Charlotte Real Estate, Foreclosures, Short Sales

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Welcome to Charlotte North Carolina's Real Estate Blog. Today's Real Estate & Auction specializes in residential home auctions for lenders, new home builders and home sellers across the Carolinas. 

We offer today's buyer up to the minute property information on the best deals available.  We offer today's seller a way to sell their home outside of the traditional listing method to create a competitive bidding environment among qualified buyers.

I've had a number of questions poised this month regarding financing for buyers. There are many industries across the country and globally struggling. FHA is the biggest buzz right now. Since 1934 the Federal Housing Administration has been helping people with income and credit challenges become homeowners. Now, this all important program for many of Americans is slated for big changes due to program coming under scrutiny as defaults on its loans climbed past 9 percent nationwide at the end of last year.

Previous FHA Guidelines

FHA has always been that "go-to" place for our buyers that have had financial challenges. Of course is not a "free" program, guidelines included

• Borrowers to have no foreclosures in the past three years, and no bankruptcies in the past two years.
• Current down payment requirement (cash investment) of 3.5 percent
• FHA loan limits as low as $271,050 in low cost areas and as high as $729,750 in high cost areas. See area limits here. 

FHA also has adjustable rate mortgages to help homeowners transition into homeownership.

New and Proposed FHA Guidelines

There was not a magic credit score number needed and allowed seller paid concessions/closing costs were always a big plus for first time homebuyers. We are now seeing changes to the credit score requirements. This year the organization raised that amount to 10 percent for borrowers who had a FICO score lower than 580 in order to protect its financial reserves.

Guidelines for the government-backed loans have traditionally allowed sellers to offer as much as 6 percent in concessions. New rules would cap that at 3 percent.

Reports have shown that borrowers who received more than 3 percent in seller concessions had a significantly higher risk of losing their homes than buyers who received less. Changes are expected this summer. "This proposed cap will not only align FHA's single-family mortgage insurance programs to industry practice, but will help ensure that borrowers who rely on FHA-insured financing have sufficient investment in their home purchases," the FHA commissioner wrote.

An already significant change that greatly affected closing costs for buyers was the raise in upfront insurance premium buyers paid from 2.25 percent from 1.75 percent.

Getting in Position to Buy

The best way to get into position to buy is to know which credit programs are available based on your current credit profile and income.  We are always, always speaking with loan officers each week about new programs that aren't main stream, but can get a buyer into a home loan at a lower interest rate without strict underwriting guidelines.  There are many companies offering programs to fix your credit report, fix bad credit, fix credit problems, etc.., but many of these "fixes" are under your control.

My next post will focus on credit repair and things many of our buyers are doing while looking for a home to increase their chances of getting a loan approval at a competitive interest rate.

Sandra Allen (704) 502-4324
Realtor/Broker & Auctioneer 

Top Seven Reasons Banks Aren't Lending Money.

Easy to Qualify Loans are a Thing of the Past

Oh, I remember the days of sold signs everywhere throughout Charlotte and the surrounding areas. This was coupled with 100% financing loans, pick-a-payment, low doc, no doc, and yes...the extended LTV loans. As a loan officer,it sometimes felt like Christmas each day waking up to see what new loan products were available to broker. The most incredible? A low doc 125% LTV? Well, I never brokered it, but it was definitely a conversation starter.

So now, 2010 and an entire shift in the economy later, we have buyers trying to buy homes that are flooding the market and lenders with moving target underwriting guidelines. So what's the scoop on financing these days? According to a recent Federal Reserve survey, it was found that about 75% of the banks surveyed indicated they had tightened their lending standards for prime, sub-prime and commercial mortgages. That was up from about 60% in the previous survey.

According to RISMedia, below are the top 7 reasons why buyers aren't getting loans:

1. Poor credit: Obtaining a conventional loan has become more challenging. Regardless of a heavy down payment or excellent equity built-up in their house, banks want to see a strong credit history. According to CNN, FHA (Federal Housing Administration) loans, which have traditionally catered to borrowers with lower FICO scores, have an average borrower credit score of 693, which is above the national average.

