Charlotte Real Estate, Foreclosures, Short Sales

Democrat Barack Obama has proposed a 90-day moratorium on foreclosures to help the nation's ailing economy.  In addition to a freeze on foreclosures, Obama has suggested a two-year tax break for businesses that create new jobs and to allow people to withdraw up to $10,000 from their retirement accounts without any penalty this year and next. 

"I'm proposing a number of steps that we should take immediately to stabilize our financial system, provide relief to families and communities and help struggling homeowners," Obama told a crowd of 3,000. "It's a plan that begins with one word that's on everyone's mind, and it's spelled J-O-B-S." 

Obama has also called for a $3,000 tax credit for each additional full-time job a business creates. That means a business that adds five jobs would get a $15,000 break.  The campaign has estimated that it would cost $40 billion and end after 2010.

What happens with a 90 day freeze on foreclosures?  Who will work the loan modifications, forebearances, etc..  Aren't the lenders already doing this?  What happens after the 90 days if the paperwork is still caught up in the loss mitigation department or collections due to the lenders not having enough manpower?  It is always nice to propose plans, but where is the meat?  Tell the American people in detail how this can work.  Sure it gives struggling homeowners a bright spot in their day to know SOMEONE in Washington is trying to figure out a plan, but we've already had a number of programs created to include, the HOPE program and yeah, the $300 Billion Housing Rescue plan passed this pass
July.

What happened to the $300 Billion Dollar Rescue Plan?

The vote was 46-21 to advance the bill, which would permit the government to insure new, cheaper mortgages for hundreds of thousands of struggling homeowners now facing foreclosure.  "We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes." 

The legislation is supposed to offer affordable government-back mortgages to homeowners at risk of foreclosure.  The FHA will be allowed to insure up to $300 billion in new 30-year fixed-rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down loan balances to 90% of the homes' current appraised value.

I'd like to know how this program is working.  Maybe we will get an update soon enough before another bailout bill is passed.

Everyone is looking for a deal these days.  It is definitely a buyer's market.  Unfortunately we still have many qualified buyers waiting for "the bottom".  You will never know the bottom nor will you be able to purchase quick enough when real estate sales begin to surge.  Most buyers should take advantage of the incredible deals being offered along with historically low interest rate.  And oh that thing you hear about not being able to get a loan, just go ahead and apply.  Loans are being underwritten everyday. 

About HUD's $100.00 Down Program

Yes, you can purchase a home for $100.00 down.  Here are the particulars as one of my fellow loan officers has informed me:

-Down to 550 Credit Score
-Finance Repairs & Closing Costs up to 110% of the Purchase Price
-Up to $5,000 in Repairs
-Only for HUD Owned Homes
-Use Original HUD Appraisal if Contract is Signed within 6 Months

Latest update on the program was posted on 8/27/08:

The $100 down offer applies if the purchase price is less than or equal to the appraised value of the property. If the purchase price is greater than the appraised value, the purchaser may obtain a new FHA appraisal to support the higher mortgage amount or must pay cash in the amount of the difference between the appraisal and the price less $100.

Charlotte Real Estate

If you are not taking advantage of this program that may go away at anytime, you may be making a huge investment mistake.  HUD programs are for limited times only.  Charlotte has really great HUD properties for sale.  Our average sales price for sold homes in August of 2008 was $230,472.  We are handling our housing market much better than the rest of the country. 

For an updated list of HUD properties and the program information, register here.

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Okay, it seems as though Capitol Hill has made a breakthrough and the leaders in Washington may have reached a deal on the Wall Street Bailout.  The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors.  This will help lenders keep credit lines open, staving off a slow economy.  The government would later try to sell the discounted loan packages at the best possible price.  There is an allocation of funds to encourage holders of distressed mortgage-back securities to keep the securities and buy government insurance to cover defaults.  Legislation would place limits on severance packages for executives of companies that are benefiting from the rescue plan.  Also, the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.

How the Bailout May Help Homeowners

It seems as though all roads may be leading to a temporary halt in foreclosures for the bad debt purchased by the government during this bailout.  When the government stepped in for Indy Mac, there was a halt in foreclosures due to the review of portfolios that had to be done.  Foreclosures are extremely expensive and a huge financial hardship for homeowners. IndyMac had 742,000 mortgages in its portfolio, 60,000 of which were 60 days delinquent or at some stage of foreclosure. One of the first actions the FDIC took after stepping in to pick up IndyMac's pieces was to declare an immediate halt to all foreclosure actions, pending a portfoliowide review.  We may see the same actions being done for struggling homeowners across the country.  The lowering of monthly payments will probably be in bulk.  According to the Seattle Times, After an initial review of the 60,000 late borrowers in the IndyMac portfolio, FDIC deemed roughly 40,000 customers eligible for the modification program.  Modification terms include rate reductions, the lengthening of payback terms, rescheduling unpaid principal and interest, rate caps, and other techniques.

We still do not have any concrete information on the "bailout of Wall Street".  I've heard elected officials many times stress how important it is to make sure the bill includes provisions for "main street".  I believe they have coined this term to make taxpayers feel better about getting the short end of the stick.  From where I sit, there is no good way to protect "main street".  Here is why:

1. If you have paid your mortgage on time, you will pay for this bailout.  It has been said that you will benefit by having a stronger economy due to the credit freezes needed to run our nation being lifted.  My concern is that we have not seen any preliminary allocations of funds to know how much is being allocated to pad pockets versus stave off future bank failures and increase lending between banks.

2. If you are facing foreclosure are you are in default of your loan your mortgagee will become the U.S. Government.  Why do so many people believe that the Government is always a friend and will protect their people so much better than the free market?  If you qualify for a loan modification or forebearance, how many pages will you need to sign your life away with? If portion of your current mortgage amount can not be forgiven, will you then be subject to a lifetime of wage garnishments, foregoing any future tax refunds, lottery winning, inheritances, etc...  Okay, I'm being sarcastic, but my point is, making Government bigger is not always the best thing for the people or the best answer.

Why Loan Modifications Don't Always Work

More than 40 percent of all subprime ARM foreclosures that occurred during the three months ending September 30 involved owners who had already worked out some kind of deal with their lenders, according to a report from the Mortgage Bankers Association (MBA).  CNN Money has reported that although Hope Now, the government-led alliance of lenders, mortgage servicers, investors and community advocacy groups, says it helped 545,000 subprime borrowers during the second half of 2007, 33% more people actually lost their homes than in the first six months of the year.  The only thing that seems to work reported by the Neighborhood Assistance Corporation of America, NACA is lowering the monthly mortgage amount. 

In short, people will continue to walk away from their homes.  How do you lower a mortgage payment without lowering the amount of the debt?  I think that is the $700 billion dollar question.