Friday, August 24, 2012
Wednesday, July 25, 2012
Top Five Short Sale Myths Debunked
Top Five Short Sale Myths Debunked
You’ve probably already realized that 2012 is the year of the short sale. As an agent, one of your most valuable business tools is the understanding of how to help underwater homeowners avoid foreclosure. Make sure you do not fall into a trap by believing these common myths:Myth #1: The homeowner must have missed mortgage payments in order to qualify for a short sale.
Debunked: Years ago this may have been true, but not in 2012.
A financial hardship should exist or be imminent. But, not all folks with financial hardships have missed a mortgage payment. Common hardships include mortgage rate adjustments, loss of job or income, health or medical issues, and divorce among others.
Myth #2: Banks prefer foreclosure to processing a short sale.
Debunked: The truth is that banks would prefer NOT to foreclose on a property because it costs them big bucks. The bank will lose a lot less on a short sale than on a foreclosure.
In fact, many banks are so interested in short sales that they are paying sellers to participate in a short sale versus letting the home go to foreclosure.
Myth #3: In order to the seller to qualify for a short sale, he or she must speak with the lender first and get pre-approved.
Debunked: While each lender has a different way in which they process the short sale, overall the best way to get in front of a tough situation is to speak with a knowledgeable agent that knows how each short sale lender operates. Often, when calling the lender, short sale sellers find that they do not get the answers that they want and need from the first line of short sale support.
Myth #4: Short sales don’t close.
Debunked: The truth is that about 50% of all real estate transactions right now involve distressed properties. And, at Short Sale Expeditor we have a 98% success rate in obtaining a short sale approval letter from the lender.
Myth #5: Short sales take months (and months) to close.
Debunked: The short sale process must be mastered and it helps quite a bit to know the ins and outs at each of the major lending institutions. There are many short sales that can be approved in about 30 days. The more liens on title, then the more lengthy the short sale process.
Thursday, July 19, 2012
Lenders less leery of reducing homeowners' principal
Lenders less leery of reducing homeowners' principal
hsangree@sacbee.com
Published Sunday, May. 13, 2012
Principal reduction, long a nonstarter with lenders, has suddenly become a potential reality for thousands of homeowners who owe far more than their houses are worth.
Some economists and politicians have argued for years that the only way to revive the housing market and jumpstart the economy is to vastly reduce the amount Americans owe on their mortgages. But lenders have balked at writing down debts.
Now, however, as part of the $25 billion mortgage settlement announced in February, some of the nation's largest lenders have agreed to reduce loan balances for thousands of customers. Bank of America announced this week that it would offer more than 200,000 borrowers relief by reducing principal to as low as a home's current value.
And in a key development, Keep Your Home California, the state's major housing-aid effort, said this week it was changing its rules to no longer require a lender contribution to its Principal Reduction Program, which provides up to $100,000 in loan forgiveness. That change will benefit as many as 9,000 borrowers in the state, program officials said.
In addition, Fannie Mae and Freddie Mac, the government-backed mortgage giants that control the majority of mortgages in the state, will now allow loans to be paid down by the California program. Before, when a lender contribution was required, Fannie Mae and Freddie Mac would not participate.
Diane Richardson, head of Keep Your Home California, said the changes will "level the playing field" for underwater borrowers, who have been unable to refinance homes in which they have no equity. "It gets them back to the point where they won't be so underwater that they just feel helpless," she said.
Even as it gains momentum, principal reduction remains deeply controversial, with some experts calling it a potential cure for the economy and others expressing concern about its effectiveness and fairness.
Keep Your Home California's Principal Reduction Program, for example, benefits homeowners who have experienced economic hardship, such as job loss, and who are delinquent on their loan payments or facing foreclosure. A borrower in that situation could receive a principal write-down of up to $100,000, while their neighbor, who has made mortgage payments on time but who is also deeply underwater, receives no debt reduction.
About 30 percent, or more than 2 million, of California's 6.8 million mortgaged properties were underwater in the fourth quarter of 2011, Santa Ana-based CoreLogic reported.
