You as a struggling homeowner might be thinking, I don’t have or pay mortgage insurance, and you are correct! This is lender paid Mortgage Insurance, and it will be the death of thousands of short sales this year!

Here is an example of what I’m referring too… Let’s say that you purchased a home in 2005 for $500,000 and you did an 80/20 loan ~ financing a total of 100% of the purchase price (an 80% first of $400,000 and a 20% second of $100,000). The benefit of structuring your mortgage in this manner was that you didn’t have to pay for PMI (Private Mortgage Insurance). PMI covers the lender or leverages their risk of loss on a higher loan to value if you as the borrower default. You as a borrower could typically save some money, come out with a lower monthly payment and by financing the entire purchase amount without having the M.I. you had a greater tax deduction.

Moving forward to 2011 – we are just now starting to see borrowers that are in the short sale negotiating phase being asked for very unrealistic contributions, in addition to being asked to sign 5~10 year promissory notes on these 2nd mortgages. In the past we have been able to work around the contributions, and in some cases negotiate the promissory note way down or even have it removed. Right now, that is not the case! PMI, TPI, and other Mortgage Insurance Companies are literally forcing the borrower and the 1st lender into foreclosure, and they are not happy about that.

Here is the behind the scenes challenge right now… The first lenders won’t allow the second lenders to get more than what they are paying them, or in certain cases won’t allow the buyer or borrower to pay then 2nd lender more money as the 1st lender is typically taking a larger loss – and they would then want the money. We are seeing so many sellers that simply don’t have the funds to bring in, can’t sign a promissory note, or in most cases just can’t do that because the first lender won’t allow that – the only alternative is for the seller to then go with a deed in lieu of foreclosure. The deed in lieu sounds a little better than a foreclosure right? Well most of time a deed in lieu of foreclosure is not an option because of marketing time, or because there is a 2nd mortgage on the property or other tax liens, IRS liens, etc.. and If there are, the 1st lender then has to accept financial responsibility for those liens should they accept a deed in lieu… so really the only thing left is the foreclosure.

So the million dollar question really is… How is the Mortgage Insurance Company helping the 2nd lenders secure more money or protect their losses? In most cases the are wiped out in the foreclosure making this a total loss to them, and then the insurance company would then have to write a bigger check to the investor. How is the M.I. company coming out ahead on this? Are they being subsidized? Is there money transferring hands behind the scenes that we are not privy too? Who is looking out for the innocent victim here which is the seller that is a true hardship, the borrower who has done everything right in order to make sure that they minimized damage to their credit, the property, values to the neighborhood, YOUR neighborhood?

This just isn’t right, and I would love to hear your thoughts and opinions on this… all you have to do is leave a comment below.

Something has to change and it has to change quickly!

The Internal Revenue Service says it’s trying to help people who are struggling to pay delinquent tax bills, so it’s reducing the number of property liens and easing rules for small businesses to enter into installment agreements.

As the economy has soured, the agency has filed an increasing number of liens on property owned by delinquent taxpayers. The IRS filed nearly 1.1 million liens in the fiscal year that ended in September, compared with 426,000 in 2001.

The steps announced Thursday will double the amount of back taxes a person can owe to $10,000 before facing a possible lien. Previously, taxpayers who owed at least $5,000 and ignored numerous IRS notices would get an automatic lien placed on their property.

The change will make it easier for people to have liens withdrawn once tax bills are paid or they start paying under certain installment plans. More taxpayers can settle their tax debt for less than they owe, if they meet certain income and debt requirements.

Small businesses with larger delinquent tax bills will be eligible for 24-month payment plans. Previously, the tax bill had to be less than $10,000; now it’s up to $25,000.

The agency believes the changes “will help people trying to get right with their taxes and we think it strikes the right balance to protect the interests of the government,” said Doug Shulman, the IRS Commissioner Doug Shulman said.
Read the original article here

The first step in the homebuying process is to find out what you can afford to pay for a house, condo or co-op. This will depend on the amount of cash you have available for a down payment, your credit, income, assets and overall financial situation.
Mortgage qualification is easier for buyers who work as employees whose income can be easily verified. Self-employed individuals or buyers with income from investments may find the qualification process more difficult.

A wrinkle in the financing end of the homebuying process is that it’s not as easy to get a preapproval letter from your mortgage broker or loan agent as it used to be. As of Jan. 1, 2010, the Department of Housing and Urban Development (HUD) began requiring lenders and mortgages brokers to issue a binding Good Faith Estimate (GFE) within three days of receiving a loan application.

Before then, buyers shopped around for a mortgage. When they saw a house they wanted to buy, they asked their loan agent or broker to provide a preapproval letter to accompany their purchase offer. The loan person would run a credit check and verify the buyers’ income and assets without, in many cases, taking a formal loan application. On the basis of this information, a preapproval letter was written.

Read the full article here

Additionally; this article fits in well with the Orange County Market Update Video that we shoot weekly, and it’s our tip of the week. Check out our Anaheim Hills Market Update here…

The Treasury Department has revamped its short sale program by easing income restrictions and documentation requirements for homeowners facing foreclosure. The changes are effective Tuesday, Feb. 1.

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Changes made under Treasury’s Home Affordable Foreclosure Alternative (HAFA) program make incentive payments more attractive for second lien holders and for borrowers completing a short sale, or deed in lieu transaction.

