Monthly Archives: February 2012
Fannie Mae has decided to release about 2,500 properties that are foreclosed to be sold to investors and then turned into rental properties.
The areas that are being sold are Los Angeles/Riverside, Phoenix, Atlanta, Las Vegas and three different regions in Florida.
When investors are purchasing the properties in a specific area, all of the properties must be purchased. This can be quite a few properties, for example, the Atlanta area has over 500 properties.
The whole purpose of this being released is to eliminate the amount of foreclosed homes that are in certain areas. Foreclosed homes increase vandalism and violence. It drops the values of home prices as well.
Fannie Mae wants the investors to purchase these properties in order to start moving renters into the homes. The investors are going to be required to rent the properties for a specific number of years, however, that information has not been published.
Because of the housing crash, renting has increased dramatically and unfortunately, not enough properties have been available to meet the demand. By selling these foreclosed homes to buyers and turning them into rentals, this will help improve the renting inventory. This will also hopefully decrease the rental prices that hiked due to lack of inventory.
There are specific qualifications that these investors must meet in order to purchase these foreclosed properties. The investors must also have property management experience, and agree to purchase the total number of homes in a specific area.
It will be interesting to see how these new properties released by Fannie Mae will affect renters as well as the housing market.
To all the homebuyers who are considering on waiting to purchase a home, you may want to think twice. Those who are going to purchase a home using an FHA loan, which is 3.5% down, are going to experience an increase in the upfront mortgage insurance premium as well as the annual premium.
Currently the upfront MIP is 1.00. Effective April 1, 2012, FHA is increasing the MIP by 75 basis points, making the new MIP 1.75.
Currently the PMI is 1.15. Effective June 1, 2012, FHA is increasing the PMI by 35 basis points, making the new PMI 1.50.
How does this look when comparing it to a monthly payment?
Here’s a quick example. If you are purchasing a home for $200,000, you put 3.5% down ($7,000) & have a 4.0% interest rate you are looking at adding an additional $65 to your monthly payment.
The upfront MIP adds about $10 a month.
The annual premium adds about $55 a month.
This increase in insurance premiums may affect your buying power if you are set on a specific monthly payment range.
How can you avoid these fees?
You do not have to use an FHA loan. If you buy a home using a conventional loan, meaning you put between 5-20% down, you will not experience these fees. Keep in mind the requirements for a conventional loan are more strict, but you can always seek guidance from a professional mortgage specialist.
If you are doing an FHA streamline refinance, these increased FHA fees will not affect your loan.
Recent studies have shown that our current real estate market has the lowest priced homes in over 10 years.
This market definitely took a hit, but it looks likes values may slightly increase this upcoming year.
After looking at data for Southern California areas, here are some forecasts for this upcoming year for real estate prices:
Riverside Area 2nd Quarter 2011 – 2nd Quarter 2012 -14.8%
Riverside Area 2nd Quarter 2012 – 2nd Quarter 2013 +5.9%
Median Home Price: $180,000
Los Angeles Area 2nd Quarter 2011 – 2nd Quarter 2012 -6.8%
Los Angeles Area 2nd Quarter 2012 – 2nd Quarter 2013 +2.4%
Median Home Price: $343,000
San Diego Area 2nd Quarter 2011 – 2nd Quarter 2012 -4.8%
San Diego Area 2nd Quarter 2012 – 2nd Quarter 2013 +2.9%
Median Home Price: $375,000
Orange County Area 2nd Quarter 2011 – 2nd Quarter 2012 -7.4%
Orange County Area 2nd Quarter 2012 – 2nd Quarter 2013 +4.5%
Median Home Price: $515,000
This forecast predicts that after the second quarter this year we will be able to see an increase in home prices finally. Homebuyers should definitely take advantage of this market right now and buy while the prices are at record lows in over 10 years.
What is the trick and benefit to paying your mortgage every two weeks in two half payments, rather than one full monthly payment?
Well by paying a bi-weekly payment you end up making 13 full payments a year because you pay 26 weeks worth. So overall you will end up making one extra payment every year which can help you pay off your mortgage early. Most loans are a 360 month term (30 years) and it takes 12 payments a year to pay it off. If you are paying 13 payments a year, just by doing the math you will end up paying your mortgage off in 27.69 years vs. 30 years.
Now where do the scams play in?