The question with principal reduction is "who do you give it to?" said Mike Himes, vice president of NeighborWorks in Sacramento, a nonprofit that helps struggling homeowners.
Himes, who stressed he was expressing his own views and not those of his organization, said those who have their loan balance reduced – in some cases because of only temporary job loss – will be better positioned to build equity as the housing market recovers.
Those who stayed employed and kept paying, on the other hand, may never catch up. "Selected people will get back (lost equity) and some won't," he said. Himes said loan modifications, which reduce interest rates and extend payment terms, can make mortgage payments affordable without giving some homeowners a big advantage.
Many critics of principal reduction say it creates an incentive for borrowers to default on their loans in order to take advantage of assistance programs. Some economists call such incentives for bad behavior, with others paying the costs, a "moral hazard," and warn against them.
"Principal reduction should be the absolute reduction of last resort," said Anthony Sanders, a professor of real estate finance at George Mason University.
Effectiveness challenged
Sanders made his comments during a panel discussion on principal reduction last month at the Brookings Institution, a public-policy think tank in Washington, D.C. The keynote speaker at the event was Edward DeMarco, acting head of the Federal Housing Finance Agency, the government conservator that oversees Fannie Mae and Freddie Mac.
Some economists and politicians have argued for years that the only way to revive the housing market and jumpstart the economy is to vastly reduce the amount Americans owe on their mortgages. But lenders have balked at writing down debts.
Now, however, as part of the $25 billion mortgage settlement announced in February, some of the nation's largest lenders have agreed to reduce loan balances for thousands of customers. Bank of America announced this week that it would offer more than 200,000 borrowers relief by reducing principal to as low as a home's current value.
And in a key development, Keep Your Home California, the state's major housing-aid effort, said this week it was changing its rules to no longer require a lender contribution to its Principal Reduction Program, which provides up to $100,000 in loan forgiveness. That change will benefit as many as 9,000 borrowers in the state, program officials said.
In addition, Fannie Mae and Freddie Mac, the government-backed mortgage giants that control the majority of mortgages in the state, will now allow loans to be paid down by the California program. Before, when a lender contribution was required, Fannie Mae and Freddie Mac would not participate.
Diane Richardson, head of Keep Your Home California, said the changes will "level the playing field" for underwater borrowers, who have been unable to refinance homes in which they have no equity. "It gets them back to the point where they won't be so underwater that they just feel helpless," she said.
Even as it gains momentum, principal reduction remains deeply controversial, with some experts calling it a potential cure for the economy and others expressing concern about its effectiveness and fairness.
Keep Your Home California's Principal Reduction Program, for example, benefits homeowners who have experienced economic hardship, such as job loss, and who are delinquent on their loan payments or facing foreclosure. A borrower in that situation could receive a principal write-down of up to $100,000, while their neighbor, who has made mortgage payments on time but who is also deeply underwater, receives no debt reduction.
About 30 percent, or more than 2 million, of California's 6.8 million mortgaged properties were underwater in the fourth quarter of 2011, Santa Ana-based CoreLogic reported.
The question with principal reduction is "who do you give it to?" said Mike Himes, vice president of NeighborWorks in Sacramento, a nonprofit that helps struggling homeowners.
Himes, who stressed he was expressing his own views and not those of his organization, said those who have their loan balance reduced – in some cases because of only temporary job loss – will be better positioned to build equity as the housing market recovers.
Those who stayed employed and kept paying, on the other hand, may never catch up. "Selected people will get back (lost equity) and some won't," he said. Himes said loan modifications, which reduce interest rates and extend payment terms, can make mortgage payments affordable without giving some homeowners a big advantage.
Many critics of principal reduction say it creates an incentive for borrowers to default on their loans in order to take advantage of assistance programs. Some economists call such incentives for bad behavior, with others paying the costs, a "moral hazard," and warn against them.
"Principal reduction should be the absolute reduction of last resort," said Anthony Sanders, a professor of real estate finance at George Mason University.
Effectiveness challenged
Democratic politicians have criticized DeMarco for refusing to let the government-sponsored enterprises reduce the principal of loans they own or back. To do so, he has argued, would undermine his responsibility to preserve their assets and minimize losses to taxpayers, who invested more than $187 billion in Fannie Mae and Freddie Mac following their near collapse in the housing crash.
