Good News for Foreclosures??

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A smaller percentage of mortgages were delinquent and the rate of those entering the foreclosure process slowed in the fourth quarter of 2009, possible signs that the foreclosure crisis that has gripped many of the nation’s housing markets is finally starting to ease, a trade group has reported.

“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007,” said Jay Brinkmann, chief economist of the Mortgage Bankers Association, in a written statement.

The delinquency rate for mortgages on one- to four-unit residential properties was a seasonally adjusted 9.47% of all mortgages outstanding in the fourth quarter, down from 9.64% in the third quarter and up from 7.88% in the fourth quarter of 2008, according to the MBA’s quarterly delinquency survey.

Delinquencies include mortgages that are at least one payment or more past due but not yet in foreclosure.

Meanwhile, 1.2% of outstanding mortgages entered the foreclosure process in the fourth quarter, down from 1.42% in the third quarter and up from 1.08% in the fourth quarter of 2008. The percentage of mortgages at some point in the foreclosure process at the end of the fourth quarter was 4.58%, up from 4.47% in the third quarter and 3.3% in the fourth quarter of 2008.

The MBA survey covers about 44.4 million loans on one- to four-unit residential properties, or about 85% of all first-lien residential mortgage loans that are outstanding in the country. No doubt, the foreclosure nightmare isn’t over yet.

The percentages of loans 90 days or more past due and loans in foreclosure process set record highs in the fourth quarter, according to the report. Many of those loans more than 90 days past due are in loan modification programs, and some of them have been seriously delinquent for months waiting for modifications to get finalized.

But the good news is there are fewer problem loans actually entering delinquency—likely a result of fewer layoffs, Brinkmann said. “We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors. Not only did we not see that spike but the 30-day delinquencies actually fell by 16 basis points from 3.79% to 3.63%,” he said. He added that the non-seasonally adjusted 30-day delinquency rate has only dropped three times in the past between the third and fourth quarter—”and never by this magnitude.”

Depending on the fate of seriously delinquent mortgages—whether they are cured with modifications or ultimately enter foreclosure—the percentage of mortgages somewhere in the foreclosure process could start to see a gradual decline in the second half of the year, he said during a conference call with reporters.

If normal seasonal patterns hold, there could be a bigger drop in the 30-day delinquency rate in the first quarter of 2010, Brinkmann said. That would be a positive sign for the months and years ahead. “The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” he said. “With fewer new loans going bad, the pool of seriously delinquent loans and foreclosures will eventually begin to shrink once the rate at which these problems are resolved exceeds the rate at which new problems come in. “It also gives us growing confidence that the size of the problem now is about as bad as it will get,” he said.

According to the MBA data, Florida was the most problematic state, in terms of delinquencies. Twenty-six percent of Florida mortgages were one payment or more past due at the end of the year, and 20.4% of mortgages in the state were 90 days or more past due or already in the foreclosure process.

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10 Foreclosure Myths (busted?)

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The following is insite to what a majority of people think about buying a foreclosure and what is actually true.  I hope it helps.

Trulia.com and RealtyTrac recently surveyed US adults to get some insight into what people *think* is involved with buying a foreclosure. Here are the Top 10 Myths that came up, and the facts to set the record straight:

1.       Foreclosures need a huge amount of work.  92 percent of consumers expressed that if they bought a foreclosure, they would be willing to make home improvements after they closed the deal, with 65 percent being willing to invest 20 percent or less of the purchase price.  Although stories of foreclosures missing plumbing and every electrical fixture are very memorable, many foreclosed homes need only the (relatively inexpensive) cosmetics that many new homeowners want to customize no matter what kind of home they’re buying: paint, carpet, etc. 

 

2.       Foreclosures sell at massive discounts, compared to other homes.  Almost every member – 95 percent – of the surveyed group expected to pay less for a foreclosed home than for a similar, non-foreclosed home; 18 percent had realistic expectations of less than a 25 percent discount.  However, 36 percent expected to receive a bargain basement discount of 50 percent or more off the value of a similar non-foreclosure.  Reality check: while foreclosures might be discounted massively from what the former owner paid or owed, their discounts are much more modest when compared to their value on today’s market and the prices of similar homes. 

