BluefoxToday blog : January 2011

If you are one of the millions of families that lost their home in the last couple of years to Foreclosure… you might think…

Been There – Done That

You might not want to own a home again! 

But if you’re one of those folks who truly does want to purchase again, here’s some potentially good news.

USDA says that they will allow you to purchase a new home to owner occupy, after foreclosure if you’ve done the following things:

• Wait 3 years from the date of the Foreclosure.
• Re-establish Credit
• Have Credit Scores that meet the guidelines (as of the date I am writing this, that means you need a 620 score.)

Here’s the other part… you need to DOCUMENT what happened, and why you ended up in a Foreclosure. 

“FHA insured mortgages are generally not available to borrowers whose property was foreclosed on or given a deed-in-lieu of foreclosure within the previous three years. However, if the foreclosure of the borrower’s main residence was the result of extenuating circumstances, an exception may be granted if they have since established good credit…

This does not include the inability to sell a home when transferring from one area to another.”  So you MIGHT be able to buy after two years. 

My “real life” answer to this question is… in today’s credit environment, it’s going to be HARD to get a Bank to loan you money for a home if you had your home foreclosed upon less than 3 years ago.  I know what the guidelines say, but Bank’s do not have to follow guidelines set by FHA. 

FHA does not say you have to have a 620 credit score, but there are VERY few lenders who will allow you to purchase a home without at least a 620 score!  There are some Banks that will not allow you to purchase with FHA if you have ANY lates on ANY accounts in the last 12 months!  That’s not an FHA guideline, that’s a BANK rule, so again – I’d say - you might still be forced to wait 3 years, and have all of your documentation in order!

These guidelines are different from the Fannie Mae / Freddie Mac Conventional Guidelines… And these foreclosure guidelines are changing OFTEN… so I would not rely soly on information you get from an online site. 

Call a loan officer.

If you are considering a mortgage loan in NC, call Steve and Eleanor Thorne, First Financial Services, 919-649-5058 we'd love to help answer your questions!

An article in the Chicago Tribune describes how some mortgage servicers are exercising strategic default in reverse and are abandoning properties after determining that the costs of foreclosure are greater than the underlying value of the property.  Often in distressed neighborhoods, such properties only add to the decline of communities, as vacant houses become eyesores and havens for criminal activity.  Chicago area foreclosures increased by 20% in 2010, only adding to lower home values and further blight.   

The Tribune article describes the “stewardship relationship” that exists between borrower and lender and how certain loan servicers are failing to live up to their responsibilities as “stewards” following default.  (I find it interesting that lenders would ever be considered stewards, for in reviewing the behavior of many during the housing crisis, it appeared it was always about the money.)  Good stewards take their responsibilities seriously, when it’s about the money, stewardship isn’t involved. 

For two years now, we’ve read of the moral responsibility of borrowers to honor their mortgage obligations; and many have been critical when borrowers made the “choice” to walk away.  It seems ironic that some of the very banks that have criticized homeowners for walking away are now choosing the same option, and solely for financial reasons.  Regardless of who is walking away, it is always about the money.  

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Many people would like to roll the dice on a Las Vegas or Henderson short sale and just be done with their homes simply because they do not like what it is worth right at this moment.  Unfortunately a large percentage of lienholders will not give debt (or deficiency) forgiveness without a solid hardship.  It would be great to walk away from our assets easily without any just cause or ramifications other than saying “I don’t like what my home is worth today and it will never come back to the same amount that my mortgage is.”

So there you have it – an upside down home is not really a justified hardship for a Las Vegas short sale.

Here is a small list of some things that do validate a hardship and make a Las Vegas short sale easier to obtain:

• Loss or Reduction of Income
• Loss of Assets
• Job Loss
• Illness or Disability
• Medical Bills
• Death
• Military  Relocation
• Civilian Job Relocation
• Separation or Divorce
• Business Failure
• Increase in Household Operating Expenses (utilities, taxes, HOA, adjustable rate mortgage, etc)

When you are selling your home as a short sale, you will be required to write a “hardship letter” as part of your short sale packet and maybe even have to prove your hardship if asked to do so.

Now there are an abundance of checks and balances during a Las Vegas short sale.  One of them is the BPO process.  I have always wondered what a lienholder thinks when they see a shiny brand new Lexus, Land Rover or Beemer sitting in the driveway during one of these secret exterior orders.  It happens more often than one would think.

When you are listing your Las Vegas or Henderson home as a short sale, you may want to make sure your hardship is valid.

copyright 2006-2011 Renee Burrows, REALTOR®, The Force Realty  702-966-2494

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Fannie Mae announced last week it's new Loan Level Price Adjustments for  (LLPA) for all loans that are Rate Locked on and after Monday January 17th.  The revised Level Price Adjustments will also apply to conventional conforming loans locked prior to January 17th that request a rate lock extension with a new rate lock expiration date greater than February 18, 2011.  

This means that if a Borrower is purchasing a home with a Conventional Mortgage that will be backed by Fannie Mae, and they have a Credit Score of 740 or higher, and are making a downpayment of 20% to 24.09% they will be assessed .25 points on their loan by Fannie Mae.  That to me is what I would call over the top, and unreasonable.

A Borrower that has a Credit Score of 740 or higher is a great borrower, one that manages his/her money extremely well.  Furthermore they are not making a minimal downpayment, they are putting down 20 to 24.09%.  To penalize such a Borrower with points is something that I fail to understand.

This is one more reason why FHA continues to be the Loan Product of choice for most borrower.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

An article on MarketWatch describes how the “shadow inventory” remains a substantial risk to the housing market.  The article reports that S&P analysts have observed that it is taking longer for the housing market to absorb foreclosed homes than first anticipated, and that the number of foreclosures “may be a drag on prices for a few more years.”

The glut of foreclosures is projected to hit cities such as New York particular hard, where it could take as long as 10 years for the market to return to “normal.”  And while other areas will clear much faster, foreclosures will place downward pressure on prices for several more years.

A separate report on HousingWire from Amherst Securities Group said “the market is not taking into consideration the high likelihood of potential defaults on performing or re-performing mortgages when estimating future losses on these loans” and that “borrowers with substantially negative equity are very vulnerable to default." 

While the news is not encouraging, it's information that we must take into account when making our plans for 2011 and beyond.

The Housing Guru: The expert source for all your housing questions—now featuring daily updates of Today’s Housing News