In his April speech, DeMarco said it might make sense in some circumstances to offer principal reductions. But he said a large-scale effort would come at net cost to taxpayers of $2.1 billion and would affect less than one-tenth of the estimated 11 million underwater homeowners in the United States.
"This is not about some huge difference-making program that will rescue the housing market," DeMarco told the Brookings audience.
Others disagree. California Attorney General Kamala Harris, a key player in negotiating the national mortgage settlement, has been one of DeMarco's critics. In February, she wrote him saying the settlement would help borrowers of Bank of America, Chase and Wells Fargo, who promised to provide at least $12 billion for principal reduction and short sales, where lenders agree to accept less than what they're owed.
The settlement did not include Fannie Mae and Freddie Mac, Harris noted. She urged DeMarco to cease foreclosures in the state and to conduct a "straight-forward analysis" of whether a broad program of principal reductions would help homeowners and save taxpayer dollars. Harris expressed confidence that the agency's potential findings would confirm her views.
DeMarco wrote back denying her request. He said the agency had already analyzed the benefits of principal reduction, and had concluded it was no more effective than other tools that reduced monthly payments without such high costs. Those tools included cutting interest rates and extending loan terms.
"There is no question that underwater borrowers in California would benefit from other taxpayers across the United States paying off the underwater portions of their mortgage debt," he wrote to Harris. But DeMarco said his obligation was to taxpayers and to ensuring maximum assistance at minimum cost.
An incentive to stay
The biggest benefit to all taxpayers, he said, would be to pull the economy and the housing market out of its slump by erasing debt that may never be repaid – and which will only lead to more foreclosures and economic turmoil.
Principal reduction should be open to a broad range of borrowers, not just to those who are delinquent, to address the fairness issue and to avoid providing incentives for borrowers to stop paying, he said. He said borrowers don't need to see their negative equity erased, but suggested that loan balances should be no more than 120 percent of home values.
"It gives them an incentive to stay in their home and gives them light at the end of the tunnel," he said.
Who would pay the billions of dollars such a program would cost? Taxpayers, he said.
It makes sense, he said, because those same taxpayers will pay regardless, though depressed home prices, lagging job recovery, neighborhood blight and under-funded schools.
The downward spiral will only continue as long as there's a massive amount of negative equity on the books, he said. With a broad-ranging debt reduction, he said, "I think we'll all be better off."
That's the wrong way to look at it, said Jeffrey Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton.
Sanders made his comments during a panel discussion on principal reduction last month at the Brookings Institution, a public-policy think tank in Washington, D.C. The keynote speaker at the event was Edward DeMarco, acting head of the Federal Housing Finance Agency, the government conservator that oversees Fannie Mae and Freddie Mac.The biggest benefit to all taxpayers, he said, would be to pull the economy and the housing market out of its slump by erasing debt that may never be repaid – and which will only lead to more foreclosures and economic turmoil.
Principal reduction should be open to a broad range of borrowers, not just to those who are delinquent, to address the fairness issue and to avoid providing incentives for borrowers to stop paying, he said. He said borrowers don't need to see their negative equity erased, but suggested that loan balances should be no more than 120 percent of home values.
"It gives them an incentive to stay in their home and gives them light at the end of the tunnel," he said.
Who would pay the billions of dollars such a program would cost? Taxpayers, he said.
It makes sense, he said, because those same taxpayers will pay regardless, though depressed home prices, lagging job recovery, neighborhood blight and under-funded schools.
The downward spiral will only continue as long as there's a massive amount of negative equity on the books, he said. With a broad-ranging debt reduction, he said, "I think we'll all be better off."
Friday, May 18, 2012
Bank of America Increases Relocation Assistance Payments to Customers Completing Preapproved Price Short Sales
Press Release
Bank of America Increases Relocation Assistance Payments to Customers Completing Preapproved Price Short Sales Short Sales Provide Alternative to Foreclosure for Delinquent Borrowers Who Have Exhausted or Declined Home Retention Solutions
CALABASAS, Calif. – Adding to its foreclosure prevention initiatives, Bank of America has launched a nationwide program that offers delinquent mortgage customers increased assistance with relocation expenses – between $2,500 and $30,000 - at the completion of a qualifying short sale. “Bank of America is committed to providing alternatives to foreclosure whenever possible,” said Bob Hora, home transition services executive for Bank of America. “This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home.”