 

3.       Buying a foreclosure is risky.  49% of respondents said they perceived buying a foreclosure as risky.  And yes – buying a foreclosure at the auction on the county courthouse steps can have risks, including the risk the new owner will take on the former’s owner’s liens and other loans.  But most buyers looking for foreclosures are looking at bank-owned properties, which are listed on the open market with other, ‘regular’ homes.  Buying these homes is really no more risky than buying a non-foreclosed home. 

 

4.       You can’t get inspections on the property when you buy a foreclosed home.  County auction foreclosures don’t often offer the ability for buyers to have the homes inspected.  But virtually all bank-owned properties for sale on the open market not only allow, but encourage buyers to obtain every inspection they deem necessary. This is because almost every bank sells their foreclosed homes as-is, and they want to avoid later liability.  It’s in everyone’s best interests to make sure that the buyer has full information about the property’s condition before they close the deal.

 

 5.       There are hidden costs to watch out for when buying a foreclosed home.  Sixty-eight percent of survey respondents who felt there is a negative stigma to buying a foreclosure expressed  the concern that buying a foreclosure poses the danger of hidden costs. At some foreclosure auctions, there are buyer’s premiums and other hefty fees that can really add up and take a chunk out of the effective savings the buyer stood to realize. However, when you buy a bank-owned property that is listed for sale with a real estate agent, the closing costs are the same as they would be if you bought a non-foreclosed home. Overdue property taxes, HOA dues and other bills left behind by the defaulting homeowner are cleared by the bank that owns a foreclosed home before it is sold on the market, though these items should be watched out for if you buy a home at the county foreclosure auction.

 

6.       Foreclosures are more likely to lose their value than “regular” homes. Thirty-five percent of U.S. adults who believed there are downsides to buying foreclosed properties believed this myth. In fact, because foreclosures often offer a discount from the home’s current market value, they may offer some degree of insulation from further depreciation.  Whether a home loses its value or not has to do with the dynamics of the local market, including the area’s supply of homes, demand for homes, interest rates and the health of the employment market – not with whether the home was or was not a foreclosure at the time it was purchased.

 

7.       Most foreclosures happen when homeowners just walk away.  Out of homeowners with a mortgage, only 1 percent said walking away from their home would be their first choice if they were unable to pay their mortgage.  And a whopping 59 percent of mortgage-holders said they wouldn’t walk away from their home – no matter how upside down they were on their mortgage. Most foreclosures happen when the owners lose their jobs or their mortgage adjusts to the point where they absolutely cannot pay the mortgage, no matter how hard they try.  Voluntary ‘walk-away’s are simply not as popular as many people think.

 

8.       When you buy a foreclosure, you should lowball the bank – they are desperate to get these homes off their books.  Stories about in the press abound about the large numbers of foreclosed homes the banks have on their books.  We’ve all heard the adage that banks have no interest in owning these properties.  But the real deal is that they’re simply not desperate enough to give these places away.  Also, the banks mostly service the defaulted loans – they don’t own them.  Various groups of investors do, and they hold the banks accountable to selling the bank-owned property at as high a price as possible, helping them cut their losses.  Many banks won’t even consider lowball offers, and many bank-owned properties actually sell for above the asking price.  Before a bank will take a lowball offer, they will almost always reduce the list price first, and see if that attracts a higher offer than the lowball one they have in hand.

 

9.       You need to be able to pay in cash in order to buy a foreclosure.  Again, if you buy a foreclosed home on the county courthouse steps, you might need to bring a cashier’s check and be ready to pay for the place on the spot.  By contrast, bank-owned homes are bought through a more normal real estate transaction, which means buyers can obtain a mortgage to finance the home just like they would if the home weren’t a foreclosure. It is true, though, that in some markets, banks prefer offers from cash buyers, but this tends to be in situations where the property’s condition is pretty dire, and the bank knows this may make it hard for a buyer to obtain financing.

