The Obama Administration has announced the launch in the next several weeks of two new government backed aid programs .  These two new programs are being launched by the Federal Housing Administration.  The first initiative is a refinancing effort designed to help homeowners keep their homes.  The second initiative is an emergency loan for unemployed homeowners, again designed to help them keep their homes while they seek employment.

Sales of new homes unexpectedly dropped in July to the lowest level on record, signaling that even with cheaper prices and reduced borrowing costs the housing market is retreating.  Meanwhile, second quarter home prices dropped 1.6%, according to the Federal Housing Agency.  This follows a first quarter price drop of 3.2%.  Many states, including North Carolina, are on a record pace for foreclosures this year.

Some people are asking for the reinstatement of the First Time Home Buyer Tax Credit that ended April 20, 2010.  I personally do not think that this will help the housing market rebound.  The previous tax credit sacrificed future buyers for current sales.  Pulling ahead those future buyers does not help the housing market.  New buyers need to be created.  Unemployment needs to be lowered through job creation.  Maybe the Obama Administration should focus more on creating jobs than bailing out companies with bad business models and mismanagement.  

It is the large supply of bank owned properties that is driving the market down.  As more houses are foreclosed on, don’t expect housing prices to recover any time soon.  Helping struggling homeowners keep their current house will help stabilize housing prices.  Lenders need to get creative when it comes to helping homeowners in pre-foreclosure through more aggressive loan modification and short sale practices.   And if you are one of the many considering a “strategic default” on your current home, then “man up” and do what you promised to do when you signed your mortgage documents…. make your payments because you can!

However, the foreclosure rate in North Carolina increased during that same period.  North Carolina saw a 10% increase in foreclosure filings in the first 6 months of 2010 versus the last 6 months of 2009.  Unfortunately, the state continues on its record pace for foreclosures in 2010.  Some of the blame could be placed on a higher percentage of “second homes” found in the North Carolina.

One would think that the presence of historically low mortgage rates and an increased willingness of lenders to complete short sales on distressed properties would help stem the tide of foreclosures.  But the failure of the government programs, such as HAMP and HAFA, and the lack of interest by retail buyers to purchase short sale homes due to the amount of time it takes to complete the short sale process are keeping the foreclosure rate at record levels.  It would also seem that the one group of buyers that ARE interested in purchasing houses right now are being kept from doing so by lender biases and the government’s often misguided attempt to protect consumers. 

Don’t get me wrong.  I am in no way against consumer protections.  As with any industry, there are bad people who are real estate investors that seek to take advantage of homeowners who are often in a desperate situation.  But to handicap good investors with the proper intentions from pumping money into the housing market and buying, for example, the distressed properties that need repair and will not qualify for traditional loans, is counter- productive to a housing recovery.  Many investors have the knowledge and capital to sit and wait through the entire short sale process, often taking on the bank negotiations themselves.  Only to have a lender come back and tell them they have to hold the property for an arbitrary 30 days or 90 days.  What exactly does that accomplish?

Until the lenders come to their senses with  beneficial loan modifications or stop picking fights with investors and others actually willing to BUY houses, I am afraid we will see the foreclosure rate continue to climb through at least 2011.  Some experts say there are as many as 5-8 million people in some stage of default right now that are at risk of losing their homes.  Can the housing market really handle twice the number of foreclosed houses that are currently on the market?  What are your thoughts?

North Carolina will build on its programs to fight foreclosure properties with a fresh program of federal funding by the Obama administration amounting to $159 million.

Majority of the funds will be utilized to make unemployed workers current on their mortgage payments when they try to find new employment or are getting training programs for new jobs. A part of the money will be utilized for refinancing a costly second mortgage of home owners or for loan modification.

North Carolina is among five states awarded a pool of $600 million intended to help states troubled with unemployment to fight foreclosures for sale. North Carolina was exceeded only by Ohio in terms of funds received as it fought a rate of unemployment of 10% in June. North Carolina officials had to put forward a proposal to the Treasury on how the funds would be utilized.

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The top three counties for foreclosure filings are Mecklenburg, Wake and Guilford Counties.  New Hanover County has had 1126 foreclosure filings through the month of July.  The remaining counties in the top ten are listed below.

Forsyth County – 1449
Union County – 1179
New Hanover County – 1126
Durham County – 1109
Buncombe County – 1073
Gaston County – 1068
Cumberland County – 961

Now, more than ever, it is important to support the various legislative measures in place to help curb foreclosures, such as Housing Finance Agency’s Home Protection Program and the NC Commissioner of Banks Foreclosure Prevention Project.  Lawmakers have also worked diligently to pass Senate Bill 1015, The Homeowner and Home Buyer Protection Act last session.

Foreclosures are a national problems as well, with rates across America up 4 percent in July. Forecasters now believe foreclosure rates might not peak until next year.

