Charlotte Real Estate, Foreclosures, Short Sales

How Much Time Do You Have?

Help is available for homeowners who own a home with a mortgage insured by the Federal Housing Administration (FHA).  If you are finding it difficult to keep your mortgage payments current or if you are actually in default, you may be able to take advantage of the FHA Pre-foreclosure Sale (PFS) Program to sell your home.  What does it require?

To participate in the program, homeowners must be willing to commit to actively market their home for 3 months.  During the marketing of their home, the lender will delay foreclosure proceedings.  Once the home is successfully sold close to present fair market value, the homeowner may receive a cash payment from FHA of up to $1,000.00 to help the homeowner transition to more affordable housing. 

A similar program is available for homeowners with a mortgage guaranteed through the Veterans Administration.  The VA Compromise Sale Program will help homeowners avoid foreclosure. 

 Some of the requirements for the VA Compromise Sale include:

• The property must be sold at fair market value.
• The closing costs must be reasonable and customary.
• The compromise sale must be less costly for the Government than a foreclosure.
• There must be a financial hardship on the part of the seller.
  

Do you need more help?  Do you need more information on this program and other programs to avoid foreclosure?

Yes, I need more help.  I need information on short sale, HAFA, HAMP and loan modification programs.

Will new the HAFA program help or hurt?  It's unknown what affect it will have on our housing industry until we see how banks handle the "approved" short sale process.  The HAFA, Home Affordable Foreclosure Alternatives Program takes effect on April 5, 2010. 

The program is geared towards helping homeowners avoid foreclosure by giving servicers, sellers and junior lien holders incentives to short sale the homeowner's home.  The main goal is to streamline these transactions into a short sale or deed-in-lieu of foreclosure when a homeowner is unable to keep their home under the HAMP, Home Affordable Modification Program.

I'm confused.  In working in real estate and mortgage for over 12 years, I'm confused as to how this helps the homeowner.  HAMP is an external program, independent of the servicer's in house loss mitigation department. 

Will homeowners understand that if they fail the waterfall test.  Below is an understanding of how the "Waterfall" process determines whether or not a loan is eligible for a loan modification under the HAMP program.

• Capitalize accrued interest and other eligible expenses to determine the modified loan amount.
  
• Reduce the interest rate to reach the 31% target housing debt-to-income ratio in increments of 0.125% subject to an interest rate floor of 2%.
  
  
• If the 31% target housing ratio has not been reached, extend the term of the loan up to a maximum of 40 years.
  
• If the 31% target housing ratio has not been reached, then reduce the principal through an agreement between the borrower and the servicer. This agreement (forbearance agreement) would require that the amount of principal reduction be set as a balloon payment at the end of the loan term or when the loan is otherwise paid off.

Okay, back to my confusion...

Will homeowners understand that they do not have to accept a fail from the HAMP program and move directly to liquidation.  Will borrowers move to loss mitigation before or after the "HAFA Sell"?
Initially, I thought the any new programs introduced would be as an enhancement to the HAMP program since the ratio of borrowers to those applying for loan modifications are so low.  I guess foreclosure alternative is supposed to help the homeowner.  I think more homeowners will feel otherwise.

Which Loans Are Eligible?

The Home Affordable Foreclosure Alternative Program provides short sales guidelines for loans not owned or guaranteed by Fannie Mae or Freddie Mac (those agencies are expected to release their own, similar guidance). The following conditions also must be met:

•  The property is the borrower's principal residence.
• The mortgage loan is a first lien mortgage originated on or before Jan. 1, 2009.
• The mortgage is delinquent or default is reasonably foreseeable.
• The current unpaid principal balance is equal to or less than $729,750.
• The borrower's total monthly mortgage payment exceeds 31 percent of the borrower's gross income.