False advertising from companies that you aren’t familiar with. There are set up fees and occasionally transaction fees to have half of your mortgage payment set aside from each bi-weekly pay check. The unfortunate thing is companies are making money off of a budgeting strategy that you can do on your own for free. Simply making it a habit to set aside half of your mortgage payment every other week from your pay check will result in 13 payments in one year versus 12.
The reason we are addressing this is to inform consumers of how this bi-weekly mortgage payment actually works.
How does it work?
The truth is, your bi-weekly mortgage payment is not being paid to your mortgage lender every two weeks. The lenders do not accept half payments every 2 weeks. Instead, what your bank does is store your money in a treasury account after it has been debited from your account (similar to setting it into a savings account on your own). Once the full payment is set aside, they then distribute it to your lender to pay your monthly mortgage. You are basically just adding one more middle man to make your payment.
What should you do?
Instead, rather than being charged a set up fee or transaction fee, why not try to set aside half of your mortgage payment every 2 weeks and hold it in your own savings account. This will serve the same purpose of making 13 payments a year and paying off your mortgage early.
As always, consult with a mortgage professional to ensure you are taking the right steps in paying your mortgage. If this bi-weekly payment is something you are interested in, then make sure the company you are setting up with does not charge a fee for something you are capable of doing on your own.
Apparently banks are now paying people up to $35,000 to short sell their home.This approach is much different than forcing homeowners to leave empty handed. According to CNN Money, banks are offering delinquent homeowners $35,000 to short sell their home before they end up in a foreclosure.
Why would banks give up to $35,000 to homeowners in order to short sell their home?
Well, when a home is short sold, the banks are agreeing to sell the home for less than what it is worth, and erasing the extra debt. However, for banks this is beginning to look like a better option, rather than letting homeowners foreclose. In many cases, people who experience a foreclosure tend to neglect their property and the maintenance; therefore, causing the bank a bigger expense in fixing things such as plumbing, roofing, etc.
With this new offer of a cash incentive, banks are eliminating the risk of the homeowner neglecting the maintenance. Also, the foreclosure process is causing banks to lose tons of dollars in cases that drag out. Homeowners are also getting a “free ride” in a sense by living in a home and not making the monthly payments.
Why would a bank choose a Short Sale over a Foreclosure?
Short sales actually do have benefits for the homeowners versus a foreclosure. For example, if the homeowner decided to do a short sale, they are at least involved in the selling process and will be involved with whoever is buying their home.
According to the article from CNN Money,
“Short sales also command higher prices than foreclosed homes. In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.”
Keep in mind, both a foreclosure and short sale will have negative effects on the homeowner’s credit report.
However, by opting to do a short sale, it limits the amount of foreclosures on the market which is negatively affecting the home values. By having less vacant homes on the market, it will hopefully slowly improve the values of homes.
What other options are available?
If you are underwater on your mortgage, but are current on your monthly payments you may consider using HARP 2.0 which allows you to refinance your mortgage to a lower monthly payment and interest rate. This doesn’t erase the debt, but it will lower your payments.
However, if you are not current on your mortgage and foreclosure is looking like the road you are headed, see if your bank is offering this $35,000 incentive for you to short sell your home. Always speak with a mortgage professional before making a final decision.
California is claiming $18 billion in this settlement against large banks, such as Bank of America, Wells Fargo, J.P. Morgan Chase & Co., Citibank and Ally Financial (GMC) for servicing and foreclosure misconduct.
This settlement is going to help homeowners who have underwater mortgages, meaning they owe more than what their home is worth. This greatly benefits the area in which we are located which is the Inland Empire of Southern California. In Southern California, it is estimated that nearly 44% of the home mortgages are underwater.
Because of this terrible housing crisis that occurred, homeowners have had to short sale their home, foreclose or declare bankruptcy. So many consumers’ credit profiles are shot due to these circumstances. However, this $ 18 billion settlement may benefit these people who experienced a foreclosure.
What is California going to do with this $18 billion settlement?
Well, the $18 billion settlement will be distributed in several ways. One way is through principal reduction for underwater mortgages that are owned or serviced by one of the five large banks involved in the settlement. There may also be monetary compensation for the homeowners who were wrongly foreclosed.