The short sale relocation assistance program builds on the bank’s already robust short sale initiatives, which led to 200,000 completed short sales in the last two years and another 30,000 in the first quarter of 2012. This program is based on a similar incentive offer that Bank of America tested in Florida last year. To qualify for the enhanced relocation assistance payments under the new program, the seller must work proactively with the bank to obtain a preapproved sales price prior to submitting a purchase offer to the bank.
A short sale must be initiated by the end of this year and close by September 26, 2013, to be eligible for the payment. Qualifying short sales that have already been started but have not closed may be eligible for the relocation assistance. The amount of assistance provided under the new program will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations.
Initially, the program will be offered on mortgages that are owned and serviced by Bank of America. While available nationally, Bank of America anticipates greatest response to the program will come from borrowers in California, Nevada, Arizona, Florida and other states hardest hit by the economic downturn and falling property values.
Customers who believe they may be eligible for Bank of America’s short sale relocation assistance program may contact program specialists at 877.459.2852. To help homeowners understand the short sale process and other foreclosure avoidance programs, Bank of America encourages them to visit the Home Transition Services website at www.bankofamerica.com/hometransition.
Bank of America Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services.
The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,250 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world.
Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
For more Bank of America news, visit the Bank of America newsroom. www.bankofamerica.com # # # Reporters May Contact: Rick Simon or Jumana Bauwens, Bank of America, 800.796.8448 pressroom@bankofamerica.com "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Statements in this press release regarding Bank of America Corporation's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.
Bank of America Increases Relocation Assistance Payments to Customers Completing Preapproved Price Short Sales Short Sales Provide Alternative to Foreclosure for Delinquent Borrowers Who Have Exhausted or Declined Home Retention Solutions
CALABASAS, Calif. – Adding to its foreclosure prevention initiatives, Bank of America has launched a nationwide program that offers delinquent mortgage customers increased assistance with relocation expenses – between $2,500 and $30,000 - at the completion of a qualifying short sale. “Bank of America is committed to providing alternatives to foreclosure whenever possible,” said Bob Hora, home transition services executive for Bank of America. “This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home.”
The short sale relocation assistance program builds on the bank’s already robust short sale initiatives, which led to 200,000 completed short sales in the last two years and another 30,000 in the first quarter of 2012. This program is based on a similar incentive offer that Bank of America tested in Florida last year. To qualify for the enhanced relocation assistance payments under the new program, the seller must work proactively with the bank to obtain a preapproved sales price prior to submitting a purchase offer to the bank.
A short sale must be initiated by the end of this year and close by September 26, 2013, to be eligible for the payment. Qualifying short sales that have already been started but have not closed may be eligible for the relocation assistance. The amount of assistance provided under the new program will be determined on a case-by-case basis using a calculation that includes the value of the home, amount owed and other considerations.
Initially, the program will be offered on mortgages that are owned and serviced by Bank of America. While available nationally, Bank of America anticipates greatest response to the program will come from borrowers in California, Nevada, Arizona, Florida and other states hardest hit by the economic downturn and falling property values.
Customers who believe they may be eligible for Bank of America’s short sale relocation assistance program may contact program specialists at 877.459.2852. To help homeowners understand the short sale process and other foreclosure avoidance programs, Bank of America encourages them to visit the Home Transition Services website at www.bankofamerica.com/hometransition.
Bank of America Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services.
The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with approximately 5,700 retail banking offices and approximately 17,250 ATMs and award-winning online banking with 30 million active users. Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world.
Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.
For more Bank of America news, visit the Bank of America newsroom. www.bankofamerica.com # # # Reporters May Contact: Rick Simon or Jumana Bauwens, Bank of America, 800.796.8448 pressroom@bankofamerica.com "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Statements in this press release regarding Bank of America Corporation's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.