HAFA, the Home Affordable Foreclosure Alternatives directive set to kick off April 5th was announced by the Treasury Department last November as an answer to the large number of loans not meeting the eligbility requirements to be fully accepted into the HAMP program.  HAMP, the Making Home Affordable Program has been a blessing for some and a nightmare for others.  The servicer of the loan has a good amount to do with the homeowner's experience. 

March 12, 2010 Release of Loan Modification Information

Number of permanent modifications increases by 45 percent

WASHINGTON - The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today released February data for the Administration's Home Affordable Modification Program (HAMP). As of the end of the month, more than one million borrowers were receiving a median savings of $500 each month - a 36 percent median monthly payment decrease. Permanent modifications have been granted to 170,000 homeowners and an additional 91,800 permanent modifications have been approved by servicers and are pending only borrower acceptance.

The February HAMP report can be found here:
http://www.makinghomeaffordable.gov/docs/Feb%20Report%20031210.pdf

Now Back to HAFA...

This week I will focus my blogposts on the HAFA directive.  There are lots of questions homeowners have.  One popular question that reaches our office daily is "Will HAFA stop my foreclosure".  According to the documentation released from the Treasury Dept, Page 3 reads  "Pursuant to the servicer's policy, every potentially eligible borrower must be considered for "HAFA" before the borrower's loan is referred to foreclosure or the servicer allows a pending foreclosure sale to be conducted".  Please check with your servicer for more information on how your application to pursue a short sale may suspend a pending foreclosure.

Buyers...
Be prepared for an increase in short sale listings for many months to come.  This will require patience, patience and more patience.  We are currently working with homeowners facing foreclosure that have expressed their desire to sell quickly and move forward in their life.  For a list of homes that are available, please visit this area of our blogsite.

HAFA, the Home Affordable Foreclosure Alternatives will start in April. This new effort is a response to the limited successes of the HAMP program otherwise known as the Home Affordable Modification Program.

"The administration wouldn't want to categorize it this way, but HAFA is an acknowledgement that a lot of loans won't meet the criteria for a HAMP modification -- even a trial one," said Rick Sharga, senior vice president at RealtyTrac, which compiles data on foreclosures.

According to RealtyTrac, foreclosure filings are expected to hit up to 3.5 million homes in 2010. There were a record 2.8 million homes with at least one foreclosure filing in 2009, the firm recently reported. Foreclosure activity will likely remain high until at least the end of 2012.

"HAMP hasn't worked," Nancy Bush, president of bank industry research firm NAB Research, said. "It's just a massive expense of time and money".  In a recent meeting with Wells Fargo, Bush noted that Wells Fargo has 15,000 people working on HAMP.  She asked executives at Wells Fargo when they thought the program may end. 

"They just shrugged their shoulders and said maybe never," Bush said. "The expense of that is huge. HAMP may turn out to be the most expensive thing the banking industry has ever done."

The HAFA Program

Under the HAFA program, if a homeowner doesn't qualify for the HAMP modification program, they must be offered a short sale.  Homeowners can also be offered a deed-in-lieu of foreclosure.  Borrowers will receive $1500.00 to help them move to a new home.

If you would like more detailed information on this program and how it can benefit you as a buyer or homeowner, please visit this area of our blogsite.

Remember, first-time home buyers purchasing a new or existing home are eligible for the tax credit. The guidelines of the tax credit specify that the home purchase must occur on or after January 1, 2009 and on or before April 30, 2010. The law also states that a closing (transfer of title to the property) occurning by June 30.2010 can qualify provided that there is a binding sales contract in force by April 30, 2010.

What does that mean to you as a buyer? Act now! There are many homes on the market. Many of them are foreclosures and short sale opportunities. Negotiation for foreclosures and short sales can take many weeks to finalize as they are subject to multiple levels of approval. We list foreclosures and short sales and can help you find a great home before the April 30th deadline.

Remember, home purchases in 2010 may be claimed on 2009 taxes or amended 2009 income tax returns. Don't miss out on your $8,000.00! There are distressed sellers, homes for auctions and foreclosures waiting for your purchase!