Travis Olsen, chief operating officer at Loan Resolution Corp., expects the changes will lead to a big jump in HAFA enrollment. “A lot more people are going to qualify for the program,” he said. “Elimination of the debt-to-income requirement along with the relaxed non-owner occupancy rule makes it easier for those who do qualify to get their short sale successfully closed.” LRC is a Scottsdale, Ariz., vendor that specializes in short sales.

Delinquent homeowners entering the program only have to prove that they used the house as their primary residence at some point in the last 12 months. Previously, it was the last 90 days. Home owners can qualify for the HAFA short sale program if they have moved across town and the property is vacant or rented to a non-borrower.

Borrowers are entitled to a $3,000 relocation incentive payment when a short sale or DIL is completed. When a deed in lieu transaction is completed, the servicer can make the incentive payment even if the borrower stays as a renter under the HAFA changes.

Servicers will have the option to pay the borrower a relocation incentive either upon a successful surrender of title or when the borrower vacates or re-purchases the property at a future date, according a TARP Inspector General report.

Treasury has retained a $6,000 cap on paying off second lien holders but removed a separate cap on paying more than 6% of the unpaid principal balance.

Olsen noted that second lien holders generally want 10% of the UPB to extinguish a home equity loan. Previously, the HAFA cap limited the payoff to $3,000 on a $50,000 HEL. Now, the servicer can pay the $5,000 to satisfy a 10% demand.

The original article can be found by clicking here…

California home sales rose in December to their highest level since May, according to a report Friday from the California Association of Realtors, as the inventory of unsold homes dwindled.

December’s sales were up 5.9 percent from November’s revised figure of 491,590 but were down 6.8 percent from the revised 558,840 of December 2009.

The unsold inventory index for existing, single-family detached homes was 5 months in December, down from 6.2 months in November but up from 3.8 months in December 2009. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Read more: California home sales hit 7-month high in December | Los Angeles Business from bizjournals – Full Story – Click Here…

To qualify, homeowners must meet income and other restrictions and their loan servicer must participate in the program. As of Friday, only three servicers had signed up, but CalHFA expects to have up to 10 by the end of this week.

Read the full article here

A very controversial topic right now… what is the benefit to stay current on your mortgage? What happens if the borrower is unable to get a job thereafter? The challenge that I have is that there are no principle reductions or streamline refinance programs available for those that are in good standing, or those on the edge or becoming late or behind due to job curtailment, loss of income, reduced bonuses, changes in interest rates… etc. Very unique times we are experiencing right now. I’m curious, what are your thoughts?

While foreclosures climbed 2% nationally, California saw a 14% drop. But California’s high unemployment rate and resetting loans mean the fall in foreclosure activity could be brief.

Fewer Californians grappled with foreclosure last year, bucking a national trend and giving homeowners fresh hope that the state’s housing market could be on the mend.

Trash litters the front yard of a bank-owned home in Phoenix. Arizona was among the states hardest hit by the housing meltdown. (Joshua Lott, Reuters / January 13, 2011)

Fewer Californians grappled with foreclosure last year, bucking a national trend and giving homeowners fresh hope that the state’s housing market could be on the mend.

The 14% drop in foreclosure activity contrasted with a 2% rise nationally, according to data tracking firm RealtyTrac. Analysts noted that California’s housing market was among the first to falter and may now be among the first to recover. Home prices here hit bottom in April 2009, and have gradually risen since then.

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If you follow my blog at all… I have a few questions for you. How can anyone know what media forum is correct? Did you see my post yesterday about 1 million homes foreclosed in 2011? While this article is more geographically specific, I would question how accurate is this data, and is it really an issue or a concern to me?

Rather than have uncertainty in the future market, ask yourself, how long am I going to live in my next home? How comfortable am I with my current job, with my current mortgage or rent payment? We have no control over the market; however we as consumers have full control over our individual plans, thoughts and actions.

Foreclosures were at a record high in 2010, and more than 1 million people lost their homes, even as notices started leveling off during the end year.

NEW YORK (CNNMoney) — Foreclosures were at a record high in 2010, and more than 1 million people lost their homes, even as notices started leveling off during the end year.

In total, there were nearly 2.9 million foreclosure notices filed during the year, according to report released Thursday by RealtyTrac. That was a record high, but just 1.7% above 2009.

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A few key comments in the article address the temporary hold on foreclosures during the 4th quarter of last year, which will lead to increased foreclosure activity 1st and 2nd quarter this year, along with the challenges the banks are experiencing with squatters moving into the vacant properties. Great information!!!

Sales of existing homes jumped in December, marking the fifth month of gains in the past six months, based on an industry report released Thursday.

NEW YORK (CNNMoney) — Sales of existing homes jumped in December, marking the fifth month of gains in the past six months, based on an industry report released Thursday.

Previously-owned home sales climbed 12.3% in December to an annual rate of 5.28 million, from 4.70 million in November, according to the National Association of Realtors.

Read the full story here

Great information; however this is not local. Experience shows that the Orange County market has one of the quietest Decembers in years past. January is off to an amazing start and it’s expected that the unit’s sold this month will be close to record highs. What does this mean to you? If you are an entry level buyer in Orange County, be prepared. Be Pre-Approved and be in a position to make a decision when the time comes. If you have specific questions about what you will need to do, simply send me a quick email and I’m happy to help you any way that I’m able.