Thursday, May 10, 2012
Underwater California homeowners to get more help
Underwater California homeowners to get more help
Thursday, May 10, 2012
In a big change, the state-run Keep Your Home California program will use federal money to reduce an eligible homeowner's mortgage balance by up to $100,000 without requiring a matching reduction by the bank servicing the loan.
Many more underwater California homeowners will get principal reductions when the change takes effect in early June, but there's a catch: The reduction is structured as a forgivable loan. If they sell their house within five years, any profit will go toward repaying the principal reduction. After five years, there is no repayment requirement. Under current rules, the loan is forgiven after three years.
Loans backed by Fannie Mae and Freddie Mac are potentially eligible for principal reduction under this program.The money is coming from a $2 billion grant the state was awarded in 2010 from the U.S. Treasury Department's Hardest Hit Fund. The grant provides four types of assistance to low- and moderate-income homeowners who can document a financial hardship.
The program allocated $772 million of that money to reduce principal by up to $50,000 per homeowner, but it required a dollar-for-dollar reduction by the servicer. Few servicers participated in this part of the program, and it only applied to loans held in their own portfolios.
As a result, only 926 homeowners qualified for principal reductions totaling $44 million.
Servicers' role
The California Housing Finance Agency, which runs the program, says that starting in early June, it will no longer require servicers to provide a matching reduction, although they will have to modify the loan by reducing the interest rate, extending the term or both. Homeowners can still get up to $100,000 in principal reduction, but it will all come from the federal money.The goal is to get the borrower's debt-to-income ratio to 31 percent and loan-to-value ratio under 120 percent, although "they can go as low as 105 percent LTV," says Diane Richardson, the program's director.
The agency expects to reduce principal for about 9,000 homeowners under the guidelines that take effect in June.
To qualify under the new rules, homeowners must use the home as their primary residence, owe more than it's worth, fall below the income limit for their county, demonstrate a financial hardship and owe no more than $729,750 on a first mortgage originated on or before Jan. 1, 2010. (The previous cutoff date was Jan. 1, 2009.)
In San Francisco the household income limit is $121,900. For other counties see keepyourhomecalifornia.org/files/income.pdf.
The owner's servicer must be part of the program, but more servicers probably will participate if they don't have to cut principal out of their own pockets.
The program originally prevented people who had taken cash out of their homes - through a cash-out refinance or home equity loan - from getting a principal reduction but it lifted that restriction last fall.
The Treasury Department has approved the latest rule changes.
The Obama administration has been pressuring Fannie Mae and Freddie Mac to permanently reduce principal on underwater loans. The Federal Housing Finance Agency, which regulates Fannie and Freddie, has not allowed them to forgive principal but has allowed temporary reductions known as principal forbearance as part of a loan modification.
A spokeswoman for the federal agency says Fannie and Freddie may accept the pay down of mortgage principal funded through a Hardest Hit Fund program - including Keep Your Home California - as long as other servicing guidelines are met.
Stance unchanged
That doesn't mean the federal agency has changed its stance and will allow principal forgiveness on Fannie and Freddie loans outside of such programs.The California agency announced several other changes to its four Keep Your Home California programs:
-- Starting in early June, homeowners can receive up to $100,000 in total assistance from one or more of the programs. The current household limit is $50,000.
-- As of May 7, homeowners with a financial hardship can receive up to $25,000 to catch up on missed mortgage payments. The current limit is $20,000.
-- Starting in early June, principal reduction will be disbursed in the first year rather than spread over three years.
On all programs combined, the state has spent $411 million of the $2 billion it received from the Hardest Hit Fund. It has until the end of 2017 to spend the remaining funds.
To apply for the program, call (888) 954-5337. Applications for principal reduction under the new rules will not be taken until early June.
Kathleen Pender is a San Francisco Chronicle columnist. Net Worth runs Tuesdays, Thursdays and Sundays. Blogging at sfgate.com/pender. Twitter: @kathpender. kpender@sfchronicle.com
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/05/10/BUVL1OFM17.DTL
This article appeared on page D - 1 of the San Francisco Chronicle
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