2. Insufficient liquidity:  Low reserves of money aren't attracting approvals for loans. Lenders are wanting to see a sizable down payment and a strong reserve of money.

3. Lack of income: The borrower doesn't have consistent proof of income for the last two to five years. Good credit is not a free pass anymore. Regardless of how good their credit score is or how much equity they have in their home, if they can't show the bank proof of income, loan approval will be tough.

4. Lying on the application: Banks are not interested in hearing stories and lies any longer.

5. Debt: Borrower has excessive debt and their debt-to-income ratio exceeds the bank's guidelines.

6. Unemployment: Most lenders will like to see at least two years of stable work to issue loan approval.

7. Self employment: Lenders are looking at self-employed applicants with a lot more scrutiny these days, making it very tough for these borrowers to get approved.

So what's a buyer to do? Private Funding?

Some buyers and their Realtors are turning to Noteflo. "With the strict underwriting guidelines banks are governed by these days, private lending is the wave of the future for getting real estate loans funded," explains Eric Wohl, president of NoteFlo, an online private lending marketplace launching today. NoteFlo's unique service allows borrowers to post loan funding requests for free, which will be broadcast out to thousands of private lenders that will bid for the opportunity to fund their loan. "Our goal is to make sure borrowers know that they have plenty of other options if their loan application is denied by a traditional bank," says Wohl.

However it can be accomplished, getting a loan and buying a home in this real estate market has been the smartest move ever for most buyers and investors.

What's the Latest in Foreclosure News?

10 States make up more than 70 percent of the national total of foreclosures.   According to a RealtyTrac report, California, Michigan, Florida, Nevada, Arizona, Georgia, Idaho, Illinois, Utah and Maryland have the highest foreclosure activity in the nation. 

California alone accounts for more than 22 percent of the national total.  California had over 72,000 properties receiving a foreclosure notice during this one month alone. 

Default notices, scheduled auctions and bank repossessions were reported on 322,920 properties in May 2010.  One in every 400 U.S. housing units received a foreclosure filing during the month of May.

Bank repossessions hit a record monthly high for the second month in a row.  There were a total of 93,777 U.S. properties repossed by lenders during the month, an increase of 44 percent from May 2009.

Where does Charlotte rank in foreclosures?

According to RealtyTrac, the number of foreclosures in N.C. fell about 35% in May from the same period last year.  The state of N.C. had 2,587 foreclosures in May 2010.  One in every 1,595 homeowners received a default notice, auction sale notice or bank-reposession filing.

N.C. ranked 36th in the nation for foreclosure filings in May of 2010.

What does this mean for N.C. homebuyers?

It means that home purchases are picking up and buyers are feeling more comfortable buying homes in North Carolina.  According to the data from the National Bureau of Economic Research, it appears that mortgage rates have not been this low since the summer of 1956.  The national 30-year benchmark for fixed-rate mortgage fell to 4.88 percent this week.

For a free short sale home list and guide, visit  

The increase in strategic defaults will have a huge impact on the recovery of the housing markets.  "Strategic defaults", the intentional non-payment on the borrower's behalf to avoid making payment on a home that has an upside down mortgage, but still makes the credit card payments and auto loan payments on time. 

The Morgan Stanley report estimates that 12% of mortgage defaults in February were strategic. Other reports estimate an even higher proportion of this type of loan default.

The problem with with strategic defaults is that is causes a contagion effect.  According to Sam Khater, senior economist for CoreLogic, a provider of consumer, financial and property information, as more and more homeowners watch friends and neighbors walk away from their homes, it becomes more socially acceptable to do so.  The result? Serious ramifications on personal credit histories, the health of neighborhoods, and the entire future of mortgage lending.

"If you know someone who has defaulted strategically, you're more likely to declare you're willing to do it," said Luigi Zingales, professor of entrepreneurship and finance at the University of Chicago's Booth School of Business.

There are many options available to avoid foreclosure.  We have put together a number of guides with information on seller options to include:

Avoiding Loan Modification Disasters and a HAFA short sale guide on the new government short sale program.  It includes information on relocation assistance money and lease-purchase home options.