 

10.   It’s easier to buy a foreclosure with bad credit if you get a mortgage with the same bank that owns the property.  Think about it: why would the bank want to end up with the same property as a foreclosure, again? Well, that’s what would happen if they allowed buyers with low credit scores to buy their foreclosures just to earn the interest on the mortgage. In reality, many banks do offer incentives like lower fees or closing cost credits for buyers who use their bank for their mortgage. But the buyers must meet the same credit, income and other qualification standards as anyone else would to seal the deal. 

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HUD To Speed Resale of Foreclosed Properties

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In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan recently announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration’s commitment to addressing foreclosure. Secretary Donovan recently announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential home buyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many home buyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping,” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

-All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
-In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
-The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

For more information, visit www.hud.gov.

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FHA To Raise Some Premiums This Spring

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The Federal Housing Administration won’t raise the 3.5 percent minimum downpayment requirement for mortgages it guarantees as long as borrowers have FICO scores of 580 or better.

Beginning early this summer, however, borrowers with credit scores below 580 will be required to make downpayments of at least 10 percent in order to participate in FHA’s mortgage insurance program.

This spring, the Obama administration also plans to raise the upfront mortgage insurance premiums paid by all FHA borrowers to 2.25 percent, up from 1.75 percent now.

Possible Home Loan Modification Problems

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10 Big Impact Low Cost “Renovations”

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Do you have some—but not unlimited—cash for upgrades? Here are budget-minded enhancements to make your home stand out from the competition.

 

1. Tidy up kitchen cabinets.

“Potential buyers do open kitchen cabinets and look inside,” says Morrissey. “Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff.”

2. Add or replace tile.

“By retiling very inexpensively, you make a room look way cleaner that it was,” says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. “Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms.”

3. Add a breakfast bar.

When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. “In one home, there was a cutout in the wall between the kitchen and living room,” explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. “We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600.”

4. Install granite tile instead of a slab.

“Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade,” says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. “Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money.”

5. Freshen up a bathroom without retiling.

“With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300,” says Wilder. “And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000.”

6. Freshen up the basement.

“If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint,” recommends Wilder. “They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon.”

7. Add a room.

Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. “One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom,” says Quinn. “That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price.” Zuluaga has also added bedrooms inexpensively. “In a two-bedroom house, there was an archway that led to a third room that was used as a den,” he explains. “It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom.”

8. Spruce up cabinet fronts.

Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. “If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on,” explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. “With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes,” says Morrissey. “If they have oak cabinets today, they can have cherry the next day.”

9. Replace light fixtures.

“In a foyer and in bathrooms and kitchens,” says Wilder, “replacing overhead light fixtures provides a lot of pop for a little money.” If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula.

10. Tech-up the garage.

“Sometimes we replace the garage door opener with a remote touchpad entry system,” says Zuluaga. “That costs about $425 and makes it look like a high-end system.”

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Why a Tax Credit???

Finding the “Right” Agent

I would encourage you to talk to friends, family, and/or coworkers in your area who have recently bought or sold a property to get 3 or 4 references. Interview those agents- asking questions like:

1. How would you market my house? (Online must be PART of their answer).
2. How would you come to a listing price for the house? (A comprehensive market analysis of your comps. Be sure to share any unique features your house has).
3. What is their online experience? (My company in CA pushes listings to over 30 search engines and real estate sites).
4. How many houses do they currently have listed? (The less listed the more likely they are to show yours).
5. Commissions? Is there a reduced commission if the agent handles both sides of the sale? Is there a reduced commission if someone in their office handles the buyer side of the sale?
6. Is there anything you can do to make your house more inviting to buyers? (Like de-cluttering, painting, getting a home inspection and termite report, etc).
7. The last thing you should ask is if they have any questions for you.

I think that a great agent would ask to see and take pictures of your house before your formal interview. They should then bring a sample flier that they would post outside your house, a virtual tour, and hopefully the market analysis. All else being equal- go with who you feel the most comfortable talking with. Remember this is a business relationship.

Thinking of That Remodel??

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Things To Look Out For In Foreclosures

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