According to a Press Enterprise article by Leslie Berkman, she explained the distribution for the $18 billion as the following:
“ In California, the banks have guaranteed more than $12 billion to reduce the principal on mortgages or offer short sales to about 250,000 homeowners who are underwater on their loans and behind or almost behind on their monthly payments. Another $849 million will be used to refinance the loans of 28,000 underwater homeowners who are current on their payments. And $279 million will provide restitution to about 140,000 California homeowners who were wrongly foreclosed on between 2008 and Dec., 31, 2011. Also, $1.1 billion is earmarked to provide mortgage forbearance and relocation assistance for the unemployed and to repair community blight caused by foreclosures. Another $3.5 billion will be used to cover unpaid balances remaining on the mortgages of 32,000 homes when they are foreclosed. The $18 billion in homeowner assistance will be distributed to counties by need, Harris said. After Los Angeles County, which is expected to get the largest amount of $3.92 billion, Riverside County follows with an estimated $1.59 billion and San Bernardino County with an estimated $1.13 billion.”
So, if you are a homeowner who is currently underwater or experienced a foreclosure in California, be on the look out because you may benefit from this $18 billion settlement that California is going to receive.
Did you know that you do not have to go to a major bank in order to refinance using HARP 2.0?
It’s true! Many consumers believe they either have to contact a major bank or their previous lender in order to refinance. You can actually contact any mortgage lender in your area, which is beneficial to those experiencing the “waiting game”.
For example, Bank of America is one of the major banks that if placing customers on a waiting list due to mass amounts of refinance applications. If you are currently not a customer of Bank of America then some over the phone applications will be placed on a 60 to 90 day hold.
However, with our company, Stateline Funding Corporation, we are able to take refinance applications over the phone and online without making you experience the “waiting game”. One of the benefits of working with a private mortgage company is the one-on-one interaction with the broker themselves. There is no waiting list for those that qualify now under HARP 2.0, so you can take advantage of the low interest rates right away.
After speaking with Fannie Mae, they are still expecting their underwriting systems to be updated by March in order to start servicing homeowners with LTV (Loan-To-Value) ratios over 125%. They already removed the LTV maximums; we are just waiting on the systems to be updated. Once the systems are running, we will definitely provide information for the homeowners who fit that category.
Right now, HARP 2.0 is still accepting applications for LTV ratios up to 125%. If that is your scenario, then you can click here for a free pre-qualification.
Did you look up your mortgage loan using the Fannie Mae or Freddie Mac look up tool?
We have had clients that used the tool and are positive that Fannie Mae or Freddie Mac own their loan, but it shows that it cannot be found. Don’t give up! If you are certain, Fannie Mae is suggesting for all borrowers to contact their servicer to find out. The reason being, Fannie Mae’s look up tool only represents 87% of their loans on file, so yours may not show up due to inaccurate information, or other miscellaneous reasons. Give your servicer a call to find out if you can benefit from HARP 2.0.
You can always contact Stateline Funding Corporation if you have further questions about HARP 2.0.
This program has been around since 2009 but has recently gained more popularity. It helps buyers purchase homes with as little as a 3% down payment. A home must be classified as a “Home Path” home in order to receive the benefits with Fannie Mae.
Benefits of using Home Path are: Low down payment, No mortgage insurance, No lender-requested appraisal or inspection, Expanded seller contributions towards closing costs.
No Mortgage Insurance
One of the biggest benefits of purchasing a Home Path home is the no mortgage insurance. The only loans that have no mortgage insurance are conventional who require 20% or more down. Home Path only requires as little as 3% down, and there will be no mortgage insurance in the monthly payment. That can roughly save $150 or more a month.
No Investor Competition
A common problem a buyer faces in this market is losing a home purchase to an investor. With Home Path, there is a 15 day period where agents are not allowed to accept any offer from an investor. If you are a buyer this is one of the advantages… having 15 days to lock the home you want and beat out an investor.
No Appraisal Required
There is also no appraisal required for home path homes, which can generally cost around $450. The only reason an appraisal would be required for a home path purchase is if the borrower is borrowing money to renovate the property.
Higher Interest Rates
Now what are the negatives about Home Path? With all these benefits, one of the disadvantages is the higher interest rates. When purchasing a Home Path home, a buyer can expect to have anywhere from a quarter of a percent to half a percent higher rate. However, with no monthly mortgage insurance payment, the increased rate actually balances out.