What exactly is a “short sale“?

A short sale is when a lender agrees to take less than the mortgage amount to satisfy the lien.

Who is the ideal candidate for a short sale?

• Owner Must Qualify For Relief of Debt
• Owner Must Show Some Financial Hardship That Is Not Temporary
• Owner Has To Owe More Than The Property Is Worth

It is important to understand that this creates a deficiency amount which can be handled in a number of ways. When we negotiate our short sale packages, we ask for the accepted offer to satisfy the lien “in full”. This means that the deficiency balance is settled as part of the accepted short sale offer and alleviates you of any further obligation to the lender. However, if the lender will not accept the offer as “paid in full”, then the lender may ask for a promissory note for the remaining balance on the loan. If no payment arrangement is made, the lender may seek a deficiency judgment against you.  Absent a deficiency judgment, you will be sent an IRS form 1099C.  This form is required any time there is a forgiveness of debt and the amount listed on the 1099C may have to be treated as income.   Check with a tax professional to determine if the amount forgiven will be subject to federal taxes.  In most instances where insolvency can be proven, the 1099C amount will not need to be treated as income.  With that being said, to this point we have not had a lender deny our offer as “payment in full” for their mortgage obligation, triggering only a 1099C from the lender.

Because of the sheer volume of foreclosures, many companies have started offering “short sale services”. This is not the time to stake your financial health on an inexperienced short sale provider. There are numerous  forms and documents that make up a successful short sale package. It is not unlike the process you went through to qualify for your original mortgage. Our experience over the years has shown us several tricks of the trade that have allowed our loss mitigators a high rate of success in getting our short sale offers approved.

Remember, a foreclosure will stay on your credit for seven years. It will decrease the likelihood of getting credit in the future and if you do get a loan, it will drastically increase the cost of that loan due to higher interest rates. One can only imagine the impact that the stress and anxiety creates within a family environment.  If a short sale is successfully negotiated, you may be eligible to purchase another house in as little as 2 years. 

Call us today at 910.538.3663 to schedule a FREE, Confidential and No Obligation Consultation or fill out the form below.

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By Jean Folger of Investipedia

Many people have either gone through foreclosure, a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership of the property, or know someone who has.

RealtyTrac released its U.S. Foreclosure Market Report on April 15 for the first quarter of 2010. The report calculates foreclosure filings, including default notices, scheduled auctions and bank repossessions, and showed that 932,234 properties were involved in the first quarter. That was a 7% increase from the last quarter of 2009 and a 16% increase from the first quarter of 2009. An astonishing one in every 138 U.S. housing units received a foreclosure filing during the quarter. If you or a loved one are facing foreclosure, make sure you understand the process. While it varies from state to state, there are normally six phases of a foreclosure.

Read the rest of the article here…..

WASHINGTON (AP) — The Obama administration’s flagship effort to help people in danger of losing their homes is falling flat.

More than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. That exceeds the number of people who have managed to have their loan payments reduced to help them keep their homes.

Last month alone,155,000 borrowers left the program — bringing the total to 436,000 who have dropped out since it began in March 2009.

About 340,000 homeowners have received permanent loan modifications and are making payments on time.

Administration officials say the housing market is significantly better than when President Barack Obama entered office. They say those who were rejected from the program will get help in other ways.

But analysts expect the majority will still wind up in foreclosure and that could slow the broader economic recovery.

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The famed US businessman — nicknamed the Sage of Omaha for sought after investment acumen — acknowledged in testimony to the Financial Crisis Inquiry Commission the rating agencies had “made the wrong call” by giving overly positive grades to mortgage- related products before the housing market collapsed.

Speaking in New York he said the US had been in “mass delusion” for not recognizing that the housing market had overheated and said he counted himself among those who didn’t see the crash coming.

Continue Reading The Story Here…

Let’s get a couple of the more questionable options out of the way first: deed-in-lieu and loan modifications.

A deed-in-lieu is nothing more than a voluntary foreclosure: it saves the bank time and money,
but your credit still gets hit with the full ramifications of the the foreclosure.

What about loan modifications? The government’s Home Affordable Loan Modification Program (HAMP) promotes loan modifications as being a viable way to deal with the foreclosure crisis. Yet the current rate of success for those loans to go from trial to permanent modification is 4 percent. Using California as an example, roughly 140,000 trial loans have entered into the modification process; however, only 5,600 loans will be modified based on current success (4%). California is on pace to file 475,000 notices of default for 2009. Those being helped are few and far between given the current numbers. 

Here are some more likely options: 1) Option one: stay in the house as long as possible, using bankruptcy procedures to stall the courts until the foreclosure auction date. It doesn’t prevent the foreclosure, but it does let you stay put at the lowest cost.

