit our website www.RealEstateProsFlorida.com for a link to our blog with current real estate information and resources for Investors & Realtors, Sellers & Buyers. Consult us when you have a property to sell or looking to buy.

Better News on Home Values

John, Susan & Karen — Mon, 12 Apr 2010 15:04:54 GMT

The Case-Schiller Home Prices Index showed another positive jump for the eight straight month in January. The seasonally adjusted prices increased by .4% for the 10 city index and .3% on the 20 city index. Both showed a decline on the unadjusted indexes due in part to the bad weather in many parts of the country.

On the negative side, Charlotte, Las Vegas, Seattle, and Tampa experienced prices that reached new index lows. In Tampa, prices are down 42% from their high levels, and Las Vegas has troughed at 55.8% from its peak. On the more positive side, San Francisco and Minneapolis are 15.2 percent and 12.9 percent ahead of their lowest points respectively.

Case-Schiller economists warn, however, that some of the forces that caused home values to start to rise are on course to be reversed, particularly with the end of the first time and move-up homebuyer tax credits. It is hard to say whether price gains can be sustained without these programs.

Keep your finger on the pulse with Bob Massey and http://www.RealEstateAgentsShortSale.Info/

Florida Looks for Money to Clear Foreclosure Backlog

John, Susan & Karen — Mon, 12 Apr 2010 15:03:44 GMT

Florida, like other judicial foreclosure states, is experiencing a serious backlog of cases and needs additional funds in order to clear the log-jammed court dockets. The Florida Courts Administration has asked the legislature for an extra $9.6 million in order to hire more case managers and judges in order to clear the current glut of lis pendens and final judgment cases in foreclosures.

There are an estimated 500,000 cases awaiting adjudication in Florida, and it normally takes a year to 14 months to clear these cases. It is estimated that only 18% of the foreclosure cases in Miami have been completed.

The Florida Bankers Association has introduced a bill which would allow non-judicial foreclosures in the state unless the homeowner requests a court appearance. The non-judicial foreclosure could reduce the process to 90 days.

Mortgages to Exceed Value until 2015 to 2020

John, Susan & Karen — Mon, 12 Apr 2010 15:00:35 GMT

First American CoreLogic has estimated that even in the healthier markets that are now beginning to heal from the steep price drops of the last three years, homeowners currently with underwater mortgages will continue to have mortgages that exceed value until late 2015.

By the 4th quarter of 2009 First American CoreLogic estimated that over 11.3 million residences with mortgages had negative equity. That’s 24% of all U.S. mortgages.

By using a subset of mortgage holders, CoreLogic was able to project the length of time it will take for the average homeowner to again reach positive equity. The typical borrower will see the problem disappear toward the end of 2015 or early 2016, while those in severely depressed markets such as Detroit may not see positive equity again until 2020.

Because negative equity is highly associated with mortgage default, this is a strong indication that those of us investing in Short Sales will see a booming business for at least the next five or six years.

Government Official Says HAMP is not Working

John, Susan & Karen — Tue, 30 Mar 2010 20:03:15 GMT

Neil Barofsky, special inspector general for the Troubled Assets Relief Program (TARP), admitted that far fewer homeowners will receive assistance under the HAMP program and other government efforts to ease foreclosure than originally estimated. Barofsky estimates that only 1.5 million to 2 million homeowners will be helped as opposed to the 4 million originally expected to receive foreclosure help from the government. Barofsky does not believe offering modifications is a meaningful goal of the foreclosure program, since so few have actually been helped and many who have received modifications are redefaulting. Herbert M. Allison, assistant Treasury secretary for financial stability said the program should be measured not just by the number of permanent modifications made, but also by the assistance given to provide Deed in Lieu of Foreclosure and Short Sale assistance. Obviously, the enhancements to the HAMP program announced on March 26 are an indication that new strategies and incentives are needed if millions of people are going to be helped to avoid foreclosure. Bob Massey

New Policy on Foreclosures and Defaults for seniors intended to be Preventive says FHA

John, Susan & Karen — Tue, 30 Mar 2010 19:56:48 GMT

Reflecting the extreme sensitivity of the issue, explanations, retrenchments, and denials are being voiced in response to an RMD story earlier this week about HUD’s intent – or not – to foreclose on seniors whose properties have gone into “technical” or other default.