2) List the house for the amount of the debt and hope someone comes along who loves the house so much that they will pay your asking price before the auction date. You can dream all you want, but the odds are that nobody will pay more than the house is worth, and you’ll end up going back to option one.

3) List the house as a short sale, find a buyer, and make the buyer wait out the short sale process in order to buy the house at a discount. Many real estate agents recommend this solution because it sounds like the easiest thing to do while still earning their commission, but it’s a little more complicated than that.

One complication arises when the agent has to convince the buyer to not only sign the purchase agreement, but to wait several months for the bank to give their approval. The typical buyer needs something that is already available.

Another complication comes up when the short sale negotiations get sidelined because the agent and/or the seller aren’t fully educated on managing the process. The lenders are very well-trained in loss mitigation and debt collection, and if you don’t completely understand the short sale process and how to get through it, they’ll take advantage of that in a heartbeat.

I’ll give you an example. Did you know that deficiency judgments and post-sale promissory notes can be avoided in some cases? You can know the basics of how the process is supposed to work, but shouldn’t you learn how to work the process? Wouldn’t that alone be worth it?

4) List the property as a short sale, but with a Real Estate Investor.  A real estate investor will be able to identify a buyer from their list of investors; someone who is willing to wait out the short sale process. An investor will also be able to negotiate with the lender so that the end result is the best possible solution for the homeowner. Realtors still receive their commissions. 

Obviously the last option is ideal, and creates a win-win situation for everyone .  The above are not the only options that are available, but are the most common.  As an experienced Real Estate Investment firm that has successfully negotiated short sales for more than 5 years, we have the experience and practical knowledge to increase the likelihood of a successful outcome for you, the homeowner.  As an educated and competent investor we also know how to use contracts and the lender’s own paperwork to get the best results for the homeowner in trouble. 

If you would like a FREE, No Obligation Consultation of your situation, call us at 910.794.8104 or fill out the form here.

April 5th marked the start date for the newest government program designed to assist homeowners rid themselves of over leveraged homes through the short sale process. The government calls this program HAFA, or Home Affordability Foreclosure Alternative. This actually the third version of the HAFA program with updates designed to enhance the appeal to homeowners. If I were a homeowner, however, I would be sure to carefully read the letter that your lender sends you prior to signing up for the HAFA program. I have outlined the details of the letter below. I have also placed a link to the letter at the bottom of this post.

Let’s start with the responsibilities that you will have as a homeowner under the HAFA program. You first list your home with a Realtor. This Realtor can be of no relation to you and cannot have any business interest with you. It is what is called an Arms Length Transaction. Also, if you, the homeowner, are a Realtor and hope to list your property under this program, understand that you cannot receive a commission as a result of the sale of your home. The Realtor you work with lists the property at a sale price set by the Lender. The home must sell within 120 days, unless the lender deems that additional time is allowable, in which case you have a maximum of 360 days. Your other responsibilities while under the program are:

• You must make payments, due on the 1st of each month, that are a total of 31% of your gross monthly income for the length of the time you are in the program.
• Keep your house and property in good condition and make every effort to allow your Realtor access to show the property.
• Be able to provide clear title to the buyer of the home. If you have any additional mortgages or other liens tied to the title of the home then they have to be cleared from the title prior to closing. This means that you either have to pay them off in full or YOU have to negotiate the debt with the lender to get them to take a lesser amount as payment in full. Under this program, you must make sure other lien holders will agree not to pursue other legal action related to the pay off of their lien, such as a deficiency judgment. The HAFA program will pay up to 6% of the balance of each lien from the sale proceeds, but will only pay a maximum amount for all liens of $6000. For example, you have a second mortgage with Bank of America that is for $50000. You will have to convince the bank to release your liability on the mortgage for $3000 or less in order to provide clear title to the buyer.
• You are authorizing the sharing of personal financial information about your mortgage, credit history, subordinate liens, and plans for relocation with your broker and other third parties that could be involved in the transaction including employees of the United States Treasury and its financial agents, Fannie Mae and Freddie Mac.

The difference between the amount you owe on the mortgage and the sale price of the home will be reported to the IRS through a 1099C filing as a debt forgiveness. In some cases, debt forgiveness can be taxed as income. In addition, the program allows you to receive up to $3000 for relocation expenses. This may also be reported to the IRS as a 1099C. They will also report your mortgage as “settle for less than full amount”.

If the short sale is not approved or you receive no offers on the property, then, by signing up for the program, you agree to a “deed in lieu of foreclosure”. This is nothing more than a voluntary foreclosure and carries the same weight as a foreclosure. Even in the event of a deed in lieu of foreclosure, it is still your responsibility to provide a clear and marketable title to the lender.

You can download a copy of the letter that they send to homeowners who may be eligible for the program here. Tell me what you think of the program. A helping hand to the homeowner in trouble, or a wolf in sheep’s clothing?