“There will be some policy forthcoming on foreclosures and defaults, intended to be preventative,” according to Meg Burns, director, FHA Office of Single Family Program Development, speaking with RMD prior to leaving for a Central American trip next week. While refusing to say when the policy would be issued, Burns said it would be “before the end of the summer.” She noted that HUD will invite industry, lender and consumer representatives “to talk through” the problem of defaults, prior to issuing the policy.

On Tuesday this week, a HUD spokesman said any reports that HUD would be permitting foreclosures on reverse mortgage holders in arrears on taxes, insurance or mandated repair work were “not true.” He stated that “FHA regulations do permit a lender to advance funds to cover tax and insurance costs, to protect FHA’s interests in the lien – on either a forward or a reverse mortgage. When lenders make these payments, FHA will reimburse them for these expenses through the claim process. There is no policy proposal that would change the nature of the existing regulations.”

But, even this statement was deemed “murky” by one reverse mortgage servicing professional, who said the industry has been trying to solve this issue “for years. Nobody wants to be first one to foreclose on a senior,” he explained, adding that the government should keep picking up default costs “indefinitely, because it solves a gargantuan dilemma,” meaning if they did not, seniors “could be thrown out on the street.”

There is some talk in the industry, he went on, that HUD may seek to “split the difference” in an upcoming ruling on the matter, allowing one or two advances for defaulted payments, but not a third. “I believe in certain instances they will allow a foreclosure where there are certain levels of severity.”

Acknowledging the current HUD policy, another servicer said, “HUD allows a lender to add tax and/or insurance advancements to the loan balance. However, if the loan is in default it cannot be assigned to HUD and this is the issue.” Things get a lot more complicated, she went on, “with [Ginne Mae] as the investor instead of [Fannie Mae],” because Fannie “handled a lot more of the back-end responsibilities that Ginnie requires the lender to [now] handle.”

A bail-out in disguise?

John, Susan & Karen — Thu, 25 Mar 2010 14:07:20 GMT

As part of an agreement with state attorneys general to settle charges over high-risk loans made by Countrywide, Bank of America will begin writing down loan balances for homeowners that meet eligibility criteria.

The giant lender expects this to help approximately 45,000 of it's mortgage holders to be eligible.

To be eligible the borrower myst be qualified for the federal government's $75 billion loan modification program. Borrowers must be 60 days behind on their mortgage payments and demonstrate financial hardship. Certain mortgages would be reduced by up to 30% if the loan balance is more that 120% of the home's value.

This move by a lender that may set the precedent for other lenders to follow goes beyond the Home Affordable Modification Program (HAMP) but eligibility for the principal reduction program requires eligibility in HAMP. HAMP has been largely ineffective in helping homeowners stay in their homes and in fact some homeowners that have applied have found that their credit scores have dropped as a result.

"The centerpiece of these enhancements is a program of earned principal forgiveness that addresses severely underwater mortgages with some of the highest rates of delinquency," Barbara Desoer, president of Bank of America Home Loans, said in a statement. "At the same time earned principal forgiveness helps homeowners, it also recognizes and addresses the interests of mortgage investors by ensuring that forgiveness is tied to the homeowners performance, reducing the probability of a future default under the modified terms."

How will this program help the bank's balance sheets? It is speculated that the mortgagers are not planning on paying off these loans and in fact are strategically walking away from homes. So, what do they have to lose? Oh yes....in addition the government may need to loan money to banks that participate. This is to cover the losses. And other major lenders such as Wells Fargo and CItiMortgage are offering mortgage write-downs to certain borrowers. Is this another bail-out in disguise?

Read more about how homeowners are strategically walking away from their homes at www.realeastateexpertsofflorida.com. Stay current with reliable information and commentary by a team of experienced professionals in the Florida Gulf Coast area that keep their thumb on the pulse of the housing market.